Eyeing Potential Shortages In 2012

When it comes to supply challenges, preparation is a distributor’s best defense.
Here are a few situations to keep an eye on.

Gases Timeline2011 held its share of supply challenges for distributors. In the months after a furnace fire halted the domestic supply of calcium carbide in March, distributors were tasked with re-learning how to source the raw materials to carry on with acetylene production. Then, in the third and fourth quarters of 2011, helium was once again the subject of a shortage. During the recent helium supply strain, many distributors found themselves on allocation from their suppliers.

In Winona, Minnesota, the supply squeeze motivated Mississippi Welders Supply Operations Manager Scott Myran to focus on converting industrial helium users to other gases. “It behooves us to be proactive with our customers and look at ways we can reduce helium usage,” he says. Myran and his salespeople work with customers to show them different process and look at ways to decrease their helium consumption. With the recent history of helium shortages, some distributors feel that helium could be an ongoing problem. “Even when the helium supply loosens up, it does not mean we can back off and carry on as we were,” says Myran. “We need to keep thinking forward.”

Helium’s Checkered Past
In order to understand the future of helium in 2012 and beyond, it’s important to consider the past. Was 2011 merely a recurrence of factors that led to the helium shortage in 2006-07? Not exactly, according to Nick Haines, head of global helium source development at Linde. “The situation in 2006 and 2007 was caused by multiple major plant outages and a lengthy Qatar I plant ramp up,” he says, adding, “Helium is a globally traded product, so shortages in any plant are felt throughout the world as supply is shifted to meet demand when supply interruptions occur.” As for 2011, Haines says the situation was the result of market demand growth and a variety of maintenance outages, which left little spare capacity and supplies increasingly subject to interruptions.

Helium Outlook for 2012
The good news for 2012 is that two new plants are scheduled to come on line. Air Products and Matheson are nearing completion of a plant in Wyoming that will introduce an additional 200 million standard cubic feet per year of helium. In Third Quarter 2012, the Skikda megatrain is scheduled to commence production in Algeria. Haines notes, “There is a great deal of volatility in that part of the world, and unexpected interruptions in supply may occur.” Until the new plants are on stream, supply is likely to remain tight.

There are several planned outages for 2012 that will impact supplies. The Bureau of Land Management, which accounts for about 30 percent of global helium supply, has a planned shutdown for maintenance in spring 2012. Other large natural gas plants are likely to have shutdowns, including ExxonMobil and Qatar. As far as distributors are concerned, Haines says market shortages could arise in 2012, especially during maintenance shutdowns and when plants are performing under capacity.

Aluminum Woes
Aside from helium, uncertainty in aluminum may present supply challenges for cylinder manufacturers in 2012. In 2011, Goldman Sachs drew attention for Detroit warehouses operated by the investment and banking firm where aluminum was exiting at a slower rate than it came in, creating a bottleneck in supply and reportedly increasing prices. Some organizations claimed Goldman Sachs was hoarding aluminum in order to collect warehouse rental fees. While aluminum prices tapered off slightly in the second half of 2011, no resolution has come of Goldman’s aluminum stores as yet.

As the year progresses, other supply challenges may emerge. For now, helium and aluminum are two situations to keep an eye on in 2012.

Gases and Welding Distributors Association