Party City closing 45 stores as helium shortage hurts sales. Why is the gas scarce?

An employee at Dan D Party Corner in Cheyenne, Wyo., Lee Medina, stands near a close-to-empty helium tank used to fill balloons.
An employee at Dan D Party Corner in Cheyenne, Wyo., Lee Medina, stands near a close-to-empty helium tank used to fill balloons. ASSOCIATED PRESS

The CEO of Party City cited a global helium shortage as he announced on Thursday that the retail chain will close 45 of its 870 stores this year.

But the scarcity of the important gas isn’t just a party-pooper: Helium is also essential in semiconductor manufacturing, scientific research and medical tools like MRIs, according to Sophia E. Hayes, a professor of chemistry at Washington University in St. Louis, Missouri.

“We’ve heard that we have roughly a 200-year supply, at current consumption rates,” Hayes said in a statement released by the university last month. “That sounds pretty comforting, because 200 years sounds like a big window. But the demand for helium is also going up at 10 percent a year, roughly, worldwide — in part driven by the semiconductor industry out of Asia.”

Helium is so vital that it’s listed as one of the 35 minerals “critical to U.S. national security and the economy” by the U.S. Department of the Interior, which cites its role in MRIs and research.

The scarcity of the gas — the third instance of tight supply in the last decade — comes amid problems in the helium supply chain, according to the CBC.

“There are five major global suppliers of helium,” said Phil Kornbluth, a helium industry consultant, according to the CBC. “Two of them have been rationing supply since February 2018.”

The shortage has been hitting party supply stores particularly hard for months, CNBC reports.

Party City CEO James Harrison said in February that the company was already missing its revenue “in large part due to helium supply pressures,” according to CNBC, which reports that the company has experimented with “decorative air-filled balloons”in lieu of the real thing.

The company didn’t say which stores will close this year.

“The problem is, helium is being used up faster than it can be produced these days,” Anders Bylund, an analyst at Motley Fool, said in an investing note. “Helium shortages fluctuate over time and across geographical markets, but anywhere between 50 and 200 of Party City’s 850 stores don’t have any helium in their tanks at any given time.”

While the gas may be scarce in usable form on this planet, it’s abundant everywhere else.

“Helium may be the second most plentiful element in the universe, but it’s also one of the lightest and doesn’t form molecules easily with heavier atoms,” Bylund wrote. “Hence, the helium we use ends up floating into space, never to be seen again. There is no economically efficient way to manufacture the gas, so the bulk of the worldwide helium supply is a byproduct of natural gas extraction.”

That means fixing a shortage doesn’t come easy.

Kornbluth, the helium consultant, told the CBC that because 97 percent of helium is created as a byproduct in natural gas production, “you require someone else to make a big upfront investment, whether it’s developing a large natural gas field, building an LNG plant, it could be multibillion-dollar investments” — and then a helium plant can be tacked on.

“So the reason for the slow response to a shortage is that the response really requires someone in another industry to do something first,” Kornbluth said.

Rob Smith, Acting Deputy Assistant Secretary for Oil and Natural Gas, Fossil Energy discusses the basics of horizontal drilling and hydraulic fracturing.

Right now, just three factories produce three-quarters of the world’s helium supply, according to Gasworld, a gas industry news site. One is in Qatar in the Middle East, while the two others are in the U.S. — an ExxonMobil plant in Wyoming and the government-run U.S. Federal Helium Reserve in Amarillo, Texas.

But a blockade of Qatari shipments, “the looming shutdown of the National Helium Reserve” and pipeline problems in the U.S. have all hurt supply, according to Hayes, the Washington University professor.

“There are new international supplies being identified, in Russia and Tanzania, but I think we need to ask ourselves whether we can weather supply challenges that are tied to international sources,” she said.

Hayes urged Congress to take steps to conserve helium and guarantee researchers have access to it.

“It’s not just a problem with supply, it’s also the price over time. Over the short period of time from about 2009 to 2015, helium prices went up dramatically, anywhere from about 350 to 400 percent,” Hayes said. “In such a short period of time and on fixed budgets — it’s almost impossible to absorb that kind of cost increase if you are a researcher.”

Related stories from Miami Herald