“The near-standstill in the Strait of Hormuz is raising fears of a price surge for commodities used in everything from farming to semiconductor manufacturing.”
“Earlier this month, Qatar shut down one of the world’s largest energy hubs due to drone attacks. That halted production of liquefied natural gas and helium, a byproduct of natural gas extraction. The disruption accounts for about one-third of the global helium supply, according to Bloomberg estimates.”
Of course it’s helium:
“Helium has essential uses, including in magnetic resonance imaging (MRI) and welding, as well as electronics and semiconductor manufacturing, which consumes a large portion of the world’s supply. It’s crucial for rapidly cooling chips during fabrication to prevent overheating and defects.”
“While the US produces large amounts of the helium it consumes, Asian countries import most of theirs. Taiwan produces over 60% of the world’s chips, including 90% of the most advanced ones, with Japan and South Korea also major semiconductor centers.”
And it’s all of course tied to the critical memory chips the AI/tech world needs from SK Hynix and Samsung in Korea of course. Micron, the third critical memory chip company is of course thankfully in the USA.
““We know that TSMC and Hynix are highly dependent on flows from Qatar (perhaps to the extent of 40–50%, if not slightly more), meaning they may have to rely on reserves in the coming months,” wrote economist Andreas Steno Larsen, founder of Steno Research.”
““This could potentially turn into a bottleneck for the entire AI story,” he added.”
You don’t say. And yes, helium has already done its natural thing.
“Some market insiders note helium spot prices have risen by as much as 50%. However, those increases don’t apply to existing contracts, which dominate the industry.”
“It’s lagged because the supply chain is quite long,” Phil Kornbluth, president of Kornbluth Helium Consulting, told Yahoo Finance on Friday. A cargo ship takes “a few weeks to get where it’s going, and so there’s no immediate deficit until it doesn’t show up where it was supposed to show up.”
So there is some short term insulation for the market, but the uncertainty rises from there.
“If the hostilities continue [and] the Strait of Hormuz stays closed for six months or a year, this is a really big deal then,” he said.”
And of course further dislocations downstream.
“The Strait of Hormuz impasse has also sent fertilizer prices soaring.”
“We’ve seen the price of urea, which is an important nitrogen fertilizer, go up somewhere between 30 to 50% since the start of the conflict in Iran. That’s a real problem for farmers,” said Blake Hurst, former president of the Missouri Farm Bureau.”
As the underlying components of the supply chain keep getting dented. Now by helium supply needed for this AI Tech Wave to keep rolling on. Stay tuned.
(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)
