Helium is perhaps best known for its use in party balloons; however, this only makes up 8% of the Helium One (LSE: HE1) market — I believe the share price is significantly affected by the demand for helium in a wide variety of scientific and industrial applications. The global market for bulk liquid helium is thought to be worth over £2bn, with demand currently increasing mostly in the technology, medical and aerospace sectors. Recent demand has been fuelled by MRI scanners in the developing world, and for pressure purging for the likes of Space X and NASA.
Helium One share price to balloon?
Since the beginning of 2022, the HE1 share price has ballooned up by over 40%. I think this is partly because global demand for liquid helium is estimated to grow at a compound annual growth rate of approximately 3%. In addition, the company has three major projects in Tanzania, including its Rukwa project, which is one of the largest known primary helium resources in the world.
I believe the Helium One share price will be greatly impacted by an increase in demand for applications where other gases cannot be substituted. Purging is one of those applications: at 6% of Helium One’s market, I think the demand for purging is likely to increase as the space industry is forecasted to grow. Superconductivity and basic laboratory research are also applications where helium has a unique role to play.
In contrast, many applications do not require the unique properties of helium to achieve the desired result. For example, welding, which makes up 17% of the Helium One market, is replaced by argon in Europe, while the United States uses helium. Also, fibre optics manufacturing at 6% of its market can often be substituted by hydrogen, as high thermal conductivity is the key property for this use case. In these examples, economics, safety, and legislation can influence the choice of using helium or other gases.
HE1 share price concerns
Helium One burnt a little over £5m of cash last year, which was approximately 8% of the company’s market value. Despite its fairly solid cash runway, I believe many investors will be concerned about how easily it could raise more cash.
I think another concern is the fact that the Helium One share price declined over 60% in less than a year, and its net income declined by 113.7% in 2021. This helps explain the roller-coaster journey for the Helium One share price over the last few years.
The Helium One share price exploded up like a rocket by 294% from the start of 2021 to 2 August. From here, however, the balloon burst and its share price dropped 82% within the month! Overall, I regard Helium One as a speculative exploration company that requires high-risk tolerance. However, I believe it has improved its commercial model, therefore I’ll be watching Helium One shares very closely before I decide whether to take the plunge and add them to my portfolio or not.
