Dollar Tree says a helium squeeze has hit sales of balloons and party supplies. Researchers note this could foreshadow higher costs for other industries that depend on the gas.

Dollar Tree said its broader party-supplies business has lost out on sales because of a helium shortage that impacts balloons.

You can add party balloons to the list of goods and products that have been disrupted by the Iran war.

Dollar-store chain Dollar Tree $(DLTR)$ said late last week that an ongoing helium shortage caused by the conflict has hit its party-supplies business, as it's become more difficult and expensive to get the gas required to fill balloons. Executives said the shortage cost Dollar Tree about $15 million in sales during the second quarter.

'[W]hen customers come in for balloons, they often purchase other items for celebrations and events.'Mike Creedon, Dollar Tree

"Balloons are an important traffic driver for that business, and when customers come in for balloons, they often purchase other items for celebrations and events," CEO Mike Creedon said on the retailer's earnings call. "So the impact definitely extends beyond the balloon sale itself."

Dollar Tree did not respond to a request for additional comment.

Creedon made his remarks as the the conflict in the Middle East keeps the Strait of Hormuz effectively closed - and the U.S. and Iran resuming mutual attacks over the weekend - and disrupts shipments of oil (CL00) (BRN00), helium, polyester and other goods around the world, pushing prices higher in the process.

Qatar supplies around a third of the world's helium, according to the U.S. Geological Survey. Attacks by Iran on Qatar's production network have upended that supply.

Helium, a byproduct of the mining of natural gas (NG00), is known widely for its use in balloons. But its cooling properties are also crucial to keeping the magnets running in MRI instruments, and the substance is also used to help keep defects and chemical impurities out of microchip production, said Sophia Hayes, a chemistry professor at Washington University in St. Louis.

When helium availability gets tight, the world's suppliers - the biggest of which include Linde (LIN) and Air Products & Chemicals $(APD)$ - tend to save the substance for higher-priority uses than balloons. Hayes said that the issues with Dollar Tree's balloon service could be a sign of what's to come for other industries that depend on the gas.

"In earlier helium supply shocks, some of the first [areas] affected were, let's call it, the 'luxury' use of helium gas for party balloons," she said.

Phil Kornbluth, founder of Kornbluth Helium Consulting, also noted that balloon makers are usually among the first to suffer from supply curbs. But he suggested Dollar Tree's issues do not extend across the balloon industry and its helium suppliers. "I've talked to at least a couple of companies who said, 'We're getting all we need,' " Kornbluth said.

Moreover, he estimated that global helium supplies are likely only 10% lower today than before the Iran war. A previous helium oversupply, a partial production rebound in Qatar and industry efforts to shore up helium stockpiles have helped keep the substance available.

Still, Kornbluth said, helium has gotten more expensive for everyone, and major producers are starting to warn customers about how much of it they can supply. He noted that spot prices for helium have jumped twofold or threefold since before the conflict; however, those supplies make up no more than 5% of the helium market. Contract prices, which are more important to the market, have gone up around 15% to 30%, he estimated.

During Dollar Tree's earnings call in May, Creedon noted that helium was "a bit tight" across the industry. But he said that, as a large-scale buyer of the gas, his company had wider access to suppliers, adding that Dollar Tree already had sufficient balloon supplies for Mother's Day that month and spring graduations. Valentine's Day, he noted, had come and gone before the Iran war.

Creedon also mentioned that there were other options for parties besides helium balloons. He said that when he celebrated his son's 15th birthday the previous weekend, there were "plenty of helium balloons," but also stick balloons.

"I say that to say the substitutability at Dollar Tree is second to none," the CEO added.

-Bill Peters