The current supply and demand of argon is keeping a delicate balance. Due to the declining demand for piping supply of oxygen affected by the reduced production of crude steel, the output of co-produced argon has naturally declined. It has caused a phenomenon of the sluggish growth in all the three major demands for silicon wafers, stainless steel and welding.

With view to the supply side, the output of crude steel in January amounted to 8.14 million tons with a substantial decrease by 9.8% from the same term of last year and a decrease for five consecutive months, according to the statistics of the Japan Iron and Steel Federation.

The main cause of declination is regarded to be the decrease in export to China and the sluggish business for the automobile industry. Naturally, the piping requirements of oxygen for customers in the iron and steel industry has been proportionally in a decreasing trend, accompanied by the decreased output of argon which is co-produced with oxygen.

As the largest source of argon is iron and steel, concerns are emerging fearing a serious worsening of declination in the production of argon. On the other hand, it is found that the demand is sluggish on the whole. The AOD steelmaking and welding of stainless steel also remain sluggish.

However, the production of silicon wafers of the biggest argon user has been growing steadily for these several years.

The output in 2018 was 6010.22 million square inch with a great increase by 11.9% which is record high.

Considering that Shin-Etsu Handotai and SUMCO together takes a 50% share of the world market, the steady business outcome in 2018 might well be attributed to the production of semiconductor chips.

Argon is used as inert gas to pull single crystal of silicon. The consumption of argon in 2018 seemed to be about 46 million m3 up 3 to 4% from last year, which marked over 40 million m3 after long before. However, comparing with 55 million m3 at the peak time in 2018, the market still remains shrinked by 20 to 30%. As the production of wafers and the demand of argon used to be in a proportional relation, the current situation is strange.

Recycling System as Main Cause of Declination

The biggest factor of such declination is guessed to be the introduction of argon recycling system by some plants of wafer manufacturers.

In addition, the optimization of argon consumption in wafer plants might also have caused the declination. The argon recycling system was once thought to be not advantageous costwise, but since it was granted for subsidization of the government, the burden to depreciate the facilities has been reduced to some extent. Also with the occurrence of argon shortage for some time, users were forced to secure a stable supply.

Argon is a big column for the industrial gas business, but its production unavoidably has to depend on the demand of oxygen. The demand of argon accounts over 80% for three major applications, i.e. pulling of silicon single crystal, AOD steelmaking for stainless steel, and shielding for MAG, MIG welding.

The application diffuses over to the PVD (spattering) process or mixing of material gases, but we cannot deny that the gas prices are too high to expand more. The current strange balance has a factor to be removed easily. The semiconductor market at least is in a wait-and-see period. It is anticipated that the capital investment will recover at the phase of next spring leading to the restoration of demand for 3D-NAND flash memory or DRAM. The demand of silicon wafers also is expected for sure to grow further. It means the demand of argon will be loaded together. If the demand for iron and steel is not recovered, the market may rapidly turn out to suffer the situation of tight supply.