In August, Tianjin, China was shaken by a pair of blasts that shook the city and killed more than 120 people. The death toll continues to rise as authorities try to cope with its aftermath, continue to search for the missing and learn what went wrong in the 10th largest port in the world.
Businesses are trying to cope, too. Thousands of new cars and other goods awaiting shipment were destroyed; factories and warehouses were shut down; logistics companies struggled to deal with disruption; homes were damaged; and small animals and birds were brought to the area in an effort to conquer fears of toxic chemical contamination (authorities claim that the quality of air and water is safe).
Residents and workers both have good reason to worry: the explosion occurred at Ruihai Logistics, and the company was reported to have stored an unsafe quantity of sodium cyanide at its facility—up to 70 times the legal limit for such storage—and perhaps engaged in illegal chemical trading as well. Fears over contamination were amplified after thousands of dead fish washed up on riverbanks four miles from the blast site.
But even as China was still trying to figure out how bad things were in Tianjin, another explosion rocked Shandong province as a factory run by the Runxing Chemical Company, a subsidiary of Runxing Group, created tremors felt a mile from the site of the blast.
The two disasters highlight questions about China’s safety record and regulatory capability—both of which pose threats to both consumers and investors.
1. Insurers.
Fairly early on, Chinese insurer Ping An said its exposure could run as high as 500 million CNY (78.2 million USD); reports cited Credit Suisse saying that many Chinese insurance companies could be affected and the toll of initial insured losses could reach as high as 1 billion USD to 1.5 billion USD, with reinsurers kicking in to cover a substantial portion.
2. Automotive industry.
Tianjin serves as one of the top ports for the importation of cars into China, which means auto companies have a massive presence there. Ex-Chinese companies including Toyota, Volkswagen, Renault, Hyundai and Mitsubishi have all experienced damage, disruption, or both. Chinese state media have reported that about 8,000 cars were destroyed, with Toyota saying that about 4,700 Toyota and Lexus vehicles were damaged in the blasts. Toyota has shut down its operations near Tianjin because of safety concerns.
3. Shippers.
Even if cars hadn’t suffered damage in the explosions, port operations have a long way to go before goods can pass freely in and out of Tianjin. While the rest of the port may be operational, roads in and around the northern part remain closed or disrupted, and berths located in the blast area are not functioning. That’s had an impact on everything from soybeans to iron ore, and kept chemicals and crude oil from being offloaded. Third-party logistics companies are seeking alternate ports to get goods out, but hours by road to reach those alternates mean that goods not destroyed in the blasts will still experience substantial delays getting to market.
4. Multinational companies.
More than 150 Fortune 500 companies have some form of operations in Tianjin, so the blasts truly had global reverberations.
John Deere is just one of the American companies affected; it has halted operations near Tianjin after some of its workers were injured in the explosions. Although the Deere facility is located eight miles from the blast area, workers who lived closer to the explosions were reported injured, some seriously. Until it can evaluate both its workers’ needs and the safety of its operations, the company said in reports that its facilities would remain closed.
Walmart has also been affected; it just expanded its distribution center in Tianjin in July, opening four new warehouses. But plenty of other multinationals, not just U.S.-based firms, are affected.
5. Chinese electronics firms.
No matter how quickly Tianjin manages to get things back up and running, there’s now already a delay built into the production of electronics goods globally. Not just a focal point for the shipping of cars and other finished products, Tianjin served as a hub for components and essential materials for industries across a wide range of sectors, from automotive to healthcare—and one feeling the heat of Tianjin’s flames is the electronics industry.
In August, Tianjin, China was shaken by a pair of blasts that shook the city and killed more than 120 people. The death toll continues to rise as authorities try to cope with its aftermath, continue to search for the missing and learn what went wrong in the 10th largest port in the world.
