The massive explosions that rocked Tianjin last week is one of those great examples of how your neighbors might be the reason that you have a business interruption. It is always a great exercise narrative. This event is starting to have significant economic implications as the resulting facility damage and port shutdown threaten to stall production and are leaving goods piling up at the Port and in businesses.
The site was still completely inaccessible two days after the incident, with police cars and fire trucks thronging the area. Chinese and other media outlets have reported that the toxic chemicals that caused the explosions were released into the air and seeped into the groundwater. Military biochemical specialists have reportedly been sent to the site.
The port of Tianjin is the gateway to North China and a key part of a region — encompassing Beijing, Tianjin and Hebei Province — with a combined population of more than 100 million. It handled the world’s fourth-highest volume of freight traffic in 2014, trailing only Ningbo in Zhejiang Province, Shanghai and Singapore. In Binhai New Area, the district where the blasts occurred, new port facilities and industrial parks had been under construction with the April launch of the Tianjin Pilot Free Trade Zone, making the impact all the more severe.
Japanese companies have not been left unscathed. Terminals at the port are closed, unable to even accept freight. The auto industry will probably be hit hardest, given the concentration of plants and logistics facilities in Tianjin.
Fuiji Industries had well over 100 new cars damaged by the blasts. The company behind the Subaru brand is mulling altering its distribution routes to compensate for the Tianjin port shutdown. The automaker has no factories in China, instead shipping all of its output from Japan. Its shipments to northern China go through Tianjin, so its inability to use the port is a heavy blow.
Toyota reported Friday that more than 50 were injured near the warehouses where the explosions occurred. It runs a passenger-vehicle assembly plant, a research facility and a distribution center near the site. While the factory had been closed from Aug. 9-16, dormitory residents and others living nearby were hurt, a Toyota representative said.
Otsuka Pharmaceutical decided to shut down a beverage plant about 4km from the blast site Friday and Saturday. The company said it will assess the impact of the disaster on employee safety and product distribution.
An Aeon mall 2km from the site was damaged by shockwaves, with no date set for its reopening.
The incident does not bode well for exports by Chinese companies, either. With much of the steel industry concentrated in Hebei Province, Tianjin is a major shipping base, handling 30% of Chinese steel product exports. “If we remain unable to use the Tianjin port, exports to Southeast Asia and Europe will come to a complete halt,” worried an official at a major steelmaker. The disaster could also throw a wrench into the government’s plans to support the economy by using yuan devaluation to boost exports.