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August 27, 2015 at 09:20 PM
Earlier this month, 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.
Here are 5 businesses and/or sectors hit by the Tianjin disaster.
1. Insurers.
Fairly early on, Chinese insurer Ping An said its exposure could run as high as 500 million yuan ($78.2 million); 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 to 1.5 billion, with reinsurers kicking in to cover a substantial portion.
But initial estimates failed to take into account mass evacuations over concerns about toxic chemicals, as well as continuing revelations of damage and disruption; both area residents and businesses are now demanding that they be compensated. In a statement, Fitch Ratings said, “Claims from the blasts are likely to undermine the financial performance of some regional players and those property casualty insurers with high risk accumulation in the affected areas.”
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.
Volkswagen reportedly lost 2,700 cars to the blasts; Renault, 1,500. Hyundai claimed damages to 4,000 vehicles that were parked near the sites of the explosions; Mitsubishi said as many as 600 vehicles might have been damaged.
