Tianjin Warehouse Explosions Heighten Need for Supply Chain Visibility

Explosions in Tianjin, China, this week called attention to the lack of sufficient chemical storage standards compliance present in the country. If not more strongly regulated, improper chemical storage and transport actions could cause major supply chain risks, sending a potential ripple effect felt across businesses in the Tianjin region and also throughout the global supply chain.

Chinese President Xi Jinping confirmed “severe problems in the work safety sector,” according to a report from the Xinhua news agency,¹ following numerous chemical warehouse explosions in Tianjin, China, earlier this week which left more than 100 people dead and hundreds of others injured. In addition, the State Council Work Safety Commission also cited a “lack of safety awareness among businesses, lax implementation of safety regulations, irregular practices among workers, and weak emergency responses to incidents,” according to the report.

The initial explosion, which occurred before 12 a.m. local time on Aug. 12 at a chemical warehouse facility owned by Ruihai International Logistics Co., led to other explosions in the area.

Events following the initial explosion in the Tianjin area this week included:

• A second explosion, more powerful than the first (equal to about 21 tons of TNT), and heard seconds after the first explosion on Aug. 12, according to a CNBC report²
• Two container terminal operations at Port of Tianjin were suspended following the explosions, per the Journal of Commerce³
• According to numerous reports, the website of Ruihai Logistics becomes inaccessible Thursday afternoon
• 50 people reported dead on Thursday and some 700 injured⁴
• Port of Tianjin and numerous companies in the area—including BHP Billiton Ltd., Renault, Hyundai Motor Co., GlaxoSmithKline PLC, and Deere & Co.⁵— heavily affected by explosions as of Friday
• Warehouse fire reported on Friday evening to have been out but visible again on Saturday morning local time, in addition to more blasts heard in the affected area⁶
• 85 dead confirmed on Saturday morning by local Chinese news agencies
• Death toll rises to 100-plus on Saturday; air pollution poses no risk as of yet⁷

While authority officials continue to investigate the cause of the warehouse explosion, sodium cyanide is one chemical which may have been stored at the warehouse, according to Gao Huaiyou, vice head of the Tianjin bureau of work safety.⁸ Other chemicals, not yet confirmed, may have included calcium carbide, toluene diisocyanate,⁹ and potassium, and ammonium nitrate. The risks that such chemicals expose to human health can be deadly, further increasing the level of severity and danger of the explosions, and enhancing the critical need to apply proper Supply Chain Risk Management (SCRM) practices.

Calcium carbide is a highly volatile chemical used in the production of PVC plastic. When exposed to water, it releases acetylene, which is highly flammable. According to Bloomberg, it is suspected that firefighters attempting to quell the initial fire from the first explosion may have exposed existing calcium carbide in the warehouse to water, potentially causing the second explosion. Toluene diisocyanate, another chemical which may have been stored at the warehouse, is commonly used in the production of flexible polythene foam. Ammonium nitrate is predominantly used in agriculture as a high-nitrogen fertilizer. Its compound is used as an explosive in mining and also sometimes in improvised explosive devices. Potassium occurs as a mineral niter also known as saltpeter, and is a natural solid source of nitrogen. Major uses of potassium nitrate are in fertilizers, tree stump removal, rocket propellants, and fireworks. It is also one of the major constituents of gunpowder.

The Tianjin explosions additionally brought to light Ruihai Logistics’ earlier problems with adherence to proper standards. “Inappropriate ‘danger’ labeling” was a cause of a failed safety inspection in 2013, according to a Reuters report.¹⁰ 14,000 containers located at Rui Hai’s warehouse were inspected, of which “29 from the five firms had failed the packaging checks,” according to the report.

Executives of Rui Hai International Logistics are in custody and a nationwide order to inspect the storage and transport of dangerous chemicals is underway¹¹ (requiring all local governments to report back by Sept. 15). While important during the aftermath of the Tianjin explosions, local governments must take stronger efforts to enforce rules and severe penalties around such supply chain risks as improper chemical storage or handling.

The explosions also enforce the importance for businesses to understand the regions their supply chains are in and what measures they can take to proactively address supply chain disruptions and increase supply chain visibility. Utilizing the right solutions to monitor events such as the Tianjin explosions can better prepare them to understand:

• Whether their company, parts/materials, or overall industry could potentially be affected
• What their right Emergency Response Procedures are is affected
• What their potential risk mitigation options are, such as an alternate qualified facility, backup inventory or backup source

Resilinc EventWatch is actively monitoring the situation and providing live updates to EventWatch subscribers, as more reports come in about the impact to Tianjin, China, and its surrounding areas. Click below to learn more about the premiere supply chain event monitoring service.

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References

1. Profound Lessons Must Be Learned from Tianjin Blasts: Chinese leaders, Aug. 15, 2015, Xinhua: http://news.xinhuanet.com/english/2015-08/15/c_134521192.htm
2. Death Toll in China’s Tianjin Explosion Rises to 50: Reports, Aug. 13, 2015, CNBC:http://www.cnbc.com/2015/08/12/explosion-in-tianjin-china.html
3. Deadly Tianjin Blast Shuts Down Two Container Terminals, Aug. 13, 2015, JOC Group Inc., http://www.joc.com/port-news/deadly-tinajin-blast-shuts-down-two-container-terminals_20150813.html
4. Chinese Port City Tianjin Searches for Clues After Devastating Blasts, Aug. 14, 2015, The Wall Street Journal: http://www.wsj.com/articles/explosions-kill-dozens-at-warehouse-in-tianjin-china-1439449553
5. Chinese Port City Tianjin Searches for Clues After Devastating Blasts, Aug. 14, 2015, The Wall Street Journal: http://www.wsj.com/articles/explosions-kill-dozens-at-warehouse-in-tianjin-china-1439449553
6. Tianjin Blasted Warehouse on Fire Again, Aug. 15, 2015, Xinhua: http://news.xinhuanet.com/english/2015-08/15/c_134520494.htm
7. Tianjin, China, Explosion Area Evacuated as Death Toll Rises to At Least 104, Aug. 15, 2015, NBC News: http://www.nbcnews.com/news/world/tianjin-china-explosion-area-evacuated-over-sodium-cyanide-fears-n410371
8. Profound Lessons Must Be Learned from Tianjin Blasts: Chinese Leaders, Aug. 15, 2015, Xinhua: http://news.xinhuanet.com/english/2015-08/15/c_134521192.htm
9. Death Toll from Tianjin Explosions Climbs to Over 100, Aug. 15, 2015, CNN: http://www.cnn.com/2015/08/15/asia/china-tianjin-explosions/

Additional Resources

• BBC: http://www.bbc.com/news/world-asia-china-33923478
• BBC: http://www.bbc.com/news/world-asia-china-33844084