Aftershock of the Tianjin Port Explosion Is Altering Asian Shipments and Having Global Effects

Operations have gradually resumed at Tianjin port after last week’s deadly chemical explosions that left more than one-hundred people dead. Reports indicate goods are flowing at 80 percent of capacity and two of the port’s container terminals remain closed. Even though traffic has resumed, oil tankers and ships carrying hazardous products have been barred from calling at the port. The reduced capacity has caused severe delays due to congestion. Until port operations return to normal capacity, experts warn that service interruptions could continue for several weeks.

More delays could come from growing safety concerns by operators and clean-up efforts by local authorities. The most alarming issue is the chance of rain and its potential chemical reaction with up to 700 tons of exposed sodium cyanide found at the hazardous goods storage facility that caused the damage. Because workers live in areas affected by the blast, labor issues are likely to cause additional delays as they work to rebuild their lives and homes.

The impact of the explosions forced freight forwarders, shippers and third-party logistics (3PL) operators to avoid service disruptions by diverting dozens of containers and rerouting shipments to other ports in northern China such as Dalian and Qingdao. As part of contingency plans, DB Schenker in Tianjin has already “diverted dozens of containers” to the port of Qingdao this week. The company said it was only aware so far of four LCL shipments that were considered as missing, presumed destroyed, “as the entire CFS warehouse burnt down completely”. DB Schenker also notes that customs services have resumed “but at a low productivity”, as officers are spending most of their time on cancelling entries and re-declaring cargo which could not be loaded last week. Swiss forwarder Panalpina said that all of its ocean export and import operations via Xingang/Tianjin had been suspended.

The aftershock from this tragedy at the north-eastern Chinese port is not only adversely affecting the logistics industry, but several companies are also experiencing pressure on their local and global supply chains. Wal-Mart Stores, Deere & Co, Airbus, and Caterpillar are likely to experience disruption to their respective supply chains because a number of shippers have storage and logistical facilities near the port. Additionally, labor issues coupled with the current logistic problems have made it difficult for the transportation of parts in the Tianjin region, compelling manufacturers to suspend operations.

Various reports estimate that approximately 2,700 new vehicles were damaged or destroyed. BMW has shifted port operations to Shanghai for its imports to China. While Volkswagen reported the most significant losses, Toyota shut-down two of its plants for three-days that were near the port and reported 50 of employees injured in the blast, Toyota is still investigating the impact on its global supply chain.

The global effects from the aftermath in Tianjin could see a rise in prices of industrial materials with considerable impact on the electronics and health care industries. With the onset of Peak Season Shipping to the U.S., popular items for the holiday shopping season in the U.S. are at risk of not arriving on time for Black Friday. If disruptions at the port persist, the demand for air freight services will increase among affected shippers.