Hazardous Chemicals from China: Thoughts after Tianjin
On August 15, 2015, Kemcore's CEO wrote this piece in reaction to the explosions that rocked Tianjin's port. Our offices are based in China, and we are familiar with the facilities that exploded. The week after the explosions was an anxious time for us, as we contemplated the future of hazardous chemicals from China.
While we know the answers to many of the questions contemplated in this piece, they still serve as a poignant reminder of the ways businesses that rely on hazardous chemicals from China and other countries can be affected by disasters.
While the flames at the Tianjin explosion site have largely been extinguished, I cannot help but wonder. What comes next for hazardous chemicals in China? Our hearts go out to the families of the victims of this terrible tragedy.
Our company and supply partners stored sodium cyanide and other chemicals at this particular chemical warehouse in the Tianjin port in the past. We used the warehouse temporarily while waiting for our vessel. Luckily, at the time of the explosions, we did not have any cargo stored at the port. I have spoken to my colleagues who did. Many lost several hundred tons of sodium cyanide, sodium hydrosulfide, and sodium sulfide.
One of my top concerns following the explosions is what impact the Tianjin accident will have on the market for hazardous chemicals from China.
My initial thoughts are:
- After this event, the Chinese government will most likely enforce a strict policy on the handling and shipping of dangerous or hazardous chemicals from China.
- Increased compliance costs are likely.
- If the explosion was caused by a leak, we might see enforcements on packaging requirements for liquid chemicals. This has always been a weak area with some exporters. It is not hard to imagine a scenario where leaks led to the explosions. An article by Reuters also points out that the "Tianjin port warehouse where two massive explosions killed dozens of people violated packaging standards during a safety inspection two years ago, the safety bureau said." This problem of packaging standards is fairly common. I was a victim twice! The picture below shows hydrogen peroxide (24 tons) that leaked enroute the port of Durban, South Africa. Fortunately, it was discovered and offloaded and repackaged in Singapore. The leak led to a $5,000 fine by the shipping company. Why do suppliers use substandard packaging? One word. Profit! And how much profit are we talking about? The cost gap between the best quality UN-rated drums and inferior drums is approximately USD20-30/MT. This translates to roughly $480 to $720 additional profit per container. It may not sound like much, but when you're talking 10 or 20 containers of hazardous chemicals from China being shipped by a single company per month, it adds up.
- Could we see strict licensing requirements and scrutiny of Chinese companies in the hazardous chemical supply chain? This might lead to some companies losing their trade licenses.
- Consolidation/fewer suppliers? Maybe leading to higher export prices of hazardous chemicals from China?
- Could sodium hydrosulfide and sodium sulfide be the culprits? They have been known to leak in the summer. Many suppliers have incurred have fines in the past from shipping companies over leaks. At Kemcore, we have refused or delayed orders of sodium hydrosulfide and sodium sulfide, as they normally leak in the summer, even with four layers of packaging.
- Insurance. I was speaking to a client who refuses to insure cargo from China. I bet he'll think twice now. Will the insurance rates increase for hazardous chemicals?
- Are we likely to see increased IMO surcharges from shipping companies out of China?
Sourcing chemicals from China has always been a challenge and logistics are more than a matter of point A to B.
What are your thoughts? Do you think importing chemicals from China has become more difficult since the 2015 Tianjin explosions? Share your comments below.
