Tianjin Port Explosion 2015

International Commerce August TIANJIN PORT EXPLOSION 2015 The huge explosion at Tianjin Port, which As a result of the fire, the following problems are led to an enormous fire that affected a likely to arise: substantial part of the port, could lead to massive supply chain disruption. This briefing Damage or loss of both non marine and provides an overview of some of the potential marine property consequences. News reports show that warehouses, port The origin buildings and real estate have all been damaged by the fire. In addition to this marine property, According to the Tianjin Police, the explosion non marine property such as nearby residential happened in a warehouse operated by a logistics buildings and road/rail infrastructure have also company called Rui Hai International Logistics been damaged. Most of these property losses will Co. Ltd. Rui Hai describes itself as a government no doubt be insured by Chinese insurers, but it is approved firm specialising in handling dangerous likely that some international reinsurers, including goods. The warehouse is reported to have been London players, will have reinsured the Chinese designed to store dangerous chemicals, including insurers. sodium cyanide (which is classified as “extremely harmful”) and the explosives sodium nitrate and London reinsurers will be reviewing their potassium nitrate. reinsurance exposure to see if they are likely to face claims. Two years ago the company was found to have flouted packaging standards, with Reuters reports Death and personal injuries citing an inspection carried out by the Tianjin The press has already reported that over 50 Maritime Safety Administration. people were killed as a result of the incident and Rui Hai will doubtless be facing substantial losses it is expected that further deaths will emerge as and it, together with the owner of the cargo which the authorities continue their sweep of the disaster exploded, will be at the centre of investigations zone. to ascertain whether the cargo was properly declared, handled and stored. The injured and the families of The Club is currently examining its under the contracts or carriage. The the deceased will be looking to exposure. Given how many shipping attitude of the Chinese courts and anyone they can to obtain answers lines are likely to have suffered losses, whether they will accept jurisdiction for to their questions and ultimately issues as to aggregation will also arise. losses and make forwarders, logistics compensation. operators and shipping lines liable is, at Cargo claims this stage, unknown. The owners and manufacturers of the cargo which started the fire and It is unclear how much cargo has been Ports and terminal claims Rui Hai will inevitably be in the firing affected by the explosions. So far, it line, with their respective product has been reported that around 2,700 In 2014, the Tianjin Port was the and operational liability insurers in the cars have been damaged, including third largest in China and fourth frame. Given the huge extent of the most notably Renaults, Toyotas and largest globally in terms of total damage, it is extremely unlikely that Volkswagens and Land Rovers. cargo throughput. It is simply huge, either party’s insurance will be sufficient Volkswagen in particular appears to comprising 121 square kilometres of to respond to the full extent of the have been particularly badly affected, land. However, only a relatively small overall losses. with Chinese media reports citing area, although still large by non- significant damage to a number of Chinese port standards, within the Questions may also be asked of the well known brands, including the port was physically damaged by the port authority, Hong Kong listed Tianjin iconic VW Beetle (391), Golfs (114), explosion and fires. Port Development, on whose land the Touaregs (1065) and Tiguans (257) warehouse was located, concerning amongst others. Reports also indicate Total cargo throughput in 2014 was whether it discharged its obligations that damage to Hyundai manufactured 445.78 million tonnes. Of this, 286.77 to ensure Rui Hai’s compliance with cars (some 4,000 Genesis and Equus million tonnes were non-containerised lease/licence obligations and health sedans) could reach US$130 million. cargo comprising metal ore (110.50 and safety regulations. Four helicopters operated by Eastern tonnes); coal (88.85 million tonnes); General Aviation Co. Limited are also automobiles (26.21 million tonnes); Port and terminal equipment known to have been damaged when steel (20.02 million tonnes); and claims a hanger door was blown off by the crude oil (18.74 million tonnes). Total force of the explosion. There may also container throughput is stated to have It is suspected that expensive terminal been 14.06 million TEUs. equipment has also been damaged as be damaged/destroyed bulk and break a result of the incident. This again has bulk cargoes. Whilst the port is operated by Tianjin probably been insured in the Chinese As mentioned above, a large number Port Development, it is understood market, but, as with property, there of containers have been affected. that there are a number of terminal could be an exposure for international The owners of the cargo due to pass operators with JV concessions at the and London reinsurers. Business through Tianjin will now be urgently port itself. There may be considerable interruption extensions to property trying to clarify with forwarders and disruption to some of these facilities. policies will be under the spotlight if shipping lines whether their cargoes The port authority itself may also need important equipment has been lost and may be those in the boxes. They to deal with traffic management and operations affected. in turn will be contacting the port disruption issues. Terminal operators affected by loss of business will be Shipping container claims operator so that they can locate which have been affected by the fire. looking for a remedy. As mentioned TV footage and still photos show above, they will also be looking literally thousands of shipping Cargo insurers will be in contact with to make claims on the equipment containers damaged by the fire. They their insureds and will be looking to see insurance policies so that they can get will be owned by a large number of who they can make a recovery from in their operations running normally as shipping lines and container leasing respect of the damage. quickly as possible. companies and have been rendered P&I Clubs and freight liability insurers Terminal insurers will be assessing their total losses. It is unclear whether will be facing enquiries from anxious potential exposure to liability claims. these were full or empty. The container members keen to clarify if they are shells themselves will be insured on a likely to be held liable for cargo losses property basis, many with the TT Club. 02 International Commerce Vessel calls and diversions should prepare themselves for potential others will inevitably be affected whilst disputes. If there are contamination part of the port is in closedown. Immediately after the explosion, all calls issues, port safety and/or berth safety and port authorities were suspended. may become an issue. The incident The extent of the explosion’s impact The full suspension has now been lifted appears to have affected two terminals is still only emerging. We do know, for but oil tankers and oil supply ships are in particular. example that businesses even up to still prohibited from calling. The Tanggu six kilometres away from the epicentre container terminal has also suspended Rail services of the explosion have been affected. all new calls. Fortunately no vessels It was reported in Lloyds List that appear to have been damaged. The port is served by multiple rail Wallenius Wilhelmsen Logistics has a heads. Tianjin Port International vehicle processing centre in Tianjin. Its If the port is unable to operate in Logistics Development Co. Ltd also staff are unharmed and its joint venture the normal manner in the coming owns and operates 15 scheduled terminal and vehicle processing centre days, pending investigations and the freight train routes within China which have suffered only some smaller quarantining of affected areas, then carried 129,000 TEU of cargo in the material damage to buildings. It is also it is likely that vessels calling at the first half of 2011. The destinations of reported in Lloyds List that Caterpillar container port and also at bulk and the train routes cover most of north and Deere & Co have facilities near multi-purpose terminal areas will need and west China, including Chengdu, the port. Many of these industrial and to divert to other ports. This will lead to Xian, Taiyuan and Urumqi. Three of logistics facilities will have property increased cost for the vessel operators the train routes are to the borders of liability insurance in place to respond to and customer problems. Liner respectively Kazakhstan, Mongolia and their own or customer physical loss or operators will face questions regarding Russia. damage claims. deviation of cargoes, temporary storage, transhipment and even If electricity supply has been affected It is unlikely, however, that many of abandonment. Bulk operators and and rail infrastructure damaged then them will have sufficient supply chain charterers will face issues regarding these services could be disrupted with insurance or business interruption demurrage, port nomination, access to knock-on supply chain and revenue cover in place to protect them in full cargoes and questions of frustration. implications. against the consequences of the Marine services explosion. Business interruption for Tianjin is one of the top ten ports in the them could be severe. world by container volume and local There are a number of major marine manufacturing companies may need to operations at the port of Tianjin, Global multinationals operating in look at alternative ports to export their including Chimbusco (Tianjin’s Tianjin will likely insure their business containerised product.

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