Devastating explosions, the largest of which was equivalent to a 2.9-magnitude earthquake, occurred on August 12th in Tianjin, the 10th busiest port in the world and the gateway to northern China. These explosions led to immediate disruptions in the shipments of a variety of products, including oil, coal, and iron.
As pictures of fireballs shooting across the skies of Tianjin make the news circuit, you're likely asking: how this will impact our supply chain?
While it is uncertain how long the port will be shut down or running at a lower capacity, it is unlikely that there will be significant impacts to global commodity prices or shipments. Even though Tianjin is a major port, other ports in eastern China have extra capacity to handle the disruptions. Most suppliers are working with their customers to minimize the potential impact, including re-routing shipments to these ports.
There is the potential for short-term disruptions or stockpile damage to materials such as iron ore, but with recent low prices, steel mills have been stockpiling and have plenty of supply to meet demand. Additional stockpiles exist at other ports throughout China. Approximately 30% of China’s steel exports in the first half of 2015 went through Tianjin.
The United States has ample supply of the major materials that go through Tianjin, and most of these markets, such as steel and oil, have in fact been oversupplied. The companies with the biggest risk to these disruptions are those with operations in China. Otherwise, despite the news firestorm, there is little to worry about disruptions impacting your supply chain.