The explosion at Tianjin Port last August should be seen as a spectacular example of why those operating throughout the global supply chains should examine their work practices and risk policies more thoroughly.

The Swiss Re insurance research report

'Natural catastrophes and man-made disasters in 2015'

provides useful insight and commentary on the blasts at the Port of Tianjin in August last year. The report anticipates this incident to be the biggest insured loss of 2015, with property loss estimated at between US$2.5 and US$3.5 billion. On the basis of historic research, the economic loss could be many multiples of that. However tragic and costly, this incident becomes a focal point, drawing attention to underlying problems within global supply chain processes.

Tianjin provides a spectacular example of how cargo in transit, potentially mis-declared, or packed or handled incorrectly, can cause widespread damage and loss of life. There have, however, been other port-related incidents of a lesser magnitude reported in the last year, at Santos in Brazil and in Vancouver in Canada. Together, these represent the tip of an iceberg that is made up of many less serious incidents that occur each year, resulting in fatalities, injuries and substantial disruption to the supply chain.

The impact of fire

TT Club's analysis of its claims history reveals that incident causation is concentrated within just five sectors. Approximately two thirds by both value and number relate to vehicle accidents, including both road traffic and cargo handling equipment collisions, fire, theft and poor cargo packing. This rolling five year analysis takes in over 7,500 insurance claims, with a total insured claim value of around US$500 million. While there is substantial consistency in the relative significance of each major causation year-on-year, it is notable that the costs related to fire are almost invariably disproportionate to the number of incidents.

the costs related to fire are almost invariably disproportionate to the number of incidents

While the cause of the Tianjin explosion may never be entirely conclusive, the combination of other shore-based fires and explosions, together with a troubling increase in cargo related ship-board fires result in a need for operators to review safety regulations, particularly relating to the storage and handling of dangerous goods. All such fire incidents expose the level of supply chain vulnerability, since the resultant disruption reverberates through much of the trade economy.

All such fire incidents expose the level of supply chain vulnerability

Apart from the inevitable delay in all cargo caught up in any conflagration, regardless of whether damaged or not, there will commonly be substantial costs in sourcing or producing replacement cargo, as well as disposal and clean-up expenditure. Furthermore, the total economic costs should in reality account also for hidden losses, such as management time and distraction, and reputational damage.

Address safety behaviours

More attention should perhaps be given to Hapag-Lloyd's comments in relation to its 'Watchdog' findings:

"there was a sharp rise in Watchdog findings following the devastating dangerous goods explosion in the port of Tianjin in mid-August. Many ports drastically tightened their dangerous goods guidelines in the wake of the incident or even prohibited dangerous goods from being processed at all. With the software, our industry can considerably reduce the risk posed to crews, ships, cargo and the environment."

While those comments relate to transport bookings, they reveal a disturbing culture. Indeed, risk assessment surveys at ports over the last 12-18 month have also found worryingly little adherence to segregation requirements for dangerous goods. As with the well-established rules for transport by each mode, there is relevant guidance for activity within the port area. At international level, this is provided in the International Maritime Organization's (IMO) document

'Recommendations on the Safe Transport of Dangerous Cargoes & related Activities in Port Areas'

(MSC.1/Circ.1216 (2007). National guidance or regulations are likely also to be applicable. While matters such as location, construction and size of facilities will almost invariably be regulated, it is important that there is appropriate recognition of requirements for dangerous goods, including things like the access and egress for emergency services or the management and containment of spills.

Sadly, the reality in many locations would seem to be that there may not be relevant facilities available to deal effectively with emergencies and more thorough risk assessments are needed. At its most basic, this should include appropriate training and full collaboration with local emergency services.

Safety calls

Considering the continuing need in other parts of the supply chain, not only to review regulation and guidance, but also to promote sound corporate culture, it is perhaps time that the existing IMO recommendations are reviewed and some teeth added to bring about greater adoption at national level. Clearly, such matters need to be better integrated globally in order to improve practice in handling dangerous goods, resulting in the safety of workers and third parties, as well as maintaining the integrity of cargo and transport infrastructure.

We hope that you have found the above interesting. If you would like further information, or have any comments, please email us, or take this opportunity to forward to any colleagues who you may feel would be interested.

We look forward to hearing from you.

Peregrine Storrs-Fox

Risk Management Director, TT Club