Chemical plant explosion sends China dye stocks surging, sinks affected firms
- Explosion will directly impact supply of m-Phenylenediamine, a chemical intermediary used in dye production
A deadly plant explosion in eastern China rocked chemical sector stocks in the country’s A share market on Friday, with shares of companies where employees were killed and production shut down sinking. Major dye producers, on the other hand, soared on expectations that dye prices could spike because of tightened supply of a chemical compound.
“The explosion will have a direct impact on the supply of m-Phenylenediamine, a chemical intermediary used in producing dyes,” Bai Juntian, a Beijing-based analyst for Chuangcai Securities, said in a research note on Friday. He said he expected dye producers to see a stock boost in the short term: “We expect a new round of price surge to set off in the dyes sector.”
The blast on Thursday, at Jiangsu Tianjiayi Chemical plant in Xiangshui County, killed 64 people and injured 640. The plant, which manufactures m-Phenylenediamine, is located in Xiangshui Biochemical Park. All companies in the park have been shut down temporarily, according to the local government.
Shares of Lianhe Chemical Technology, which has two subsidiaries in the industrial estate and had two employees killed in the accident, declined by the maximum allowed limit of 10 per cent to 11.36 yuan on Friday.
“Part of our houses and equipment were destroyed in the accident,” Lianhe Chemical said in a statement after market close, adding that the employees and properties were covered by insurance. “To ensure employee safety and production safety, our two subsidiaries have been temporarily shut down,” it said, adding that it was not yet sure of the impact of the accident.
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The two subsidiaries are important to Lianhe Chemical, as their combined profit contributed 58 per cent of its net income in 2018, the company said.
Jiangsu Yoke Technology, which owns a chemical plant in the park, also retreated 1.1 per cent to 17.43 yuan.
Major dye producers soared in Friday trading. Zhejiang Runtu, one of China’s largest dye producers, soared by 10 per cent to 13.02 yuan. Zhejiang Longsheng Group, which produces textile chemicals including reactive dyes, also rose by 10 per cent to 12.56 yuan. Zhejiang Jihua Group surged 5.2 per cent to 15.27 yuan.
According to an estimate by Chuangcai Securities, Jiangsu Tianjiayi Chemical produces more than 10 per cent of the m-Phenylenediamine in the market. Bai said he expected the chemical compound to see a price increase of 10,000 yuan per tonne in the short term. As a result, prices for disperse dyes will also increase.
Meanwhile, Liu Xi, an analyst at Huatai Securities, said in a report on Friday that the biochemical park could face shutdown risks or increased safety scrutiny afterwards. Some chemical producers located in the park could also be affected, including Jiangsu Jurong Chemical, China’s main producer of acrylic acid. Its listed unit, Zhejiang Satellite Petrochemical, closed flat at 14.19 yuan on Friday.
