Chemical plant explosion sends China dye stocks surging, sinks affected firms

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.

Executives in custody as China chemical plant explosion death toll reaches 47, with 640 injured

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.