Severe floods in Henan province disrupt production, logistics, and infrastructure

Severe floods in Henan province disrupt production, logistics, and infrastructure

Executive Summary

  • From July 18 to July 21, Henan province in China was devastated by record rainfall. Zhengzhou city, the provincial capital, was the hardest hit. Within three days, 617.1 millimeters (24.3 inches) of rain fell on the city, which is almost equivalent to the city’s annual average of 640.8 millimeters (25.2 inches).
  • The floods destroyed the city’s transport and utility infrastructure: 29 sections of 26 national and regional highways were closed to traffic while many freight lines and high-speed rail lines were suspended or operated at limited capacity.
  • Zhengzhou city is home to several key automotive and technology manufacturers. Due to severe flooding and subsequent network disruption, including power and water shortages, many manufacturers in the automotive, technology, and pharmaceutical sectors have temporarily halted production. In certain cases, production has been suspended indefinitely.
  • The Henan Meteorological Observatory forecast further heavy rainfall in parts of Henan until July 29; poor weather conditions are likely to exacerbate the ongoing logistical disruption and cleanup efforts. Companies in Zhengzhou may face near-term operational and logistical hurdles as a result.
  • Customers with suppliers based in Henan province are advised to closely monitor the ongoing adverse weather conditions and identify which suppliers have been impacted through the network mapping and monitoring solutions provided by Everstream Analytics.

From July 18 to July 21, Henan province in Central China was devastated by record rainfall and subsequent flooding with significant damage to transport, infrastructure, and production operations. Zhengzhou, the provincial capital city of Henan, was one of the worst affected areas. The city recorded 617.1 millimeters (24.3 inches) of rain, which was almost equivalent to the city’s average annual rainfall of 640.8 millimeters (25.2 inches). As of July 26, flood-related casualties amount to at least 58 people. The financial cost stemming from the disaster is estimated between CNY 1 billion (USD 154 million; EUR 131 million) to CNY 10 billion (USD 1.5 billion; EUR 1.3 billion).

Significant disruption to freight movement

Zhengzhou is situated on a low plain, an ideal location as China’s road and rail transportation development hub and strategically located along the Belt and Road Initiative. Its geographical advantage allows the city to provide freight services to several European cities including Berlin, Duisburg, Madrid, and Helsinki and serves as an integrated transportation system for China’s national highways, expressways, and rail services. However, Zhengzhou is a flood-prone city, particularly during monsoon season when the Yellow River’s water level exceeds its usual threshold.

The recent heavy rainfall paralyzed the city’s transport network as floodwaters in certain areas reached two meters in height, making roads impassable and submerging tunnel networks. According to China’s Ministry of Transport, 29 sections of 26 expressways remained partially closed to traffic. They include parts of the G4 Beijing-Hong Kong-Macau Expressway, the G30 Lianhuo Expressway, the S26 Taihui Expressway, the G1511 Rilan Expressway, and the G3001 Zhengzhou Ring Expressway. The ministry also mentioned that heavy rain had caused landslides, causing traffic disruption on many roads and bridges. In total, eight national highways and eight provincial highways were damaged due to landslides in Zhengzhou.

The structural integrity of certain bridges and expressways were compromised, forcing the Henan Emergency Management Department to issue a truck driving ban, effective from July 20, 23:30 local time. The ban has been lifted for the rural provinces of Henan but remains in place in Zhengzhou. Authorities have not provided a timeline as to when the ban would be lifted. Similarly, Zhengzhou’s rail infrastructure was halted as train tracks and tunnels were submerged in flood waters and inundated with debris, further exacerbated by power outages. According to reports, 160 trains were stranded at Zhengzhou East railway station. Multiple train services operated by China National Railway Group Co., Ltd. were also suspended or had to operate with limited capacity. Other train services including the Zhengzhou high-speed railway, Longhai railway between Zhengzhou and Luoyang, Beijing-Guangzhou high-speed railway, Xulan high-speed railway, Beijing-Guangzhou railway, Longhai railway, Jiaoliu railway, and Ningxi railway were also affected by the floods to varying degrees.

Zhengzhou Xinzheng International Airport, the seventh busiest airport in central China for both passenger and cargo traffic, faced significant flight cancellations after the authorities issued a red warning on July 20. More than 660 inbound and outbound flights were either canceled or delayed. Although export customs processing and outbound freighter flight operations have largely returned to normalcy, carriers continue to report customs processing delays for air cargo imports due to tremendous backlogs at the time of writing.

Most areas remain without power

Due to heavy rain, the municipal power station became inoperable. The problem was further compounded when the station’s backup power generator failed. This resulted in many districts and counties within Zhengzhou to experience power outages. As of July 26, local media sources report that most areas in Zhengzhou remain without power.

Several key districts affected by the blackout include Zhengzhou Xinzheng International Airport area, Zhengzhou High-tech Industrial Development Zone, and Zhongmu county. Without electricity, the city’s water processing plants are unable to operate, creating a shortage of clean drinking water for the city’s inhabitants and for its production bases.

Furthermore, major telecommunication providers are continuing to face service disruptions in Henan province. More than 6,000 base stations in Henan remain out of service, in which Zhengzhou accounts for almost half the number.

Production halts in Zhengzhou

In total, 91 companies are registered  in Zhengzhou. The city has seven pillar industries which include new materials, pharmaceuticals, automotive, equipment manufacturing, and electronic information. Table 1 lists the affected companies that had to temporarily suspend operations due to the floods.

CompanyIndustry SectorReason for DisruptionDuration of Disruption
Dongfeng NissanAutomotiveDamage to sensitive equipmentIndefinitely
Zhengzhou Yutong Bus Co., Ltd.AutomotiveLabor shortageJuly 20 to July 23
Haima Automobile Co., Ltd.AutomotivePower outagesJuly 20 to July 23
Feilong Auto Components Co., Ltd.AutomotivePower outagesJuly 20 to July 22
Foxconn Technology GroupTechnologyPower outages and labor shortageIndefinitely
Tailong PharmaceuticalPharmaceuticalsDamage to equipmentIndefinitely
Fuhua Iron and Steel GroupIndustrial ManufacturingDamage to equipmentIndefinitely
Henan Brilliant Biotech Co., Ltd.BiotechnologyDisruption to water suppliesJuly 20 to July 23
Xinxiang Baiyi Chemical Fiber Group Co., Ltd.New materialsDamage to production hallJuly 22 – August 5
Dengdian Group Aluminum Alloy Limited CompanyIndustrial ManufacturingExplosion in alloy tankIndefinitely
Mingtai ALIndustrial ManufacturingSafety concernsIndefinitely
Table 1. List of companies affected by the flooding in Henan province. Source: Everstream Analytics

Although most companies in Zhengzhou stated that the heavy rain had minimal impact on the their operations, the extreme weather phenomena has nevertheless caused severe disruptions to several vital industries. For instance, the flooding caused Foxconn Technology Group to give tens of thousands of workers a day off at two of its three major factories in Zhengzhou. While one of its plants in the Zhengzhou Economic Development Zone had resumed partial operations on July 23, another plant in Zhongmu county has yet to restart operations. Both plants suffered from intermittent power outages and workers could not return to their respective factories due to inaccessible roads. The three Foxconn facilities in Zhengzhou assembles more than half of Apple’s smartphones. Hence, production of Apple’s new iPhone series 13 is likely to face delays in the short-term.

Moreover, Zhengzhou’s automobile industry, which is a cornerstone of the city’s economic development plan, also suffered disruptions. Dongfeng Nissan, a joint venture between Dongfeng Motor Group and Nissan Motors, had indefinitely suspended production at its Zhengzhou production facility on July 20 after it was inundated with flood water and some manufacturing equipment were damaged. Other companies such as Zhengzhou Yutong Bus Co., Ltd. and Haima Automobile Co., Ltd. also suspended operations temporarily. Zhengzhou Yutong Bus Co., Ltd. declared July 20 a working holiday to allow workers to return home. However, the deteriorating situation of the floods made it difficult for the workers to return to the production facilities the next day, resulting in the company’s decision to temporarily suspend production until July 23. Haima Automobile Co., Ltd. also gradually resumed production on July 23 after its electricity supply was cut for two days. The automotive industry contributes CNY 100 billion (USD 15.4 billion; EUR 13.1 billion) to Zhengzhou’s economy and the city’s automobile production capacity exceeded 2 million units in 2020.  

Residual disruptions to persist

The devastation caused by the severe floods in Zhengzhou underlines the changing environmental and geological challenges that supply chain managers will face going forward due to unpredictable weather patterns. The ripple effects of supply chain disruption are likely to be felt long in Zhengzhou even after the waters have receded.

The city remains largely cut off, with rail and road infrastructure operating at a limited capacity. Districts and counties are still reporting intermittent power outages as the city struggles to resume operations at its full capacity. Many companies that were not directly impacted by the floods are likely to experience logistics difficulties in the coming weeks. For example, SAIC Motor Corporation Limited factories noted that logistics around its factories have been impacted substantially. A company spokesperson indicated that disaster relief efforts have been prioritized and that the transport of automotive parts will not resume anytime soon.

The ongoing power outages in Zhengzhou may exacerbate production halts for manufacturing-based companies. In total, 473 residential and commercial areas remain without continuous electricity and these include important districts such as Zhongmu county, a crucial manufacturing hub in the city. The State Grid of Zhengzhou Power Supply Co. reports that eight power stations in the city remain inoperable. Emergency service crews have been sent to repair an approximate 441 power distribution lines uprooted by the flood.

Furthermore, many parts of Zhengzhou are continuing to experience water shortages. At the time of writing, the city’s water treatment plant has yet to resume operations while authorities work round the clock to restore water towers, water pumps, and pipelines. The situation is compounded by network disruption as China Unicom, a telecommunication provider, reported that 8,773 base stations had been damaged, 256 cables disrupted, and more than 400 poles uprooted. China Tower also reported that 6,000 base stations had been damaged. Lack of accurate geo-positioning services has hampered their progress and delayed the restoration of the city’s internet, which may take some time to return to normalcy. 

Recommendations

Everstream Analytics recommends the following measures that can help companies navigate through the latest disruptions caused by the severe flooding in Henan province.

  • Continue monitoring city and province-level flooding: Customers are advised to closely monitor ongoing adverse weather conditions that may last at least until July 29 as the Henan Meteorological Observatory has forecast further heavy rainfall in parts of Henan; poor weather conditions are likely to exacerbate the ongoing logistics disruptions. Our in-house Intelligence Solutions team will be monitoring real-time impacts from the disruption and will be reporting them as they become available.
  • Assess supplier impact: Customers should develop multi-tier visibility across their supply base using Supplier Risk Assessment tools to identify which suppliers have been impacted and the extent to which they may be subject to severe production delays due to shutdowns and infrastructure disruptions.
  • Identify alternative suppliers: To mitigate potential delivery delays and supply shortages, companies should identify alternate suppliers located in different geographical locations outside of Henan province to mitigate the current impacts and reduce the crisis response time.  
  • Activate contingency plans: Companies are advised to activate contingency plans where necessary, and seek alternate suppliers or modes of transportation to avoid delivery delays.

Share this post

[Webinar] Record Level Shipping Costs Intensify Supply Chain Stakes – Part 1

A crisis of long-term rising shipping costs will likely hit cargo shippers ranging from food and beverage companies to retailers and automakers as they strive to meet high customer demand or replenish inventory levels ahead of the year-end holidays. Register for our upcoming webinar today to learn how to mitigate risks and save on costs.