Flash Explosion at Lanhua Organic Silicone 08-18-2020

At around 17:30 on August 3, a flash explosion occurred in the methyltris (methyl ethyl ketoxime) silane workshop of Lanhua Organic Silicone Co., Ltd. (Lanhua Organic Silicone), an organic silicon and chemical raw material producer in Xiliuhe Town, Xiantao City, Hubei Province. As of August 4, the accident has caused 6 deaths and 4 injuries. Among the dead, five workers have still not been found and are presumed dead, and one worker died in the hospital. Lanhua Organic Silicone has temporarily stopped production, with relevant departments launching a thorough investigation into this accident.

The Xiantao Chemical Park, where Lanhua Organic Silicone is located, is mainly engaged in pesticides, medicine, dye intermediates, daily chemicals, and composite products.

Lanhua Organic Silicone with a history of policy violations

On May 16, 2018, Xiantao City made an announcement regarding the Environmental Impact Assessment (EIA) of Lanhua Organic Silicone’s project of an annual production of 15,000 tons of methyl ethyl ketoxime and 3,250 tons of organic silane. According to the EIA, the project could potentially cause a fuel leak or fire. As for the assessment of the project’s likelihood of causing a severe accident, the ELA result was “acceptable.”

In fact, Lanhua Organic Silicone was once punished for not meeting the environmental protection standards. In June 2015, the company started the project’s construction without completing an EIA. Thus, the construction was called off by the Environmental Protection Administration of Xiantao City.

Lanhua Organic Silicone explosion may affect listing of parent company Hubei Blue Sky

Notably, 97% of shares of Lanhua Organic Silicone are held by Hubei Blue Sky New Material Inc. (Hubei Blue Sky). According to the website of Hubei Blue Sky, the total investment of Hubei Blue Sky is RMB 1 billion, with a production line of over 10,000 tons of methyl ethyl ketoxime and an annual production of over 100,000 tons of silane-based chemicals. In June 2020, Hubei Blue Sky became one of the “gold-seed-program” enterprises.

The CEO of Hubei Blue Sky attended a forum on the development of small, medium and micro enterprises on April 13, and said in the forum that the current competition in the organosilicon industry was very severe in China, and that it was critical for Hubei Blue Sky to register to enter the market during 2020. He also said that Hubei Blue Sky has added 44 hectares of land for building a project of an annual production capacity of 150 thousand tons of organosilicon polymers so as to improve the company’s production lines.

Jiangxi Chenguang New Materials Co., Ltd. (Chenguang New Materials) is the main competitor of Hubei Blue Sky. Chenguang New Materials mainly focuses on the research, development, production, and sales of basic raw materials, intermediates and finished products of organic silane coupling agents. According to the prospectus of Chenguang New Materials, Hubei Blue Sky was one of the major clients of the company between 2017 and 2019. In 2019, Hubei Blue Sky became the first major client of Chenguang New Materials, with 6.32% of the company’s income coming from Hubei Blue Sky.

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