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China’s flooding slams rare earth, fertilizer and other industries

Economy recovering from coronavirus lockdowns now threatened by deluge

SHANGHAI — Weeks of flooding along the Yangtze River, China’s longest waterway, has crippled commodity production, weighing on an economy that has been shaking off the coronavirus downturn.

Though authorities have not revealed total economic losses caused by the deluge of rain since June, several companies whose production plants have been submerged have ceased operations.

Sichuan-based Shenghe Resources, one of China’s few rare earth production companies, on Wednesday said floods have damaged fixed assets, including equipment and inventory at two plants.

The Shanghai-listed group is projecting an initial loss of between 390 million yuan and 520 million yuan ($56 million to $75 million), though the water has prevented company personnel from entering the premises to gauge actual destruction.

One of the plants in 2019 produced 28,227 tons of rare earth saline and accounted for about 8% of the group’s operating income. The material is one of 17 metals vital in the production of smartphones and other electronic devices. The company’s stock price fell to 7.90 yuan on Monday, 11% lower than a week earlier.

China produced 132,000 tons of rare earth minerals last year, accounting for nearly two-thirds of global production, according to the China Industrial Information website.

Sichuan Hebang Biotechnology, a fertilizer maker, announced on Thursday that its plant had been submerged. Losses due to production line and inventory damages are estimated at 350 million yuan. Sichuan Hebang Biotechnology and Fuhua Group account for 24% of China’s production of phosphate ore, according to Everbright Securities analysts who also said uncertainty remains as to when production can restart. Phosphate ore is a mineral widely used in the making of fertilizer and animal feed.

The flooding has also affected leather producer Sichuan Zhenjing, whose 157,000-sq.-meter factory has been inundated with water. The company, which supplies auto and shoemakers, said it will take three months before it can resume operations.

Heavy rainfall has affected millions of people along the Yangtze, which cuts through central China, and drawn the attention of the country’s top leaders. President Xi Jinping and Premier Li Keqiang last week visited areas affected by floods, promising greater flood control and economic support. State TV showed Li in rubber boots in ankle-high water talking to victims in Chongqing, a centrally located city with a population of more than 30 million.

Although several dams in the country, notably the Three Gorges in Hubei Province, have withstood high water levels, people living downstream are living with anxiety. The Three Gorges has had to put its back up against a record-level of inflows this summer; on Thursday, it opened its gates to 75,000 cu. meters of water per second.

The Ministry of Emergency Management warned on Saturday that levels along key waterways remained high and ordered local governments to remain on alert for more rain to come through Tuesday.

Another storm is on the way. The China Meteorological Administration on Sunday issued an alert for Typhoon Bavi, which is expected to hit the country’s southern region on Wednesday.

China recorded a better-than-expected economic growth rate of 3.2% in the second quarter, but some economists now doubt whether that pace can be sustained. S&P Global Ratings in a report on Aug. 17 said economic data for July indicates that growth had relied on government support.

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