Indian police on Friday filed a homicide complaint against a subsidiary of Korea's LG Chemical over an alleged deadly gas leak at a factory it owns in India. LG Chem stock barely budged in response.
Styrene gas escaped from the plant while people slept in the early hours of Thursday morning. The fumes allegedly have killed 12 people and sickened another 300 after escaping from the Korean-owned plant in a village around nine miles inland from the eastern port city of Visakhapatnam, or Vizag for short.
The company that operates the Indian plant, LG Polymers India, is not separately listed. But its parent, LG Chemical, has seen its stock only slightly hurt. LG Chem, Korea's largest petrochemicals maker, bought what originally was called Hindustan Polymers in 1997.
Indian police on Friday filed a complaint citing several counts of alleged negligence and culpable homicide against the management of LG Polymers, Reuters said after seeing a copy of it. A complaint is lodged prior to a full police investigation and potential charges.
On Friday, LG Chem (KR:051910) shares fell 2.4% at the start of trade, adding to a 2% loss on Thursday. However, they ended Friday down only 0.4%. Parent LG Corp. ended the day up 1.0%, in track with the 0.9% gain in the Kospi 200 index in Seoul.
In other words, a slight underperformance for the chemicals unit after the incident. I can't imagine a U.S. industrial stock remaining unmoved if, for instance, 12 people died from a leak of toxic gas in suburban Philadelphia.
While this is a one-off incident, I think the movement in LG Chemical's share price is instructive of how global markets may respond to Covid-19 deaths in emerging markets. Unless deaths directly affect the supply chains of companies in the developed world, they are likely to cause barely a ripple in the equity markets, in my view.
Any chemicals accident in India immediately revives memories of the Union Carbide industrial accident in Bhopal. At least it did for me. In 1984, a pesticide plant leaked methyl isocyanate gas into the community, killing at least 3,787 people and sickening 500,000. It's often cited as the world's worst industrial disaster.
Obviously, this latest incident is nowhere near that scale. Unless industrial errors become a pattern as India's economy opens back up, the accident likely will take its place alongside the Korean warehouse construction fire that killed 38 people in Icheon last week. Authorities suspect the fire 50 miles southeast of Seoul started on an underground floor after an explosion of urethane, a combustible chemical used for insulation.
In India, the styrene gas leak allegedly occurred as the LG Polymers plant was reactivated after several weeks of inactivity during India's nationwide lockdown. The factory closed as ordered on March 25. The gas cloud ended up extending two miles from the factory, in a city dubbed Vizag by British colonial administrators who struggled to pronounce its full name.
Styrene is used to make polystyrene as well as other plastics, insulation, fiberglass and paints. Overexposure can cause dizziness and nausea and can hit the central nervous system. Villagers were left strewn in the streets after feeling its effects.
LG Chem declined to comment on the police report. However, the company said it had asked police on Friday to evacuate more residents from the surrounding area as a "precautionary measure" because of concerns about temperatures rising in the plant's chemicals tank. The company is taking steps to cool the tank.
The top official in the state where the accident occurred, Andhra Pradesh Chief Minister Jaganmohan Reddy, said in a TV address that the gas leak happened because raw materials had been stored for a long period of time. The industries minister said workers were checking the gas storage tank when it started leaking.
There have been at least two other industrial accidents in India as workers return. Seven people were taken to hospital at a paper factory after a gas leak in Chhattisgarh state in central India, and seven people were hurt when a boiler burst at a coal-mining factory in Tamil Nadu.
How India's Covid-19 outbreak develops will be something to watch. The skyrocketing case count has seen India hit 56,351 cases as of Friday, more than any Asian nation outside China. That's likely to be heavily underreported due to a lack of testing facilities. As of Friday, 1,889 people have died.
Those numbers just keep flowing and seem to make little difference anymore. So far, the great surprise of this pandemic is that it infected rich people first. Once the virus left Wuhan, it hit people who travel and the people who hang out with people who travel.
So it made an initial foothold in Western Europe's most developed nations, expanding outward from Italy's northern industrial heartland. That shocked markets in March; so did the leading edge of the outbreak sweeping through the United States.
India likely does not have China's financial or political ability to combat Covid-19. In a country of 1.4 billion people, the world's fifth-largest economy, this could be a disaster that unfurls slowly but with terrible impact on human life. But will emerging-market death tolls carry weight outside the borders in which they occur?