The Chinese New Year is around the corner
The Chinese New Year is around the corner, and we wanted to take this opportunity to share some updates on the upcoming celebrations along with possible impacts on the freight market.
As per tradition, businesses are getting ready to slow down their operations and for some close to celebrate the new year. This year, the public holiday is set start on the eve of January 31st and conclude the festivities by February 6th, 2022.
In mainland China, most businesses including government services plan to observe a week-long public holiday while some other manufacturing facilities may close for a longer time or reopen only with a skeleton staff. We can therefore expect normal production levels to resume only in four to six weeks after the break.
Throughout the country, customs offices will be closed for the week’s long Chinese New Year break which means that eastbound shipments arriving to China at that time will be on hold until February 6th.
As many factories will be closed for an extended period. Many local and international vendors are significantly increasing their orders to prepare high levels of inventory to compensate the production slow down. This anticipation is and will strongly impact the overall Chinese productivity in the upcoming weeks. Pushing factories into a full speed of production marathon to complete all orders before the break creating extra pressure on the transport logistics sector.
The ongoing supply chain congestion is now impacting all industries soon intensified by the Chinese New Year break which will result in a heated logistics market.
Coincidently, the 2022 Winter Olympics will be held from February 4th - 20th in the Chinese capital city, Beijing. No official announcement about transportation restrictions has yet been published. Although not yet confirmed, it is expected that security inspections will be tightened, and that restrictions of dangerous goods will be implemented a few days prior and during the event.
Finally, the sudden outbreak of Covid cases may cause additional disruption such as road closures, flight cancelations and manpower shortages as many operators or drivers may be quarantined.
The peak season of air freight has begun and is expected to last until the end of January with the beginning of the Chinese New Year. Overall, the market is still facing a shortage in capacity, especially due to the various Covid quarantine policies. Directly resulting from the Omicron variant threat which leads to more uncertainty and volatility.
Many freighters are required to undergo maintenance checks in the upcoming few months after being deployed for a long period of time, further affecting market capacity.
Sea freight markets are equally busy, facing high demand. Services from ocean carriers remain disrupted with many blank sailings due to port congestion. Feeder services from South China to and from the Pearl River Delta were suspended since December and now maintained until the start of the Chinese New Year which inevitably leads to longer transit times via road transportation. Service integrity may remain challenged or may get worse starting January and onwards.
Due to expected stronger demand in anticipation of the Chinese New Year break, together with continuous Covid outbreaks and market congestion. Thus, capacity and equipment will be under tremendous pressure. Rates tend to soar in such situations. Shippers are advised to plan bookings ahead of time with an anticipation of at least 3 weeks.
The 2022 rail schedule is yet to be released. Based on past records, rail services will be available as usual until the last week of January. Gate-in schedules might be adjusted as per rail operators’ instructions. However, pre-carriage services in China will become a challenge from January 20th, 2022, and onwards, therefore a general increase in rates is expected.
During the Chinese New Year national holiday, there will be no rail service. Based on experience and excluding Covid uncertainties, trucking services for both westbound and eastbound are expected to resume to 80% of normal levels two weeks following the Chinese New Year break and fully resume by the beginning of March.
For further information, please contact your usual LEMAN contact person