Thursday, January 19, 2017

Year of the Rooster

Chinese New Year set to shut down manufacturing, shipping in world's largest exporter.

While this country's January 1 holiday may not mean much more to your supply chain than a few employees nursing hangovers, across the Pacific, the lunar new year can have a profound effect on goods sourced from China and surrounding countries.

The Year of the Rooster begins on January 28 - the actual date jumps around from year to 
year like Easter or Thanksgiving. Chinese New Year (CNY), also known as the Lunar New Year or the Spring Festival, is the most important of the traditional Chinese holidays and the economy slows to a crawl. Manufacturing plants across China typically shut down and tens of millions of workers make long trips back to their home towns from the industrial cities where their jobs are. It has a huge impact on global supply chains originating in China and it's not always back to business as usual, before and after the 15-day celebration. The festivities can also affect port operations in terms of loading, barging schedule and possibly product availability.

Container shipping lines alliances servicing the Asia-Europe trade lanes have announced flurry of sailing cancellations to cut back on capacity in the post-CNY period, in preparation for volume lulls following the start of the holiday. February is traditionally the slowest month of the year for imports; this is the time of the year when the U.S can narrow the trade deficit with China. 

Spot rates for ocean freight are expected to drop temporarily as cargo demand dries up after CNY, so this presents shippers a window of opportunity. In the longer term, contracted rates on Asia-Europe have risen significantly, and Trans-Pacific shippers are also expecting contract rate hikes. The shipping lines are working hard to cut over-capacity; 600,000 TEUs (20-ft. equivalent container) of capacity were scrapped last year, and container lines ordered just 200,000 TEUs of new builds, compared to 2.3 million TEUs in 2015. 

Importers from China must anticipate the impact of the Chinese New Year and adjust their purchase orders to maintain their desired inventory levels.

Happy New Year!

Kirk Shearer
800-989-0054 x103

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