Freight forwarders and supply chain professionals are expecting disruptions owing to Covid outbreaks in China and this year’s early Chinese New Year factory closures.
According to the annual Chinese New Year survey by Container xChange, 73 percent of supply chain professionals expect Chinese New Year to further disrupt the shipping industry this year.
This comes in contrast to industry reports predicting a reduction lessening in disruptions from China on the global supply chains. Of the 73 percent saying that they do foresee an impact, 65 percent were freight forwarders and the rest were supply chain professionals in general.
“We are looking at three different Chinese Years in 2020, 2021 and 2022. It’s not what we’ve been accustomed to in the prior years when there was demand leading up to the Chinese New Year. There is a lot of inventory with retailers and manufacturers,” said Cathy Morrow Roberson, founder and president of logistics trends and insights LLC during a webinar organized by Container xChange on the Chinese New Year analysis and predictions.
“Inflation and fear of recession continue to impact demand…spot rates have started to fall off the cliff. There are a lot of unknowns and preparing with better data, information and visibility into the supply chain is the way to navigate through these unforeseen times.”
Container xChange polled some 2,300 respondents from the supply chain industry sharing their opinions and views about how they view Chinese New Year and Covid outbreaks in China have an impact on global supply chains.
One webinar participant said the early new year will have a significant impact on the domestic supply chain from January 15 to February 6, 2023. Companies can prepare better by controlling costs, improving forecasting, and managing information better by using technology, suggested Mr. Sun, the director and general manager of CNTRANS.
When asked in the survey, ‘what impact will be the most prominent in the coming weeks’, most agreed that there will be ‘an increase in port congestion and delays’ and ‘delayed container journeys’ soon after China reopens. Last year, most industry professionals feared capacity issues and higher rates as the Chinese New Year aftermath.
One respondent elaborated: “I think an ‘increase in port congestion and delays’ and ‘delayed container journeys’ will be the possible result as it makes sense to me that once they all ship out again that means more ships leaving closer to one another for the same destinations which may cause backups for a short time.”
“There are added, and new complexities ahead coupled with Chinese New Year where at one end we see China coping with the Covid infections, and on the other end we see a continued dip in demand. We cannot see Chinese New Year in isolation but in combination with all these challenges,” said Christian Roeloffs, cofounder and CEO of Container xChange.
“The biggest concern is the reduced production and port capacity due to the infections in China. Also, the rates are low, capacity management is still a top priority for carriers and blank sailings are prominent. Amidst this, in the coming weeks, we foresee prolonged factory closures and bearish market conditions.”
Preparation for New Year closures
In the year 2022, 59 percent of respondents to the survey said they had prepared for Chinese New Year by ordering early. This year, 55 percent said they had.
And, while 65 percent of international freight forwarders said they expect Chinese New Year closures to impact supply chains, only 47 percent said they have made advance plans to deal with the same. One possible cause of the dip in preparing in advance could be still high inventory levels – and the market being bearish in general, as demand continues to fall and transportation capacity supply increases.