It is well known that Chinese New Year, the biggest festivity of the year in the country, creates a certain level of turbulence in the supply chain. This year however, it is coupled with an increasing number of COVID infections and an overall dip in consumer demand.
The aftermath of the Chinese New Year, which becomes evident as soon as the festive nation resumes labour, is expected to be stronger this year. This was concluded by Container xChange based on its annual Chinese New Year survey. “As compared to some 66 per cent in 2022, there was an increase in the percentage (73 per cent) of supply chain professionals expecting Chinese New Year to further disrupt the shipping industry this year”, the analyst says.
A combination of challenges
The survey by Container xChange was filled in by some 2300 respondents from the supply chain industry sharing their opinions and views about the impact of the Chinese New Year and COVID outbreaks in China on global supply chains. Out of the 73 per cent saying that they do foresee an impact, 65 per cent were freight forwarders, the rest were supply chain professionals in general.
“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 continued dip in demand. We cannot see Chinese New Year in isolation, but in combination with all these challenges”, said Christian Roeloffs, CEO of Container xChange.
“The biggest concern is the reduced production and port capacity due to the infections in China”, he continues. “Also, the rates are low, capacity management is still top priority for carriers and blank sailings are prominent. Amidst this, in the coming weeks, we do foresee prolonged factory closures and bearish market conditions.”
As the backlog in the aftermath of the Chinese New Year is not a phenomenon in itself, the industry has learned to prepare for the turbulence. This is done by placing orders earlier in the year, for example. Placing orders for equipment does not have to be done too far in advance this year, as there is sufficient supply, respondents of the survey pointed out.
Another positive element of this year’s Lunar New Year is that trains will not prioritise passengers over cargo, as the stakes are too high. “Unlike the previous Spring Festival, when transport was characterised by more passenger trips and less cargo volume, transportation demand for specific cargo types was on the rise this year. Currently, all is going well, major traffic arteries and hubs are running smoothly, and key logistics indicators keep improving,” noted the Chinese vice minister of transport, Xu Chengguang, to Xinhua.