Date: Tuesday, January 24, 2023
Source: Sourcing Journal
The combination of an earlier-than-usual Lunar New Year and rising Covid infections could spell trouble for stakeholders linked to China’s supply chain.
With the Year of the Rabbit celebrations in full effect, logistics experts expect to see greater disruptions and delays than those experienced in 2022. An annual survey of 2,300 industry insiders by Container xChange showed 73 percent foresee problems with shipments, compared to 66 percent during the year-ago period. Of those that said they foresee an impact, 65 percent were freight forwarders.
Most survey-takers agreed that increases in port congestion (41 percent) and subsequent container delays (28 percent) will be the two biggest issues facing the industry after China’s post-holiday return to work around Feb. 5. By contrast, the Lunar New Year holiday period in 2022 saw the sector most concerned about capacity issues (48 percent) and higher shipping rates (44 percent). This year, just 28 percent believe delays will result from container travel time.
“There are added and new complexities ahead,” said Container xChange co-founder and CEO Christian Roeloffs, who called out China’s uptick in Covid infections as well as a downturn in demand. “The biggest concern is the reduced production and port capacity due to the infections in China.” With spot rates declining, the CEO sees capacity management as carriers’ top priority while blank sailings remain “prominent.”
“Amidst this, in the coming weeks, we do foresee prolonged factory closures and bearish market conditions,” Roeloffs said.
While the majority (55 percent) of respondents said they ordered inventory or placed bookings earlier this year, that number represents a 4 percent drop from 2022. And while 65 percent of freight forwarders predict problems will arise due to the factory closures and Covid infections, only 47 percent have made plans to deal with those issues. Container xChange said lax planning could stem from soft consumer demand and the fact that retailers are still saddled with last year’s leftover inventory. Most also revealed that they had changed “nothing specific” in their container sourcing strategies to ensure enough capacity, noting that they believe there is enough supply to satisfy their needs.
During a webinar hosted by Container xChange, Logistics Trends & Insights LLC founder and president Cathy Morrow Roberson said that the past three Lunar New Years have presented different circumstances. “It’s not what we’ve been accustomed to in the prior years when there was demand leading up” to the holiday, she said. “There is a lot of inventory with retailers and manufacturers. Inflation and fear of recession continue to impact demand. And therefore, the spot rates have started to fall off the cliff.”
While the logistics sector usually sees a “cargo rush in January and February,” the earlier timing of the holiday means that China’s domestic supply chain will be impacted through Feb. 6, CNTRANS general manager Mr. Sun said during the webinar. Calling the current climate “difficult for businesses,” he said efficient information flow and better forecasting using advanced technology “can help greatly.”