Chinese New Year 2014
SEKO Offices Closed:
Hong Kong: 31-Jan to 3-Feb
China: 31-Jan to 6-Feb
What does it mean for my supply chain?
Chinese New Year (CNY) is one of the biggest festivals of the year in China. Normally workers will be travelling back to their hometowns and will have family gatherings during the holiday. Many workers will not have seen their families since the previous CNY celebrations. The festivities are treated very similar to Thanksgiving in America, and Christmas in UK/Europe and are considered the most important holidays of the year.
China Factories will be closed 1-2 weeks in advance and will not resume work until 1-2 weeks after the holiday ends. The lack of definitive dates on closure times is quite unique to China and is mainly driven by the long distances workers travel from their homes to the East of the country to work. Some shops will also be closed for the first few days in CNY. Hong Kong is not as affected by the holiday closure as most workers live and work in the area.
Therefore, before CNY there are huge issues for the shipping industry in terms of spaces & pricing as demand peaks and the carriers reduce capacity.
How does it affect my business?
Given that it this is an annual holiday for the people in China most importers buying from Asia would normally have planned and work around the weeks effecting production. However, those that have not planned or perhaps have an unexpected peak in demand will find it necessary to change ocean shipments to air freight. This will result in additional pressure on the air freight markets capacity. The alternative can be delayed orders compounded by a lag in production once workers return to factories. Many factories will not return to full production until one or two weeks after they reopen.
Space Constraints – Airlines & Ocean Carriers
The Air Freight market is facing a mini peak prior to CNY. All carriers are offering a “shoulder rate” (in between off-peak & high-peak) during this period. In order to have goods shipped a premium must be paid. Our operations teams will advise any increases in rates when bookings are made or quotes are requested. Once quoted however shipments must be booked quickly as rates are likely to change again if demand increases further.
Demand for space will be at its highest from 25-Jan to 1-Feb. As well as the increase in bookings many carriers will cancel their freighter services and provide the passenger flights only. Demand will continue to be high until factories close but as backlogs will likely remain space will be critical until around the 5th February.
China customs will be closed from 31-Jan to 4-Feb and will only provide limited services which subject to special requirement. As goods must be customers cleared prior to departure this must also be considered.
Appendix 1: Polar Air Freight Cancellation post Lunar New Year (see attached)
We have faced serious space issues for Asia-Europe trade since December 2013. Carriers continue to withdraw sailings with little or no notice. As a result they are taking advantage of the increase in demand and manipulated decrease in capacity. The result is inflated ocean freight rate rates.
For Trans-pacific trade we have been dealing with a peak since early January. This has been further compounded as vessels are cancelled and increased volumes are booked by Wal-Mart and other BCO’s. A modest PSS was imposed on 5-Jan (USD100/FEU) and GRI imposed on 15-Jan (USD300/FEU)
Note that up to and several weeks after Chinese New Year uplift will continue to be affected as shipping lines deal with a large pool of rolled containers.
Pick up issues at factory locations
As we approach CNY it becomes more difficult to arrange collections as drivers return to their hometowns. Advanced bookings are highly recommended. Please note that local FOB charges will likely be increased as overtime is paid to drivers who remain behind. Shippers would normally arrange trucking locally but we recommend they do so during this period.
The CFS warehouses have already announced the pre-CNY cut off as Friday 24th January. The period will be extremely busy for CFS receiving. In some cases drivers can queue for up for 2 days to drop loads. Any additional overtime incurred during this time will be invoiced at cost to relevant party.