Chinese New Year 2024 – Impact on logistics II
As Chinese New Year (CNY) approaches, businesses close, and people take time off work to celebrate with their families. This event has a significant impact on local and international logistics. In order to navigate this, it is crucial to stay up to date with developments in the industry and make necessary adjustments, especially for businesses that depend on Chinese suppliers or have operations in China.
The current Red Sea circumstances have been heavily impacting the Chinese export market. Multiple carriers are rerouting via Cape of Good Hope when transporting cargo from Asia to Europe and Europe to Asia, which is straining the entire supply chain. Transit time is much longer from China to Europe and the Mediterranean, due to lack of equipment at several origin hubs.
South China ports have started to see a shortage of 40HC equipment due to slow turn-around. The situation may spread to Eastern China and other ports. Undoubtedly freight rates have been severely affected. The Shanghai Container Freight Index (SCFI) presented an 8-week continuous increase in rates, which is almost triple compared to the freight level a short while ago. It’s predicted this trend could keep going throughout March 2024.
Both major trade lanes from China, Europe and US, are quite challenging currently. SCFI indicates an increase of 45% compared to last term. There are no signs signalling a decrease in the near future. Factories are releasing their workforce for an early close-off in this CNY.
Due to the current Red Sea circumstances, several industries are seeking airfreight options to ship the critical volume to sustain the supply chain. However, they are facing space shortages competing with e-commerce giants like Temu, which are flying huge volumes from China to the US and the EU all year round.
Major domestic freighter airlines like CK, CZ, and CA have been adjusting the freighter arrangement towards CNY, on particular lanes like CN-AMS/FRA, CN-SIN, and CN-US, at major Chinese gateways like PVG or TAO, including cutting flights during the period, that makes life quite challenging. Freight rates keep increasing slightly week after week towards CNY, but the main concern is the lack of space and flight cancellations that can affect the timely delivery of goods.