You will be redirected back to your article in seconds
Skip to main content

Chinese New Year Factory Closures to Bring More Supply Chain Disruption

More than two-thirds of respondents to a global survey conducted by logistics technology company Container xChange expect Chinese New Year factory closures to further disrupt container shipping supply chains.

Most respondents expect the February Lunar New Year holidays in China will result in delayed transit times and reduced availability of containers. This comes on top of continued backlogs at U.S. West Coast ports such as Long Beach and Los Angeles that have led to a shortage of shipping containers and slow deliveries.

“We always expect a spike in container shipping demand ahead of Lunar New Year holidays in China, as shippers look to ship cargo ahead of factory closures as workers in coastal areas return to families inland, often for extended periods,” said Dr. Johannes Schlingmeier, co-founder and CEO of Container xChange.“Even though it is unclear if China will allow millions of workers to travel for holidays this year due to strict Covid lockdown policies, shippers and forwarders are still expecting output from OEMs to decline significantly next month and are planning accordingly by shipping early. This is no doubt a factor in some of the spot freight rate increases out of China we have seen in January.”

The official public holiday for Chinese New Year only lasts a week and is scheduled this year for Jan. 31 to Feb. 6. However, in most previous years factory output in China has been impacted for far longer as many workers take extended holidays.

In addition, 53 percent of survey respondents said Chinese New Year would make existing ocean supply chains “even worse” and 60 percent said they had planned for Chinese New Year factory closures by ordering inventory earlier. Large numbers of respondents also said Lunar New Year would further delay container transit times, reduce the availability of containers and slots, increase container and freight costs and add to port congestion and delays.

Related Stories

Asked how they were planning for Chinese New Year factory closures by changing container sourcing strategies, 32 percent of respondents replied “nothing specific,” 25 percent said they would make use of shipper-owned Containers (SOC) and 24 percent said they would buy equipment.

Ahead of the Chinese New Year holidays, the average price of a 20-foot container in Shanghai increased to $2,767 this month from $2,718 in December 2021, according to Container xChange data. For a 40-feet high cube container, the average price rose to $6,030 from $5,918 in a month at the port of Shanghai. Prices have also increased month on month in Ningbo and Shenzhen.

“Predicting the impact of the Chinese New Year holidays in 2022 is rather more difficult than in previous years because China’s policies on internal travel are rather opaque,” Schlingmeier said. “Even if workers are allowed to travel home, it is unknown if they will need to quarantine before they can return to work.”

The start of the Beijing Winter Olympics in early February and the possibility of power cuts is further clouding the ability of manufacturers to predict output levels in February.

“There are a lot of uncertainties over the next few months,” he added. “One potential upside is that if we do have reduced output from China in February, this could allow container lines to get vessel schedules in slightly better order, which could improve the equipment availability situation globally and especially in China. The counterpoint to this is, of course, that we could see large backlogs of cargo building up in China, which could be a factor at the end of the first quarter and into Q2.”