January 19, 2021
Carriers May Break from Blank Sailings at Chinese New Year, Providing Cues for 2021 Planning
With no major blank sailings announced yet, this year’s Chinese New Year may diverge from years past.
The decisions to sail through the holiday, observed from February 11 to 17, reflect bullish sentiments for the kickoff to the Year of the Ox. A carrier’s market, rates from Asia are soaring as import demand stays high.
While unexpected capacity may provide minor relief for some companies, most shippers can take their cues from Chinese New Year to prepare for what lies ahead.
Usually, the Chinese New Year week is a public holiday, compelling shippers to navigate carefully before factories go offline and voyages come to a halt.
But 2020 was one long peak season, driven by intense demand for Covid supplies. Adding to that reality was a breakneck shift to e-commerce before the traditional winter holiday rush.
Now, carriers are slammed with vessels fully reserved up to a month ahead. There aren’t enough containers in existence, and the empty ones are in all the wrong places: Flexport’s Nerijus Poskus, VP, Ocean, recently told Bloomberg that current demand requires availability of up to 500,000 more TEUs—enough to fill 25 mega-vessels.
But the break from blank sailings doesn’t mean the entire supply chain will follow suit. Smaller regional boats may still announce the usual cancellations. Freight Market Update is providing weekly market changes and announcements to help shippers stay abreast of the latest conditions.
A few key considerations can help companies manage uncertainty around Chinese New Year and plan for the near future.
Book now for spring. With capacity reserved weeks in advance and carriers turning away some requests to book, there is no time to spare—and no guarantee of space—for spring deliveries. The equipment shortage and a seafarer crisis could also mean ships reroute with little notice, resulting in delays.
Prepare for volatility. Shore up the supply chain in case carriers announce blank sailings between now and February. Last year, cancellations caused chaos and proved carriers have the discipline to pull back capacity to control rates. This year, demand is high enough to warrant continued sailings, but things could change.
Stick to core competencies. For many companies, it’s best to focus on core products in the weeks leading up to Chinese New Year. Rather than invest in product development, for instance, target goods that are safe bets if the supply chain flounders.
Inform forecasts. Outlier scenarios, like sailing through the week of Chinese New Year, can be helpful for playing out different forecast outcomes. Since shorter-term forecasts make more sense this year, note various supply chain impacts or solutions.
Gather data for RFPs. Comb through shipment data to get a handle on rolled cargo, on-time performance, or sustainability during times of uncertainty. Carriers hold pricing power for now, but companies can start negotiating for other value adds once spot rates lower. This may be closer to summer, but Chinese New Year data can contribute to bases for negotiation.
Learn more about Chinese New Year and its implications—including additional procurement strategies—by attending the upcoming webinar, Logistics Rewired: What Now? Ocean Market Predictions for 2021.