The Chinese New Year impacts the capacity to and from China and the Far East in general. Celebrations of Chinese New Year traditionally last for 16 days, starting from Chinese New Year's Eve to the Lantern Festival. However, its impacts on the world’s supply chains last longer than the specified time. With the unprecedented challenging market conditions, the impact of CNY 2022 is expected to be greater than usual.
Here are some certain factors that are likely to have a significant influence on your supply chain.
Most businesses including government services in China will be closed during the official public holidays, carriers will reduce capacity in response to lower demand.
Many people return to their hometowns to celebrate the Chinese New Year with their families before the holiday officially begins, so some manufacturing facilities may close for a longer period or re-open with skeleton staff. Normal production levels will usually resume after several weeks or even one month.
To minimize the impact, you need to plan ahead - your orders need to ship prior to CNY, and don’t forget to plan for inventory needed to get you through the holiday and even longer.
Since early December, outbreaks have occurred in Zhejiang, Shaanxi, and Henan, which have affected production, movement, and delivery. The consequences have caused backlogs and delays.
The Winter Olympic Games
The Winter Olympic Games is held in Beijing from Feb. 4-20. It’s not certain how the supply chain will be influenced, but we expect that the security inspection level for dangerous goods and road control will be increased in certain areas, and it may create more supply chain bottlenecks over the coming month.
On any given year, it is always the rush time ahead of CNY. Export demand keeps strong, the capacity is very constrained on all modes of transport – air, ocean, rail, and road.
The air market is facing a shortage of capacity during the peak season. As port congestion worsens, we see cargo moving from sea to air. It was also disrupted by Omicron emergence and related COVID quarantine policies. For example, HKG has been experiencing a significant shortage in terminal manpower leading to delays and flight cancellations since December.
The capacity and space of ocean freight are still under pressure due to port congestion. Together with COVID outbreak, some ports may face a significant backlog, blank sailings are also possible. We expect limited ocean capacity for transshipments within South China, as feeder services from South China to and from the Pearl River Delta were suspended from December until the start of CNY.
Based on historical experience, rail services will be available as usual during CNY public holidays. However, departure delays are common due to COVID outbreak. The capacity of trucking is expected to resume to normal levels at the beginning of March.