Forwarders gear up for Chinese New Year cargo surge

Forwarders gear up for Chinese New Year cargo surge

HONG KONG — Asia forwarders are preparing for a busy first quarter with a six-week sweet spot between the western year end and a late Chinese New Year expected to drive up cargo volumes being shipped out before the mainland's most important holiday.

Chinese New Year falls on Feb. 19, which is later than usual and typically leads to a three-week factory shutdown that shippers the U.S. and Europe need to beat if they are to make the Spring sales.

Chad Taylor, regional vice president, Crane Worldwide Logistics Asia Pacific, said he expected the peak period to be sharper because shipments would be condensed into a shorter February and March. 

“The actual Chinese New Year holidays only last the weekend but the factories are closed for almost three weeks afterwards, and that puts you into the last month of the quarter,” he told JOC.com

“March is usually a big month but the workers won’t be back for a week into it. That means there will be a shorter time period when shippers will try to move a greater quantity of goods, and four weeks of shipping will be squeezed into three.”

David Goldberg, DHL senior vice president ocean freight, Asia Pacific and acting country manager for Singapore, said the integrator was forecasting a typical pre-Chinese New Year (CNY) period where factories try to push out as much cargo as they can before closing down for the holiday. 

He said the tight ocean space may support container lines’ attempts to impose mid-January and February general rate increases (GRIs), but the higher prices were unlikely to last for long.

“After factories re-open post-CNY, we see a ramp-up period of about two weeks where cargo volumes will be slack, which may also have some negative impact to rates so the overall rates for the month may even out quite fairly. We also expect a higher volatility in the market post-CNY that will put rates under pressure if additional air and vessel capacity cannot be supported by volume demand.”

A second set of historic rate increases are on planned for next week on the trans-Pacific trade as the 15 members of the Transpacific Stabilization Agreement (TSA) when on Jan. 15, a combined general rate increase and peak season surcharge will be levied. The $600 per 40-foot container and $400 per FEU peak season surcharge will attempt to add $1,000 per container to rates in anticipation of a cargo surge preceding the Chinese New Year. The new charges mirror an announcement from Maersk and MOL, with Hapag-Lloyd planning trans-Pacific eastbound rate hikes.

Carriers on Dec. 15 levied historically high rate increases on the market, but the GRIs failed to stick for long.

A spokesman for Kerry Logistics’ eastern China team said freight rates would increase in week three or four on the major trade lanes to capture increasing volumes from China to Europe and the U.S., but the elevated prices would not stick.

“Regardless of how much and when exactly the rate increment will be applied, we don't think the rate at high levels would last the entire first quarter. We believe it will drop right after the CNY holidays as the ocean freight market will be going into the quietest period during the year,” the spokesman said. 

DB Schenker’s Joerg Hoppe, director and head of ocean freight, North and Central China for the German forwarder, said the late Chinese New Year extended the shipping period from Jan 1 to mid-February. 

“These couple of weeks help to somehow mitigate the typical CNY rush. We see definitely a pick-up in volumes, but not to a point of a real peak season. Freight rates remain volatile, and GRI’s are tough to push through by carriers in such a market,” he said.

 Air freight will enjoy a shorter peak period this quarter, with the Kerry Logistics spokesman predicting volumes and rates will start to rise in early February before the holidays then drop off after Chinese New Year. He said the financial year-end of some companies on Mar. 31 would create another “small peak”.

Port congestion at the U.S. import gateway of Los Angeles-Long Beach was good news for the air freight business as shippers were forced to fly urgent shipments across the Pacific, and DHL’s Goldberg said that situation would continue.

“We expect the pre-CNY volume surge and the U.S. West Coast container port situation to have a double impact on the demand for air freight, resulting in a similar upward shift in air rates. We are working closely with our customers to manage the capacity constraints during this period and the better the forecasts our customers can give us, the easier it will be for us to help them manage their shipments,” Goldberg said.

However, Gerhard Blumensaat, DB Schenker director air freight for North and Central China, said he did not believe rates would be affected by any Chinese New Year volume increases.

 “We might have a few days of strong activity right before the CNY holidays but do not expect this to have an impact on rates. The fact that we have a rather long period in between the two New Year’s rather leads to a stable and business as usual scenario,” he told JOC.com.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.