Shippers wary of container shortages as China nears Lunar New Year holiday

Strict covid lockdown policies in China are layering additional delays on maritime container flows already struggling to keep up with pandemic conditions, even as the Asia-Pacific region prepares to lock down ports and factories for Chinese New Year celebrations next month, according to a report by Container xChange.

In a survey of forwarders and shippers, Hamburg, Germany-based Container xChange found that two-thirds of respondents expect Chinese New Year factory closures to further disrupt container shipping supply chains. Most respondents also expect that the February Lunar New Year holidays in China will result in delayed transit times and reduced availability of containers.

While the official public holiday for Chinese New Year lasts only a week—this year stretching from January 31 to February 6— factory output in most previous years has been impacted for far longer, as many workers take extended holidays, the company said.

That forecast is even harder to make in 2022, as the Beijing Winter Olympics will begin in early February, raising the chance of covid outbreaks from increased international travel flows. The country also faces an ongoing power-shortage crisis caused by a national electricity ration imposed by Beijing that has forced closures at some manufacturing plants.

“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,” Johannes Schlingmeier, co-founder and CEO of Container xChange, said in a release. “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.”

Supply chains are already stumbling over some of these issues, as the latest Chinese covid lockdowns have led to an increase in shipping delays from China to Europe from four days to six, according to supply chain visibility vendor Project44. Delays are likewise up for goods moving from China to the U.S. West Coast. The firm’s data also shows that that maritime carriers struggled with schedule reliability in December as congestion at ports and the omicron variant forced cancellations and delivery delays.

“COVID impacts to shipping will be a toss-up in terms of labor available at Asian manufacturers, ports, and throughout the supply chain. This will likely continue to impact carriers’ schedule reliability, which in turn will cause a ripple effect downstream of supply chains,” Josh Brazil, SVP of Supply Chain Insights at project44, said in a release. “Spot rates will remain high throughout most of 2022. However, it’s unlikely port conditions will return to pre-pandemic levels.”

In response to those supply chain threats, Container xChange said that 60% of respondents to its survey said they had planned for Chinese New Year factory closures by ordering inventory earlier. However, many others lacked specific plans to cope with potential container sourcing problems, with 32% of respondents replying they would do “nothing specific”, 25% saying they would make use of Shipper-Owned Containers (SOC), and 24% saying they would buy equipment [instead of renting containers].

“There are a lot of uncertainties over the next few months,” Schlingmeier said. “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.”