January 31st marks the beginning of many celebrations across Asia as the Year of the Horse is ushered in.
Over the next 40 days, an estimated 3.65 billion journeys will take place as Chinese workers make plans to travel home as offices and manufacturing facilities close for the week long holiday. This is up 9.1% from last year. The mass exodus usually begins at least two weeks before the holiday and can last two weeks after the end of the holiday celebrations. In fact, many manufacturers choose to shut down for up to a month to allow workers adequate time for travel.
Over the years, a mad scramble occurred as demand for freight transport to and from Asia increased in the weeks leading up to this event. This led to rising rates and tight capacity particularly for airfreight providers. However, as manufacturing shifts to other countries, is the Chinese New Year still relevant to the global supply chain? Yes, it is.
While it is a national holiday in China, it is also a major festival in other countries as well – Thailand, the Philippines, Cambodia, Vietnam, Korea and Japan – many logistics and transportation providers have issued customer advisories suggesting possible delays in these countries as well.
However, ocean freight rates leading up to the holiday have faltered a bit as shipping lines try to make rates stick despite recent rate hikes. In late November, member liners of the Transpacific Stabilization Agreement (TSA) announced a round of rate hikes. The first of the two-stage rate increase was enacted in mid-December for shipping lines operating from Asia to the U.S. for late holiday season shipments and another increase on January 15th.
As such, CMA CGM announced plans to reduce capacity starting February 4th by cancelling some ports of call. Hapag-Lloyd is following suit as well by cancelling four of its Asia-US network services during the holiday.
The airfreight market, which in past years benefited greatly leading up to the holiday, still remains fragile. For December, the Association of Asia Pacific Airlines reported a 0.7% increase in cargo freight tonne kilometers. For 2013 as a whole, total freight tonne kilometers declined 0.6%.
Among the large Asian airfreight providers, Cathay Pacific expects only a “mini-peak” in air cargo demand leading up to the Chinese New Year. However, it expects demand to fall quickly into February.
Even though global freight transportation may be subdued, the Chinese New Year is still relevant in today’s global supply chain. Perhaps the mad scramble as seen in years past has been tempered by improvements in technology and forecasting tools as shippers are better able to manage inventory needs and manage transportation expectations with improved transportation management system (TMS) tools.