Prepare for the Supply Chain Impact of Chinese New Year 2022
Chinese New Year is an annual occurrence that has a substantial impact on the global freight market. Production in Chinese factories is more or less put on hold during the celebration, and capacity is significantly reduced across all means of transport. However, this year Chinese New Year might have an even greater impact than usual, and if you are not already considering this impact in your business planning, now is the time to do so.
Chinese New Year, also referred to as Lunar New Year or Spring Festival, is one of the most significant Chinese celebrations. The upcoming Chinese New Year will fall on February 1, 2022, and in connection with the celebration, a seven-day public holiday will be held between January 31 and February 6.
In any given year, Chinese New Year impacts capacity to and from China and Asia in general. The usual consequences of this include long transit times, flight cancellations, and blank sailings, which have a significant impact on the global freight market for weeks after the Chinese New Year. However, this year, several extraordinary factors add up to a great deal of uncertainty about what the impact of the upcoming Chinese New Year will be. That said, we expect to see an exceptional demand for transportation of goods in a market that is characterized by limited capacity.
Plan ahead and think in alternatives
To prepare your business for the upcoming Chinese New Year, we recommend that you consider creating a forecast for a longer period of time. In this forecast, it is important to not only make a plan for the time before Chinese New Year, but also for the time that comes after the celebration, as the repercussions of the Chinese New Year might be felt well into the spring. For this reason, you might also benefit from considering a deeper inventory than normal to support an easier end user delivery in your supply chain in the time after the Chinese New Year.
Furthermore, it is not uncommon that businesses without strategic supplier relationships face additional challenges with orders ahead of Chinese New Year. There is massive pressure on the suppliers in this period, and because of this, many have to prioritize their orders and customers. We therefore recommend investing additional time and resources in your suppliers throughout the year and work towards confirming a diversified supplier pool if you have not already done so.
Finally, we encourage you to reach out to your local DSV office. We are here to assist you, and through our extensive global network and vast experience in navigating any market situation, our skilled colleagues can help you find alternatives and provide you with the best solutions for your business’ logistics needs.
Understand the unusual circumstances
Although the impact of the upcoming Chinese New Year cannot yet be determined, we expect that certain factors are likely to have a significant influence on how the situation will look in the coming months. These factors include COVID-19 restrictions, global supply chain congestion, power curbs, and the Beijing Winter Olympics.
In China, many people return to their hometowns to celebrate the Chinese New Year with their families, and this usually has a significant impact on the manpower in most Chinese workplaces. At the same time, the global market continues to be historically challenged, with supply chains that are under severe pressure.
Chinese power curbs – i.e. the electricity rationing which was recently introduced in many parts of China to reduce carbon emissions – are also likely to have a significant impact on production in the coming months. The extent of the policy varies from province to province, but in some places, the power curbs have resulted in factories cutting output or halting production entirely. Although we have seen the situation improving recently, it is not possible to say how things will look in the future.
Finally, the 2022 Winter Olympics will take place in Beijing between February 4 – 20, and it is still uncertain what the implications of the event will be, as no official Control Policy has been published yet. However, we expect that the security inspection level and road control will be increased in certain areas.
To learn more
If you are already a DSV customer and have any questions about your transport solutions or scheduled shipments from China, please reach out to your dedicated contact person at DSV.
If you are not yet a DSV customer and wish to find out what DSV can do for your business, please fill out the contact form below.
Our experts are ready to help. Get in touch.