Higher Container Rates and Tight Capacity Leading into Chinese New Year - Global Trade Magazine
  February 3rd, 2017 | Written by

Higher Container Rates and Tight Capacity Leading into Chinese New Year

Sharelines

  • Most of Asia’s manufacturing facilities close for one to three weeks during Chinese New Year.
  • Ahead of Chinese New Year businesses rush to import goods from Asia.
  • Higher rates and tight capacity usually characterize the run-up to Chinese New Year.

Chinese New Year, which started this year on January 28, is a time in which most of Asia’s manufacturing facilities close for one to three weeks. Ahead of this period, however, businesses rush to import goods from Asia often in the midst of higher rates and tight capacity.

We asked our community if they are experiencing higher rates and tight capacity leading up to the Chinese New Year.

The results of our survey were a resounding yes with 80 percent of those surveyed indicating that they are in fact experiencing higher rates and tight capacity while 20 percent of survey respondents voted no.

Data from the Xeneta platform reports ocean freight spot rates to both the East and West Coasts of the US were on average 37 percent higher than they were in late December 2016. Although not as high as on the transpacific, the Asia-Europe route has also reported high spot rates since late December with an increase of approximately 10 percent.

Container cargo imports jumped during the final weeks of 2016, as retailers stocked up on inventory heading into the New Year. According to research firm Panjiva, which tracks trade data, US-bound seaborne shipments increased 8.9 percent in December over the same month a year earlier.

Strong holiday sales ended 2016 on a positive note for retailers as expectations for 2017 have only increased further. The period between the holiday season and the Chinese New Year is a short one this year, so it comes as no surprise that ocean freight rates have remained elevated.

Most industry analysts do not expect ocean freight rates to maintain their current levels after the Chinese New Year celebration. An interesting commentary is from Jock O’Connell, a trade economist, who said that shippers may be stocking up on inventory now in case rates rise this spring. It is possible that rates could rise as ocean freight alliances prepare to begin services in April but it remains unknown what the alliances may bring.

“I think it’s key to keep an eye on how the short-term market develops post Chinese New Year because if, as we’ve seen historically, it plummets quickly after that then it might very well rapidly change from a seller’s to a buyer’s market again,” said Xeneta CEO Patrik Berglund in a recent webinar. “If it sticks, the shippers sitting on the fence, waiting for Chinese New Year to blow over, might have lost out on the opportunity to contract, as they’ve done historically, according to the calendar year for Europe and then, as quickly as possible, for the transpacific corridor.”

Ocean freight rates are increasing and it remains to be seen how they will fare after Chinese New Year.

Katherine Barrios is chief marketing officer at Xeneta, a company which provides a database of ocean freight rates.

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