Prepare your business for the supply chain impact of the Chinese New Year 2022
The Chinese New Year is one of the yearly occurrences that has a substantial impact on the global freight market. The production in Chinese factories is more or less put on hold in connection with the celebration, and the transport capacity is significantly reduced across all means of transport. However, this year the Chinese New Year might have an even greater impact than usually, and if you are not already considering this impact in your business planning, now is the time to do so
The 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 1 February 2022, and in connection with the celebration, a seven-day public holiday will be held between 31 January and 6 February.
On any given year, the Chinese New Year impacts the capacity to and from China and the Far East in general. The usual consequences of this include long transit times, flight cancellations and blank sailing, which have a significant impact on the global freight market for weeks after the Chinese New Year. However, this year, several extraordinary factors cause 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 characterised 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 the 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 the Chinese New Year. There is a massive pressure on the suppliers in this period, and because of this, many of them have to prioritise their orders and customers. We therefore recommend to invest 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, the 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.
The 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 4 – 20 February, 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.