Chinese New Year, which started yesterday, January the 28th, marks the time in which most of Asia’s manufacturing facilities close for 1-3 weeks. However, during the months leading up to this week, businesses were in a hurry to import goods from Asia despite the higher rates and tight capacity.
In this week’s survey, done by xeneta.com, individuals from the shipping and freight community were asked if they are experiencing higher rates and tight capacity leading up to the Chinese New Year.
Yes, the shipping community does experience higher rates and tight capacity due to the season.
The results of Xeneta’s survey was a resounding “yes” with majority or more than 75% of those surveyed indicating that they are in fact experiencing higher rates and tight capacity, whilst not more than 30% of survey respondents responded with a “no” vote.
Information taken from the Xeneta platform reported that ocean freight spot rates to both the East and West Coasts of the US were on average 37% higher than they were in late December 2016. Although not as high as the trans-Pacific, the Asia-Europe route also reported high spot rates since late December, with an increase of about 10%.
A Move Is Being Made into US Imports
Container cargo imports peaked during the final weeks of 2016, as retailers stocked up on inventory heading into the Chinese Lunar New Year. According to research firm Panjiva, which tracks trade data, U.S.-bound seaborne shipments increased 8.9% in December over the same month as in 2015.
Formidable 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 for 2017, so it comes as no surprise that ocean freight rates have remained elevated.
The Results Are Yet to be Seen
Majority of industry analysts do not expect ocean freight rates to maintain their current levels after the Chinese New Year period. An interesting observation came from Jock O’Connell, a trade economist, who said that shippers may be stocking up on inventory now, in case rates rise in spring of 2017. 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.
Xeneta’s CEO, Patrik Berglund, mentioned in a recent webinar that:
“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. If it sticks, the shippers sitting on the fence, waiting for Chinese New Year to blow over, they 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 trans Pacific corridor.”
Shipping Rates Are Increasing this Season
Ocean freight rates are at a momentum at this moment, and as said, it remains to be seen how they will fare after the Chinese Lunar New Year. That is why it is very crucial to find out how to stay ahead of the market to make sure your freight prices are competitive and cargo flow uninterrupted by observing the activity that will follow the Chinese New Year.