Lunar New Year, 2021 looks different than previous years, to those in the shipping and logistics industry. Demand for Chinese exports has increased since late 2020, causing backorders in factories and congestion at the ports. That fact paired with the recurring spikes in positive coronavirus cases throughout Asia has brought about the decision for many China-based factories to remain open and operational during the holiday this year.
Holiday Travel
In an effort to control the spread of the virus, local Chinese Governments have urged citizens to “celebrate in place” rather than travel home for the holiday celebration, as outbreaks of the virus in Heilongjiang, Hebei, Jilin, and Beijing continue. Some Government agencies have also encouraged companies to offer bonuses to migrant workers as an incentive to not return home during the holiday. An estimated 30% of migrant factory workers will therefore not be traveling during this time but instead, plan to use the holiday to catch up on backorders.
Several truck drivers, on the other hand, returned home early due to quarantine policies, causing labor shortages since the end of January. These shortages are expected to continue after the holiday as truck drivers returning to work will again need to isolate for an estimated 7 to 10 days.
Fewer Blank Sailings
Another notable change taking place during this year’s Lunar New Year is the significant drop in blank sailings which usually occur at this “slow” time. To keep up with demand, ocean carriers have only blanked, or canceled about 2.1% of total planned capacity heading to the U.S. West Coast this year, compared to 30.5% last year. The capacity heading to the U.S. East Coast has only been cut about 3.6% compared to 27.7% during Lunar New Year 2020.
Consumer Demand
Consumer buying behavior, during the second half of 2020, shifted away from travel and leisure and instead favored household goods. Exports out of China increased by 21.1% year-over-year in November and 18.1% year-over-year in December 2020. With the Lunar New Year holiday beginning at the end of this week, some U.S. and European companies have put pressure on their supply chain partners to move containers to ports early, which has caused congestion at many Chinese terminals. In South China at the port of Yantian, where approximately one-quarter of China’s exports to the U.S. are handled, truckers are waiting in lines up to 10 hours to enter the terminal.
This year there does not appear to be any break for shippers, manufacturers, or carriers during what is normally considered a slow period in the industry. And although many factories will remain open and there will be fewer blank sailings at this time, it may not be enough to bring supply chains back on schedule as workers who have chosen to travel for the holiday will be required to quarantine for up to 10 days after returning to work.
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