Lunar New Year 2023: Impacts on Supply Chain

Expeditors wishes everyone a happy and healthy Lunar New Year (LNY)! Each new year comes with changes that will shift the supply chain, whether it be forecasting and planning, alternative routes, adjusted lead times, or critical communication. As we enter this year, we see different operational impacts for our regional air and ocean services.

Air:

Following China's announcement on January 8th of the removal of Zero Covid Policies, carriers are eager to resume passenger flights based on the available resources. Other expected impacts include:

• Flight cancellations. It is expected to see around 30% of the flights canceled, which is slightly better when compared to the cancellations in previous years.
• Low cargo output.
• Chinese factory workers are expected to take longer breaks this year due to the removal of domestic travel restrictions and low production orders.

Ocean:

We do not see an uptick in bookings for pre-LNY cargo rush as traditional market behavior, mainly attributed to the slower demand out of commercial and geopolitical challenges in the United States and European markets. Many vendors, manufacturing, and supply chain experienced labor shortages that disrupted production and were forced to delay shipping as a result of increases in COVID in middle to late December. Some of the challenges are:

• China's government suggested more relaxed planning for the 2023 LNY holiday, which could spread labor travel almost in a 4-week window and consequently affect shipping plans through the LNY market.
• Feeder service network from Pearl River outports to Hong Kong and the South China ports are suspended from mid-January through mid-late February to comply with the Chinese government pandemic containment measure.
• Carriers scaling back capacity deployment through the LNY holiday by adding more blank sailings in response to the slower market demand.
• Ocean Alliance, composed of COSCO, CMA, Evergreen, and OOCL, has determined to void the entire WK5 sailing into TPEB trade while reducing it to four weekly sailings. 

It remains to be seen how the market will react to the capacity cuts and the ramp up in production post LNY. Stay up to date with current market news by subscribing to the Horizon Blog and Brief.