Carriers prepare for slow trot into into Year of the Green Wood Horse
The Chinese calendar is going to do container shipping lines no favours in 2014, at least not in the first couple of months.
The Year of the Horse is riding into China early next year and it is playing havoc with shipping schedules in the first quarter.
Chinese New Year falls at the end of January and factories traditionally close for three weeks and sometimes even longer. Production grinds to a halt and nothing moves for that time. Often large numbers of factory workers never return to work and manufacturers struggle to return to full productivity.
Shippers around the world requiring mainland-made items, which neatly encompasses almost all of them, have always rushed their orders in well before Christmas to have them pressed, sewn, moulded or poured in time. That should usually result in an extended peak shipping season into the fourth quarter.
Unfortunately, there is no longer any "usual" in the business. This year never brought much of a peak shipping season. Neither did last year, or the year before that.
With Europe languishing in crippling debt and the US economy stuttering along with incremental growth, retailers have become more careful, even miserly, with their orders.
Large retailers in the US and Europe are ordering smaller amounts more often as they try to match their supply to fluctuating demand and keep as much inventory stored in the supply chain pipeline as possible.
It is a dangerous practice and it doesn’t take much of a disruption for it to end in tears. No one wants to run out of stock, but the general feeling is that it is better to have a stock-out than be trapped carrying too much inventory. Margins are thinner these days and need to be aggressively protected.
The effect on container shipping is making itself felt. So far six sailing cancellations have been made on the Asia-North Europe and Mediterranean trade in January and February, taking out 51,000 TEUs, according to PR News Service. Four withdrawn sailings involve the G6 carriers and two are by Evergreen. More cancellations are expected as the container shipping downturn continues into the New Year as too much capacity chases not enough cargo.
Soothsayers are trying to work out whether the Year of the Horse will bring good or bad luck, but for the shipping industry it doesn't take a fortune teller to predict it is going to get off to a highly inauspicious start.