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Preparing for the High Shipping Season

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Golden Week, Diwali, Christmas and more…the holiday season is upon us and for many shippers how well one prepares in advance of these events can be a make or break situation. Advance preparation including forecasting and ordering the correct amount of inventory, making sure there is enough warehousing space to house the inventory and booking your transportation well in advance is important for success.

Hanjin Collapse

Being mindful of trends in the market is important and should also be incorporated into planning. Perhaps one of the biggest examples is that of Hanjin’s collapse. What was once the 7th largest container shipping vessel, Hanjin’s bankruptcy left many containers hostage at either ports or onboard vessels stranded on the high seas. However, as the beleaguered Korean carrier works with ports and shippers through bankruptcy courts, the containers are slowly being offloaded and transported with the expectation all containers will be offloaded by the end of October.

Meanwhile, the South Korean bankruptcy court announced plans to dispose of Hanjin’s sales and marketing network for its Asia-US route as well as some ships. Potentially a great opportunity for such carriers as Maersk, MSC and HMM to expand market share in this trade lane but for shippers it is a time of uncertainty particularly as the Chinese New Year approaches.

Withdrawal of Capacity

freighthub_Preparing for the High Shipping SeasonAlready capacity has been reduced across various trade lanes in an attempt to artificially raise rates.
For example, according to the latest quarterly World Liner Supply Report from BlueWater Reporting, weekly capacity from Asia to the West Coast of North America dropped 4.7% during third quarter, from 273,038 TEUs at the end of second quarter 2016 to 260,097 TEUs at the end of third 2016. Meanwhile the Asia-North Europe trade noted overall weekly capacity declining 3.9% from 230,317 TEUs to 221,212 TEUs while the transatlantic trade dropped slightly, decreasing 1.2% for the quarter, from 73,134 TEUs to 72,227 TEUs.

Chinese New Year

January 28, 2017 is the Chinese New Year, a period in which manufacturing facilities in China and other Asian countries such as Indonesia, Malaysia and Vietnam close in observance of the holiday. Because of the short time period between it and the Christmas holiday period, shippers will need to plan well in advance to ensure enough inventory is on hand for the period leading up to and several weeks after the Chinese New Year.

Typically, factories and businesses in China will close for about 10 days before the holiday to allow time for workers to travel home. In years past there was a mad dash to ship products prior to the holiday shutdown which led to higher rates, tight capacity and potentially longer transit times if there was any type of delay at ports. These days, tools for planning and preparation have greatly improved thanks to technology allowing for collaboration among supply chain partners, better inventory forecasting and visibility throughout transportation process.

But, shippers should not stop with just pre-preparation and planning. Planning  for the time after Chinese New Year is a task many shippers underestimate. Sometimes manufacturers slowly ramp back up after the holiday as workers return to work and in some cases do not return depending on new job offers, possible layoffs or even worse, a manufacturer permanently closing down. This is a good reminder to all shippers to know who your suppliers are and have a plan in place for additional suppliers you can turn to just in case.

Hanjin has until December to submit a rehabilitation plan to the South Korean bankruptcy court which will then decide whether it can continue to operate or be liquidated. Regardless of the outcome, there will be affects for shippers pre- and post- Chinese New Year. Continuous collaboration with supply chain partners including customers will be especially important during this period.

Rate Fluctuations

Don’t forget the rates which despite being at historical lows on some trade lanes can and have been known to jump overnight. In our next blog post, we’ll take a look at rates including how they historically developed and how they will likely develop in the future including the differences between shipping during the high season versus low season. In addition we’ll look at short term versus long term contracts.

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