The Golden Week is a week-long Chinese national holiday when the entire country goes on holiday for one week. Following the Chinese National Day on October 1, there is a seven days celebration called the Golden Week festival when ceremonies and parades are held throughout the country. The freight forwarding industry in China and beyond needs to prepare in advance to deal with the tight capacity and the soaring prices of air and ocean freight during this time of the year. Today, we will discuss the impact of the Golden Week on the transportation and logistics industry.
The impact of Golden Week on the international transportation and logistics industry
A tightness of capacity
Generally, during this time of the year, the forwarders rush to move their shipments out of China before the closures happen. As a result, there is a tightness in capacity and a surge in prices of air and sea freight. Additionally, the pandemic-induced capacity reduction will make this time all the more challenging for logistics operators.
Carriers are likely to be overbooked leading to a vast volume of rolled cargo. Additionally, there will be a high demand for road freight services that in turn will result in a higher trucking cost. Just like the Chinese New Year, the Golden Week also witnesses a rush from the manufacturers to speed up their productions. They try their best to send out the items from China before the workers leave for holidays. The result is a sudden imbalance in demand and space capacity.
Even though the ports and the customs offices remain open, all the factories will be closed during the first week of October. This has a substantial impact on logistics operations to and from China. Furthermore, this year we are expecting to see several blank sailings in the week following the Golden Week when most carriers will cancel the sailings to optimize vessel utilization. This is precisely why freight forwarding companies need to book their containers well in advance.
Simply put, China’s Golden Week kickstarts the peak shipping season. In July and August, we see the shippers scrambling for space and dealing with the increased freight rates. Once the operations normalize after the Golden Week, there is yet another surge in prices. This is because the shipping preparations commence for the Christmas season.
High demand and low space availability
In the weeks leading up to the Golden Week, we see a rise in demand for exports of Chinese goods. To cope with the increasing space demand, the carriers push up the spot rates. The spot rates from China to the USA will be at its highest level in the coming weeks. In a time when the transportation and logistics industry is already suffering a setback because of the container shortage, port congestion, and equipment shortage, we can confidently infer that the Golden Week is going to further complicate the situation. Moreover, the containers also need to be returned to the terminals on time to keep up with the massive demands for Chinese exports. As a result, the freight forwarders might need to pay detention fees and other surcharges to the carriers.
Impact of Golden Week on the international supply chain
The Golden Week even impacts freight forwarders who are not shipping out of China. Even though most South-East Asian countries don’t have to deal with rising volume as a result of the Golden Week, it will still impact their operations. For example, carriers all over the Asia Pacific have to contend with the pre-holiday rush and a resulting backlog of orders. Moreover, the ocean freight industry reserves more space for the Chinese cargo resulting in a space crunch in other parts. Freight forwarders in most countries are required to wait out until the backlog is cleared.
Most sea freight forwarders in South East Asia have to deal with container shortages from the middle of August until the last week of September. This year the already ongoing container crisis will further complicate the problem. Additionally, sea freight rates from China to the USA will be reaching a record high. It goes without saying that the freight forwarding industry will experience a crisis of sorts even if they are not shipping to/from China. Moreover, with the recent supply chain disruptions in China, there could be a considerable impact of the Golden Week on your upcoming cargo. Some of the regions where the freight forwarders will be most affected during pre and post-Golden Week are as follows:
The international demand for space has led to a congestion in all the important trade lanes. As a result, North America is facing a shortage of charter vessels. This has greatly impacted the capacity of the ocean carriers. Putting it simply, the situation will become very similar to the Yantian Port congestion which happened a few months back.
North European countries
Freight ships destined to Antwerp are already delayed by more than a week. This trend will only rise as the Golden Week approaches. Moreover, the congestion in North America and Asia Pacific is also affecting the ports of Northern Europe. The port of Algeciras which is a freight hub for cargo coming from Asia will most likely remain congested.
The Typhoon In-Fa already affected the Asia Pacific region that will face a further crisis in the coming months. The shipping industry in the Asia Pacific region was already performing under strain capacity and freight forwarders here will now have to deal with the additional obstacle of Golden Week. Moreover, the meteorological department has forecast a couple of cyclone on the Northwest Pacific and South China Sea in the months from August to December. This will lead to further blank sailings and delays.
How the freight forwarding industry needs to prepare for Golden Week
- Sea freight forwarders who want their shipment to arrive in time for the Christmas season need to start preparing before the Golden Week commences. Therefore, the first thing you need to do is book your shipments at least 3-4 weeks before the 1st of October. Air freight forwarders should book their shipments at least one week before the start of the Golden Week holidays.
- Moreover, you need to determine which batch of shipment is the most urgent and plan accordingly.
- Most importantly, you should conduct thorough research on the routes and capacity of the carriers.
- You have to stay informed with all possible announcements of blank sailings, freight cancellations, rate hikes, and surcharges.
- Consider opting for 40 ft containers as 20 ft containers will be in high demand. Although you might not require the extra space, the lower demand for the 40-ft could result in better rates and availability.
- Shippers in need of open-top containers, reefers, and flatracks should start making arrangements as early as possible.
- As a freight forwarder, you need to be flexible and consider options that might take a slightly longer transit time.
- Using the transload option at the point of destination can also be a good idea.
- If none of the above tips work out for your particular requirement then consider the option of air freight.
Lastly, you need to forecast your upcoming shipping requirements and start preparing accordingly. Also, remember to keep your customers informed about the situation and changes in plans to avoid any possible miscommunication.