12 January 2023 (Lloyd's List) - THE early Chinese New Year is likely to go off with a whimper rather than a bang, as weak demand drives a less than celebratory season for carriers. Traditionally, the period leading up to the Lunar New Year sees a rush of orders ahead of the closure of factories for the holidays. That pattern has changed since 2020, first because of the onset of the pandemic in 2020, then by consistently high volumes across the year in 2021 and last year. But demand has been easing since the second half of 2022. And with inventory levels still high, this year has seen little sign providing any boost to carriers. “The fear of recession and increasing inflation has seen demand for goods start levelling off,” Logistics Trends & Insights analyst Cathy Roberson said in a webinar. “There are also many question marks over the lifting of China’s zero-Covid policy. How much manufacturing will come back online from February 7? And how will this affect the port and logistics workers? It is going to be hard for a lot of businesses to gauge how to replenish their inventories.” The usual sudden jump in spot rates leading up to Chinese New Year had not happened this year, she added. “We’ve just finished the holiday season and retailers are saying they have reduced inventory levels, but the question is how much inventory replenishment is needed. Government statistics show inventories remain high and we’re seeing sales plateau due to concerns over the economic outlook.” This picture is further complicated by an increase in blankings by carriers responding to lower demand. Figures from Xeneta show that in the four weeks leading up to the holiday, carriers have announced the blanking of more than 220,000 teu of capacity on the Asia-US West Coast trade lane. By comparison, in 2019 only 29,000 teu was blanked. “This really does show the low level of demand gripping the industry at present,” said Xeneta chief analyst Peter Sand. “In a normal year, we tend to see very few blanked sailings in the run-up to this significant Chinese holiday as shippers stock up on their inventories. So, this is a worrying development for carriers and, no doubt, a bad omen of what’s to come for the year ahead.” The number of blankings would likely grow in the period up to January 22, he added, as would those in the following four weeks, when carriers traditionally reduced sailing in line with the fall in Chinese manufacturing. “There’s still plenty of time left for carriers to remove further capacity, so expect this year’s total to eclipse 2019’s figures,” he said. Despite this, blanked sailings were likely to be half what had been seen in 2022. But this anomaly was due to severe congestion last year, rather than a lack of demand. “That was due to huge strains on global supply chains, with congestion and a lack of equipment derailing schedules,” Mr Sand said. “In some cases, carriers were forced to add weeks to round trips, making it impossible for ships to get back in time for their next scheduled departure. This year is very different. It’s a clear issue of depleted demand, as we can see by the falling ocean freight rates as carriers compete for business, rather than either congestion, Covid or any other structural challenges.”