Shipping market year timing fluctuations
6 minutes to read
By Hemisphere
There are occasions where companies have little choice in when parts or goods have to be shipped; supply chains are by their very nature bound by the flows of supply and demand. However, there are times when businesses do have to make decisions about shipping dates, and there are a number of factors that can influence what might be better or worse times to ship throughout the year; these factors can also affect shipping prices. In this blog we’ll consider some of the external factors that can have an impact on shipping, and take a look at how the shipping market can fluctuate throughout a typical year.
Top 5 things impacting shipping
- Holidays – It can’t be understated how much of an impact national and international holidays can have on shipping. For businesses in the West, the period from Thanksgiving (late November) through Christmas to New Year is an obvious stress period. In recent years, increased pressure due to e-commerce from Black Friday (the day after Thanksgiving, when many online and offline retailers launch a sales period) can last into December, with a further spike in air freight, in particular, as millions of last-minute orders are placed before Christmas. Naturally, reduced staffing in docks and airports over the festive period also has an impact – and this is also the case with the other major holiday on the shipping calendar: Chinese New Year, which falls between late January and late February. In the Far East and Southeast Asia, Chinese New Year means public holidays across the entire region, ranging from a single day (for example, in Indonesia and the Philippines) up to a whole week in mainland China. As many workers also take additional time off to be with their families around this time, and businesses adjust output levels to account for the holiday period, the impact of Chinese New Year on global shipping can span as much as a month.
- Extreme weather – Adverse weather can severely disrupt transportation networks including roads and railways, as well as ocean and air freight. As the recent “Beast from the East” storm showed, extreme weather isn’t always seasonal or predictable. While experienced logistics providers can do their best to minimise the impact of adverse weather, sometimes conditions are too extreme to counter. In the recent UK snowstorms, for example, the Met Office issued “red alert” warnings indicating a likelihood of widespread damage and potential loss of life – under such conditions, haulage drivers are advised to leave the road network and park up until the alert has passed. The hurricanes that lashed the Caribbean and the Gulf Coast last September also demonstrated how extreme weather can affect ocean and air freight – with a consequential knock-on effect on local road and rail transport – as airports were closed and flights grounded, and sea ports were likewise shut down and vessels rerouted.
- New products – Clearly, not all new products attract the sort of sales numbers that would have a significant impact on global shipping … but some do. For example, whenever Apple launches a new iPhone, it creates a spike in the shipping market that directly affects air freight prices, sometimes over a period of months. It’s all down to the sheer volume of orders for the new product, usually in the fourth quarter of the year – in 2016, for example, Apple sold over 45 million iPhones in the final three months of the year alone. Apple chooses air rather than ocean freight for speed of delivery, and every year a new version is launched with a corresponding spike in air freight prices. Perhaps the most noteworthy was in 2012, when the effect was so pronounced that some believe the iPhone helped the air freight industry bounce back from a post-recession collapse in prices.
- Technological advancements – We’re living in interesting times for the logistics industry, as technological developments look likely to increase automation and efficiency in the near future. In the past couple of years, fully automated driverless trucks have been trialled in America, Europe, Australia and Asia, and although they’re not yet in full-scale regular operation, it’s only a matter of time. It’s not just on the roads that automation is coming: the world’s first autonomous, zero-emissions container ship is being developed by Norwegian aerospace and marine firm Kongsberg, and chemical company Yara International. The ship is expected to launch on a manned basis in the second half of 2018, transitioning to remote operation in 2019 before becoming fully autonomous in 2020.
- Changes in government/law – Changes in national government don’t always mean sweeping changes in international trade and logistics, but it’s probably fair to say that the election of Donald Trump as President of the United States is a special case. Trump has long been critical of the US’s trade deficits with other countries in general, and China in particular. The latest example of Trump’s quest to get a “better deal” on trade has seen him declare his intention to impose punitive tariffs on up to $60 billion in Chinese imports. Alongside a commitment to impose tariffs on steel and aluminium, and international pronouncements of retaliatory action, it’s clear that current threats of a global trade war will have a considerable – if currently unpredictable – effect on international trade and shipping.
Peaks and troughs – what are the busiest/least busy times of the year?
We’ve already mentioned how the pre-Christmas period and Chinese New Year can have an effect on shipping, however the peak this causes in demand through December and January is only one of two big seasonal peaks in the shipping calendar. The other traditional shipping peak can start to ramp up as early as July or August, but typically spikes in September, presenting considerable challenges and representing a potentially risky period for businesses that haven’t planned ahead.
The August–September peak coincides with the run-up to China’s Golden Week celebration in early October which, like Chinese New Year, sees businesses closing or running down operations during the seven-day holiday period. Factories shut and ports operate a skeleton staff, which prompts an annual pre-shutdown rush to move goods to the West in order to meet retailers’ demands in the early pre-Christmas period. The common factor between the two main seasonal shipping peaks is a spike in freight prices – particularly in air freight as businesses are willing to pay more to expedite deliveries, in some cases shifting consignments from ocean to air freight.
How can HGL help clients with logistics?
For HGL, the advantage of having years of involvement in the logistics industry is that we have had deep experience of dealing with the seasonal peaks and troughs of the shipping year. As a logistics provider with global reach and strong international partnerships we believe in working closely with our clients to maximise the potential of their supply chain and encourage forward planning in order to both minimise costs and ensure there are no unpleasant surprises further down the line. With HGL, you can be confident that you are dealing with a trusted partner that delivers logistics solutions with honesty, attention to detail, professionalism and passion.