February and March are months of massive delays in supply chains and shipping due to the celebration of the Chinese New Year. With everything that happened at the Suez Canal recently as well, we decided to shine a light on shipping issues. We want to explain just how much various predictable and unpredictable situations can affect businesses worldwide. Now that the Chinese New Year has ended and shipping has settled, let’s look at the details behind it. Why is it such a massive holiday in China? And how does it impact businesses all around the world?
The Chinese New Year & Shipping
Chinese New Year celebrates the beginning of the new year according to the traditional lunisolar Chinese calendar, which is why it falls later during the year, as opposed to the Gregorian calendar, which celebrates the New Year on the 31st of December. Given that China is one of the biggest countries with the largest population, and knowing how much of the world’s products come from China, it’s easy to see how integral this country is in trade happening worldwide. Most businesses depend solely on China to get their supplies, materials, and products delivered to them via various shipping methods. That’s why the period before, during, and after the Chinese New Year is a stagnant one for businesses.
The reason why this happens is, in China, celebrating the New Year includes days, sometimes even weeks of complete shutdown. During this time, people don’t work and spend their time with their family. It’s one of many traditions and customs associated with this holiday. It’s important to note that other countries also celebrate this New Year, such as Indonesia, Malaysia, South Korea, and North Korea.
These shutdowns typically last for about two weeks. Most businesses that work with China either finish transactions before their New Year or wait for it to end. Either way, this is absolutely fine because it’s predictable. Although it does cause a slight interruption in typical business flow, it’s actually very manageable once China starts working again. Most of the issues are often related to packaging and/or shipping. But, what happens when unpredictable things happen – things like the container ship stuck in the Suez Canal, an action that caused an enormous amount of trouble for trade worldwide? Well, that’s where things get a bit tangled up.
The Suez Canal and the Shipping Chaos
The Suez Canal in Egypt is an artificial canal that is a little over 120 miles long and connects the North Atlantic ocean with the Mediterranean and the Red Sea. Over history, this canal has become the most crucial waterway route in which a lot of the world’s most important, global sea trades occur. Many ships take this route to shorten the time needed to transfer goods from one point to another. With exchanges as big as these, only two things are vital – time and money.
So, when an enormous, 200,000-tonne cargo ship carrying 18,000 containers of products blocks the entire Suez Canal diagonally, making it fully impossible for other ships to pass for the next five days, it requires a lot of money to make up for the damage – nearly 1 billion U.S. dollars, to be exact.
Sure, some of the ships did take a different route, but this also cost a lot of time and money. It also caused problems for businesses that depended on these ships for their products.
We will be closely observing to see what happens next, as will the rest of the world. But this blockage will definitely leave many consequences on global trade, especially in Europe and Asia.
Given the awful impact the coronavirus pandemic has had on global trade, this blockage was definitely not necessary at all. In the end, the situation shows how much we depend on supply chains to function in an already shaken-up world. It also exemplifies how, sometimes, businesses are affected by things that they cannot control, whether it’s the Chinese New Year or horrendous blockages in the Suez Canal.