The Lunar New Year – Oil demand, container supply and freight ratesThe Lunar New Year is the most important holiday in Asian bringing families together for feasting. This year it seems that the Lunar New Year will mark multiple turning points in the shipping industry, especially for oil demand and container supplies, following much turmoil in the shipping industry.
This holiday is tied to the lunar calendar. Traditionally a time to honor household, families and heavenly deities and ancestors, China for example is discouraging people from travelling during the holidays due to the Covid-19 pandemic. This led analysts to cut forecasts for the first quarter oil demand on the assumption that less gasoline and jet fuel will be consumed. As predicted, flight bookings as of January 19th plummeted by 74% compared with 2020 according to travel analytics firm ForwardKeys.
According to Yuntao Liu, Energy Aspects’ China analyst, a cooldown during the Lunar New Year set the stage for a healthy reset for stronger rebound for the oil business in Q2 2021. China would then be going full steam on economic growth without being stretched by wider-scale virus outbreaks.
A recent analysis by Container xChange, is suggesting that the upcoming Lunar New Year holiday period could also be the turning point for the recent container shortage experienced in the second half of 2020. The shortage was caused due to the increased demand for goods in the wake of the first wave of lockdowns related to Covid-19. The shortage was so drastic that even major ports like that of Shanghai, for which container deficits are customary, reported a decline in availability of 83% for 40HCs and 75% for 40DCs.
The advent of normality brought around in the Lunar New Year is also stimulated by uncompromising repositioning actions by the shipping line, and an increase in supply of newly built containers.
Lloyd’s list is also reporting that, following one of the best January s in several decades for the bulk sector, freight rates have begun to slide. The markets are heading into a seasonal lull due to the Lunar New Year holidays.