Panama Canal Authority begins auctions to transit as delays drag on

1 Sep 2023 | Eoin Hughes

The Panama Canal Authority has reportedly begun holding auctions for ships waiting to pass the canal, with one vessel reportedly paying $2.4 million to transit, amid warnings that restrictions at the key waterway may last for another 10 months.

Since late July, only 10 vessels have been allowed to move through the neopanamax locks per day.

The Authority kept only one to two daily slots for unbooked vessels that they auctioned to the highest bidder, according to a second quarter earnings report from LPG company Avance Gas.

This company said one bidder had paid $2.4 million for a one-way northbound transit at one auction, on top of a regular toll fee of $400,000.

Problems with the canal began several weeks ago as an extended dry season led to falling canal water levels.

Water levels on the Lake Gatun reservoir have fallen to 79.5 feet, from a long-term average of 84.9 feet, according to September 1 data from the Authority.

Due to the low levels, the Authority said only ships with a maximum draft of 44 ft may pass the neopanamax locks, to avoid them grounding on the bottom of the canal.

From July 25, the Authority cut the number of ships that could move through the canal to 32 per day, 22 through the Panamax locks and 10 through the Neopanamax locks.

That was down from a norm of 36 and led to a growing backlog.

As of September 1, 116 vessels were waiting to transit through the canal, based on the latest data provided by the Panama Canal Authority.

Sources told Agricensus that waiting times were at around 20 to 21 days.

The Panama Canal Authority said these restrictions could last for another 10 months.

Agricensus understands the restrictions to date have only had a limited effect on freight rates from the US, but this is likely to change if restrictions continue for so long.

“If Panama Canal delays continue there should be support on rates which will also split to the ECSA region as well”, Yiannis Parganas, the Head of Research for Intermodal, told Agricensus.

“If delays continue and become even bigger it will make no sense to send ships via Panama and some charterers could choose to use alternative routes”.

“It all depends what is more profitable for charterers - to pay the extra costs at transit and due to delays or choose a longer distance trip, in both scenarios rates will go up”, he further said.

Continued problems at the Panama Canal may also begin to weaken US crop exports to Asia which have already become less competitive against their Brazilian rivals.

If freight rates from the US to Asia continue to increase that could have knock-on effects on agricultural export prices and may increase the attraction of South American crops for Chinese buyers.