The prices for Panama Canal transit rights have soared to record levels due to the ongoing conflict in Iran and the effects of El Niño. While exports of U.S. crude oil and petroleum products to Asia have increased due to the closure of the Strait of Hormuz, drought conditions have led to lower water levels in the canal. As demand for transit rises and the volume of transportable goods decreases, prices have surged.
On August 11, the Financial Times reported, citing data from the commodity price information firm Argus, that the average daily auction price for transit rights through the Panama Canal's major locks this month reached approximately $1.1 million, more than 16 times higher than the average during the same period last year.
The transit rights for the Neopanamax locks, used by larger vessels, have recently averaged $2.5 million, marking an all-time high. Since July 28, individual auctions have seen Neopanamax transit rights reach as high as $3.78 million, while Panamax rights peaked at $2.63 million.
The surge in prices has been influenced by the Iran conflict. Following U.S. and Israeli airstrikes on Iran on February 28, the Strait of Hormuz was closed, prompting Asian countries to increase their purchases of U.S. crude oil and petroleum products from the Gulf of Mexico. This rise in energy transport from the U.S. to Asia has led to greater demand for the Panama Canal.
Additionally, the drought caused by El Niño has compounded the situation. Concerns about falling water levels in the Panama Canal have grown since El Niño began developing in June. The water level of Gatun Lake, which supplies the canal, is currently below the average from 1965 to 2022 and is expected to decline further in the coming months.
The Panama Canal Authority has tightened restrictions on the draft, or the depth to which a vessel can be submerged. The allowable draft for Panamax vessels is set to decrease from the usual 50 feet to 47.5 feet by September 3. A reduced draft means vessels must carry less cargo to transit the canal.
The number of vessels waiting to transit has also increased significantly. The number of waiting vessels rose from 40 on January 2 to 113 on August 3, nearly tripling.
Most large container ships and liquefied petroleum gas (LPG) carriers, which frequently use the canal, typically reserve their transit rights in advance. However, up to 30% of all transit vessels can secure their rights through daily auctions, which can lead to significant price increases when demand surges.
Market analysts suggest that conditions this year could worsen compared to the record drought experienced in 2023. Although the current water level in Gatun Lake is higher than in 2023, it is declining at a faster rate, and the dry season is approaching in December.
Ross Griffiths, Argus's North American freight pricing manager, stated, "Typically, from May to December, water levels should not be falling, but they are currently continuing to drop. There is a possibility that the situation could worsen compared to 2023."
The Panama Canal Authority noted that recent auction prices exceeding $1 million reflect temporary market conditions driven by specific vessel demand and differ from official toll rates. They added that while there are no current plans to reduce the number of vessels transiting daily due to the announced draft restrictions, further limitations may be implemented if water levels continue to decline.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.