29 February 2024 (Lloyd's List) - THE AVERAGE price to secure transit through the Panama Canal’s neopnamax locks has more than doubled in February as more shippers opt to bid for slots.
Auction prices rose to an average of $654,444 on February 27, according to data from price reporting agency Argus Media, up from about $260,000 at its onset.
One crude tanker operator paid $1m to win a neopanamx slot last week, the agency said, the highest price paid since early January after the Panama Canal Authority (ACP) increased the number of daily transit slots by two.
“Operators are choosing to go via the Panama Canal in order to cut travel time and fuel costs and, in a few cases, to avoid the increasingly risky Red Sea route and have been paying historically high prices,” Argus’ Americas senior freight pricing analyst Ross Griffith said.
“At the end of January auction prices for the Panamax locks rose to more than $500,000 lumpsum, almost double from the week before.”
Low water levels have forced the Panama Canal Authority (ACP) to impose increasing restrictions starting last summer, limiting the number of transits and the maximum allowed draughts.
After experiencing its driest October on record, the ACP initially planned to limit daily transits in January to 20 and 18 in February – half of the “normal” of 36 transits – but rainfall in November was less adverse than expected, leading the authority to increase the number of daily transits to 24 in January.
Still, with the number of daily transits restricted to about two thirds of normal levels and the number of bookable slots down by about 10 per day, more operators are forced to bid for a slot, Griffith said.
“Since July 2023, sustained low water levels at Panama’s Gatun Lake, which feeds into the canal’s lock system, have forced the Panama Canal Authority to limit the number of ships allowed to go through,” he said.
”This has led to extended delays for cargoes such as diesel, gasoline, LPG, coal and petroleum coke. It also led to heightened competition among shippers to reserve transit slots through the canal’s auction system.”
Very large gas carriers on US-Asia trade have rerouted away from the canal as the restrictions increased congestions and costs soared, opting to sail through the Suez Canal and Cape of Good Hope instead. An auction record was set in October when a shipper paid nearly $4m for a slot.
However, VLGCs are turning back to the Panama Canal amid the Houthi threat in the Red Sea, Griffith said.
“Operators of vessels like very large gas carriers that had previously routed away from the Panama Canal in favor of the the Suez Canal are now returning to the Panama Canal amid the increasing risk to vessels caused by the Houthi militants targeting commercial ships in the Red Sea.”
