Millions being spent to “skip the line” at Panama Canal
Congestion in the Panama Canal, exacerbated by low rainfall and shifts in oil and gas flows, is causing a significant rise in shipping costs. Historically low rainfall has led authorities to cut the daily vessel limit from 40 to 32, resulting in a backlog of over 100 ships. While the Panama government insists the canal is “open for business,” the average waiting time for northbound ships has tripled from June to August.
The bottleneck is affecting freight prices severely. The canal’s congestion has led to an auctioning system for slots driving costs unpredictably higher. Historically, the fee for skipping the queue was around $840,000 for northbound and $400,000 for southbound transits. These fees have surged to as high as $2.4 million recently and if you include the regular fee, the total cost can approach $3 million making alternative routes like the Suez Canal or the Cape of Good Hope financially attractive.
This spike in costs is particularly concerning as the busiest period for the Panama Canal typically doesn’t peak until the fourth quarter. Although rainfall is expected to increase briefly, experts predict low water levels to persist, indicating that high shipping costs and delays may continue for the foreseeable future.
