Panama Canal Auction Prices Soar as Wait Builds and Water Level Falls

The price shipowners and operators are willing to pay to transit the Panama Canal is once again on the rise as delays at the vital waterway are building. This week was the second time this year there have been reports of record prices being bid at the transit auctions as volumes have increased at the canal due to Asian demand for U.S. energy exports and the closure of the Strait of Hormuz and disruptions in the Red Sea.

A containership is reported to have bid nearly $4 million this week to “jump the line” at the Pacific entrance to the Panama Canal. Bloomberg reports the vessel Seaspan Benefactor (119,000 dwt) placed the bid, marking the first time since April that auction prices have jumped to these levels.

Seaspan’s website lists Ocean Network Express (ONE) as the charterer of the containership, which is 337 meters (1,106 feet) in length with a capacity of 10,100 TEU. It is unclear if the vessel is behind schedule on its trip from Asia. ONE’s online schedule shows the ship due to transit the Canal on August 16–17 and then to proceed to Houston and Mobile, before returning to the Canal for a return transit on September 6–7.

Data indicates the Seaspan Benefactor is currently traveling at a 13.8-meter (45.3-foot) draft. As such, it has to transit the Neopanamax locks, which currently a taking vessels with a draft of up to 49 feet.

Argus is reporting that this high bid is the latest in a series of high bids driving the average price up. It calculates that the average bid for the Neopanamax locks has reached $2.5 million. Argus reports the high since late July is $3.78 million for the Neopanamax locks and $2.63 million at the original Panamax locks. It reports that the average prices “have surged more than 16-fold compared to the same period last year.”

At play may be concerns that the Panama Canal Authority, starting in late August, will lower the maximum draft for the Neopanamax locks by half a foot and then, in September, another half a foot. In late July, it was also reported that they would be temporarily suspending some of the close-in auction slots, which are offered 96 to 48 hours before the transit time.

The Panama Canal Authority’s online dashboard shows the number of booked vessels waiting for transit has risen to 78 total, including 19 booked Neopanamax and 11 non-booked. There are, as of August 12, 32 non-booked vessels waiting for transit. The average days wait for non-booked vessels is also climbing. Currently, it is just under 8 days northbound (Pacific to Atlantic) and nearly 10 days southbound.

The pressure is building as the Panama Canal Authority is taking steps to increase its water management as the anticipated El Niño phenomenon builds and reduces rainfall. The Panama Canal Authority reported a five percent increase in the number of transits between October and June. So far, it is maintaining the number of transits at around 35 per day, but during the last drought it was forced to reduce the number of daily transits.

As the restrictions build, shipowners and operators will face the choice of diverting or reducing their loads. During the last drought, large containerships were required to offload a portion of their cargo and transship the containers across the Isthmus by train.

Water levels in Gatun Lake have slipped slightly in early August down to a current 84.3 feet. The current forecast shows that by mid-October it could be at 82.8 feet. Gatun Lake’s lowest five-year average water level was just under 84 feet, recorded in the month of May. However, in 2023, during the last significant drought, starting in June and through until October, the lake was measured at just over 79 feet as the authority imposed limits on the number of vessels and their drafts.