Panama Canal transit auction bids exceed $1 million as demand surges

Some vessels have recently paid more than $1 million ​at auction to secure transit slots through the Panama ​Canal, the waterway's authority said on Tuesday, citing ‌shifts in ​global trade supply and demand.

The Panama Canal Authority said the high bids reflect temporary market fluctuations rather than tariff increases set by the interoceaniccorridor. The statement follows the authority's announcement last ‌week that it would impose new limits on daily vessel transits, reversing an earlier stance that no further restrictions were planned this year.

In May, the canal authority told Reuters the waterway was not planning passage restrictions in 2026. However, a longer-than-usual El Niño season has since forced a ‌change in strategy. Under new measures, the canal will cap daily transits at 34 vessels starting September 4 and further reduce that ‌limit to 32 on September 15. Panama has the capacity to handle around 40 crossings per day and had averaged 35 through June.

While median auction prices averaged around $55,000 between October and February, recent high demand has pushed median prices to roughly three times that level, according to the authority. A South Korean shipper agreed to ⁠pay a ​record $5.3 million to travel through the canal ⁠on September 1, Bloomberg News reported on Tuesday. The fee surpasses the previous record of $4.6 million paid to transit through the waterway earlier this month, according ⁠to shipping reports.

"Auction values are determined by multiple factors, including each client's urgency and commercial priorities, as well as broader supply and demand conditions," the ​Panama Canal Authority said in a statement. Concerns about costs for line-jumping, paying fees to gain access to passage slots without ⁠previous reservation, arose in April when reports said that a liquefied petroleum gas carrier paid $4 million to secure passage.

The canal authority downplayed the reports at the time, saying they ⁠were ​a reflection of temporary market conditions heightened by the war in Iran, which had increased traffic through the passage. To avoid delays or high auction fees, some shippers are rerouting around Africa's Cape of Good Hope. Roughly half of U.S. liquefied gas carriers bound ⁠for Asia chose the Cape route in August, extending a typical voyage from Houston to Japan to 45 days from 26 days.

Unlike the ⁠sea-level Suez Canal, the Panama ⁠Canal uses a gravity-fed lock system that relies on freshwater from the Gatun and Alajuela lakes. The El Niño weather pattern has diminished the seasonal rains required to replenish these reservoirs, forcing the authority ‌to restrict traffic.