A $5.3m ticket through Panama as the canal tightens again

A liquefied petroleum gas tanker will pay a record $5.3m to transit the Panama Canal on 1 September, the second record in a fortnight, as drought measures and Middle East diversions collide at the chokepoint that carries US Gulf energy exports to Asia.

South Korea's SK Gas agreed the sum in an auction this week for a northbound slot for the G. Spirit, Bloomberg reported, beating the $4.6m paid on 14 August by another Korean-controlled vessel. Before February the median auction price was around $55,000. Wait times for ships arriving without a reservation have stretched to as long as 11 days, according to Argus Media.

The scramble follows the Panama Canal Authority's announcement last Thursday that it will cut daily Neopanamax slots from 10 to nine from 3 September and Panamax slots from 26 to 23 by 15 September, taking total daily capacity to 32 vessels. Rainfall across the watershed has fallen short despite the arrival of the wet season, and as recently as April officials had said they expected to avoid restrictions through the end of the year. Auction slots will now be split into four market groups, with LNG and LPG carriers in their own category, and fully laden containerships with the highest capacity will get priority at the Neopanamax locks. Draft cuts to 48 feet and 47.5 feet have been postponed to 2 September and 1 October. Canal administrator Ricaurte Vasquez said this week he expects the El Nino dry spell to last about eight months.

For US shippers the exposure runs both ways. Gulf Coast LPG and LNG exporters depend on the canal to reach Asian buyers, and each auction record is a cost that flows back to Houston and Corpus Christi. On the import side, Asia-to-East Coast container rates hit a new high earlier this month, carriers have added canal surcharges, and the Port of Los Angeles is planning for a 5 per cent volume uptick over the next six to eight months as cargo diverts west. Clarksons analysts warned that the restrictions will start feeding into freight rates as effective vessel supply tightens.

The 2023-24 drought was supposed to be the lesson. The canal has since added water-saving basins, simultaneous lockages and reduced hydro generation. It may not be enough.