Panama pulls the drawbridge, and US East Coast cargo starts heading west

In May, the Panama Canal Authority told Reuters it had no plans to limit transits this year. As recently as 5 August it repeated that draft adjustments would leave daily crossings untouched. On Thursday it reversed course, capping transits at 34 a day from early September and 32 from the 15th, down from the roughly 35 to 36 the canal has been averaging since June and a normal capacity nearer 40.

The trigger is rain that never came. Cumulative rainfall across the canal watershed is running about a third below the historical average since May, with inflows down by more, and Gatun Lake sits around a foot beneath its five-year August norm. With forecasters expecting an El Niño to persist into 2027, the authority chose to ration slots rather than keep cutting how much each ship can carry. Planned draft reductions to 48 feet and then 47.5 feet have been pushed back to 2 September and 1 October respectively.

The market had already priced in trouble. MSC, CMA CGM and Hapag-Lloyd have all layered Panama surcharges onto Asia-to-US East Coast and Gulf Coast services, with MSC's latest increase taking effect on 12 September. Asia-East Coast spot rates hit a fresh high earlier this month, and one vessel reportedly paid around $4 million at auction to jump the queue.

None of which is a crisis on the scale of late 2023, when transits fell to 22 a day. But it is enough to shift cargo. Port of Los Angeles chief Gene Seroka told reporters on Tuesday the port is planning for a 5 per cent year-on-year volume bump over the next six to eight months as shippers route around Panama and the Red Sea, and has opened talks with terminal operators, truckers and the ILWU to absorb it. LA handled 960,464 TEUs in July, its second-busiest July on record, even before any diversion effect. The canal handles about 5 per cent of global trade. For the East Coast gateways that depend on it, the dry season is arriving early.