Shipping companies have paid a total of $235 million so far this year to jump ahead of congestion at the Panama Canal as drought has dramatically limited how many ships can enter the waterway, according to data from Waypoint Port Services Ltd.
That amount is 20% higher than what companies paid during all of 2022 for expedited passage. It’s also enough to cover a projected revenue shortfall of $200 million that the canal faces from the drop in traffic this year, based on estimates by financial services firm ING Groep NV.
The Panama Canal Authority auctions off priority slots to shippers to enter the system, and bids have soared to record levels this year as an El Niño-fueled drought has reduced water levels to an unprecedented low, prompting officials to sharply reduce traffic. The auction fees are paid on top of usual tolls to cross the canal.
The canal authority plans to continue restricting access through February 2024 to conserve water, further driving up competition for shippers desperate to speed through the waterway.
Auctions provided options to customers who would otherwise not have reservations and prices were determined by market dynamics, said a Panama Canal spokesperson, who added that it’s too early to predict the impact of auctions on revenues.
“With the amount of money being paid in the auctions and the amount of money that customers are willing to put in, we really don’t know where this is going to end,” said Francisco Torné, Panama country manager for Waypoint.
