Container ship paid $4m to jump August canal queue
The Panama Canal Authority plans to cut daily vessel transits by 18 percent starting in October, deepening restrictions imposed in September as worsening drought caused by El Niño reduces the freshwater supply that powers the canal’s lock system. From October, an average of 29.5 vessels will be allowed through each day, down from 36 in August and 32 in September, according to a draft plan submitted to Panama’s parliament.
The cuts hit a waterway that handles 5 percent of global maritime trade and about 40 percent of US container traffic, prized by shippers for the cost and time savings it offers on routes between Asia and the United States. The 82-kilometer canal connects the Caribbean Sea to the Pacific Ocean, and its locks lift vessels 26 meters from sea level to Lake Gatun and back down on the other side. Each transit consumes fresh water, and the canal depends on rainfall feeding rivers that fill the lake.
With water levels in the watershed lower than forecast for September, officials have signaled that further restrictions could follow. If lake levels are no longer safe for the largest ships to pass, the Panama Canal Authority imposes restrictions for safety and to preserve water. El Niño is expected to peak later this year and is forecast to be the strongest in four decades. The natural phenomenon, which brings worldwide changes in winds, air pressure and rainfall patterns, has been tied to record temperatures across multiple continents.
The shipping costs of the squeeze have become visible in the canal’s daily auction, which allows shipowners to bid for slots ahead of scheduled transits. In August, with vessels waiting an average of 10 days to enter the canal — the longest wait since May — a container ship reportedly paid about $4m to jump the queue. Maritime companies ordinarily pay a flat fee to reserve a transit slot; the auction layer allows them to leapfrog when delays grow severe, and bid prices typically rise with demand.
The pressure on the canal comes on top of broader disruption to global shipping routes. The US and Israel’s war on Iran and its disruption to the strait of Hormuz has complicated logistics and added costs for shipping companies using the canal.
The current restrictions echo an earlier episode. In 2023, water levels in the lakes feeding the canal fell so low that authorities cut daily transits from 38 to 22, producing a bottleneck that sent companies scrambling for alternatives. Those cuts were more severe than the current measures, but the trajectory is the same, with no clear timeline for relief given forecasts of continued dry conditions through El Niño’s peak.
The drought is part of a wider pattern of extreme weather across the regions most affected by this El Niño cycle. Nine countries in Central America and northern South America experienced their hottest June-August period on record this year, according to an Agence France-Presse analysis of data from the European Copernicus programme. Fifty-two countries across all continents broke their seasonal temperature records over the same period, the analysis found, with eighteen African countries — from Mauritania and Sierra Leone in the west to Eritrea and Ethiopia in the east — also setting new seasonal marks. The extreme heat has taken many forms, from unprecedented heatwaves in Europe to devastating drought in Sudan and toxic smoke in Indonesia. More than a third of people experiencing the hottest northern summer months on record were in Africa, particularly in the Sahel and areas south of it.