Shipping Companies Bid Millions to Bypass Panama Canal Delays

Last updated on September 8th, 2023 at 08:03 am

Shipping companies are paying millions to skip long wait times and secure transit through the Panama Canal, which has been hit by severe drought and lowered water levels this year, according to recent reports.

An unnamed shipper paid $2.4 million to win a slot auction held by canal authorities for the week of August 20th, said Oystein Kalleklev, CEO of gas shipping firm Avance Gas, during the company’s Q2 earnings call last Thursday. When combined with regular toll fees, the total cost reached nearly $3 million to cross the canal, he noted per a call transcript.

Other companies are facing high fees too. The Wall Street Journal reported on August 18th that shipping giant Maersk had to pay $900,000 on top of regular $400,000 toll charges for each of its two vessels unable to obtain canal crossing slots.

Standard canal fees range from $150,000 to over $1 million depending on ship size and capacity. Shippers are paying premium rates because drought has reduced water depth, limiting vessels able to traverse the canal.

The Panama Canal Authority told Bloomberg its slot auctions are frequently won by liquefied petroleum gas and liquefied natural gas carriers (4). Congestion is being closely monitored since 40% of U.S. container traffic passes through the canal, per an August report from logistics firm Container xChange.

Watch – The World’s Shortcut: How the Panama Canal Works

In a statement Tuesday, canal authorities said vessel queues at both canal entrances have improved, dropping 20% from 135 to 108 ships. However, average and maximum wait times have doubled to four days in the past week, noted supply chain platform project44, sparking concerns ahead of the holiday season.