Panama Canal fees hit record high as El Niño and Iran war choke shipping

{"text":[[{"start":9.35,"text":"Prices for the busiest shipping lanes in the Panama Canal have hit a new record, as falling water levels linked to an intensifying El Niño and strong demand driven by the Iran war constrain traffic. "}],[{"start":22.9,"text":"Daily auctions for a transit slot in August through the canal’s commonly used locks have averaged about $1.1mn so far this month, more than 16 times the average price for the same period last year. Prices have surged since the US and Israel-led bombardment of Iran began on February 28, leading to the closure of the Strait of Hormuz."}],[{"start":45.099999999999994,"text":"At the same time, a strengthening El Niño, a warming of surface temperatures in the Pacific Ocean which can cause severe drought and warmer winter temperatures, began developing in June and could be stronger than usual this year, according to the National Oceanic and Atmospheric Administration. "}],[{"start":62.3,"text":"Prices are rising because lower water levels are expected to limit the amount of cargo ships can carry through the canal and potentially reduce the number of passage slots later this year. "}],[{"start":73.35,"text":"“The problem right now is the water levels are dropping steadily and it’s not supposed to be doing that from May to December,” said Ross Griffith, head of Americas freight pricing at Argus. This year’s El Niño has already disrupted marine traffic in European rivers such as the Rhine and Danube, causing the cancellation of cruises and rerouting of freight. "}],[{"start":94.5,"text":"Meanwhile, the closure of the Strait of Hormuz, the chokepoint through which a fifth of global oil flows, has forced Asian buyers to increase purchases of crude and petroleum products from the US Gulf Coast, boosting demand and prices for transit through the Panama Canal. "}],[{"start":111,"text":"In recent weeks the average price to use the canal’s larger locks — which accommodate larger vessels — hit $2.5mn, the highest recorded for either auction, according to data compiled by Argus. "}],[{"start":null,"text":""}],[{"start":123.1,"text":"The prices for some individual auctions for Neopanamax and Panamax locks have hit as high as $3.78mn and $2.63mn respectively since July 28. The names of the locks refer to ship sizes based on cargo capacity. "}],[{"start":142.2,"text":"Big vessel owners that frequently utilise the Panama Canal, such as large container ships and liquefied petroleum gas companies, typically pre-book slots at set rates usually well below average auction prices rather than compete for slots in the daily auctions. But as much as 30 per cent of canal traffic overall can compete in the daily auctions rather than by pre-booking slots."}],[{"start":164.7,"text":"The most recent price surge follows enactment of restrictions by the Panama Canal Authority in July governing how low vessels can sit in the water, known as a ship’s draft. "}],[{"start":176.14999999999998,"text":"The draft reductions force ships to carry less cargo so they sit higher in the water. This raises prices for shipping companies and their customers and can create large queues of vessels at the entrance of the 50-mile-long waterway. "}],[{"start":188.95,"text":"Three draft restrictions announced over the past month for Panamax locks would reduce the water level a vessel can operate in to 47.5 feet by September 3, down from its typical level of 50 feet."}],[{"start":202.1,"text":"Some 113 vessels were waiting to transit the canal on August 3 either via pre-booked slots or taking part in daily slot auctions, up from 40 on January 2."}],[{"start":214.45,"text":"Water levels in the man-made Gatun Lake, which feeds into the Panama Canal, are below the 1965 to 2022 average and are projected to fall even further for the next few months, according to estimates by Argus. Though water levels are higher than they were when compared with 2023, which was an exceptionally dry year, the projected decline is much steeper and comes ahead of the dry season beginning in December. "}],[{"start":239.39999999999998,"text":"“So potentially you could have a situation that is worse than 2023,” Griffith said."}],[{"start":null,"text":""}],[{"start":245.39999999999998,"text":"The Panama Canal Authority told the FT some vessels that recently transited have paid amounts exceeding $1mn at auction to meet their specific market needs and reflected “temporary market fluctuations”, not a tariff set by the Panama Canal. "}],[{"start":261.45,"text":"“The announced draft adjustments will not reduce the number of daily vessel transits,” an authority spokesperson said. But depending on how conditions change, the authority could impose further restrictions, the spokesperson added."}],[{"start":null,"text":""}],[{"start":null,"text":""}],[{"start":283.09999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1786504333_4668.mp3"}