Panama Canal, record prices for transit: auctions at 3.7 million between climate and war in Iran

Prices for the busiest sea routes in the world have reached record levels Panama Canal as traffic is limited both by the drop in water levels, linked to the intensification of the phenomenon The Boy and by the strong demand as a consequence of war in Iran.

According to data provided by Financial Times daily auctions for the allocation of a transit slot in August through the canal’s most used locks have recorded so far this month an average of approximately $1.1 million more than 16 times the average price for the same period last year.

Prices had already increased since the US and Israel began the bombing of Iran which led to the closure of the Strait of Hormuz. At the same time, according to the National Oceanic and Atmospheric Administration, the Nino phenomenon began to intensify in June – a warming of surface temperatures in the Pacific Ocean that can cause severe droughts and milder winter temperatures – and this year could prove more intense than usual.

The impact of El Nino and the crisis in Iran

Prices are rising because lower water levels are expected to limit the amount of cargo ships can carry through the canal and could reduce the number of transit slots later in the year. This year’s El Nino has already caused disruption to shipping traffic on European rivers such as the Rhine and Danube, prompting the cancellation of cruises and the diversion of cargo.

Meanwhile, the closure of the Strait of Hormuz, the hub through which a fifth of the world’s oil passes, has forced Asian buyers to increase purchases of crude and oil products from the US Gulf Coast, boosting demand and prices for transit through the Panama Canal.

Record auctions for Neopanamax and Panamax closures

According to data collected by Argus and reported by the FT, in recent weeks the average price for using the Canal’s largest locks which accommodate larger ships has reached 2.5 million dollarsthe highest value ever recorded in both auctions. The prices of some individual auctions for the locks Neopanamax e Panamax (the names of the locks refer to the size of the ships based on their carrying capacity) respectively touched the 3.78 million hey $2.63 million from July 28th.

Furthermore, the FT recalls, the recent increase in prices follows the entry into force, in July, of the restrictions imposed by the Panama Canal Authority which regulate the maximum depth to which ships can immerse themselves in the water, known as draft. Reducing the draft forces ships to carry less cargo, so they can stay more afloat. This increases prices for shipping companies and their customers and can create long queues of ships at the entrance to the canal, up to 50 miles long.

The Panama Canal Authority told the Financial Times that some recently transited ships paid amounts in excess of $1 million at auction to meet their specific market needs.