Panama Canal Institutes Daily Auctions for Additional Transit Slot

This article is taken from the November 30, 2023 USDA Grain Transportation Report.

On November 24, the Panama Canal Authority (PCA) announced it would offer, as conditions permit, an additional transit slot for the Panamax locks to be allocated via auction. Vessels that have waited outside the Panama Canal for at least 10 days are eligible to participate. By February 2024, PCA plans to reduce the number of daily transits from about 32 per day to only 18 per day (Grain Transportation Report (GTR), November 2, 2023, first highlight).

According to HJ O’Neil Commodity Consulting, auction slots can sell for $2-4 million. For a grain vessel that wins an auction slot for $2 million, U.S. Gulf-to-China freight costs for a metric ton (mt) of grain rise by about 50% (i.e., $60 per mt to $90 per mt).

According to HJ O’Neil Commodity Consulting, the majority of grain vessels leaving the U.S. Gulf will likely forgo the PCA’s auction, opting to pass through the Suez Canal instead of the Panama Canal. From October 15-28, 87% of grain bulk vessels leaving the U.S. Gulf for East Asia traveled through the Suez Canal (GTR, November 22, 2023). This trend is likely to continue until Panama’s drought subsides.