Panama Canal slot sells for $5.3m

South Korea’s SK Gas paid a record $5.3 million to secure a northbound Panama Canal transit slot for the LPG carrier G. Spirit on September 1, according to SupplyChainBrain and Kuehne+Nagel. The price surpassed the previous record of $4.6 million set earlier in August, as drought and El Niño concerns tightened capacity at one of the world’s main shipping chokepoints. The payment was for a priority slot in the canal’s auction system, which is used by ships that do not have confirmed reservations or need faster passage. The premium reflects the cost of avoiding delays at a time when the Panama Canal Authority is preparing new capacity cuts because of reduced rainfall in the canal watershed. (supplychainbrain.com) ### Why would a shipper pay $5.3 million for one canal slot? The $5.3 million bid bought time. Kuehne+Nagel said unreserved vessels have faced waits of up to 11 days, and the number of ships arriving without reservations has risen from about 10% to 20%-25%. Ricaurte Vásquez, administrator of the Panama Canal Authority, said the canal had at one point seen 18 bidders for one slot, compared with a more typical two to three. (mykn.kuehne-nagel.com) An LPG cargo can justify that cost if the value of arriving on time is high enough. FreightWaves, citing people familiar with the auction, said the premium reflected the value of avoiding a long delay during an unusually tight LPG shipping window. ### What is drought doing to canal operations? (mykn.kuehne-nagel.com) The Panama Canal Authority said on August 20 that it would cut daily transit capacity because rainfall and inflows were well below historical averages. Its advisory said cumulative rainfall in the canal watershed from May through August was 34% below the historical average, while inflows were 44% below average for the same period. (freightwaves.com) Those conditions will reduce daily transits to 34 vessels effective September 3 and to 32 vessels from September 15. Reuters reported on August 20 that the authority linked the move to an expected longer-than-usual El Niño season that could further reduce water levels. (pancanal.com) ### Why are LNG and LPG ships especially exposed? Wood Mackenzie said on September 1 that El Niño-driven drought conditions were restricting Panama Canal operations and lowering effective vessel carrying capacity through draft restrictions. The consultancy said LNG, LPG and refined products are among the most directly exposed cargoes because the canal links U.S. Gulf Coast export terminals with Pacific demand centers. (pancanal.com) Wood Mackenzie said carriers facing draft restrictions have three options: load below capacity, compete for transit slots, or reroute via the Cape of Good Hope. The last option adds about 10 to 15 days to voyage times, increasing tonne-mile demand and freight costs even if underlying supply and demand do not change. Ian Solis, a data associate at Wood Mackenzie, said monitoring canal disruptions would be critical through the third and fourth quarters of 2026. (woodmac.com) ### How does El Niño fit into this? NOAA forecasters now see a greater than 90% chance that El Niño becomes a very strong event this fall and winter, according to Reuters reporting carried by gCaptain. That has raised concern that Panama could face another period of low precipitation just as demand for canal access remains elevated. (woodmac.com) Reuters reporting carried by gCaptain said the canal is entering this El Niño period while also dealing with stronger demand from tanker traffic and rising LNG and LPG flows. That combination has made last-minute transit slots more valuable and pushed auction prices higher. ### What happens next for shippers? (gcaptain.com) September 3 is the next operational milestone. The Panama Canal will begin the first step of its transit reduction that day, with a second cut due on September 15 under the authority’s August 20 advisory. Shippers without reservations will continue to rely on daily auctions, where the next benchmark will be whether bids remain near the $5.3 million record as capacity tightens further. (gcaptain.com) (pancanal.com)