VLGCs that shifted away from Panama Canal transits because of weather-related restrictions are returning because alternative Red Sea routes have been shut off by Houthi rocket attacks, according to new analysis from Argus Media.
The peak of the climate change-related crisis in the last months of 2023 had seen some VLGCs hauling cargoes from the US to East Asia reroute via the Suez Canal or the Cape of Good Hope, adding about two weeks to the journey.
“Operators of vessels like VLGCs that had previously routed away from the Panama Canal in favour of the Suez Canal are now returning to the Panama Canal amid the increasing risk to vessels caused by the Houthi militants targeting commercial ships in the Red Sea,” said Ross Griffith, Argus’ senior freight pricing analyst for the Americas.
About 24 Panama Canal transits are available daily, an increase from the start of the year after rainfall, but competition for slots has seen prices for slots at auction soar, Argus said. Neopanamax slots more than doubled on average since the beginning of February to $654,444.
Slot rates surge
A crude tanker operator paid $1m last week, the highest level paid since more slots became available in early January. The rates still represent a decline from the one-off record price of nearly $4m in October 2023 for a neopanamax slot.
Sustained low water levels at Panama’s Gatun Lake, which feeds the lock system, have forced the Panama Canal Authority to limit the number of ships allowed to pass, causing extended delays for some cargo carriers and increased competition for slots. The crisis saw daily transits cut from 36 last year to 22 in December.
Water levels are still well below usual and typically fall further during the spring.
Slots are either booked in advance or secured by auction. With bookable slots down by about 10 a day compared with last summer, more companies have been forced to resort to slot auctions.
Waiting times for the canal currently stand at two to three days, according to port services group WaterFront Maritime Services.
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