As Asian buyers seek alternatives for oil as a result of the closure of the Strait of Hormuz, the Panama Canal is coming under greater strain with the auction price for passage rocketing.
While energy cargo does not normally come from the Atlantic basin to Asia, the Hormuz crisis is increasing demand for propane and butane exports from the U.S. Gulf via the Panama Canal. The change has resulted in more vessels arriving at the chokepoint, causing wait times and auction slot costs to surge in April. For ships arriving without a reservation, the delay was 5.5 days in the Atlantic-to-Pacific direction last week, and 6.3 days on the Pacific-to-Atlantic route with ACP data showing 128 vessels in the queue.
For shipping line operators that want to jump the queue, the option exists to pay an auction price in addition to the transit fee. The recent average auction price for a panamax locks slot was $837,500. “The surge in demand from Pacific basin buyers has boosted the number of bids for these transit lanes by nearly five times compared to before the outbreak of the war, with every offered auction attracting multiple bidders,” said Ross Griffith, Head of Americas Freight Pricing at Argus.
IAM Member Impact: Members need to closely monitor rising freight rates due to geopolitical events that increasingly strain customer budgets.
Source: Lloyds List