By Lori-Ann LaRocco – Recent supply and demand data highlight the reasons behind the skyrocketing auction prices at the Panama Canal.
In an extended interview with gCaptain, Ricaurte Vasquez, Administrator of the Panama Canal Authority (ACP), noted that the percentage of vessels arriving without appointments has jumped from 10% to between 20% and 25%.
“We are seeing a significant number of vessels coming without reservations,” explained Vasquez. “One lesson we learned from the last El Niño event is that it is essential for everyone to book a reservation. Those without one often wait longer and typically end up paying high prices for auction slots.”
Vasquez explained that the number of bidders during an auction varies based on how many slots are available. The total available slots each day are influenced by water levels and any slots that companies previously booked through the Long-Term Slot Allocation System (LoTSA) but later canceled.
“Once a slot becomes available for bidding, participants start to place bids, and the highest bidder wins,” Vasquez stated. “The allocation of slots has always been determined by market forces.”
Recently, auction prices have been breaking records. On Monday, an auction slot reached $5.3 million, surpassing the previous week’s $4.6 million bid. Back in March and April, auction slots were around $385,000, while before the war, they were priced between $135,000 and $140,000.
“At one point, we had 18 bidders for a single slot,” remarked Vasquez. “That’s quite a lot, as typically you see two to three bidders per day.”
The number of auction participants has been steadily growing, especially due to the ongoing war with Iran.
During May and June, the average number of bidders per Neopanamax slot auction was about four. In July, this number increased to roughly eight bidders per day.
Vasquez mentioned that in August, the ACP saw as many as 15 bidders competing for one Neopanamax slot, with an overall average of six bidders for the month.
For the Panamax locks from April to August, there were more than eight bidders per day, and one auction in May featured 18 bidders. In comparison, the average number of bidders from October to March was around two per day.
This data underlines the strong demand driving these bids.
When asked if the Trump Administration had commented on the record auction prices and transit fees, Vasquez stated that they have been transparent.
“We communicate with everyone,” he said. “We issue local and international press releases. These vessels arrived without a slot and had to wait for one to open up before they could bid against each other. We don’t set prices; the market determines the price.”
In the past, former U.S. President Donald Trump labeled Panama Canal transit fees as “exorbitant” and “a ripoff,” even suggesting he might take over the Canal.
Following the significant El Niño event in 2023, the ACP launched a daily transit auction system in 2024 and recently updated it to include LoTSA. They also established a dedicated booking system for Liquefied Natural Gas (LNG) vessels, alongside options like auction bidding and last-minute reservations.
Three auction slots are set aside daily for segments like LPG and LNG that require quick access. Auction slots are open for the highest bidder to secure transit, and canceled bookings can be added to the auction, potentially increasing the daily availability by 3-5 slots.
With vessel transit reductions announced for September, it’s likely that auction slot prices will rise.
The costs associated with passing through the Panama Canal have led some shipping companies to implement “Panama Canal Surcharges” or reroute their vessels.
One carrier, ONE, has dropped three routes. Clients have reported receiving notifications about these changes. In response to inquiries about the canceled vessel strings, Vasquez mentioned a meeting with ONE executives on Monday evening.
“They understand the situation,” Vasquez noted. “They need to redeploy and ensure timely delivery of cargo. We adhere to rules and regulations that apply to everyone, and then we discuss options like A, B, and C that can help them bring larger vessels or make transfers at specific locations. Being clear about available options is crucial for us.”