Businesses are reportedly paying up to $4 million to navigate the Panama Canal, a move confirmed by the Panama Canal Authority, reflecting a seismic shift in global trade due to the effective closure of the Strait of Hormuz.
Passage usually comes via reservations, but companies without slots can bid in auctions for an additional fee, avoiding lengthy waits.
Slots go to the highest bidder, with prices soaring in recent weeks.
Demand has surged due to escalating US-Iran tensions, bottlenecking the Strait of Hormuz, a crucial shipping artery.
Ships reroute via the Panama Canal as businesses seek safer passage and adjust supply chains to avoid the now-treacherous Middle Eastern waterway.
Rodrigo Noriega, a Panama City lawyer and analyst, said: “With all the bombings, the missiles, the drones … companies are saying it’s safer and less expensive to cross through the Panama Canal.”
He added, “All of this is affecting global supply chains,” and Panama’s government is “maximizing what it can earn from the Panama Canal.
A typical canal crossing costs range between $300,000 and $400,000 depending on the vessel.
Previously, to get an earlier crossing, businesses would pay an additional $250,000 to $300,000. In recent weeks, the average additional cost has jumped to around $425,000.
Ricaurte Vásquez, the canal’s administrator, said another company that he would not name paid an extra $4 million when its fuel vessel had to change its destination because of ongoing geopolitical tensions.
“It was a ship carrying fuel to Europe, and they redirected it to Singapore, and it needed to get there because Singapore is running out of fuel,” he said.
Other oil companies paid an excess of $3 million in addition to the crossing fee to accelerate their passage in the face of soaring oil prices.
Vásquez said that ships have not piled up at the canal, but rather the costs can be attributed to last-minute shifts and greater urgency by vessels needing to get from one point to another faster in the wake of larger trade chaos.
Vásquez emphasized that the costs were not a blanket market rate, but rather a temporary toll shouldered by companies.
“They decide how high a price to go,” Vásquez said.
At the same time it’s earning more money from the new business, Panama’s government has also been dealt a blow by the geopolitical struggle.
On Wednesday, the country’s foreign ministry accused Iran of illegally seizing a Panama-flagged vessel from the Italian company, MSC Francesca, in the Strait of Hormuz.
Panama, a country with one of the world’s largest ship registries, said the ship was “forcibly taken” by Iran. It wasn’t immediately clear if the boat remained in Iranian custody.
“This represents a serious attack on maritime security and constitute an unnecessary escalation at a time when the international community is advocating for the Strait of Hormuz to remain open to international navigation without threats or coercion of any kind,” it said.
Noriega, the analyst, said that the amount companies are paying to cross the Panama Canal may only go up if the conflict continues to stretch on, as oil prices are already skyrocketing. The price of a barrel of Brent crude oil briefly jumped above $107 this week, soaring from around $66 a barrel a year ago.
“No one really foresaw the potential effects (the war) would have on global trade,” Noriega said.
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