Container Ship Pays $4 Million To Skip Panama Canal Queue Amid US-Iran War

A container ship has paid $4 million to move ahead of other vessels waiting to cross the Panama Canal, where some ships without reserved slots are now facing waits of up to 10 days.

The payment was made for the Seaspan Benefactor, according to people familiar with the transaction. They could not be identified because the Panama Canal’s auction data is private.

The amount was more than twice the average auction payment over the previous seven days, according to a document seen by Bloomberg.

The higher costs come as the Iran war disrupts shipping through major routes.

Buyers and sellers of oil, natural gas, fertilizer and chemicals, especially those in Asia, have been looking for other routes after traffic was heavily reduced through the Strait of Hormuz and, more recently, the Bab el-Mandeb.

The Panama Canal connects the Atlantic and Pacific oceans and has become an important alternative route for ships affected by those disruptions.

Ships face 10-day wait

Neopanamax-size vessels without booked transit slots are now waiting about 10 days for a Pacific-to-Atlantic crossing, the longest wait since May, according to Argus Media data.

These vessels include ships carrying liquefied petroleum gas, liquefied natural gas, crude oil and refined petroleum products.

The Seaspan Benefactor paid the $4 million auction amount on Monday to move to the front of the queue. The payment was more than double the average of the previous seven days, according to the Bloomberg-seen document.

The ship was last reported in South Korea before heading toward the Panama Canal. On Tuesday, it was positioned on the Pacific side of the canal and appeared to be waiting to travel northbound, according to shipping data compiled by Bloomberg.

Panama Canal auction system

Ships normally use booked reservations and pay a flat rate to cross the Panama Canal. The Panama Canal Authority also allows customers to take part in auctions to bypass the regular queue.

The authority said auction costs have increased because of changes in global trade supply and demand. It said some auction payments have exceeded $1 million.

The authority declined to comment on the latest $4 million payment or the owner of the vessel. Seaspan also did not respond to a request for comment on Tuesday.

Maintenance adds to delays

Maintenance work at the canal’s locks is also adding to the congestion. The work is expected to continue until September and is affecting locks used by Neopanamax-size vessels.

The canal has also reduced the maximum permitted draft in the Neopanamax locks for the coming weeks because of lower-than-expected rainfall linked to the El Nino phenomenon.

The combination of increased demand for alternative routes, maintenance work and draft restrictions is putting further pressure on available transit capacity at the Panama Canal.

As of Tuesday, the Seaspan Benefactor was still positioned on the Pacific side of the canal, according to Bloomberg’s shipping data.

References: Moneycontrol, NDTV