Panama Canal Drought

Panama Canal transit prices have surged to unprecedented levels, with average August auction slots exceeding USD 1.1 Mn, driven by increased demand following the Strait of Hormuz's closure and restrictions imposed by record low water levels. The Panama Canal Authority has cut maximum draft for Panamax locks to 47.5 feet by 3 September, compounding congestion issues that are causing transits to hit a ten-year low. This combination of higher transit costs, reduced cargo capacity especially for dry bulk vessels, and ongoing drought conditions are creating tighter supply dynamics that could elevate freight rates on alternative shipping routes, particularly affecting US Gulf grain exports and coal transfers.