Businesses dole out up to US$4 million to cross Panama Canal during Strait of Hormuz chokehold

Cargo containers are stacked on a cargo ship moving through the Panama Canal, at sunrise in Panama City. (AP Photo/Matias Delacroix)

PANAMA CITY — Businesses have doled out as much as US$4 million for last-minute plans to move boats through the Panama Canal in recent weeks, the Panama Canal Authority says, as the effective closure of the Strait of Hormuz generates a seismic shift in global trade flows.

While passage through the canal usually comes at a flat rate via reservations, companies without one can cross by paying an additional fee in an auction for slots, which are awarded to the highest bidder, rather than waiting for days off the coast of Panama City.

The demand for slots skyrocketed and the price ballooned in recent weeks as Iran and the United States have bottlenecked the strait. Ships have increasingly traveled through the Panama Canal as shipments are rerouted and buyers purchase from other countries to avoid commerce through now-treacherous Middle Eastern waterway.

“With all the bombings, the missiles, the drones ... companies are saying it’s safer and less expensive to cross through the Panama Canal,” said Rodrigo Noriega, a lawyer and analyst in Panama City. “All of this is affecting global supply chains.”

Meanwhile, Panama’s government is “maximizing what it can earn from the Panama Canal,” Noriega said.

The average price to cross through the canal ranges between US$300,000 and US$400,000 depending on the vessel. Previously, to get an earlier crossing, businesses would pay an additional US$250,000 to US$300,000. In recent weeks, the average additional cost has jumped to around US$425,000.

Ricaurte Vásquez, the canal’s administrator, said one company that he would not name paid an extra US$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 US$3 million in addition to the crossing fee to accelerate their passage in the face of soaring oil prices.

The extra fees are becoming so high not because ships are piling up at the canal, but rather because of last-minute shifts and greater urgency for vessels to pass through in the wake of broader trade chaos, Vásquez said. He emphasized that these costs were temporarily being shouldered by companies based on their level of urgency.

“They decide how high to go on the price,” Vásquez said.

At the same time as Panama’s government is earning more money from the newly brisk business in the canal, its shipping industry is being confronted by the geopolitical struggle in the same way as those of other countries.

Panama’s foreign ministry on Wednesday accused Iran of illegally seizing a Panama-flagged vessel from the Italian company, MSC Francesca, in the Strait of Hormuz. Panama, which has 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 constitutes 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 continue to go up if the conflict stretches 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 US$66 a barrel a year ago.

Nobody expected the war to have quite so much effect on global trade, Noriega said.

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Alma Solís And Megan Janetsky, The Associated Press