Panama Canal to Launch Long-term Slot Booking System in Fall
Taking lessons from what it learned in 2023, the Panama Canal Authority (ACP) believes it will be ready if it must encounter another drought.
The authority expects another El Ni?o-driven drought within the next four years, Panama Canal administrator Ricaurte Vásquez Morales told reporters Monday.
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According to Vásquez, the canal isn’t expecting to have new infrastructure before the next major drought. The canal’s planned $1.6 billion Indio River reservoir project would take six years, and would need at least 18 months before construction could even start. The authority still needs to gain approval from the 12,000 people who live near the river’s basin. If built, the new reservoir would provide capacity for an additional 11 transits in the event of another drought period.
“The frequency (of droughts) is faster now than it has been in the past,” Vásquez said.
Recently, vessels have been arriving at the canal with larger cargo volumes, allowing the authority to cut water usage while keeping tonnage stable, Vásquez said. He said the ACP will work with shippers to ensure ships arrive at the canal with the most cargo possible.
The Panama Canal’s average tonnage per transit has increased to 43,000 metric tons this year from about 38,000 tons in 2023, as it reduces water utilization.
The ACP already announced a return to 36 vessel transits per day as of Sept. 1., progressively having increased the amount allowed through the canal in 2024. This number is a far cry from the nadir of 22 ships that could be booked last December, when the transit restrictions were at their peak.
This move essentially brings the Panama Canal back to its maximum sustainable capacity, in which approximately 36 to 38 vessels per day can pass through the 50-mile waterway.
On August 15, the canal lifted draft restrictions back to their normal maximum draft of 50 feet for Neopanamax locks, which facilitate the movement of container ships longer than 966 feet.
The agency may need to bring back the draft restrictions during the 2025 dry season, which lasts from January to May, Vásquez said, but it will seek to avoid using daily transit restrictions.
With the year-long restrictions lifted for the remainder of the May-to-November rainy season, the ACP has launched a long-term slot allocation (LoTSA) initiative for Neopanamax vessels to increase transit certainty and flexibility within the canal.
The long-term transit reservation system offers booking slot packages for different market segments, such as container ships, liquefied natural gas (LNG) vessels and liquefied petroleum gas (LPG) vessels. The system allows customers to secure transit slots up to a year in advance.
Participants bid through a sealed auction process, with the first year covering booking dates from Jan. 5, 2025, to Jan. 3, 2026. The first auction for container ships take place Oct. 1, with five total auctions taking place that month. LNG and LPG vessels will be able to make first bids on Sept. 9.
Each slot has a base price of $200,000. Slots will be allocated based on the bidding results and the timing of bids. For example, the highest bidders on slots 70 to 60 days before transit get priority.
The system allows shippers to swap out of their slot for free up to eight days before the reserved transit date. Slots can also be transferred to vessels within the same alliance.
Making a more efficient reservation system has been a major goal of Vásquez since the restrictions were put in place starting last May. As water levels at Gatún Lake dwindled throughout late 2023, the canal even began holding auctions in which shippers could bid for transit slots. Only about 70 percent of transits were booked in advance prior to the drought, he noted.
As of Wednesday, water levels at the manmade, rainfall-fed Gatún Lake have a depth of 85.8 feet, which is nearly two feet deeper than August’s 83.9-foot average since 2019. The water levels are an almost six-foot improvement over the 79.6-foot depth on Aug. 28, 2023.
Vásquez said he expects long-term vessel traffic to return as the water levels keep rising, but at a slower pace.
“It is the market that responds to this, not something you see immediately. Assigning vessels and assigning contracts is a process and the lead time associated with that is critical,” Vásquez said. “So, if it took about four to five months for the market to adjust downward, we’re assuming it will take five to six months for the market to readjust upwards.”