Panama Canal Cuts Daily Booking Capacity as Drought Worsens

The Panama Canal is reducing its daily booking capacity to 32 vessels from mid-September as a growing rainfall deficit prompts authorities to introduce further measures in response to El Niño conditions.

For booking dates beginning September 4, the canal will make nine neopanamax and 25 panamax slots available each day. Further restrictions will take effect on Sept. 15, when the number of daily panamax slots will fall to 23. This will reduce total booking capacity to 32 vessels per day.

The latest measures follow previously announced restrictions on vessel drafts as the Panama Canal Authority responds to deteriorating water conditions.

Clarksons Securities analysts Frode Mørkedal and Omar Nokta warned earlier this week that tighter restrictions at the canal could soon begin influencing freight rates. Reduced capacity effectively limits available vessel supply, while ships that divert away from Panama may be required to travel considerably longer distances.

Clarksons is particularly optimistic about the impact on the VLGC market, which has significant exposure to trades between the US Gulf and Asia that normally use the Panama Canal. Dry bulk shipping could also benefit from increased tonne-mile demand. The company has raised its forecast for VLGC rates in 2026 by $15,000 to $81,250 per day. Its 2027 projection has also increased by $20,000 to $70,000 per day.

The Panama Canal Authority said the additional measures are necessary despite the rainy season having already begun. Rainfall and inflows into the canal’s watershed have continued to fall short of expectations, increasing pressure on the waterway’s available resources.

The canal is also changing the way some transit slots are auctioned. For selected auctions, LNG and LPG carriers, bulk carriers, containerships and vehicle carriers, and tankers will be divided into four separate groups. The largest containerships, based on teu capacity, will also receive priority when competing for neopanamax slots.

The latest reduction follows an earlier decrease in daily booking capacity from 36 vessels to 34. Draft restrictions also returned in June for the first time in approximately two years.

The growing pressure on capacity has increasingly been reflected in the price shipping companies are paying to secure transit slots. Daily canal slot auctions averaged approximately $1.1 million earlier this month. Some bids for neopanamax passages have reached several million dollars as restrictions on water availability have coincided with unusually high demand for the route.

There has been some short-term relief for vessels regarding draft limits. A planned reduction in the maximum permitted draft to 48 ft has now been postponed until September 2. The subsequent reduction to 47.5 ft has also been delayed and is now scheduled to take effect on October 1. However, the combination of declining booking capacity, disappointing rainfall and high demand for transit slots continues to raise concerns over conditions at the canal.

The shipping industry will be watching developments particularly closely given the disruption experienced during the 2023-24 drought, when Panama Canal throughput fell by as much as 40% below normal levels.