Marine Service Manager for Central America and Inchcape’s in-house expert on the Panama Canal, Fernando Ayala shares insight on the current state and outlook for Panama Canal to better prepare for transits in 2025.
Starting with the weather, the current situation is very stable. The Canal was heavily impacted by drought in 2023, but 2024 has been much easier, with a lot of rain in recent months. Water levels in the Gatun Lake have been rising steadily, with the PCA removing draft restrictions. No water problems are forecast for next year thanks to the La Nina phenomenon. We are already in the dry season but there should be plenty rain going forward.
The majority of vessels are arriving with a reservation and typically ahead of their transit date – mainly in the hope of securing an advance transit. Advance transits depend on factors including the size and type of ship and prevailing restrictions, and of course come at an additional cost. It doesn’t seem there are any plans to include non-booked vessels on this first-come, first-served basis.
Vessels arriving without a reservation normally take around two days to procure a slot, most likely via auction bids. What is positive is that many auctions are going for the minimum price. In terms of booking utilization (percentage of slots used), during October, for example, quite a few, not including auctions, remained open. In order to maximise utilisation, the Panama Canal Authority (PCA) is looking to post another option similar to the LoTSA (long-term slot allocation) system from next year, as well as introduce last-minute bookings.
If not all slots are being allocated, why aren’t they being used for transits of non-booked vessels? The PCA’s answer is they are looking at ways to allocate these slots, but they don’t want to return to the days of ships queuing and backlogs. Their prerogative, of course, is to generate more revenue.
Meanwhile, the PCA is not lowering transit levels even though maintenance is scheduled, which is an indicator of efficient management.
Customer ranking system
This was put on hold at various times in 2024 as the PCA sought to revise the ranking formula, potentially to include or consider auction bids. But following the introduction of the new LoTSA (long-term slot allocation) system, the revision was discarded, and the former formula was restored: 40% weighting was given to the number of canal transits and 60% to the total payment volume over a one-year period. The PCA will continue to analyse the formula following complaints from certain customer segments that this is discriminatory in view of the money spent at auctions.
Pre-booking system
Here there have been a lot of changes. For the Panamax locks to the end of the year, there are 26 slots divided into 20 for supers and six for regular or smaller vessels. From 16 November, one super slot in the first period will be transferred to the second, increasing from 10 to 11. The rules for the Panamax locks continue to see no more than 10 supers booked in one transit direction, with a maximum of two slots per day per customer. However, auctions are not included, meaning you can get however many slots you want for a certain day through auction in addition to your two-day slots already booked. If you already have a slot for one day in the first period, you can also continue to have two slots allocated in the second period. This is important because it might not be assigned if you already have two slots allocated on a single day, and there is a special competition for slots during period two. In other words, if, for whatever reason, no one applies for that special competition and the customer wins that slot, it will be allocated. But if other people want that slot, it would be denied because you already have two slots allocated for that day. If you have two slots and there are many competitors for a slot, the decider will be your customer ranking.
For 2025, the PCA is increasing the pre-booking cost for the Panamax locks, rising from USD 41,000 to USD 50,000 for supers and from USD 10,500 to USD 15,000 for regulars. Arrival time is important as well. For supers the deadline arrival time is 2 AM and 2 PM on the day of transit for regulars. But next year, all pre-booked ships must arrive the day (22 hours maximum) before transit. You may lose your booking if you don’t comply. One can inform the PCA of late arrival in advance, but the decision is totally theirs.
For Neo-Panamax vessels, the pre-booking costs will rise from USD 80,000 to USD 100,000, and the arrival deadline will remain the same: 02:00 hrs for LNG and 22:00 hrs for the rest.
Late cancellation/no-shows
From 2025, the PCA will charge 200% to 250% of the reservation fee if a vessel fails to arrive within seven days of the booking date or if a cancellation is made within two days before the transit day. There will be no charge if you cancel more than two days ahead of the deadline or arrive within the next seven days. Not arriving within the next seven days will incur a surcharge of 250% of the booking fee.
Slot swapping will remain free as long as the request is made 14 days in advance. Making a request within 14 days will incur a 1% surcharge of the reservation fee. The substitution will be applied to the higher of the two reservations, so if your super vessel was booked in 2024 at USD 41,000 and you want to substitute a vessel for 2025, the higher tariff will apply.
Last-minute reservations
For vessels arriving without a booking, we understand this offer will be premised on the customer having made bookings in previous periods or not having been able to secure a slot in a particular period because, for example, of their ranking. The cost will be USD 100,000 for supers and USD 25,000 for regulars.
New locks – slot distribution
In 2025, there will still be 10 slots per day; however, four period 1A slots per day will be dedicated to LoTSA. This will affect all the other periods. Period 1 (from 90 to 31 days) will disappear. The Special Period exclusively for cruise ships will stay, with the cruise keeping the right to apply for or secure slots up to two years in advance.
The two-day booking rule still applies, and auction slots are excluded. Customer ranking will also be the tie-break for slots not awarded during competitions. If slots are still available after competitions close, they will be awarded to the first-comer. However, under LoTSA, open slots are now rare.
Price comparisons
The cost for a booking in 2024 was USD 80,000, rising to USD 100,000 under LoTSA. Arrival times will continue as is for all segments except LNG ships, which will still be allowed to arrive at 2 a.m. on the day of transit. The same rules apply to the Panamax locks.
A cancellation surcharge will apply if a ship does not arrive within seven days of its booking. If they do not cancel within two days, the surcharge will be 250% of the booking fee.
Swapping will also continue for free within 14 days. After that, a 1% surcharge will apply. The higher tariff applies if you want to substitute a vessel from 2024 with a vessel in 2025. Last-minute reservations, which as earlier mentioned will be possible under LoTSA for vessels unable to secure a slot in competitions, we understand will cost USD 200,000.
Auction system
There are two types of auctions, daily and extraordinary, which continue as is. The daily auctions are for slots in Period 3. Extraordinary auctions arise from cancellations, date changes, early transits, etc. Starting bids are similar for both: USD 100,000 for neopanamaxes, USD 55,000 for supers and USD 15,000 for regulars. Daily auctions are subdivided into three groups covering different commodities. Depending on the number of ships already booked or slots auctioned, the PCA may reserve the daily auction for a specific group and open it to all groups or a mixture. The high demand surcharge remains on Friday when they add 10% to every cost, auctions and the pre-booking fee.
LoTSA
This new system generated a lot of speculation, however, despite the costs involved, 100% of the slots have been awarded. The programme runs from 5 January 2025 to 3 January 2036 and might be replicated from the Panamax to the new locks. The Panamax locks offer four slots per day (28 per week) split equally north and south, which would cost up to USD 4.8m. Once awarded a transit, you are given specific dates to apply for your slot. If you fail to do so, the slot will be forfeited.
Price increases for oil and gas
This segment will see percentage toll increases in 2025 – 11% for LNG, 17% for LPG, around 16% for crude Neopanamaxes, 12% for Panamax LPG, and 15% for Panamax chemicals. Other auxiliary charges will remain the same (no announcements to the contrary).
Drought mitigation
The PCA is planning to build a tunnel from a river to the west of the Canal to a dam to feed the Gatun Lake as a long-term solution to avoid the lack of water seen in 2023. Construction may start in 2025/2026 and is slated to take five/six years at a cost of around USD 1.6bn. The scheme has been approved by the government, and talks are underway with local communities as some villages and land will have to be flooded. Until then we still have to rely on rain, but as mentioned, 2025 is looking ok in this respect. We’ll have a better idea in the next six months regarding 2026.
If you would like to get in touch with Fernando for any other information related to the Canal, please reach out to him or his team at Fernando.Ayala@iss-shipping.com or Panama.ISSOPS@iss-shipping.com