Strait of Hormuz blockade drives up costs at Panama Canal
Sign up now: Get ST's newsletters delivered to your inbox
A container ship entering the Panama Canal in Panama City on April 21.
PHOTO: AFP
DeeperDive is a beta AI feature. Refer to full articles for the facts.
Follow our live coverage here.
PANAMA CITY - The war in the Middle East has boosted demand to move vital cargo through the Panama Canal to such an extent that one vessel carrying liquefied natural gas (LNG) paid US$4 million (S$5 million) to skip the line and avoid a wait that can take up to five days, according to an official report.
A surge in such payments has been recorded since the US-Israeli attack on Iran began on Feb 28, which led to the blockade of the Strait of Hormuz, a critical waterway for one-fifth of the world’s oil and natural gas exports from Gulf countries.
To meet fuel demand, Asia’s refineries are choosing to buy oil or gas from the United States and ship it through the transoceanic waterway instead of purchasing from Gulf countries that rely on the Strait of Hormuz, according to reports from the Panama Canal Authority.
The average number of ships passing through the canal on a daily basis has “remained strong”, the authority told AFP on April 21, with 34 ships in January and 37 ships in March.
Some days exceeded 40 transits.
“The increase reflects changes in global trade patterns and market conditions, including geopolitical factors affecting key routes,” the authority said.
Ships transiting the canal book their passage well in advance, and ships without bookings wait an average of five days to get through. There is, however, an auction where last-minute transits can be purchased.
The most recent auction included a US$4 million bid for an LNG vessel, and in recent weeks two oil tankers exceeded bids of US$3 million, the authority said.
Past average auction prices between October and February stood at around US$130,000, and rose to US$385,000 in March and April.
Five per cent of global maritime trade passes through the Panama Canal, and its main users are the US and China. The route primarily connects the US East Coast with China, South Korea and Japan.
In the first half of the 2026 fiscal year, which runs from October to September, the Panamanian waterway recorded passage of 6,288 ships, a year-on-year increase of 3.7 per cent, according to official figures. AFP
