SHIPPING companies have paid a total of US$235 million so far this year, just to jump ahead of congestion at the Panama Canal as drought dramatically limits how many ships can use the trade route, according to a recent report on business and financial news platform, Bloomberg. The report quoted data from Waypoint Port Service Ltd.

It noted that the amount paid to jump the queue is 20 per cent higher than what companies paid in 2022 for expedited passage. It’s also enough to cover a projected revenue shortfall of US$200 million that the canal faces from the drop in traffic this year.

Restrictions started this month and will continue through at least February, the canal’s managing authority said. By then, trips will be limited to 18 per day, a 50 per cent drop from a year earlier. Excluded vessels will likely alter course to the Suez Canal — adding at least a week to the journey between the US and China — or around the bottom of South America. Such voyages will burn more fuel and lead to higher freight costs.

The Panama Canal Authority auctions off priority slots to shippers to enter the system, and bids have soared to record levels this year as an El Niño-fuelled drought has reduced water levels to an unprecedented low, prompting officials to sharply reduce traffic. The auction fees are paid on top of usual tolls to cross the canal.

Auctions provided options to customers who would otherwise not have reservations and prices were determined by market dynamics, said a Panama Canal spokesperson, who added that it’s too early to predict the impact of auctions on revenues.

“With the amount of money being paid in the auctions and the amount of money that customers are willing to put in, we really don’t know where this is going to end,” said Francisco Torné, Panama country manager for Waypoint in the Bloomberg report.

Many companies, particularly those moving fuels from the US Gulf Coast to Asia, have been willing to pay extra to ensure their ships get through. The authority holds auctions whenever a ship with a reservation cancels, and slots this year have gone for as much as $4 million. A year ago, the average auction price was around $173,000, according to data from Waypoint Port Services. “It’s just astronomically out of control,” said Francisco Torné, one of the firm’s country managers for Panama.

Money for an auctioned slot comes on top of the canal’s usual transit fee, which depending on the vessel’s size can be close to $1 million.