24/12/24
Trump-Panama tiff highlights rising transit cost
New York, 23 December (Argus) — US president-elect Donald Trump's threat on
Saturday to reclaim the Panama Canal for the US put a spotlight on rising costs
this year and additional fees planned by the Panama Canal Authority (ACP) for
2025 in the ongoing fallout of a 2023 drought in Central America. Trump claimed
that the US is the "number one user" of the Panama Canal, with "over 70pc of all
transits heading to, or from, US ports" on 21 December. ACP data for ships
destined for or departing from the US puts this percentage at 73pc in 2023 and
75.5pc in 2024 based on total tonnage of commodities moved through the canal.
"This complete ‘rip-off' of our Country will immediately stop…" Trump said. The
base transit tolls at the Panama Canal have been on the rise and are largely in
line with those at the Suez Canal, but Panama Canal costs can be much higher for
vessel operators that compete in auctions to enter the Central American
passageway. The operator of a medium range (MR) tanker traveling laden through
the Panama Canal would pay $279,564.87 in transit fees, while the operator of a
laden very large gas carrier (VLGC) would pay $505,268.24 without accounting for
reservation costs, ACP estimates. Suez Canal fees have also been on the rise ,
with MR tanker at $274,001 throughout 2024, while a VLGC operator would pay
$487,562. But after last year's drought caused the ACP to temporarily limit
transits, ACP required shippers to book transit reservations. Shippers unable to
secure reservations via pre-booking often resort to the transit slot auction,
where winning bids vary wildly. Pre-booked transit slots often quickly sell out
to the containership and LPG vessel owners that dominate the top spots on the
ACP's client list. Auction prices for the Neopanamax locks, which have a
starting bid of $100,000 and handle large vessels like VLGCs, are at about
$220,000, per Argus assessments. Auction prices for the Panamax locks, which
have a starting bid of $55,000 and handle vessels like MR tankers, are around
$75,000. The highest Neopanamax auction price was nearly $4mn, with the highest
Panamax auction price at about half that level. In December 2023, 30pc of
Panamax lock tanker transits were reserved via the auction system , according to
ACP. The president-elect's criticism of the ACP's handling of Panama Canal fees
comes as the administrators of the waterway bounce back from a severe drought
throughout 2023. Freshwater levels in the manmade Gatun Lake that helps to feed
the canal have recovered because of the return of the rainy season this year,
but ACP has maintained its requirement that shippers wishing to transit have
reserved transit slots. Prior to the drought, ACP maintained a first-come,
first-serve basis for vessels without reservations. ACP ups reservation costs,
adds fees for 2025 Starting in 2025, ACP is maintaining the auction system while
also increasing pre-booking costs and adding other fees. ACP will raise transit
reservation fees from $41,000 to $50,000 for Panamax lock transits for "Super"
category vessels, including MR tankers. Neopanamax lock transit reservation fees
will climb from $80,000 to $100,000 on 1 January. ACP announced a third transit
option in late 2024 for vessel operators in the form of the "Last Minute Transit
Reservation" (LMTR) fee to start 1 January 2025 alongside other new fees and
higher existing reservation fees. ACP set the cost of the LMTR fee at about
twice the starting bid of an auction , or $100,000 for Supers and $200,000 for
Neopanamax, and will likely offer the LMTR fee to vessels that fail to secure a
transit slot at auction. Furthermore, vessel operators that cancel within two
days of their transit will be charged a fee at 2.5 times the transit reservation
fee, described by the ACP as a surcharge to the existing cancellation fee, which
ranges up to 100pc of the transit reservation fee depending on how close to the
transit date that an operator cancels. This means that a Super vessel that
cancels within two days of its transit date will receive the 2.5 times surcharge
on top of the 100pc transit reservation cancellation fee and pay a total of
$175,000. A Neopanamax vessel will pay a total of $350,000. "Vessels of war"
should also vie for slots: ACP Trump also suggested that the ACP was charging
the US Navy, alongside US corporations, "exorbitant prices and rates of passage"
and that these fees were "unfair and injudicious". In March 2024, the ACP
published an update on transit slot assignments for vessels of war, auxiliary
vessels and other "government-owned" vessels encouraging their operators to
participate in the transit system rather than waiting for the ACP to assign them
a slot. "Vessels of war, auxiliary vessels, and other government-owned vessels
are encouraged to obtain a booking slot through the available booking mechanisms
in order to have their transit date guaranteed and minimize the possibility of
delays," the ACP said. The ACP points out that these vessels of war are entitled
to "expeditious transits" based on the Treaty Concerning Permanent Neutrality
and Operation of the Canal and are technically not required to obtain a
reservation to be considered for transit. Panama president Jose Raul Mulino on
Sunday rejected Trump's threat to retake the canal , which has been under full
control of the Central American country since 1999. The canal's rates are
established in a public and transparent manner, taking into account market
conditions, Mulino said. "Every square meter of the Panama Canal and its
adjacent area is Panama's and will continue to be," Mulino said. "The
sovereignty and independence of our country are non-negotiable." By Ross
Griffith Send comments and request more information at feedback@argusmedia.com
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