Panama Canal to temporarily suspend Period 3 daily auctions; dry bulk markets weigh impact

The Panama Canal Authority (ACP) will temporarily suspend Daily Auctions for Period 3 booking slots for Regular and Super vessel segments from July 25, reducing booking availability through the Panamax locks as the waterway manages lake levels under potentially drier hydrological conditions.

The measure will cut the canal's daily booking capacity to 34 vessels from 36 vessels, according to a notice from shipping agency Norton Lilly citing the ACP. The suspension will remain in place until further notice.

The ACP said the decision was part of its water-management strategy to ensure safe and reliable canal operations, taking into account current Gatun Lake levels and the possible development of El Niño conditions over the canal watershed in the coming months.

The change applies to the standard booking system's Period 3 Daily Auction for Regular and Super segments. Transit slots that become available during Period 3 due to cancellations, transit advancements or other reasons will continue to be offered through Extraordinary Auctions, the notice said. No changes have been announced to the Neopanamax booking system.

While the reduction represents about 5.6% of total daily booking capacity, shipping sources said the operational impact could be greater for vessels that rely on late-stage booking opportunities. The removal of the Period 3 Daily Auction is expected to shift more demand into Period 1 and Period 2, potentially increasing competition for earlier reservations and raising the risk of longer waits for vessels without confirmed slots.

Market participants were mixed on the likely impact on dry bulk freight rates, with some pointing to the possibility of tighter effective vessel supply if canal delays build, while others said Panamax trade patterns were unlikely to shift materially.

"Congestion in the Panama Canal could firm up rates," one dry bulk Greece-based shipbroker said. "This, in combination with the Iran war, could make the market significantly firm up, with delays causing lower supply. Although effects will be gradual, not immediate."

However, most Panamax sources said the impact on freight rates was likely to be limited, noting that Panamax vessels do not typically prioritize Panama Canal transit unless the vessel is already positioned nearby.

"People have been avoiding the Panama Canal for months, so this is not really a big change," a London-based shipbroker source said. "It will have an impact on those turning up without a slot, but for the majority in group two who have been booking slots already, nothing really changes."

A Panamax shipbroker source said vessels in the segment "very rarely" choose to transit the Panama Canal because "usually the cost-benefit isn't there unless the vessel opens close by."

For smaller vessel sizes, such as the Handysize and Supramax segments, market participants were more cautious, with some saying El Niño-related disruptions could support longer voyages and higher freight costs if vessels reroute.

"Tons per mile will definitely rise, thus shipping costs will rise," one Greece-based Supramax shipbroker said. "I already have a vessel there fixed that has to go through the Strait of Magellan to avoid the El Niño rains and floods now."

The announcement comes as some Atlantic Supramax routes linked to Panama Canal transit have seen modest upward pressure. Platts assessments for the 50,000 mt New Orleans-Kashima grain run rose 50 cents from the start of the week to $59.50/mt on July 22. The 50,000 mt Houston-Qingdao petcoke run also rose 75 cents over the same period, assessed at $54/mt on July 22. Platts is part of S&P Global Energy.

Market sources attributed the increases to higher bunker costs and stronger inquiry levels in the Atlantic market, rather than solely to the Panama Canal booking changes.