Panama Canal imposes initial crossing restrictions

The Panama Canal Authority (Autoridad del Canal de Panamá [ACP]) temporarily suspended auction processes for close-in transit slots — offered 48 to 96 hours before transit — and cut the number of daily crossings from 36 to 34 from July 25. The ACP has implemented draft reductions since June, with further cuts scheduled for August. Major carriers have already announced surcharges of at least US$100 per twenty-foot equivalent unit (TEU) in response to anticipated operational constraints and higher canal pricing.

These actions have been taken against the background of the US National Oceanic and Atmospheric Administration (NOAA) forecasting a 91% probability of a strong or very strong El Niño weather pattern during the last quarter of 2026 and into early 2027. In 2023-24, El Niño-driven droughts in the canal basin prompted progressive capacity reductions over roughly 10 months, from 36 vessels per day to approximately 22 at the time of most severe restriction.

The ACP’s decision to restrict capacity while the canal’s basin remains near its historical seasonal average indicates the authority is acting on forecasts of future hydrological deterioration rather than responding to an existing shortage. It is highly likely that the ACP will impose further draft and transit restrictions during the second half of 2026 if the NOAA’s El Niño forecast materializes.

The 2023-24 drought precedent, however, suggests that lower transit volumes are unlikely to translate into lower toll revenue, given the ACP’s dynamic pricing model, in turn limiting impacts on Panama’s fiscal metrics. Despite a 21% decline in vessel transits in fiscal year 2024, the ACP reported a 1% year-over-year revenue increase reflecting freshwater surcharges and auction premiums.

The more significant domestic risk for Panama likely stems from the threat of water scarcity. Should El Niño develop as forecast, renewed pressure on water resources would increase the likelihood of rationing in Panama City. This would increase the risk of protests, particularly road blockades along major avenues and highways. Precedents from 2023 did not involve large-scale demonstrations, but even small crowds pose elevated cargo disruption risk if targeting the Pan-American highway surrounding Panama City, as is likely.