Business · Fortune Technology
Even as businesses spend $4M to cross Panama Canal, they say ‘it’s safer and less expensive’ than the Strait of Hormuz
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Businesses have doled out as much as $4 million for last-minute plans to move boats through the Panama Canal in recent weeks, the Panama Canal Authority says, as Iran war’s effective closure of the Strait of Hormuz generates a seismic shift in global trade flows.
Key facts
- The average price to cross through the canal ranges between $300,000 and $400,000 depending on the vessel
- Previously, to get an earlier crossing, businesses would pay an additional $250,000 to $300,000
- Businesses have doled out as much as $4 million for last-minute plans to move boats through the Panama Canal in recent weeks, the Panama Canal Authority says, as Iran war’s effective closure
- Normally, about 6% of global trade passes through the Panama Canal, which connects the Atlantic and Pacific oceans in Central America, according to Patrick Penfield, professor of supply chain
Summary
While passage through the canal usually comes at a flat rate via reservations, companies without bookings can pay more to cross through an auction that awards slots to the highest bidder. The demand for slots skyrocketed and the auction prices ballooned in recent weeks as a standoff between the Iran and the United States over access to the strait kept traffic bottlenecked. “With all the bombings, the missiles, the drones … companies are saying it’s safer and less expensive to cross through the Panama Canal,” said Rodrigo Noriega, a lawyer and analyst in Panama City. Meanwhile, Panama’s government is “maximizing what it can earn from the Panama Canal,” Noriega said.