Panama Canal restricts traffic amid Hormuz crisis: Why this matters

SaveSharefacebookxwhatsapp-strokecopylinkThe Panamanian-flagged tanker G Spirit enters the Agua Clara lock at the Panama Canal, in Colon, Panama, September 1 [AFP]By Al Jazeera Staff and AFPPublished On 3 Sep 20263 Sep 2026While shipping remains severely disrupted in the Strait of Hormuz, shippers are facing new constraints at another strategic maritime chokepoint on the other side of the world: the Panama Canal.From this week, the number of vessels permitted to pass through the canal per day will begin to fall because of low water levels, canal authorities say.Recommended Stories list of 3 itemslist 1 of 3Asia looks to store oil, gas closer to home after Strait of Hormuz crisislist 2 of 3Trump suggests renaming Strait of Hormuz as Trump Strait amid Iran warlist 3 of 3The US is gobbling up Venezuelan oil, but will it lower fuel prices?end of listHere’s what we know about the latest measures at the canal, which handles some 5 percent of global maritime trade, according to the Panama Canal authority.What restrictions are being introduced in the Panama Canal?From Thursday, only 34 vessels will be permitted to sail daily through the canal, which has traditionally been able to accommodate up to 40 per day.On September 15, the cap will drop further to 32.The Panama Canal Authority, the body which oversees the waterway, says the new limits are necessary as the country braces for lower water levels due to the El Nino weather phenomenon.In the area of the canal, rainfall from May to August is down by 34 percent from its historical average, the authority said, adding that El Nino could cut it even more.The authority has already implemented other water conservation measures, such as lowering the maximum draft – the vessel’s depth in the water – for the largest ships.How significant is the Panama Canal for world trade?Some $270bn of cargo passed through the canal in 2024, according to research by Al Jazeera. The passageway accounted for 40 percent of all US container traffic and 2.5 percent of all global sea trade.This year, according to the Panama Canal authority, that has risen to 5 percent of all global sea trade, with 70 percent destined for or originating in the US.Has traffic in the Panama Canal been increasing this year?Yes.At the end of June, Panama Canal administrator Ricaurte Vasquez Morales said more than 10,000 vessels had transited the canal over the previous nine months, up 5.2 percent from the same period a year earlier, driven largely by increases in container ships and liquefied petroleum gas (LPG) carriers.He also said the canal’s total vessel tonnage was 7.2 percent higher during the same period.How has the Hormuz crisis contributed to this?With Gulf producers unable to export as much oil through the Strait of Hormuz as they did before the war – about 20 million barrels of oil per day (bpd) – countries are increasingly turning to North and South America to make up supplies, driving more traffic towards the Panama Canal.The effect has been particularly pronounced for crude oil exports from the United States, which leapt by 46 percent year-on-year to a record 61.6 million metric tonnes in the second quarter of 2026, according to global trade intelligence firm Kpler – equivalent to about 450 million barrels in total, or an average of about 5 million bpd.Brazil, Argentina and Guyana have all posted record shipments of oil so far in 2026.What impact will the new Panama restrictions have?The rise in cargoes needing to be shipped through the canal is already creating a bidding war for transit slots in the canal.While average auction prices for transit slots were $55,000 between October last year and February this year, the recent surge in demand has caused those prices to jump three-fold, according to the canal’s authority.One South Korean ship paid a record $5.3m to pass through the canal on September 1, according to Bloomberg News.Niels Rasmussen, chief shipping analyst at the Baltic and International Maritime Council (BIMCO), an international shipping association, said the canal’s new restrictions will put more pressure on shipping, pushing some vessels to reroute and make longer, more costly journeys around the Cape of Good Hope in South Africa.“Reduced cargo capacity, combined with higher auction prices for transit slots, is likely to push freight rates higher,” Rasmussen told Al Jazeera.Container cargo moving from Asia to the US’s east coast, as well as LPG exports from the US Gulf to Asia and the western coasts of Central and South America, could be particularly affected, he added.