After two years of drought-driven bottlenecks, the Panama Canal has eased both daily transit limits and draft restrictions. Conditions are better than the 2023 nadir—but they’re not fully back to 2019 norms, so freight still exerts an outsized pull on commodity basis, especially for U.S. Gulf-to-Asia grain and Atlantic coal flows. This piece maps what changed on the waterway, how that feeds through to CFR vs FOB pricing, and which premia could compress—or persist—into Q4.
1) What’s improved—and what hasn’t
Transit slots: Through 2024, the Canal Authority (ACP) progressively raised daily bookings from crisis levels, taking the system to ~35 slots by early August and 36 by September, split across Panamax and Neopanamax locks. Those steps followed rains that lifted Gatún Lake and allowed more passages. Pre-drought, the canal commonly handled ~36–38 ships/day on average, so today’s capacity is near but not fully back to the old baseline. (Reuters, U.S. Energy Information Administration, maritime-executive.com, The Wall Street Journal)
Draft: Maximum authorized drafts on Neopanamax locks, cut during the drought, have been raised multiple times since mid-2024 (e.g., to 45–48 ft at stages), with ACP signaling a 44 ft “floor” as a practical drought-season safeguard. Each foot of draft matters: deeper drafts mean fewer part-loads/top-offs and more efficient cargo lift per transit. (Autoridad del Canal de Panamá, Reuters, bertling.com)
Traffic mix: Some trades are returning, but not uniformly. For instance, July 2025 VLGC transits hit 129, the highest monthly total since the prior December—evidence of recovery in LPG/LHC traffic. Bulk segments are more mixed as charterers balance canal queue risk against alternatives (Cape, Suez) and as competing chokepoints (e.g., the Red Sea) complicate planning. (S&P Global)
Bottom line: The canal is “comfy” relative to 2023, but still a notch tighter than a typical pre-2022 year. That nuance matters for freight—and therefore for commodity basis.
2) Freight mechanics: how the canal moves commodity basis
For bulk commodities, pricing at destination (CFR) is roughly:
CFR = FOB (origin) + Ocean freight + Insurances/fees
When the canal constrains throughput (fewer slots, shallower drafts), shippers (a) pay more to secure a booking, (b) accept longer waiting time, or (c) re-route via the Cape of Good Hope/Suez, adding tonne-miles and days on the water. All three raise the “freight” term in CFR, widening the CFR–FOB spread at destinations that typically rely on Panama.
Conversely, when the canal normalises, voyage times shrink, waiting premia fade, and some Atlantic-to-Pacific trades swing back to the shorter Panama route. That reduces CFR uplift and narrows origin–destination spreads. You see the effect most clearly in U.S. Gulf → Asia grain and Colombia/US → Pacific coal.
3) Grains: watching the Gulf–PNW spread
The U.S. Department of Agriculture’s Grain Transportation Report shows how freight embeds in landed costs:
- U.S. Gulf → Japan grain freight averaged $46–57/mt across recent quarters, versus $27–31/mt from the Pacific Northwest (PNW)—a durable gap that widens in stress periods (e.g., low Mississippi water, canal limits). In March 2025, USDA recorded $46.25/mt Gulf → Japan and $27/mt PNW → Japan, with landed-cost tables showing transport at ~42% of Gulf-route corn costs in Q4 2024. (AMS)
- Independent trackers summarised 2024 averages as $57.14/mt Gulf vs $31.12/mt PNW, with the Gulf–PNW spread near $26/mt. That spread tends to narrow as the canal loosens and as barge/river conditions improve. (Feed & Grain)
Interpretation: The more “normal” the canal, the easier it is for U.S. Gulf corn/soy to compete for Asian demand without ceding margin to freight. Expect basis compression (CFR Asia vs FOB Gulf) when:
- Panama queues and auction premia are low;
- Draft allows fuller Neopanamax transits (fewer top-offs);
- River logistics are stable (keeping barge premiums contained).
USDA’s landed-cost tables make the same point in a different way: when ocean and barge components moderate, transport’s share of delivered cost falls, shrinking the pricing wedge between origin and destination. (AMS)
4) Coal: Atlantic barrels vs Pacific buyers
Coal illustrates the routing choice even more starkly:
- In 2024, Colombian coal swung heavily toward East Asia (Kpler data via Argus), as Atlantic demand faded; that arbitrage is most efficient through Panama for certain parcel sizes, otherwise it adds Cape miles and laytime. When canal conditions deteriorated, some coal switched routes; when they eased, freight pressure diminished. (Argus Media)
- U.S. suppliers sending coal to Asia often default to the Cape route, but historically some flows have used Panama to shorten voyage time and timing risk; 2023–24 disruptions forced diversions and discouraged these transits. As normalisation proceeds, more Atlantic coal can price into Pacific again without punitive freight, which compresses CFR Asia premia versus Atlantic FOBs. (S&P Global)
- Freight operators themselves acknowledge the linkage: increasing Panama transits knocks down tonne-mile demand, easing Atlantic Supramax/Cape tightness. That softens voyage rates and—in turn—narrows commodity basis. (S&P Global)
Caveat: Coal’s directional trade is also sensitive to tariffs, power demand, and competing fuels. Canal normalisation removes a logistics surcharge but does not erase macro demand risks.
5) Why we’re not back to 2019—yet
- Throughput: Even after increases, the canal’s daily transits have hovered below the historic 37/day average—and ops still flex with rainfall and lake levels. The ACP itself and industry reports stress that capacity is improving, but system performance remains weather-conditional. (The Wall Street Journal)
- Draft volatility: ACP advisories show draft levels rising with the rainy season, but administrators have talked about maintaining at least 44 ft as a drought-season threshold, reflecting longer-run climate risk. Less draft = more part-loading or top-off calls = micro-freight frictions that don’t vanish overnight. (bertling.com)
- Structural fixes still pending: The canal is pursuing watershed and reservoir projects (e.g., Río Indio concept) and even diversification ideas (ports; LPG pipeline studies). These are multi-year efforts—helpful to the long-term outlook, but irrelevant to Q4 freight. (Reuters)
6) What to watch in Q4 (and what it means for premia)
A) Booking & queue metrics.
The ACP booking dashboard and agents’ circulars remain the best near-term stress gauges (reserved slots, wait times). A stable 35–36/day with short queues suggests premia compression for Gulf-to-Asia grains and Atlantic coal moving Pacific-bound. (Autoridad del Canal de Panamá)
B) Draft bulletins & Gatún Lake.
Each draft increment (e.g., 45→47→48 ft) increases effective cargo lift. Watch the Gatún water level dashboards and draft advisories; slippage signals renewed micro-tightness and the potential return of freight premia. (evtms-rpts.pancanal.com, Autoridad del Canal de Panamá)
C) Competing chokepoints.
If Red Sea risk escalates, ships may lengthen routes irrespective of Panama; if the U.S. Gulf sees hurricanes that stall loadings (or Asia’s JKM premium yanks LNG/LPG back through Panama), slot competition rises again. LPG/VLGC congestion has already ebbed and flowed, with 129 VLGC transits in July pointing to tighter slot competition at times. (S&P Global)
D) Grain cost ladders.
USDA/AMS charts comparing Gulf vs PNW to Japan give a clean read on whether the Gulf freight penalty is narrowing. A shrinking $/mt spread → basis compression at Asian destinations and easier FOB competitiveness for U.S. Gulf exporters. (AMS)
E) Dry bulk spot indices & assessments.
Platts/Argus dry freight assessments and analyst notes often call out Panama-related tonne-mile shifts. Rising canal throughput usually leans bearish for voyage rates (other things equal), which lowers the freight term in CFR pricing. (S&P Global)
7) Micro case studies (illustrative, not prescriptive)
Grain (corn/soy):
In late Q4 2024, USDA reported Gulf→Japan corn landed cost $276/mt with transport ~42% of the total; PNW→Japan was $263/mt with transport ~39%. As 2025 progressed and both river and canal frictions eased, the Gulf ocean leg held near mid-$40s/mt this spring, while PNW held high-$20s—still a big gap, but narrower than peak stress periods. Each incremental easing at Panama typically trims a few dollars from voyage time/risk and narrows the destination basis in Asia. (AMS)
Coal (Atlantic → Asia):
In 2024, Colombian Capesize flows to East Asia climbed (over 50% of exports Jan–May), supported by arbitrage; when Panama tightened, some cargoes detoured via the Cape, raising voyage costs and stretching laycans. As 2025 throughput improved, the logistics surcharge faded, allowing Atlantic coal to compete into Asia without as heavy a CFR premium—especially on prompt windows where Panama transit avoids multi-week Cape detours. (Argus Media)
8) So, will premia compress?
Yes—partly. With slots in the mid-30s, higher drafts, and shorter waits, Panama’s “tax” on Gulf-to-Asia grains and Atlantic-to-Asia coal is smaller than in 2023–early 2024. Expect some compression of CFR premia vs origin FOBs where Panama is the natural route.
But not to zero. We’re not back to an always-available 37–38 ships/day with max drafts and empty queues. Seasonal weather, surging LPG/gas flows, or a string of heavy-arrival weeks can re-tighten the system and re-inflate freight premia. And even a normalised Panama can’t offset other logistics shocks (Red Sea, storms, river levels).
Net-net: Into Q4, baseline freight looks less punitive than last year, which is supportive of basis compression in the affected trades—contingent on the canal holding its present operating tempo.
Sources
- ACP advisories & updates on slots/drafts (2024–25 increases to ~35–36/day; draft rises with rainy season). (Reuters, U.S. Energy Information Administration, maritime-executive.com, Autoridad del Canal de Panamá)
- Pre-drought daily average (~37/day) and recent operating levels (still below 2019 norms). (The Wall Street Journal)
- Gatún Lake & booking system dashboards (operational indicators; slot availability). (evtms-rpts.pancanal.com, Autoridad del Canal de Panamá)
- USDA Grain Transportation Report (Gulf/PNW freight to Japan; landed-cost shares). (AMS)
- Feed & Grain 2025 recap (annual average Gulf/PNW rates; spread). (Feed & Grain)
- Colombian coal flows to Asia (Kpler via Argus); routing sensitivity to canal/Cape choices. (Argus Media)
- Dry bulk commentary on tonne-miles vs Panama transits (Supramax/Cape). (S&P Global)
- VLGC transits & slot competition context (129 in July 2025). (S&P Global)
- Long-run mitigation (reservoir) and diversification ideas around the canal. (Reuters)
Educational disclosure
This article is for general informational and educational purposes only and does not constitute investment, financial, legal, or tax advice. Shipping conditions and commodity markets change quickly—please verify all key facts and figures directly from the cited primary sources (ACP notices, USDA/AMS reports, reputable newswires and data providers) before relying on them. We do not recommend buying, selling, or using any specific security, contract, or strategy. If you need advice tailored to your circumstances, consult a licensed professional in your jurisdiction.