Large cargo ships have recently paid up to $5 million to pass through the Panama Canal, as the global shipping industry reacts to trade disruptions from the Iran war and extreme weather patterns in the Western Hemisphere.

The recent bids to use the 50-mile interoceanic waterway, which handles almost 6% of global trade, reflect the canal's crucial role at a time when shipping companies have been forced to shift maritime routes.

"I can tell you that some vessels have paid $4 million or $5 million to go through," said Ilya Espino de Marotta, who was recently appointed as canal administrator. She characterized the recent prices as a record. Some ships bid over $1 million at auction this summer, while average auction prices stood at around $150,000 between October 2025 and March 2026.

"The market dictates the price," Espino de Marotta said in an interview. "I will not be surprised if we get again here or there (bids of) $2 million or $3 million," she added.

Many shippers book slots to transit the canal months in advance, using a reservation mechanism that accounts for 90% of total traffic through the complex freshwater system of locks and artificial lakes. Prices for those slots typically depend on the type and volume of cargo. A rise in transit costs has a cascading effect on shipping prices, commodities and consumer goods.

In addition, a few slots are held back to be auctioned off for near-term use, providing flexibility for shippers facing urgent needs. The current base auction price starts at $100,000 and averaged about $380,000 this season, Espino de Marotta said.

Some vessels urgently needing to transit on a specific date submit aggressive bids and that is what accounted for the recent sums, she said.

Tankers move oil and liquefied-natural gas from the U.S. Gulf Coast through the canal. Other vessels use the canal to carry U.S. grains in bulk, while containerships transport Chilean wines or Chinese consumer goods to large U.S. markets such as New York. The canal's top user is the U.S., followed by China.

As the conflict between the U.S. and Iran escalated this year, global energy routes shifted to serve rising demand in Asia for liquefied natural gas from U.S. Gulf ports.

"There is an energy shortage getting worse by the day. In particular in Asia," said Peter Sand, chief analyst at Oslo-based maritime analytics platform Xeneta. He noted that shipments by gas carriers to transit the canal are rarely booked in advance.

LNG tankers shifted away from the canal after Russia's invasion of Ukraine in 2022, to accommodate rising demand from Europe. "Now we're seeing LNG come back again" because shipments to Asia from the Middle East have been disrupted by the war, Espino de Marotta said.

The canal registered an increase in transits for about three to four months earlier this year, when the waterway handled between 38 and 41 crossings a day, up from about 34 to 36 before the war.

But the number of transits was recently reduced by canal authorities to 32 because of extreme weather patterns related to the El Niño cycle, which is driving severe disruptions across global energy markets and coastal infrastructure. That is putting more upward pressure on the price to go through the Panama Canal.

The Panama Canal relies on rainwater for its complex system of locks, which lifts ships almost 90 feet above sea level onto a navigable waterway, and then lowers them at the other end. Droughts driven by El Niño can be so intense that ships must reduce their cargo so as not to run aground. A decline in depth of Gatún Lake-the main reservoir for the canal and the artificial lake that carries ships for about 20 miles of their transit across-means ships can't go through fully loaded.

Authorities are also forced to reduce the number of ships that cross the canal because it needs to keep enough rainwater in its reservoirs and lakes to provide freshwater to fill the locks. The reservoirs are also an important source of drinking water for Panamanians.

The lower the lake level, the higher the toll, said canal chairman José Ramón Icaza, who also serves as Panama's Minister for Canal Affairs. Canal authorities provide a three-month forecast so shipping companies know what draft ships will be able to transit with and how much they are going to pay, except for auctions, which focus on the needs of vessels requiring transit on specific dates.

Canal business is essential for Panama, contributing to 6% of the country's economy. Profits generated by the canal are also vital for government coffers, providing 20 cents of every dollar it collects in revenue, representing more than $3 billion annually.