Why some companies are paying more than $1 million to get through the Panama Canal

VPM | By Rob Schmitz, Henry Larson and Mallory Yu

Published August 14, 2026 at 9:22 PM EDT

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The war with Iran is causing problems with traffic in another waterway, far from the Middle East. With the Strait of Hormuz effectively closed, pressure on the Panama Canal has increased, And combined with lower water levels, transit prices through the canal are soaring. According to new reporting from the Financial Times, some companies are having to cough up more than $1 million for each trip through the canal. That’s more than 16 times what it cost a year ago. Jamie Smyth is the U.S. energy editor for the Financial Times and joins me now.

Hey, Jamie.

JAMIE SMYTH: Hi, Rob.

SCHMITZ: So $1 million to cross the Panama Canal? That – I mean, how is the war in Iran impacting the Panama Canal, which is on the other side of the planet in Central America?

SMYTH: Well, that was actually only the smaller sized ships, this average of $1.1 million that came out last week for a transit. Actually, the larger ships, we’re seeing, you know, an even larger amount of money. One of the big tankers that carries liquefied petroleum gas today reportedly paid 4.6 million just to go through on one of these auction slots, and they’re like priority slots. So it’s really a staggering sum which they’re now having to pay to get through the canal.

SCHMITZ: What do these new costs to cross the Panama Canal mean for the global economy?

SMYTH: You know, who’s going to pay this? You know…

SCHMITZ: (Laughter) Oil companies, apparently.

SMYTH: It’s going to be the shipping companies to start with. But ultimately, you know, it feeds through the economy, and it means higher prices for consumers, which will push up inflation.

SCHMITZ: OK.

SMYTH: So the shipping companies are already passing on these extra costs of the transit. So, for example, MSC shipping line, it just announced it’s going to introduce a new surcharge from next month of $376 for a 45-foot container. So the – it’ll – that cost will ultimately, you know, fall on large, multinational retailers – think of Walmart or Amazon – who are importing products to the U.S. from Asia. And it’ll also fall on trading companies who are shipping products out of the U.S. to Asia, you know, things like grains or soy beans. Also these LNG gases like propane and butane. So it’s really going to feed all the way through the economy. And one of the interesting things about the Panama Canal is, of course, you know, about three-quarters of the cargo passing through the canal either originates or is destined for the United States. So it’s the American consumer who will ultimately pay.

SCHMITZ: There is a weather element involved in all of this, too, with El Nino. I understand this weather event means less water in the canal. Explain that for us.

SMYTH: That’s right. So whenever you get a threat of an El Nino, you know, this causes hotter and drier conditions in Panama. And the canal requires a man-made lake to feed the water into the canal to help the ships actually move through the sort of intricate system of lochs. It needs a lot of water. Now, that lake, called Gatun Lake, is – the water levels are falling. And with weather services predicting a very severe El Nino later this year, the authorities that run the canal have actually implemented a series of restrictions governing how low vessels can sit in the water. It’s called a ship’s draft. So they’ve implemented these measures to try and conserve water. And that means that the amount of cargo that ships can actually carry through the canal is falling. And they’ve also flagged that it might mean that the amount of transit through the canal will fall as well later this year, and that’s really pushing up the prices quite a lot.

SCHMITZ: And very quickly, Jamie – we’ve got about 20 seconds left – any solution on the horizon, or would we have to wait for the weather to cool and the war to end here?

SMYTH: You know, the authorities are trying two solutions. One of them is building a huge pipeline to carry gas. So the tankers would arrive at one end of the canal and they’d offload the gas and move it through the canal and a different tanker would pick it up. They’re also looking at water management issues, but that’s going to take years. It’s early 2030s before that. Until then, shippers will have to look at alternative routes.

SCHMITZ: That is Jamie Smyth, U.S. energy editor at the Financial Times.

Thanks, Jamie.

SMYTH: Thank you. Transcript provided by NPR, Copyright NPR.

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Rob Schmitz

Rob Schmitz is NPR's international correspondent based in Berlin, where he covers the human stories of a vast region reckoning with its past while it tries to guide the world toward a brighter future. From his base in the heart of Europe, Schmitz has covered Germany's levelheaded management of the COVID-19 pandemic, the rise of right-wing nationalist politics in Poland and creeping Chinese government influence inside the Czech Republic.

Prior to covering Europe, Schmitz provided award-winning coverage of China for a decade, reporting on the country's economic rise and increasing global influence. His reporting on China's impact beyond its borders took him to countries such as Kazakhstan, Mongolia, Vietnam, Thailand, Australia, and New Zealand. Inside China, he's interviewed elderly revolutionaries, young rappers, and live-streaming celebrity farmers who make up the diverse tapestry of one of the most fascinating countries on the planet. He is the author of the critically acclaimed book Street of Eternal Happiness: Big City Dreams Along a Shanghai Road (Crown/Random House 2016), a profile of individuals who live, work, and dream along a single street that runs through the heart of China's largest city. The book won several awards and has been translated into half a dozen languages. In 2018, China's government banned the Chinese version of the book after its fifth printing. The following year it was selected as a finalist for the Ryszard Kapuściński Award, Poland's most prestigious literary prize.

Schmitz has won numerous awards for his reporting on China, including two national Edward R. Murrow Awards and an Education Writers Association Award. His work was also a finalist for the Investigative Reporters and Editors Award. His reporting in Japan — from the hardest-hit areas near the failing Fukushima nuclear power plant following the earthquake and tsunami — was included in the publication 100 Great Stories, celebrating the centennial of Columbia University's Journalism School. In 2012, Schmitz exposed the fabrications in Mike Daisey's account of Apple's supply chain on This American Life. His report was featured in the show's "Retraction" episode. In 2011, New York's Rubin Museum of Art screened a documentary Schmitz shot in Tibetan regions of China about one of the last living Tibetans who had memorized "Gesar of Ling," an epic poem that tells of Tibet's ancient past.

From 2010 to 2016, Schmitz was the China correspondent for American Public Media's Marketplace. He's also worked as a reporter for NPR Member stations KQED, KPCC and MPR. Prior to his radio career, Schmitz lived and worked in China — first as a teacher for the Peace Corps in the 1990s, and later as a freelance print and video journalist. He also lived in Spain for two years. He speaks Mandarin and Spanish. He has a bachelor's degree in Spanish literature from the University of Minnesota, Duluth, and a master's degree from Columbia University's Graduate School of Journalism.

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