To maintain today’s globalized supply chains, it is essential that cargo moves smoothly across the world. However, in recent years, rapidly changing global developments and increasingly severe weather and climate changes have posed significant threats to maritime cargo transport. If cargo movement is disrupted at a chokepoint—a critical maritime passage—the global supply chain can quickly break down, causing serious repercussions for the world economy.
This blog post introduces the Panama Canal, a passage chokepoint between the Pacific and Atlantic Oceans, through which more than 13,000 vessels transit annually.
What is a Chokepoint?
A Chokepoint is a geopolitical concept that refers to a “point” where one party can “choke” (i.e., block or restrict) the movement of others, thereby securing maritime dominance for itself. Specifically, it is a place where shipping routes converge, making it a critical hub for maritime traffic.
MITSUI OCEAN FUJI navigates a 26-meter elevation change in the Panama Canal — a remarkable maneuver captured from the bridge. Watch the dramatic water level shift beginning at 1:20.
In 1492, Columbus reached the Americas, and about 20 years later, Spanish explorer Balboa, guided by indigenous people, crossed the narrow isthmus separating the Atlantic and Pacific Oceans, becoming the first European to reach the Pacific in 1513.
In 1881, Ferdinand de Lesseps, the French diplomat and businessman who succeeded with the Suez Canal, established the Panama Canal Company and began construction. However, the project was plagued by malaria, yellow fever, and far greater engineering challenges than anticipated, leading to bankruptcy in 1889.
The current Panama Canal project began in 1904, soon after the United States signed the Hay–Bunau-Varilla Treaty with the Republic of Panama, securing rights to build and lease land for the canal. Despite continued struggles with disease and landslides, the U.S. invested over $300 million and nearly a decade of work, finally completing the canal in August 1914.
The canal was returned to Panama on 31 December 1999, under the Torrijos–Carter Treaty, of 1977 and is now operated by the Panama Canal Authority.
In other words, the Panama Canal is a waterway that makes exceptionally good use of Panama's climate, one of the world's most rainfall-rich regions.
The canal is approximately 81 kilometers long. For many years, the maximum vessel size was limited to 289.6 meters*2 in length, 32.3 meters in width, and 12.0 meters in draft. In the maritime industry, the largest vessels capable of passing through the Panama Canal are referred to as "Panamax" (short for Panama Maximum). This designation has become a key benchmark, with numerous ships specifically designed to meet these dimensional limits.
(*1)
The surface of Gatun Lake is approximately 26 meters above sea level.
(*2)
For passenger and container ships, the maximum length is 294.4 meters.
In 2016, new locks were completed, expanding the maximum vessel size to 370.3 meters*3 in length, 51.2 meters in width, and 15.2 meters in draft.*4 Ships designed for these locks are called "Neo-Panamax" and their numbers are increasing.
(*3)
An integrated tug-barge (a pusher barge with the barge and push boat firmly connected using the method prescribed by the Panama Canal Authority) is limited to an overall length of 366.0 meters.
(*4)
Construction was originally scheduled for completion in 2014, marking the 100th anniversary of the Panama Canal’s opening, but actual completion was delayed until 2016.
The canal established direct maritime routes between the east and west coasts of the Americas and significantly shortened routes between the U.S. East Coast and Asia.
For example, the voyage time from the Port of New York on the U.S. East Coast to the Port of Tokyo in Japan is approximately 42days (about 15,000 miles) when traveling via the Cape of Good Hope at the southern tip of Africa (-- red dotted line). In contrast, the route via the Panama Canal takes roughly 28 days (about 9,700 miles) (ー red solid line), shortening the journey by approximately 35% *5.
Similarly, for liquefied natural gas (LNG) shipments from the U.S. Gulf Coast —which have seen rising import volumes in recent years— the voyage via the Cape of Good Hope takes about 44 days (approximately 16,000 miles) (-- blue dotted line), whereas the Panama Canal route reduces the voyage time to around 26 days (about 9,200 miles) (ー blue solid line), achieving a reduction of over 40% and enabling more efficient resource transportation.
Source: Created by the author
(*5)
One nautical mile is 1,852 meters. For more details, please refer to “Let’s see the Routes and Speed of Cargo Ships”. The estimated number of days is calculated based on a cruising speed of 15 knots. For routes passing through the Panama Canal, an additional day is included to account for both waiting time and transit duration.
According to the latest available figures, a total of approximately 13,400 vessels passed through the Panama Canal during Panama’s 2025 fiscal year (October 2024 to September 2025), in both the Pacific-to-Atlantic and Atlantic-to-Pacific directions.
Among these, container ships accounted for the largest share, making up about 22% of the total. They were followed by dry bulk carriers transporting commodities such as grain and coal, tankers carrying liquid cargo and liquefied gas, and car carriers, among others.
While toll rates for transiting the Panama Canal vary depending on vessel type, the official toll schedule released by the Panama Canal Authority (as of January 2025) indicates that a Neo-Panamax container ship incurs a toll of approximately USD 1.3 million.
In comparison, a conventional Panamax-size dry bulk carrier is charged around USD 220,000*6.
(*6)
The figures assume a container ship carrying 14,000 TEU (with a 90% utilization rate) and a dry bulk carrier with a deadweight tonnage of 80,000 (fully loaded). In addition to tolls, various other fees are required for canal transit. Discounts may be applied if certain conditions are met.
In Panama, the rainy season typically lasts from May to December. The Panama Canal relies on the large volumes of rainwater collected during this period, which are stored in Gatun Lake and used to operate the canal. In years with low rainfall, when the water level in Gatun Lake drops, draft restrictions have been repeatedly imposed on vessels transiting the canal.
Many vessels that would normally transit the Panama Canal were forced to either endure extended waiting times or reroute via the Cape of Good Hope, significantly increasing voyage durations. This disruption had a major impact on global supply chains.
In response to the disruption caused by the 2023 drought, the Panama Canal Authority has announced plans to fundamentally address the canal’s water shortage. The initiative involves damming the Indio River, which flows from Panama’s mountainous region to the Caribbean Sea, to create a new reservoir that will supply additional water to Gatun Lake.
According to reports, construction is expected to begin around 2027, with completion targeted for the early 2030s. However, the project faces significant challenges, including the relocation of residents from the proposed dam site, environmental concerns, and the need for substantial financial resources. As a result, there is uncertainty over whether the new water source will be completed as planned.
As noted at the beginning of this article, the Panama Canal—linking the Pacific and Atlantic Oceans—is a critical chokepoint in global logistics. Any restrictions on canal transit have a direct and far-reaching impact on maritime cargo transportation worldwide. With climate change intensifying and the increased risk of water shortages in Panama, it is essential to monitor developments closely in the coming years.