The Panama Canal prepared for a bad year and got the opposite. Revenue rose between 8% and 10% in the first five months of fiscal 2026, which began in October, according to chief financial officer Víctor Vial — a sharp contrast to the authority’s own budget forecast of an 8.8% decline to $5.2 billion for the full year. Both vessel transits and cargo tonnage increased, and Vial said the waterway is on pace to surpass last year’s record $5.7 billion in revenue.
“We’ve seen a resilience in demand, and it’s quite surprising, because we didn’t expect it,” Vial said in a Bloomberg interview Wednesday. The authority had anticipated that Trump’s tariff regime would depress container shipping after companies front-loaded goods in 2025 to beat levy deadlines, artificially inflating the prior year’s figures. Instead, US demand for Asian merchandise has held firm, LPG shipments to Japan and South Korea remain strong, and automobile exports from Asia to Latin America and the United States are providing additional lift.
War, Routes and Opportunity
The canal’s traffic mix is shifting beneath the headline numbers. LNG transits have declined as European buyers, still adjusting supply chains after the Ukraine war, pull tankers across the Atlantic rather than through the canal to Asia. But the Iran conflict and Hormuz disruption could produce a short-term transit boost, Vial said, as shippers reroute cargo through alternative corridors. The canal authority is monitoring the situation closely.
The stronger-than-expected performance comes after a turbulent two years. A historic drought in 2024 cut transits to 11,240 — a 29% drop from the prior year — forcing severe slot restrictions and driving up tolls. Fiscal 2025 saw a full recovery to 13,404 transits, up 19.3%, with revenue climbing 14.4% to the record $5.7 billion. The current fiscal year’s gains build on that already elevated base, making the outperformance more significant than a simple rebound.
An $8.5 Billion Investment Plan
The canal authority is channeling its financial strength into long-term infrastructure. In April, it will open bidding for an LPG pipeline running between Atlantic and Pacific terminal facilities, separate from the CK Hutchison ports whose concession Panama’s Supreme Court struck down. By moving LPG through a pipeline instead of transit locks, the canal could free up to 12% additional capacity for other vessel categories. The pipeline and associated port terminals are expected to be operational by 2031, with contracts likely awarded in late 2026 or early 2027.
The authority also plans to begin engineering this year on a $1.6 billion reservoir along the Río Indio, designed to secure water for canal operations and Panamanian drinking supply for 50 years. A freshwater surcharge on shippers, imposed in 2020, will fund the project and be discontinued once it opens. Consultations with 400 families facing relocation are being finalized.
Sovereignty and New Operators
The investments unfold against a backdrop of geopolitical friction. Trump spent much of 2025 threatening to reclaim the waterway over alleged Chinese influence, while President José Raúl Mulino repeatedly defended it as a sovereign Panamanian operation. Although China plays no role in canal management, Hong Kong–based CK Hutchison had operated ports on both coasts until the Supreme Court voided the concession. In February, Panama signed provisional contracts with AP Moller-Maersk and MSC Mediterranean Shipping to operate the terminals. Vial said the authority expects to tap financial markets within two to three years to fund portions of the investment program, supplemented by internal cash flow and loans. For a canal that braced for a tariff-driven downturn and instead found a revenue surge, the timing could hardly be better.