US may reclaim Panama Canal and its 'exorbitant' fees: Trump

President-elect Donald Trump has signaled the US could seize the Panama Canal to prevent it from falling into the "wrong hands", while accusing Panama of charging excessive rates for transit through the key commercial shipping passage.

In a Dec. 21 posting on Truth Social, his social media platform, Trump also pointed out Panama, not China, was supposed to be sole manager of the 82-km waterway, which acts as a bridge between the Atlantic and Pacific oceans

The Panama Canal sees more than 12,500 commercial transits by large vessels each year, making it a key cog in global commodity trade. It cuts around three weeks – and thousands of kilometers – from a typical journey between Asia and ports on the US East Coast.

It was largely constructed by the US, which held the territory surrounding the passage, but Washington ceded control of the canal to Panama in 1999, after a period of joint administration that Trump dubbed "foolish" in his posting.

"We would and will NEVER let it fall into the wrong hands! It was not given for the benefit of others, but merely as a token of cooperation with us and Panama," he wrote. "It was likewise not given for Panama to charge the United States, its Navy, and corporations, doing business within our Country, exorbitant prices and rates of passage. This complete 'rip-off' of our country will immediately stop."

He later added, in reference to the handover: "If the principles of this magnanimous gesture of giving are not followed, then we will demand that the Panama Canal be returned to us, in full, and without question."

The government of Panama, whose economy benefits hugely from transit fees for the canal, has not responded publicly to Trump's comments. Trump is set to be inaugurated on Jan. 20.

Disruptions to the canal, such as with the El Nino weather system in 2023, tend to result in higher freight costs, as they tend to lead ship operators to use longer routes or charge more.

Last year, low water levels led operators to reduce the number of journeys, taking waiting times to around nine days, just weeks before Middle East tensions hit transits through the Bab el-Mandeb Strait, a key Red Sea chokepoint.

The Panama Canal authority plans to spend up to $900 million building a new reservoir, which could be operational by 2028 and could increase the daily transit capacity by 11 Panamaxes.

Platts last assessed the freight rate for shipping LNG from the US Gulf Coast to Japan or South Korea via the Panama Canal at $1.54/MMBtu on Dec. 20, down from $4.39/MMBtu in September 2023, when the low water levels cut transits. Platts is part of S&P Global Commodity Insights.