Liquefied Natural Gas shippers look to be choosing longer routes rather than pay the rising fees required if they are to get their vessels through the traffic-restricted Panama Canal, reports Bloomberg.
Routes around the southern Americas tip via Cape Horn take up to two weeks longer and add nigh-on 6,000nm rather to bypass the Panama Canal, but the Canal alternative can cost several million dollars or see the LNG tanker stuck in an ever-lengthening queue.
For the first time in two years LNG shippers preferred using the Cape of Good Hope more than any other route, according to BloombergNEF data. Although the drought problem at the Panama Canal has been developing throughout 2023, only now can it be seen to be having a substantial impact on global trade in energy.
Because of the drought the Panama Canal Authority has had to reduce the maximum number of daily transits – because each use of the locks sees some 50m gallons of freshwater leave the reservoir and leech into the sea. There is less market incentive for oil and LNG carriers to pay millions of dollars to jump the queue, since container ships are often under greater pressure to deliver on time, and Asian spot prices for LNG are not trading at a level high enough to justify the paying of high transit fees.
European gas prices are much lower than they were 12 months ago. Storage levels have been restored and mild temperatures have eased prices. Asian demand has been moderate after the anticipated post-Covid economic rebound in China turned out to be something of a damp squib.