Panama Canal LNG Transits Reach A Near Three-Year High
Eleven laden liquefied natural gas carriers passed through the Panama Canal in July, up from six the previous month and the highest monthly figure since late 2023, before drought-related draft restrictions and transit caps drove gas traffic away from the waterway. The recovery is being driven not by canal policy but by the price spread between Asian and European gas markets.
Transits never returned to pre-drought levels after water conditions improved in 2024. Most carriers bound for Asia continued to route around the Cape of Good Hope, and from late 2023 until the outbreak of conflict in the Middle East earlier this year, laden canal transits averaged fewer than four cargoes a month. What changed over recent weeks was the emergence of a sustained premium for routing United States Gulf Coast cargoes to Northeast Asia through the canal rather than around Africa, described by one analyst as the first robust and durable such premium since before the drought.
Market pricing supports the shift. The benchmark for cargoes delivered into Northeast Asia was assessed in mid-August at a premium of more than a dollar per million British thermal units over the Northwest Europe marker, keeping the eastbound arbitrage open. A senior commercial executive at a major American exporter told an earnings call that as Asian prices moved to a premium over Europe, flows shifted decisively east, with quarterly exports to the region reaching a record of around eleven million tonnes while deliveries into Europe declined.
The canal authority attributed the increase primarily to market conditions and the rise in American gas flows to Asia, while also crediting reservation programmes and auction mechanisms that give participants more predictable access to transit slots. Even so, the majority of Gulf Coast cargoes heading to Northeast Asia still take the longer route. Of the eleven laden transits in July, nine were destined for Japan and South Korea and the remaining two delivered into Chile.
The persistence of the Cape route reflects how charterers actually think about cost. Many control ships on long-term charters and treat the shipping element as sunk, focusing instead on avoiding canal fees. The African route also preserves commercial flexibility, since a cargo sailing around the continent can still be redirected to Europe, South America or South Asia if the market moves, whereas a ship booked into a canal slot is effectively committed to the Pacific. Higher spot prices tilt that calculation, because shortening the voyage reduces boil-off losses on a more valuable cargo.
