LNG Tanker Traffic Via Panama Canal Likely to Fall

LNG tankers transiting trough the Panama Canal waterway could significantly decline from December onwards, as further drought restrictions come into effect according to Bloomberg.

• The number of available booking slots for Neopanamax locks will be gradually reduced from 10 at the end of October to five next January. These openings serve both south- and northbound journeys. This is set to impact LNG vessel transits as almost all LNG carriers can only pass through the waterway via the Neopanamax locks, ACP numbers showed.
• LNG tankers are not the only users of the Neopanamax locks and the share of LNG tankers stood at just 8% of October.
• LNG market participants will be only second in line to compete for slots from December, after container ships, which will likely lead to a bidding war to compete for slots as total slots are falling.
• From 1 January, daily slots for Neopanamax locks will dip to five and auctions will be no longer be held. Unless container shippers fail to book these limited slots, LNG players won’t be able to reserve one and LNG flows through this choke point could drop to zero. All LNG players will have to either seek swap deals or arrange shipping capacity for longer journeys.
• Netbacks for a one-way voyage of a tanker loaded with 160,000 cubic meters of LNG in December from Cheniere Energy’s Sabine Pass plant in the US to Yokohama in Japan will be $12/MMbtu via the Panama Canal, $11.17/MMBtu through the Suez Canal and $11.16/MMBtu around the Cape of Good Hope according to BNEF.
• Though the daily priority slot for LNG for Neopanamax locks will remain available until December, some players have already taken steps to avoid the Panama Canal.