Asian LNG consumers will bear the cost of Panama Canal surcharge in 2024

The price gap between liquefied natural gas (LNG) in Asia and Europe is widening due to tighter restrictions on the Panama Canal, making trips from U.S. suppliers more expensive. The Asian gas price premium over Europe for summer 2024 has doubled since the Panama Canal announced further restrictions, and the spread has also widened for winter 2024. The number of slots available for LNG tankers will be reduced by half starting in January, impacting energy markets and increasing shipping costs.

As a result, traders will have to avoid the Panama route and ship Asian cargo from the U.S. and Trinidad and Tobago via longer routes, adding time and shipping costs to the journey. The stowage costs for LNG cargo from the U.S. to Japan have increased, making U.S. shipments more expensive and less competitive in the Asian market. The Panama Canal is a key shipping route for LNG shipments from the U.S. to North Asian countries, and with restrictions in place due to drought, LNG tankers could face bidding wars for transit slots from next month.

Container ships will have priority over LNG ships for transiting the waterway, and LNG shippers are now preferring the Cape of Good Hope route. This will continue until LNG spot prices in Asia rise enough to justify the additional costs of getting past the queue of waiting ships, on top of the usual canal transit fee.

Source .