Escalating Panama Canal fees compel LNG shippers to seek alternative routes

Liquefied natural gas (LNG) shippers are opting for longer and more costly routes to avoid the Panama Canal, as other fuel shippers are paying millions to bypass the backlog. For the first time in two years, LNG shippers are favoring the longer route around the Cape of Good Hope, reflecting the impact of drought and rising canal costs on global energy trade routes.

Low water levels at the canal have limited available spaces for shippers, prompting them to choose alternative routes. Additionally, the high cost of paying extra fees to expedite transit through the canal is not justified by current LNG spot prices in Asia. European gas prices have decreased from record highs set last year, due to full inventories and mild temperatures, while Asian demand for fuel remains weak.

BloombergNEF research shows that the amount of LNG on floating storage has reached record levels for the second consecutive winter, further indicating the shift in global energy trade routes and market conditions.

Source .