Restrictions on Panama Canal transits are likely to persist into Q2 2027 as a strong El Nino threatens to worsen dry conditions in Central America, raising costs for liquefied petroleum gas shipments from the US Gulf Coast to Asia, according to a Kpler note on Wednesday.
The Panama Canal Authority announced last week cuts to daily transits through its Panamax and Neopanamax locks as water levels in Gatun Lake decline, the analysis said.
Panamax transits will fall to 25 per day from 26 on Sep. 3 and to 23 from Sep. 15, while Neopanamax transits will drop to nine from 10 on Sep. 3.
Kpler projected that the Gatun Lake levels would come under pressure in early 2027, with April likely to mark the seasonal low point.
The data analytics firm said under a scenario in which rainfall from October 2026 through July 2027 is 20% below the five-year average, the lake level could fall to about 80.7 feet in April.
Kpler said a drier scenario, with precipitation 40% below average, would push the level closer to 2023 drought lows at about 79.9 feet.
The outlook comes as US LPG export capacity is set to expand, potentially increasing demand for Panama Canal transits at a time when the waterway is already congested.
Enterprise Products Partners (EPD) is projected to add about 300,000 barrels per day of LPG capacity at its Houston facilities in Q1 2027, while Targa Resources' (TRGP) Galena Park expansion is expected to add another 130,000 b/d in Q3.
Early Q2 2027 will have the most acute pressure from low lake levels, Nils Jenson, insight analyst at Kpler, said, adding that higher US exports would provide another source of cargoes competing for limited canal capacity.
US shipments to Asia have already increased across crude, refined products and NGLs as Middle Eastern supplies have been constrained, boosting demand for the Panama Canal.
Kpler said a return of some Middle Eastern supply in Q1 2027 could redirect part of the US-Asia flow but is unlikely to eliminate pressure on canal capacity.
Meanwhile, the combination of restricted transits, congestion and strong LPG demand has already pushed up the cost of moving cargoes through the canal.
A Neopanamax slot for an Aug. 28 northbound transit was recently auctioned for $3.15 million, according to an industry report cited by Kpler.
Alternative trading strategies, including moving LPG on smaller shuttle vessels through the Panamax locks to bypass Neopanamax congestion, are also being explored.
However, such arrangements are costly and can handle only limited volumes, leaving many operators with a choice between paying higher canal costs or taking longer routes around the Cape of Good Hope.
Kpler said that those constraints are likely to support very large gas carrier freight rates and delivered LPG prices in East Asia through Q2 2027.
A proposed pipeline to bypass the canal for LPG shipments is not expected to be operational until late 2030, so it is unlikely to provide near-term relief.
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