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Panama Canal watching for surge in LNG transits to continue during early July

The Panama Canal Authority is monitoring for high arrivals of LNG ships during the early part of July following a surge in transits during the final week of June.

From June 25-29, 11 LNG vessels arrived with reservations and three without. One of those without a reservation won an auction slot to transit July 2, the agency that operates the Canal said in an e-mail response to questions.

Congestion at the shortest passageway for LNG vessels between the US Gulf Coast and East Asia has been a persistent challenge.

That has occurred more recently even as there has been a strong pickup in eastward voyages around the Cape of Good Hope, amid US Gulf Coast LNG netbacks that strongly favor the Platts JKM through the balance of summer, based on S&P Global Platts Analytics data.

The JKM has been on a bull run since early March, driven by persistent demand from the world’s largest importers.

The benchmark price for spot deliveries into the world’s largest LNG importing region reached as high as $14.20/MMBtu July 1, its highest level since January this year.

The price impact from the strong fundamental demand in Asia that has been pulling cargoes from the Atlantic into the Pacific has been augmented by unusually high European hub prices.

The European market tends to set the floor price for LNG globally, with movements in that market tending to filter through to other markets, including the traditionally premium markets in Northeast Asia.

Despite a trimming of the JKM-Dutch TTF spread July 2, multiple trading sources agreed that spot Atlantic-sourced cargoes would likely continue to point east, maintaining the demand for Panama Canal transits.

Waiting time projections from the Panama Canal Authority have been increasing recently, however, reaching eight days for transit from the Atlantic to the Pacific July 2, up from just three days June 25.

A similar trend can be observed for transits in the opposite direction, with waiting times reaching seven days on July 2, up from just two days on June 25.

Ships with reservations transit on their booked day, while those without reservations are subject to longer waits.

The higher round-trip economics implied by longer waiting times could begin to provide an incentive for even more transits around the Cape of Good Hope. And in marginal cases, that could end up constraining some cargoes to the Atlantic Basin.

In February, the Canal administrator said the agency was working to add a third daily reserved transit slot for LNG vessels to ease congestion.

At times, delays have caused supply disruptions and extra shipping costs for the market, while unpredictable weather and increased spot trading of LNG cargoes can alter the destination mid-voyage and cause the Canal to lose revenue when it receives a cancellation.
Source: Platts

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