The opening of a new, third set of locks on the Panama Canal will cut the distance between the US and Far East by more than one-third for vessels that can now transit the waterway but hadn’t been able to before. A voyage from the US Gulf Coast to the Far East around the Cape of Good Hope typically takes 45 days vs. the 25-30 taken by passage through the canal.
Old Panamax vessels could measure up to 965 ft long, with a 106-ft beam and 39.5 ft draft. Neopanamax ships can measure 1,200 ft by 160 ft by 50 ft, boosting capacity to 400,000-600,000 bbl from 300,000-500,000 bbl.
This increase will allow passage of the very large gas carriers typically used to carry propane and other LPG and products tankers but falls short of the scale needed to accommodate fully loaded very large and ultra-large crude carriers, the vessels that haul the majority of crude shipments. VLGC passage will be far more efficient than the ship-to-ship transfers required until now to move LPG across the isthmus.
Distillate and gasoline led Atlantic-to-Pacific petroleum traffic through the canal last year, with a respective 9.5 million and 9.1 million long tons, according to the US Energy Information Administration. But net US length in these markets doesn’t compare to that in ethane and propane, for which the ability to move more volume more quickly will be a welcome relief. The continued strength of demand for refined products in western South America also is questionable.
China is already the biggest single customer for US propane and second-biggest for LPG and the ability to move these volumes more efficiently will likely only increase that flow. EIA data show trade to both China and Japan having already accelerated before the canal expansion’s opening. LPG shipments to Japan more than tripled to 166,000 b/d in the first 3 months of 2016 from 49,000 b/d for the same period last year. Shipments to China jumped to 161,000 b/d from 66,000 b/d in the same window.
The first VLGC to pass through the new locks will be the Lycaste Peace, carrying propane from Enterprise Products Partners for discharge in Tokyo Bay in Japan. By 2018 US exports of LPG will likely equal those of Qatar and the United Arab Emirates combined (OGJ, June 6, 2016, p. 28).
The expansion will also shorten the journey for future US LNG exports. All LNG carriers except the Q-Flex and Q-Max ships, limited by their excessive beams, will now be able to pass through the Panama Canal compared with only a small portion of the fleet that could before. Stagnant LNG demand, however, will likely limit the shipment of US-sourced LNG through the canal for the time being, particularly given the proximity of new Australian liquefaction capacity to Asian markets.
Contact Christopher E. Smith at email@example.com.