Panama gets a lift from the Gulf shipping shock

Panama and the quiet shift in trade routes: Panama is beginning to capturetraffic as the regional war forces shippers to reroute around rising fuel costs, security risks, and delays. With instability in the Gulf persisting, the canal offers a shorter, more reliable alternative. Prolonged conflict could increase Panama’s appeal for cargo owners seeking shorter transit times.

The demand is speaking on behalf of the canal: Canal management indicates tonnage and revenue are running about 10% above budget, with daily transits rising to 38-41 ships, up from the anticipated 34-36.

The shift is most visible in energy markets: Asian refiners are rerouting medium-sized crude US Gulf Coast crude cargoes to Asia via Panama, paying a premium for faster access. The move is notable — a Korea-bound cargo was the first on that route since September 2022, while another Japan-bound cargo was the third in nearly five years.

Even with some cargoes initially diverting around the cape, Panama still screens as the cheaper route into Asia for US LNG. Platts data showed freight from the US Gulf Coast to Asia via Panama Canal at USD 2.8 per mmbtu last week, versus USD 4 per mmbtu via the Cape of Good Hope.

The signal is starting to show up in canal reservations: Canal data from earlier last month shows southbound LNG slots reserved for this week and the next — pointing to early positioning by US LNG exporters for Pacific-bound shipments.

Our take: Panama is not replacing the region’s main trade corridors — but it can help build a workaround around them. As Gulf disruption pushes up risk and cost, the canal is giving Atlantic Basin crude and LNG exporters a more competitive path into Asia.

MENA’s energy gateways are adapting in different ways: Saudi Arabia is leaning on Yanbu and the East-West pipeline to keep crude moving outside Hormuz, while the UAE’s main backup route sends oil to Fujairah via the Habshan-Fujairah pipeline. Egypt is trying to turn its own infrastructure into part of that bypass by offering the Sumed pipeline and additional Red Sea storage to help move Gulf crude toward the Mediterranean.

However, LNG has less flexibility — the damage at Qatar’s Ras Laffan complex knocked outabout 17% of the country’s LNG export capacity, pushing QatarEnergy to declare force majeure on some contracts.

Elsewhere, regional hubs are trying to turn disruption into traffic. Tanger Med is bracing for more calls as rerouting around Africa adds 10-14 days to transit times and starts feeding extra pressure into Moroccan hub operations. In Egypt, Damietta Port is opening a new Ro-Ro transit corridor from Europe to the Gulf via Safaga after Egypt eased ACI requirements for Gulf-bound transit cargo.