Panama Canal Drought Tightens Grip on Asian LNG Markets
The Panama Canal drought is causing a significant disruption to liquefied natural gas (LNG) flows to Asia, forcing draft restrictions that reduce vessel carrying capacity. According to Wood Mackenzie's VesselTracker data, daily transits fell from around 325 in early May to as low as 271 in late May before recovering to about 308 through June.
The drought has pushed Panama Canal water levels below both 2025 levels and the five-year average, causing authorities to impose draft restrictions due to rainfall deficits that limit canal operations. Asian LNG markets are also dealing with the effects of the Strait of Hormuz closure, which has removed about 20% of global LNG supply.
LNG carriers facing draft restrictions can load below capacity, compete for transit slots, or reroute through the Cape of Good Hope, adding around 10 to 15 days to voyages and increasing tonne-mile demand. Lower vessel capacity, longer voyages, and higher freight costs could further constrain LNG flows into Pacific markets if canal restrictions persist.