S Korean lifters of US LNG bypassing Panama Canal amid tightening transits

South Korean lifters of US LNG have started bypassing the Panama Canal, with at least two carriers heading to the Suez Canal, according to S&P Global Commodity Insights shipping data, in an effort to meet their winter demand in light of tightening restrictions at the key waterway.

The Hyundai Princepia chartered by Korea Gas Corp. was expected to arrive at Port Said, the northern entrance of the Suez Canal, on Nov. 16 after having left Sabine Pass in Louisiana Oct. 30, according to S&P Global Commodities at Sea. The carrier is laden with an LNG cargo after having loaded at Sabine Pass, according to Platts cFlow ship and commodity tracking software from S&P Global.

Kogas officials confirmed to S&P Global that the company is using the Suez Canal to import a Sabine Pass LNG cargo as a result of increasing restrictions on transits at the Panama Canal caused by historic drought conditions.

The number of booking slots available for transiting the Neopanamax locks (for ships including LNG carriers, container ships and Very Large Gas Carriers) will be reduced from the current seven slots to six from Dec. 1 until Dec. 31, and then five from Jan. 1, 2024, the Panama Canal Authority has said.

A Kogas official said that the company, which imports roughly 2.8 million mt/year of LNG from Cheniere's Sabine Pass under a long-term contract, is expected to receive the Sabine Pass LNG cargo at one of its terminals next month.

"But we have not fixed yet future cargo shipping routes, and we will decide, closely monitoring situations in the Panama Canal," the official said.

In an apparently similar move, the SK E&S owned LNG carrier Prism Brilliance is currently sailing in the North Atlantic towards the Suez Canal arriving Nov. 24, having left Freeport in Texas on Nov. 8 after loading a cargo at Freeport in Texas, according to Platts cFlow.

SK E&S, South Korea's major LNG importer and power utility, has a contract to lift 2.2 million mt/year of Freeport LNG. The Prism Brilliance has primarily been used for round trips between Freeport and SK E&S' Boryeong terminal in 2023, according to Platts cFlow.

SK E&S officials could not immediately comment when asked whether the Prism Brilliance was bringing back a Freeport LNG cargo to one of its terminals in South Korea via the Suez Canal.

South Korea's average temperatures from November to January 2024 is forecast to be slightly higher than the average, according to the latest Korea Meteorological Administration forecast, under which the country is forecast to experience 30-year average or above the average in December with a 40% probability, with a 50% chance of the average temperatures.

The country's average temperature during the 1991-2020 period decades were at 7-8.2 degrees Celsius in November, at 0.5-1.7 degrees Celsius November, and minus 1.5-0.3 degrees Celsius in January, the KMA said. South Korea was hit by a cold wave last winter -- in December and January -- which boosted electricity consumption and LNG demand and imports.

Japan options

Japanese lifters of US LNG are also considering alternative options for shipping their winter cargoes in light of tightening restrictions through the Panama Canal, including LNG cargo swaps or routes via the Suez Canal or the Cape of Good Hope, company sources told S&P Global.

The deteriorating situation through the key shipping waterway is also likely to see Japanese lifters review their shipping routes for their 2024 annual delivery programs.

"We are considering options in the Atlantic side including via the Suez Canal in case we cannot transit the Panama Canal," said one Japanese lifter, with other sources mentioning the Cape of Good Hope route, as well as the potential for LNG cargo swaps.

From the US Gulf, the Suez Canal route takes a little over a month to Japan while the Cape of Good Hope route is about 40 days. This compares with just over 20 days to reach Japan via the Panama Canal.

Although the US is not among the largest LNG suppliers to Japan, accounting for 8% of its total LNG imports so far this year, delays to shipments could have an impact in the upcoming winter.