US LNG cargoes continue to set sail around Cape of Good Hope in March

Although drought-related restrictions have improved slightly at the Panama Canal since the start of the year, the proportion of US LNG exports being sent round the Cape of Good Hope remains elevated in March as attacks on commercial shipping in the Red Sea force shippers to take the longer route to Asia.

Of the total US exports of 3.33 million mt delivered in March thus far, around 710,000 mt were delivered into Asia, with all volumes transiting through the Cape of Good Hope to reach their destination, according to data from S&P Global Commodity Insights.

No US volumes have been delivered to Asia via the Suez or Panama canals so far in March, with the last US cargo delivered via the Suez Canal arriving in Japan on Jan. 27 after being exported from the Cove Point LNG export terminal in Maryland on Dec. 16, 2023.

US LNG exports round the Cape elevated in Q1

Following a historic drought in parts caused by the El Niño weather pattern in the Panama Canal, the Suez Canal was the principal alternative route to Asia in November, but with the tensions in the Red Sea escalating in December, more volumes began taking the longer route through the southern tip of Africa.

In 2024, 46 US LNG cargoes have reached Asia via the Cape of Good Hope so far, compared with a total of 66 for all of 2023. A total of 18 cargoes each made the voyage in January and February, the highest monthly total since May 2021.

Meanwhile, only 13 US LNG cargoes have been delivered to Asia via the Panama Canal this year, compared with 145 cargoes for all of 2023. The trade passage in February saw only five US LNG cargoes transit Panama to reach Asia. Monthly voyages were last seen lower in April 2018 at just three cargoes delivered into Asia after travelling through the Panama Canal.

In comparison, only seven US cargoes have travelled through the Suez Canal this year to reach Asia, compared with 120 in 2023.

It is also worth noting that the 2024 volume so far is higher than the 17.70 million mt exported over the same period in 2023.

While supply-side risks are still looming in the market, "the pause in LNG export authorizations announced by the Biden administration in January has no short-term impact on US gas balances or prices," Christopher Elsner, associate director, and Suramya Sharma, senior analyst, at S&P Global said in a US natural gas report.

The Platts Gulf Coast Marker for US FOB cargoes loading 30-60 days forward was assessed at $7.13/MMBtu March 14, up 37 cents on the day.

Freight rates

Although the number of spot vessels in the Atlantic and Pacific has dropped on the week, with spot demand slowing in both basins, freight rates are expected to remain relatively steady.

Currently, inter-basin arbitrage opportunities remain limited as JKM prices have seen an increase relative to Europe. As a result, some cargoes have been heading East with traders seeing the physical market in the East becoming more active. For now, given the bearish environment this pickup in activity shouldn't stress freights too much.

Platts, part of S&P Global Commodity Insights, assessed the US Gulf Coast to Northwest Europe LNG freight cost at 67 cents/MMBtu on March 14, up 1 cent/MMBtu on the day.

The LNG USGC to Japan/Korea freight cost via Panama was assessed at $1.53/MMBtu March 14, unchanged on the day. The freights to Japan/South Korea via the Cape of Good Hope and the Suez Canal were assessed at $2.09/MMBtu and $2.21/MMBtu, respectively.

While lower spot prices have incentivized some buying interest, the LNG market across Europe and Asia remains comfortably stocked to deal with any uptick in demand ahead of the injection season.

The Platts DES Northwest Europe Marker for April was assessed at $7.881/MMBtu March 14, or a 40-cent/MMBtu discount to the April TTF hub price, up 28.7 cents from March 13. April JKM, the benchmark price for LNG cargoes delivered to Northeast Asia, was assessed at $8.792/MMBtu March 14, up 7.8 cents/MMBtu on the day.