Panama Canal Sees Transit Surge as Hormuz Chaos Reroutes Oil, LNG — “Growth Will Persist Until…

Panama Canal Sees Transit Surge as Hormuz Chaos Reroutes Oil, LNG — “Growth Will Persist Until Middle East Issues Are Settled”

The Panama Canal Authority says it expects elevated transit volumes to continue “until Middle East issues are settled,” as the effective closure of the Strait of Hormuz pushes tankers and container ships toward the Western Hemisphere’s shortcut. ”Higher energy, fuel and navigation costs could make the Panama Canal a more attractive option for commercial traffic,” Administrator Ricaurte Vásquez told the AP. If the Iran conflict persists, Asian buyers will replace Qatar LNG with U.S. cargoes, and “U.S. shippers would likely use the Panama canal to shorten the route to Asia to offset rising fuel costs”. The canal handled 6,288 transits between October and March — up to 224 year-over-year, a 2.8% increase. Cargo volumes climbed ∼ 5% to 254 million PC/UMS tonnes. Daily passages averaged 34 in January, 37 in March, and have hit 38–40 on peak days in the last two weeks, vs. an expected 34 for 2026. ”We had expected around 34 daily passages” for this year, but in the last two weeks “we’ve been having 38, 39, 40,” said deputy administrator Ilya Espino de Marotta. “The Panama Canal is a safe, short route, that with gas prices” still reduces costs. LNG and LPG are the new growth engines. The canal handled four LNG carrier transits/month before the crisis, but LNG traffic has been increasing since March and the canal will offer one additional slot. Tanker transits rose 11.2%, driven by increased shipments from the United States due to higher demand for fuels and methanol from South Korea, Mexico, and Guatemala.

“Energy products are assuming an increasingly central role in the canal’s operations,” Vásquez said. The disruption has led the Panama Canal to handle more energy products in recent weeks. With Hormuz blocked, demand for guaranteed Panama slots spiked. Average auction prices rose to about $385,000 between March and April, up from $135,000–$140,000 before the conflict. Some vessels paid over $1 million to win a preferred time-slot. VP of Finance Víctor Vial said the $1M+ results reflect a “temporary rise in demand” tied to short-term rerouting. The canal offers three to five auction slots daily. Most ships book in advance, helping avoid queues.

The Strait of Hormuz moved ∼ 20% of global oil and LNG before Iran and the U.S. began trading fire Feb. 28. Today it’s down to a handful of vessels per day. “Iran reimposed closure measures on the Strait of Hormuz on April 18, reducing traffic to just a handful of vessels per day compared with a pre-war average of roughly 130 to 140”. With Suez also risky and Hormuz “no longer treated as a default”, shippers are paying up. Japan, hit by a 90% cut in Gulf imports, has dramatically increased U.S. crude purchases. The problem: the Panama Canal historically charges record-high transit fees as more ships carrying U.S. oil travel through it to reach Japan and other Asian markets.

U.S. crude is now heading to Asia via Panama because “Asian refiners are scrambling to get whatever barrels they can. So sending them through the Panama Canal is going to be the quickest way to get supplies”. A 60-day Jones Act waiver also lets foreign-flagged vessels move fuel between U.S. ports, increasing Panama traffic.

Banking with Billy: How to Price a Geopolitical Detour

When 20% of global oil can’t use its normal route, the world doesn’t stop buying oil. It pays more to move it. Here’s the tape: Pre-war, auction slots were $135K–$140K. In March-April they averaged $385K, with $1M+ peaks. That’s a 175% spike. But Vial says it’s “temporary” and tied to short-term demand. Translation: If Hormuz reopens in May, pricing normalizes. If it stays shut to August, $385K becomes the floor. The canal’s revenue just added ∼$250K per auctioned ship × 3-5 slots/day = $750K–$1.25M/day in extra take. Annualize: $270M–$450M. That’s free cash flow from war. LNG transits were 4/month pre-crisis. Now the canal will offer one additional slot. With Qatar cargoes risky and U.S. LNG priced $3/MMBtu below TTF, Asian buyers will pay the Panama toll. “It is likely that cargoes such as LNG will be diverted to the US, which will generate more demand for the canal”. Each VLGC or LNG carrier paying $400K+ in fees vs. $140K means the canal’s energy mix is repricing permanently. Long $GLNG, $LPG, $ET. Deputy administrator Espino de Marotta warned 40 daily boats “isn’t sustainable” given space. The canal has water now — 50-foot draft all year — but operational max is ∼ 38. When demand exceeds slots, auction prices blow out. That’s what happened in the 2023 drought, and it’s happening now with war. The difference: drought ends with rain. War ends when someone blinks. Until then, the canal is a toll booth on global inflation. Shippers eat the cost, or consumers do.

— If the U.S.-Iran blockade drags into Q3, analysts expect increasing passage of U.S. LNG through Panama to Asia. The canal says it can handle 38 ships/day and absorb additional LNG demand. More slots = more revenue, but also more congestion. Spot LNG to Japan/Korea will carry a “Panama premium.”

— A $24B Iraq-Turkey trade corridor, Saudi’s East-West Petroline at 7M bpd, and the China-Europe railway via the Middle Corridor are accelerating. “Hormuz remains indispensable for energy, but it is no longer treated as a default. That shift is permanent”. Panama wins short-term; overland routes win in 2028+.

• “Transit passage in straits used for international navigation is a right under international law and not a discretionary privilege that can be paid for or negotiated”. If Hormuz reopens under UNCLOS terms, Panama transit growth slows. If Iran keeps its “toll” or blockade, Panama stays bid.

Billy: The Panama Canal Authority isn’t forecasting peace. It’s forecasting reroutes.

Vásquez: “The canal is benefiting from the significantly reduced traffic through the strait of Hormuz. :War is revenue.

For shippers: Budget $385K for slots, not $140K. For oil traders: U.S.–Asia arb works even with $1M canal fees when Brent is $111. For investors: The canal just became an energy play. Every day Hormuz is 99% closed, Panama prints money.

The Authority says growth persists “until Middle East issues are settled.” Billy says: that’s not a timeline. That’s a trade.

Long Panama Canal revenue. Short “normal” shipping costs. And hedge it all with $USO — because until Hormuz is safe, the only sustainable route is the expensive one.

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