Record-high Panama Canal fees and congestion are forcing liquefied petroleum gas (LPG) exporters, including Chevron Corp., to change their shipping strategies from the US Gulf Coast to Asia. Typically, the trade relies on large Neopanamax vessels for direct transit. However, due to climate-induced draft adjustments by the Panama Canal Authority (ACP), intense bidding wars for transit slots, and the lingering effects of the Iran war on global trade routes, transit expenses have drastically increased. Auction bids for last-minute slots for Neopanamax vessels have frequently surpassed the multi-million-dollar mark, with a recent record reaching $5.3 million paid by South Korea-based SK Gas for a September 1 transit.
In response, operators are adopting a "shuttle concept." This involves using narrower Panamax tankers, which face less severe toll increases and transit a separate set of locks, to cross the canal. Once on the Pacific side, these Panamax vessels transfer their LPG cargo to larger Neopanamax ships, like Chevron's chartered Fritzi N and Pacific Yantai off Panama's Pacific coast. The Neopanamax vessels then transport the fuel, used as cooking gas and in manufacturing, across the Pacific to Asian markets. This ship-to-ship transfer strategy aims to mitigate the heavy toll and priority fees associated with sending Very Large Gas Carriers (VLGCs) directly through the canal.
The Panama Canal Authority's restrictions on daily transit slots, due to drought conditions caused by the intensifying El Niño weather pattern lowering water levels, have further exacerbated the issue. While a majority of vessels use a reservation system, the demand for urgent transit has driven auction prices significantly higher than the pre-February median of around $55,000. Around 60% of US LPG exports have gone to Asia so far this year, up from 55% in 2025, making the efficiency of this route critical for exporters. This new operational playbook introduces new dynamics and complexities, including increased coordination and potential operational risks, compared to traditional direct transit.
