Panama Canal drought forces carriers to cut loads, reroute via Cape

The rerouting added about 10 to 15 days to voyage times.

The El Niño-driven drought at the Panama Canal is forcing carriers serving Pacific demand centres to cut cargo loads, compete for transit slots, or reroute through the Cape of Good Hope, according to Wood Mackenzie’s VesselTracker data.

Rerouting through the Cape adds about 10 to 15 days to voyage times, increasing tonne-mile demand, tightening vessel availability, and raising freight costs.

The canal links US Gulf Coast export terminals with Pacific demand centres. Rainfall deficits have pushed water levels below 2025 levels and the five-year average, forcing authorities to impose draft restrictions that reduce effective vessel carrying capacity.

Daily transits fell from about 325 in early May to as low as 271 in late May before recovering to about 308 through June, Wood Mackenzie said.

Liquefied natural gas (LNG), liquefied petroleum gas (LPG), and refined products have the most direct exposure to the canal constraints.

LNG is the most sensitive amongst these commodities because of its narrow arbitrage margins, followed by LPG and product flows.

Asian LNG markets are also dealing with the effects of the Strait of Hormuz closure, which has removed about 20% of global LNG supply, according to Wood Mackenzie.

“Monitoring El Niño-driven disruptions to canal operations and Gulf Coast logistics will be critical for staying ahead of further commodity flow dislocations through the third and fourth quarters of 2026,” said Ian Solis, Data Associate at Wood Mackenzie.

Solis said the Pacific is facing energy crunches and that disruptions could worsen tight energy markets.