With the Strait of Hormuz blocked by war and fuel and cargo prices soaring, the Panama Canal is doing more business than usual.
Panama Canal Deputy Administrator Ilya Espino de Marotta said the canal, which connects the Atlantic and Pacific Oceans at the narrow point between North and South America, has seen a “slight increase” in the number of ships.
“What we have recently seen is a slight increase in the number of connections,” Espino de Marotta explained in a statement to CNN. “Keep in mind that at a time when fuel prices are rising, the Panama Canal is arguably a more attractive route due to its shorter distance.”
The Panama Canal is approximately 80 miles long, less than half the length of Egypt’s 190-mile Suez Canal.
Espino de Marotta added that this year, thanks to an unusually humid dry season, “we were able to accommodate 40 to 41 flights a day instead of the usual 36.”
The addition of transit is particularly noteworthy given the extreme drought Panama experienced during the 2023 and 2024 El Niño weather events.
The Panama Canal is essentially a water elevator, moving ships up and down through the locks by controlling the water level at each station. But during El Niño, drought caused water levels in Lake Gatun, which supplies water to the canal, to historic lows, reducing traffic from 36 to 24 flights per day.
“41 or 42 trips is not sustainable in the long term,” Espino de Marotta said. “But we can consistently maintain about 38 trips, so we support the needs of the industry.”
When asked about where the canal’s new customers were coming from, the deputy administrator said he did not have exact data.
“Clearly they’re using us as an alternative route to the one they were using before,” she said.
Although the Middle East’s energy market is casually synonymous with oil, liquefied natural gas (LNG) typically accounts for the majority of the fuel that passes through the Strait of Hormuz. According to the U.S. Energy Information Administration, roughly one-fifth of the planet’s LNG trade goes through waterways.
Freight rates for U.S. LNG have quadrupled as war squeezes the Strait, making the Asian market a new center of gravity for the fuel as Asian nations vie for new energy sources. Eighty percent of Asia’s fuel passes through the strait, and at least four U.S. LNG cargoes have headed from their original destination in Europe to Asia since the war began.
As for the possibility of buyers from Asia using the Panama Canal to transport LNG, Espino de Marotta said the canal could indeed see some of that business.
“But we must also remember that Russia is currently in a situation with Europe,” she said, referring to the war in Ukraine. “Therefore, it is more profitable for the United States to send LNG from the U.S. East Coast to Europe.”
Still, as the war rages on and traffic in the Strait of Hormuz remains severely restricted, administrators said they are confident the Panama Canal is ready to accept more of the world’s fuel.
CNN’s Stephanie Yang contributed to this report.
