PCA counts trade war costs

20 September 2018, Week 37, Issue 536

The Panama Canal Authority’s (PCA) fears that fewer ships between China and the US will ply the Panama Canal if trade tensions between the two countries escalate look set to be realised after Beijing slapped a 10% tariff on imports of US LNG on September 18.

The PCA chief, Jorge Quijano, noted late last week that most cargoes passing through the canal are travelling to or from the US and China and that “tensions between them could ultimately have an impact on the amount of loadings using the waterway in any direction”.

He added that the canal – which cuts through Panama, creating a shipping route between the Atlantic and Pacific oceans – could benefit from an uptick in LNG shipments from the US to countries such as Japan, South Korea or Mexico. This would make up for a loss in US-China trade, he said.

“If China eventually imports less LNG from the US, we will see more imports from Japan, Korea and Mexico, which would compensate,” Quijano said. “The canal has many ways to ease any impact.”

Almost 90% of LNG shipments passing through the Panama Canal are from the US, according to PCA figures.

Still, this week’s news that China had acted on threats to retaliate to Washington’s imposition of tariffs on a string of Chinese goods will inevitably do some damage to trade via the canal.

China represents the biggest potential market for the four new US terminals and one extension set to come on stream over the next two years. These include export projects being developed by Cheniere Energy, Sempra and Kinder Morgan that have been predicted to account for 60% of all new supplies hitting the global market by 2023.

The Panama Canal was expanded in a work programme that concluded in 2016, allowing larger LNG carriers (LNGCs) to transit the waterway. In June, the PCA said it would lift restrictions, which had been in place on LNGCs, as of October 1. This allowed vessels to move through the locks at night, similar to other transports, while also letting two LNGCs enter the canal going in different directions. 

Speaking at the time, a PCA official said these changes would “provide more flexibility and time during the day to transit LNG vessels, and result in an opportunity for LNG shippers to compete for a second booking slot”. As of June, 372 LNG transits had been completed and the PCA said it expected the rate to grow by more than 50% in the 2018 financial year from 2017.

Edited by

Ed Reed

Editor

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