Panama Chaos Grows as US Diesel Shippers Bypass Canal


The worsening bottlenecks at the drought-stricken Panama Canal are pushing at least one US diesel shipper to sail around the tip of South America en route to Chile for the first time since 2020.

The vessel Green Sky is hauling ultra-low sulfur diesel loaded at Citgo Petroleum Corp.’s Clifton Ridge terminal in Louisiana to Valparaiso, Chile, according to Bloomberg vessel tracking and Kpler. Rather than traversing through Panama, the vessel is headed down the eastern coast of South America toward the Strait of Magellan, the first such voyage for a cargo of Gulf Coast diesel since 2020, according to Kpler.

The journey is expected to take about a week longer than it would via the canal at a time when freight rates are near record highs.

The cost to haul fuel from the US Gulf Coast to Chile surged to a record $4.6 million per shipment in late November, according to data from Argus Media. That’s more than twice what it cost at the beginning of the year. Freight rates have surged as a historic drought left water levels in the Panama Canal so low that authorities have curtailed traffic, creating huge, prolonged delays.

While Green Sky’s journey marks the first US Gulf Coast diesel cargo to go around South America in three years, refiners in Texas and Louisiana are known to divert cargoes across the Atlantic to European markets when the Panama route is jammed. In the past, such delays tended to be related to maintenance work, and, as such, were mostly short-lived. This time, however, there is little relief in sight with shipping restrictions set to tighten in the months ahead.

Source: Bloomberg


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