The Panama Canal is rationing ships again, and US propane has nowhere to go

The Panama Canal Authority’s advisories A-28-2026 and A-29-2026, issued August 20, 2026, cut daily transits from 36 to 34 on September 3 and to 32 from September 15: the Neopanamax locks that take the largest ships go from ten daily slots to nine, and the older Panamax locks from 26 to 25 and then 23. Rainfall across the canal watershed has run about 34% below normal and inflows 44% below for the hydrological year. The maximum Neopanamax draft fell to 48 feet on September 2, with a further cut to 47.5 feet postponed to October 1, 2026.

On August 25, 2026 South Korea’s SK Gas paid a record US$5.3 million at auction for a priority northbound slot for the gas carrier G. Spirit, against a rival bid of $4.6 million; average auction prices were about $55,000 earlier in 2026 and passed $1 million in August. From September 3 the auction is split into vessel groups, with LNG and LPG carriers forming the first.

The canal now carries roughly 5% of world seaborne trade, double its 2024 share, because Gulf oil and gas cargoes blocked at the Strait of Hormuz have been replaced by US Gulf exports to Asia: US crude exports rose 46% year over year in the second quarter of 2026.

Kpler models Gatún Lake bottoming in April 2027 under a 20-40% rainfall deficit, and notes that new US Gulf LPG export capacity arrives into that trough — Enterprise’s Houston terminal adds 300,000 barrels a day in the first quarter of 2027 and Targa’s Galena Park expansion 130,000 barrels a day in the third quarter — while NOAA puts a greater than 90% probability on a very strong El Niño for the 2026-27 winter. Clarksons has raised its 2026 very-large-gas-carrier rate forecast to $81,250 a day.

Mont Belvieu propane averaged $0.687 a gallon in the week of August 28, 2026 (EIA), about $28.85 a barrel against WTI crude at $84.62 — roughly a third of the crude price.

Opportunity

The obvious expression, the gas-carrier owners, has already moved: Dorian LPG closed at $53.58 on September 8, 2026, up 84% from $29.15 on March 13, and BW LPG at $23.86, up 76% from $13.59, both within 4% of their six-month highs (Yahoo Finance daily closes). The less-examined leg is the price gap the bottleneck creates. Every lost canal slot or Cape-of-Good-Hope voyage adds days and dollars between Mont Belvieu and Asia, and that cost comes out of the US price, the Asian price, or both.

The 2023-24 canal drought is the precedent: US propane fell to a deep discount against crude while Asian delivered prices held, and US inventories built. The same mechanism now meets 430,000 barrels a day of new export capacity arriving into a canal that cannot pass it, and a Hormuz closure that has already diverted Gulf cargoes onto the same route.

Hypothesis: the beneficiaries are the domestic buyers of cheap Mont Belvieu propane — US propane retailers heading into a heating season with a wide wholesale-to-retail spread, and propane-fed petrochemical assets such as propane dehydrogenation units — while the losers are Asian propane importers and PDH operators paying the full delivered premium, and the netbacks of US producers whose price is set at Mont Belvieu. Export-terminal owners charging fixed fees are hedged either way. That is an inference from one precedent, not a modelled result.

How it could play out

Fewer transits push more gas carriers around the Cape and keep auction slots at seven figures, so VLGC rates stay high — the part already in the shipping stocks. The US-to-Asia propane spread widens to cover the freight, Mont Belvieu propane cheapens against crude and US inventories build through the winter. Domestic propane distributors and propane-fed crackers and PDH plants see wider margins, while Asian PDH margins compress.

The dated points are the September 15, 2026 transit cut, the October 1, 2026 draft cut, the first-quarter 2027 Enterprise Houston ramp and the April 2027 lake trough; a wet Central American winter unwinds all of it.

Questions worth asking

• Where is the Mont Belvieu-to-Far East propane spread now versus the 2023-24 drought, and how much of it is freight versus canal auction cost? This is the question that decides the idea.
• Do US propane retailers’ reported margins actually widen when wholesale propane falls — what happened to UGI’s and Suburban Propane’s unit margins in the 2023-24 drought winter?
• Are US propane stocks building faster than seasonal norms in the EIA weekly data, and at what inventory level does the Mont Belvieu price get capped outright?
• Which Asian propane dehydrogenation operators in Korea and China are most margin-exposed, and does cheap US propane instead pull their demand toward US cargoes routed via the Cape?
• Does Enterprise’s first-quarter 2027 Houston export ramp get delayed or re-contracted if canal capacity is not there for it?

Where to look

• Dorian LPG (NYSE: LPG) and BW LPG (NYSE: BWLP) — the gas-carrier owners that already reflect the freight leg, useful as a gauge of what is priced
• UGI Corp (NYSE: UGI) — owns AmeriGas, the largest US propane retailer, whose margin moves with wholesale propane
• Suburban Propane Partners (NYSE: SPH) — a pure-play US propane distributor, 15% below its March 2026 high
• Enterprise Products Partners (NYSE: EPD) — owns both the Houston export ramp and propane dehydrogenation units, exposed on both sides of the spread
• Targa Resources (NYSE: TRGP) — Galena Park LPG export expansion due in the third quarter of 2027
• Asian petrochemical PDH operators — the losers on the delivered side

Thesis check

The facts are primary and dated — transit cuts, a record auction, a greater-than-90% forecast of a very strong El Niño, and 430,000 barrels a day of new US export capacity arriving into the lake’s trough — and the mechanism already ran once in 2023-24. The weak link is that the Mont Belvieu discount may be absorbed by exporters and traders rather than passed through to distributors like UGI and Suburban Propane, whose margins depend on weather and regulation as much as on wholesale price; and if Central American rainfall recovers by early 2027, the canal restrictions unwind before the Enterprise ramp and the spread never opens.

Sources

The Rio Times, Aug 31 2026 · Kpler, Sep 2026 · Latin Times, Sep 5 2026 · Forbes España, Sep 2026 · Al Jazeera, Sep 3 2026 · Marine Insight, Aug 2026 · Splash247 on Clarksons VLGC forecast, 2026 · EIA spot prices (weekly), data to Aug 28 2026