Crude tanker rates in unchartered territory; VLCC index tops $420K
- Baltic Exchange’s TD3C MEG-China index assessed at $423,736 per day on Monday; TD2 MEG-Singapore index at $257,986 per day
- Global average VLCC index reaches $280,941 per day, highest level since at least 2008
- MEG-Med suezmax index more than tripled over weekend to $267,579 per day; global average suezmax index rises 23% vs Friday, to $158,531 per day
The crude tanker market was already historically strong before the US and Israel attacked Iran. After three days of air strikes, spot rates on some routes have reached unprecedented highs, and rates globally are on the rise
BALTIC Exchange indexes for very large crude carriers loading in the Middle East Gulf reached record highs on Monday. Iranian attacks on tankers and insurers’ withdrawal of war risk cover have effectively closed the Strait of Hormuz.
Spot rate strength in the MEG has cascaded through global freight prices, leading to a surge in rates for VLCCs and other tanker segments worldwide.
The Baltic Exchange’s MEG-China TD3C index went parabolic after the outbreak of war, coming in at a record $423,736 per day on Monday, up 94% from Friday.
As with extreme spikes in the past, there are questions about how “real” the index number is. Indexes can be moved by fixtures that ultimately fail.
“Little activity has been concluded, at last above the surface,” said Clarksons.
As of late Monday, Tankers International had yet to post any new VLCC fixture data since Friday.
According to Braemar, “With rumours rife — both within the VLCC and suezmax market of possible rates done out of the MEG — we have not seen rates publicised or confirmed to the wider market today.”
BRS said, “While there have been rumours of w450-plus on subs MEG/East, these are yet to be confirmed and at this point is it impossible to call the market rate as the market is largely on hold until further clarity can be obtained.”
The Baltic Exchange released a circular on Monday, stating that it was consulting with its panellists and advisory councils as “a routine part of how we respond to periods of heightened market uncertainty”.
“Should any formal methodology changes become necessary, they will be communicated transparently and in accordance with our published procedures,” it said.
The TD3C index, and indexes in general, have much wider market implications than they used to, said Frontline chief executive Lars Barstad in a conference call on Friday.
There is now an “enormous” amount of “pricing exposure” to a small number of fixtures due to the spread of index-linked floating contracts, said Barstad.
“This becomes a problem if everybody is pricing their freight off an index that runs out of control,” he added, three days before the TD3C did just that.
The TD2 index — which measures MEG-Singapore VLCC rates — usually follows the TD3C closely. On Monday, the TD2 shot up as well, but nowhere near as high as the TD3C. It increased by 16% versus Friday to $257,986 per day. This is $165,760 per day below the price for a similar voyage under the TD3C.
Outside of the directly war-impacted area, the Baltic’s West Africa-China VLCC index jumped 40% over the weekend to $264,523 per day, and the US Gulf-China index rose 23% to $154,565 per day.
The outsized TD3C print pulled up the Baltic’s global average VLCC index to $280,941 per day. This is its highest level since at least 2008, topping the previous high of $264,072 per day on March 16, 2020, at the onset of the Covid-era floating storage boom.
MEG rate outperformance, driven by the war, was seen in the suezmax indexes as well.
The Baltic’s MEG-Mediterranean index more than tripled over the weekend, to $267,579 per day on Monday.
The Black Sea-Mediterranean suezmax index rose 24% versus Friday, to $185,766 per day, and the West Africa-Europe suezmax index increased 21% to $131,295 per day. The global average suezmax index (which does not incorporate the MEG route) rose 23% to $158,531 per day.
