Clean tanker freight reached a record this week. TC1 (75,000 tonnes Middle East Gulf to Japan, LR2) stood at WS1075 on Thursday 22 October, a round-trip earning of $313,200 a day, and TradeWinds reported the clean market at a new high as LR2 spot rates crossed $300,000 a day. The likely cause sits ashore: US refineries are running hard, and diesel is still short.
Crude went the other way. The US Gulf to China VLCC voyage came well off its early-October record, and Asian buyers have been walking away from US barrels while freight stays high. In dry bulk, capesize earnings recovered on weather.
In London, the Mercuria v Baltic Exchange trial is listed to open today, with the benchmark behind many freight contracts under challenge. A US port-fee date follows on 9 November.
Wet Bulk
The anchor is TC1, at WS1075 and $313,200 a day on Thursday 22 October, in the Baltic’s weekly report of 23 October. The likely cause is ashore. Oil & Gas Journal reports that US summer refinery utilisation was the highest since 1998, yet total output was only the highest since 2019, because US refining capacity is down 4% since 2019. Xclusiv’s weekly product tanker review adds that earnings rose while global refined-product trade contracted. Fewer cargoes are chasing the ships, and earnings rose regardless.
Washington has started to use emergency tools. The Department of Energy is loaning up to 315,000 barrels of ultra-low sulphur diesel, about a third of the Northeast reserve’s 1m barrels, from Boston, South Portland and New Haven. Bids are due on Tuesday 27 October and releases are to finish by 13 November, with borrowers returning the volume plus a premium before the 2027-28 season. It is a loan. The European Commission says there is currently no physical shortage in Europe, although supplies remain tight.
Russian diesel is the other emergency source. Two cargoes are at sea for the US, the first in more than three years. The Agioi Fanendes loaded about 40,000 tonnes at Primorsk on 22 October and sailed on 23 October, with arrival expected around 7 November and the discharge port unconfirmed. The PVT Azura left St Petersburg on 15 October and is signalling Norfolk for 2 November. The deal announced on 9 October covers 300,000 tonnes immediately and 500,000 tonnes in November. A Primorsk cargo into the US east coast is a longer voyage than the Gulf or Caribbean cargo it replaces, so on our reading the supply fix adds ship-days.
Crude freight eased from its peak. TD22 (US Gulf to China) stood at $58.22m a voyage on Thursday 22 October, against almost $80m earlier in the month, a record on Bloomberg’s figures. Asian buyers cut November orders for US crude to a level traders put at roughly 24m to 26m barrels, about half the previous month, because the freight added to the delivered price. Kpler says falling freight may eventually bring unsold Brazilian cargoes back into demand.
Dry Bulk
The Baltic’s BCI 182 5TC, the section’s anchor, stood at $34,380 a day on Thursday 22 October, against $29,464 on Thursday 15 October. The earlier level was the first average below $30,000 since April. The recovery has a proximate cause in a North Pacific super-typhoon, which ties up tonnage that would otherwise be ballasting towards load ports.
Underneath, Chinese demand is soft. Banchero Costa has China’s iron ore imports growing 11.3% year on year in the first quarter, 1.1% in the second and 0.5% in the third. Third-quarter volume growth is close to flat, so cover bought at this level pays partly for the weather.
The lasting part of the market sits on the Brazilian and West African side. Fearnleys expects Simandou volumes to add tonne-miles for newcastlemaxes and capesizes, and Himalaya Shipping’s chief executive calls the new long-haul West African trade a structural change. ABG notes that unchanged BHP and Rio Tinto guidance limits how far the Australian short haul can fall away. In the Baltic’s report of 23 October, C5 (West Australia to Qingdao) reached $14.15 to $14.25 a tonne midweek, while C3 (Brazil and West Africa to China) held between $34.00 and $34.50.
Geared sizes carry a separate cargo line. Braemar says falling Chinese domestic steel demand is pushing volume into export, which is supramax and handysize cargo. The Baltic’s report of 23 October had the ultramax and supramax index above the previous week and handysize firming.
Macro and Regulatory
The Mercuria v Baltic Exchange trial is listed to open in the London High Court today, Monday 26 October. Mercuria filed in April over TD3C, arguing that the Baltic kept publishing the route after the Strait of Hormuz was effectively closed. No rate anchors this section. The question before the court is whether a number that contracts settle on was validly assessed.
Mercuria has dropped its damages claim, which it had estimated in the hundreds of millions of dollars. It now seeks a declaration that assessments published since early March were invalid, and argues the Baltic should have suspended TD3C or used comparable routes still operating. Mr Justice Butcher ordered an expedited trial, citing wider market concern about the benchmarking.
The Baltic’s defence is that short stretches of thin activity on a route are not unusual, that ships kept transiting and that experienced brokers provide the assessments. It also says its liability to users is capped at the subscription or membership fee, or £5,000, and its counsel argues that benchmarking would be unworkable if exchanges were liable to users. Its lawyers warn that a ruling for Mercuria could force hundreds of trades to be unwound. The trial’s length has been reported inconsistently, and no outcome should be assumed.
A declaration of invalidity could reach parties that settled against those assessments, well beyond the two in court, which is the exposure the Baltic’s lawyers describe.
The US port-fee date follows. The US Trade Representative has proposed extending the Section 301 suspension from 10 November 2026 to 9 January 2027, with comments due on 30 October. The fees apply to Chinese-owned, Chinese-operated and Chinese-built vessels. The proposal is not final, and the current suspension lapses on 9 November.
Term Contracts Need a Fallback for the Benchmark
In one week the clean tanker market set a record, crude freight eased from its own, and capesize earnings recovered on a storm. Each sector was priced on where ships were positioned and how far cargoes had to travel. Distillate scarcity lengthened clean voyages, Asian buyers shelved crude they could not afford to ship, and the typhoon removed capesize tonnage from the ballast leg.
That leaves fourth-quarter term business with two checks before signature. Freight cover can be matched to the cause of the move, with short cover where the cause is weather or a spot unwind and longer cover where it is structural, as in clean tankers. The freight settlement clause can then be read for its benchmark, a fallback if the assessment is challenged, and the treatment of trades already settled.
Until next week,
The Voyager Portal Team