Underwriters spent the summer repricing the Strait of Hormuz. This week they stopped pricing part of it. Charterers’ liability cover, in its standard form, now carries a blanket exclusion on vessels associated with Saudi Arabia in any way. David Osler of Lloyd’s List, who reported the change, was clear that a Saudi nexus remains insurable: it simply falls outside the standard product and costs a great deal more. The Saudi government sent a delegation to London last week to talk to brokers about a state-backed guarantee scheme to bring that cost down, which is not the first attempt.
The scale of what sits behind it is now measurable. There have been around $2bn in war risk claims since the fighting began, across more than 70 claims, the second largest marine underwriting payout in more than a decade, behind only the container ship that brought down the Baltimore bridge in 2024. The IMO counts more than 72 attacks on ships since March. Hormuz war risk premiums run at forty to sixty times pre-crisis levels and currently reach 10% of hull value. On a VLCC worth around $140m that is roughly $14m of premium on a single voyage, a larger number than most demurrage exposures on the same fixture. Roughly $7 to $8 of the price of a barrel of crude is now war risk insurance.
An exclusion works differently from a premium. A rate can be budgeted, argued down, or shared between the parties. An exclusion asks a question about the ship and her counterparties, gets an answer, and stops there.
Wet Bulk
The freight market kept paying to stay outside the strait. TD3C, the 270,000 tonne run from the Middle East Gulf to China, rose from WS631.67 to WS677.22 across the week for a round trip equivalent of about $704,000 a day. TD34, which loads at a Gulf of Oman port outside the strait and discharges into the same market, sat at WS272.5, worth over $261,800 a day.
The Atlantic answered the same question with a record. Platts assessed the 270,000 tonne US Gulf to China run at $29.5m on the fourth, passing the previous record of $29.3m set on the fourth of March and finishing 21.6% higher on the week. ST Shipping booked the Helios on that route for a 13 to 16 October laycan at the same $29.5m, and Pertamina is reported to have taken the C. Progress from Sidi Kerir to Cilacap for $29.75m. The Baltic’s own TD22 assessment for the US Gulf run sits lower at about $28m, which is the usual distance between two assessors looking at different laycans. Brokers described a position list with very little on it for early to mid October loading out of the US Gulf.
Behind the rates, the geography: Saudi crude exports fell to about 3m barrels a day in August, the lowest in records going back to early 2017. The Red Sea port of Yanbu carried 4.3m barrels a day in June, 3.7m in July and about 2.25m in August as the Houthi blockade took hold, while Gulf coast exports recovered to around 800,000 barrels a day in July and fell back again. Riyadh now moves 1.9m barrels a day through the Egyptian pipeline to the Mediterranean, having already used the East-West line to divert about three quarters of its oil away from Hormuz. Each of those routes costs more and takes longer to reach Asia, and each one is why the cover was rewritten.
Transit itself has become intermittent. The ten day moving average through the strait fell to ten commodity ships a day on Sunday, the lowest since May, with two vessels passing on Saturday and six on Sunday, and no VLCC has exited since Wednesday. UKMTO counts 27 projectile strike incidents since the sixth of July. Yet on Tuesday forty tankers carrying about 18m barrels crossed in a single escorted day, close to 90% of the pre-war daily volume, with vessels advised to keep transponders off. A tanker chartered for the passage is reported at over $500,000 a day.
Gas has settled into a workaround that no longer looks temporary. Three cargoes loaded in Qatar and the UAE were transferred ship to ship outside the strait in recent weeks for delivery to India and Japan: GasLog Shanghai to GasLog Savannah off Oman, QatarEnergy’s Al Rekayyat to Tembek off the UAE east coast with the cargo reaching Dahej on the last day of August, and ADNOC’s Mraweh to LNG Enugu, now bound for Futtsu. Ship to ship transfer of LNG is unusual, and three in a matter of weeks is a practice rather than an incident. Asian spot LNG reached a five month high of $23.20 per million British thermal units, more than double pre-conflict levels. A Q-Flex in ballast turned back from an apparent Hormuz transit this week and returned to its anchorage off the UAE.
Charterer Lens
- Read the charterers’ liability wording before the next Gulf fixture. A vessel can be seaworthy, correctly flagged and clean on every sanctions screen and still sit outside the standard product because of an association.
- The strait is a spread and should be budgeted as one. Roughly $442,200 a day separates TD3C from TD34, so the transfer sequence at Sohar or Fujairah wants costing, with terminal slots understood, while there is still a choice to make rather than at the point of nomination.
- The premium has become large enough to change which cargoes clear. At 10% of hull value a $140m VLCC carries about $14m of war risk on one voyage, and roughly $7 to $8 of the barrel price is now insurance, so a trade that worked on last quarter’s cover assumption may not survive the recalculation.
Dry Bulk
Dry bulk had the better week and owed almost none of it to the war. The Baltic Dry Index closed Friday at 3,628 points against 3,186 the week before, its highest level since October 2021, and slipped 53 points to 3,575 on Monday. The capesize 182 five route average reached a fresh high for the year above $58,000 a day. C5, the West Australia to Qingdao run, moved from the mid fifteens to the high eighteens, and C3 out of Tubarao went from the high thirty eights to above forty one. Panamax pushed higher through the week on active transatlantic business, and 63,000 dwt supramaxes were reported around $19,000 plus a $900,000 ballast bonus from East Coast South America to the Far East. The index is up 77% this year.
The causes are ordinary supply and demand. Typhoons have battered Pacific port operations, Australian exporters are lifting volumes as maintenance winds down, and transshipment upgrades are raising ore flows out of Guinea’s Simandou. Thurlestone Shipping called it a perfect storm of tightening vessel supply and demand firing in both basins at once. BRS warned that the typhoon season usually becomes more disruptive from here, which would tighten effective tonnage further. Iron ore futures were at $98.75 a tonne in Singapore midweek.
Owners are taking the money on both sides of the same hull. Major Greek owners have been selling capesizes into the strength in a run of sale and purchase deals, while South Asian recycling prices are surging on a scarcity of tonnage, with cash buyer Wirana reporting that vessel scarcity now matters as much to the price as the steel itself and that high standard yards are bidding aggressively for what little is available. Both trades remove ships from the trading fleet.
Grain is moving on a redrawn map with less capacity on it. Russian wheat loadings from the four deep sea Black Sea terminals fell about 60% in the five weeks to 28 August against the same period last year, with Novorossiysk still the principal outlet on roughly half its usual volume, Taman down sharply and no qualifying wheat loading recorded at Kavkaz. Rail booking requests for Russia’s Baltic terminals reached 5m tonnes by 18 August, approaching the 6m tonnes requested for Novorossiysk and Tuapse, but those Baltic terminals handle an estimated 7m tonnes a year in total and the longer rail leg raises the delivered cost. Ukraine’s exports were down almost 70% year on year in August, with about seventy vessels waiting at Sulina and only three or four transiting a day towards the Danube ports. In Canada, the Port of Churchill loaded its first grain in six years, roughly 30,000 tonnes of Saskatchewan durum aboard the Federal Sprey for the Mediterranean, the first of three cargoes this season.
Charterer Lens
- Capesize strength rests on typhoon disruption, Australian export timing and the Simandou ramp, so it should be positioned on that logic and will not necessarily unwind when the Middle East settles.
- The two sided sale and purchase market is a supply signal worth reading. Greek owners selling capesizes and recyclers bidding the same vintages up are both taking tonnage out of the trading fleet, which supports the market into next quarter even if the current demand spike fades.
Regulatory and Trade
Panama eased one constraint this week and tightened another. The canal scrapped the reduction in maximum Neopanamax draft to 47.5 feet that had been set for the first of October, holding at 48 feet tropical fresh water after a review of Gatun Lake and the weather. In the same stretch it cut Neopanamax capacity to nine daily slots from the third of September and set Panamax at twenty five slots, falling to twenty three on the fifteenth. Administrator Ricaurte Vasquez expects the developing El Nino to hold rainfall down for about eight months. Traffic that ran near thirty four transits a day before the war has been pushed to forty or forty one, and a ship arriving without a reservation waits about eight and a half days. Draft stopped being the limit that binds, and the slot count took its place.
At the IMO, the Net Zero Framework survived another round. Thirty eight countries backed carbon pricing during ISWG-GHG 22 against seventeen opposed, mostly oil producing states, with nearly 1,200 delegates attending. The mechanism is estimated to raise $10bn to $15bn a year. The technical working group meets from 23 to 27 November and MEPC 85 follows from 30 November to 3 December, which leaves the pricing question to be settled in a fortnight of meetings at the end of the year.
Charterer Lens
- Panama now needs planning around the slot. Draft holds at 48 feet, while nine Neopanamax slots a day and a Panamax count going to twenty three on the fifteenth are now the binding constraint. An unbooked arrival is an eight and a half day exposure.
What The Cover Reads
Most of this war has put geographic questions in front of a chartering desk. Which strait, which detour, how many days, and what the extra distance did to the delivered cost. The documents that governed the voyage still described routes and dates, and the market moved inside them.
The exclusion changes the unit of analysis. A blanket carve out for vessels associated with Saudi Arabia in any way does not ask where a ship is going. It asks who she belongs to, who chartered her, and who owns the cargo, and it withdraws the standard product on the answer. The same logic ran through the rest of the week. EU boarding parties are verifying nationality. Norway arrested a ship for an award against her owner, with nothing on board relevant to the claim. Bahri reflagged eleven VLCCs, which changes no ship’s capability and every ship’s paperwork.
That is a harder thing to manage than a rate, because it is not continuous. A premium at 10% of hull value is expensive and can be planned around. An exclusion has two states. The forward positions being taken this week assume the current answers hold: a $200m VLCC resale, a record $660bn orderbook, Greek owners selling capesizes into the strongest freight market since 2021. Assets are long-lived and the tests being applied to them are being rewritten inside a single week. The desks that come through this in good order will be the ones treating counterparty identity as a term of the fixture, priced and warranted at the front, with the same seriousness they give to laycan and demurrage.
Until next week,
The Voyager Portal Team