Mercuria Challenges Baltic Exchange Over Hormuz Tanker Rate

Mercuria Energy Group is asking a London court to rule that the Baltic Exchange breached its obligations over TD3C, a tanker benchmark supporting billions of dollars in derivatives. At a Monday hearing, the commodity trader argued the exchange should have suspended the route after the conflict involving the United States, Israel and Iran strangled oil exports through the Strait of Hormuz.

The dispute centers on the cost of hiring a supertanker from Saudi Arabia’s Ras Tanura, inside the Persian Gulf, to China. Before the war, TD3C served as the global reference for oil-tanker earnings, underpinned contracts between owners and customers, and provided a comparison for other routes.

The war threw global commodity markets into turmoil by slashing oil shipments after Tehran declared the Strait of Hormuz closed in the conflict’s early days. The Baltic Exchange, founded in 1774, says it continued to price freight risk and consulted consistently with the market. In recent months, most trackers have seen shipments recover close to pre-war levels.

What does the case change?

For tanker owners and their customers, the issue is whether a disrupted route should keep setting contractual and derivative prices. Suspension could open the benchmark to a rival, while continued publication gave the market a reference despite exceptional risk and assessments that some contributors said could not be made.

Mercuria’s lawyers say the evidence shows the Baltic Exchange did not suspend TD3C because it wanted to keep the market for certain freight agreements active and avoid replacement by a rival. The exchange denies that competitive pressure drove its decision, says passage through Hormuz remained possible, and told the court the continuation was not taken lightly.

Why did the Baltic keep TD3C published?

On an April 14 call, a senior freight assessor described the prospect of replacement by a competitor as “the overriding fear of what we do here,” according to a document Mercuria submitted before the Monday hearing. The statement placed the exchange’s alleged conflict between setting a defensible rate and protecting its market position at the center of the trial.

The Baltic Exchange called the case “instability and opportunism,” while Chief Executive Officer Mark Jackson said the trader’s claim lacked merit. Jackson said the exchange had met every statutory, contractual and regulatory obligation in producing TD3C.

Mercuria also cited tanker-market participants, including Baltic staff, who questioned continued publication of a route rate. One freight assessor did not enter a value into Mercuria’s internal system for his personal forecast of the index. When he later submitted one, he said forming an opinion on the route made no sense.

A contributing broker said on April 2 that producing an assessment was nonsensical because disruption through Hormuz had reached unprecedented levels, according to another transcript submitted by Mercuria.

How do the parties assign responsibility?

Mercuria initially estimated losses in the hundreds of millions of US dollars because the Baltic Exchange continued publishing the index. It removed that estimate from its most recent claim, but the exchange’s argument centers on the trader’s own exposure.

Baltic Exchange lawyers said Mercuria carries huge index-linked exposure that it failed to manage. They said sharp benchmark increases caught the trader out and concluded that Mercuria now wanted to unseat TD3C by reaching for any available argument.

The two sides therefore assign responsibility in opposite terms. Mercuria says the exchange had a duty to suspend a benchmark tied to a severely disrupted route; the exchange attributes the losses to Mercuria’s failure to manage its exposure.

What could a ruling change?

Mercuria’s spokesperson did not immediately respond to an email for comment. The court must decide whether continued publication satisfied the Baltic’s obligations during the Hormuz disruption or whether TD3C should have been suspended.

With Hormuz shipments now near pre-war levels, a suspension ruling could accelerate a rival challenge to TD3C. Continued publication would keep global tanker pricing tied to the Ras Tanura-to-China rate, a reference already embedded in owner contracts and derivatives.