The Baltic Exchange has received two whistleblowing claims of attempted manipulation of TD3C, the world's benchmark tanker rate, since the start of the war in Iran, according to documents made public in a major legal battle with trading house Mercuria Energy Group. TD3C is the most important benchmark for the cost of chartering oil tankers, and billions of dollars of derivatives and other contracts depend on it.
In the London case, Mercuria argues the Baltic should have suspended the TD3C rate from Saudi Arabia to China after the war broke out. While Mercuria has questioned whether the index reflects reality, it has not alleged manipulation. One claim targeted Mercuria itself, alongside an unidentified company. The Baltic's investigation did not establish that the benchmark had been manipulated, according to its written opening arguments. A second claim, against another unnamed company, is still under investigation. Mercuria "strongly and categorically rejects any allegation of wrongdoing," its lawyers said, calling the allegations irrelevant to the trial.
Prices published by the Baltic Exchange are based on assessments from shipbroker panels bound by a code of conduct. However, since the Iran war, it has become much harder to verify which ships are hired to carry oil through the Strait of Hormuz and at what price. Shipments plummeted and those that occurred were largely secretive, leaving brokers with very limited information. Bloomberg has reported that WhatsApp messages from shipping tycoon Ga-Hyun Chung's Sinokor Group have become a main driver of the price. Middle East to China tanker earnings surged from $218,000 a day before the war to $1.35 million on Thursday.
Mercuria held large short positions in TD3C-linked derivatives before the war, accounting for between a quarter and a half of open interest, according to filings. After the US and Israel attacked Iran on Feb. 28, transit through Hormuz became nearly impossible, and soaring TD3C prices caused losses on those derivatives while its tankers could not take advantage of higher rates.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing