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On April 30 Mercuria issued a claim in the High Court in London against the Baltic Exchange, an institution founded in 1744 and now owned by Singapore Exchange Ltd. The subject is TD3C, the assessment for a cargo of 270,000 tonnes of crude from Ras Tanura to Ningbo, the number Frontline’s chief executive has called the Dow Jones of the freight markets and that a multibillion-dollar derivatives market settles against. Mercuria’s pleaded case is that the Baltic breached “its aforementioned contractual and/or statutory duties” by continuing to publish that assessment after the effective closure of the Strait of Hormuz, and its filing puts the position in one sentence: “The result has been ongoing extreme volatility in the pricing of TD3C, which no longer accurately or reliably represents the underlying market it is intended to measure”. The Baltic answered within days that it “has met and continues to meet all its statutory, contractual and regulatory obligations in the production of the TD3C benchmark”, called the claim without merit and said it would defend it to the fullest extent. On May 22, Mr Justice Christopher Butcher expedited the case and fixed trial for October 26. What makes this worth a working broker’s attention is not the money. Mercuria’s counsel told the court in terms that his client is “not here to extract money from the exchange” and that “a declaration is enough for us commercially”. The argument is about whether a number produced by professional judgement, on a voyage that is barely being performed, can carry the settlement weight the market has hung on it. And underneath that sits the question nobody in this trade has had to ask before, because until this year the answer never mattered. If the number is wrong, who is actually liable for it. The Baltic has already given a court its answer to that, and it is a great deal smaller than anyone settling against this index has assumed.
📋 In This Issue:
⚖️ The Story:
What Mercuria actually pleaded and what the Baltic actually answered, the TD3C route definition in the Baltic’s own words and why it matters, what the assessment has been printing and what the strait has been carrying, the Baltic’s own on-record explanation of how panellists are pricing a voyage nobody is fixing, the consultation the market voted down, the back-up plan the Baltic drafted anyway and the one number in the case that decides whether anybody can be made whole
📊 By The Numbers:
WS677.22 and just under $704,000 a day, the 45.55 point move in six days, the 10 commodity vessels a day through the strait, the $55,038,000 a charterer has withheld and the liability figure both sides are arguing about
🌍 Why It Matters:
What it changes for the chartering desk, the S&P broker, the freight derivatives book and the general counsel
👀 What To Watch:
October 26, the daily assessment between now and then, the September 28 vote in Oslo and the falsifier that would break this brief
🚨 Gosships Signal:
The market did not build a benchmark. It built a habit, and it never read the terms
