The dispute centers on the TD3C benchmark, a widely used measure of the cost of transporting crude oil from Saudi Arabia’s Ras Tanura terminal to China aboard a very large crude carrier. The rate influences tanker charter agreements and supports a derivatives market worth billions of dollars.
Mercuria argues that the Baltic Exchange should have suspended the benchmark when the conflict between the United States, Israel and Iran sharply restricted oil shipments through the strategic waterway. The exchange rejects the allegations, describing the claim as without merit and maintaining that it fulfilled its obligations in producing the rate.
The case raises questions about how shipping benchmarks should operate when geopolitical shocks radically alter normal market conditions.
Court Hears Concerns Over Benchmark Reliability
Lawyers representing Mercuria told the court that the Baltic Exchange continued publishing TD3C partly because it wanted to protect its position in the freight assessment market and avoid losing business to a competing provider.
A document submitted by Mercuria refers to an April 14 call during which a senior freight assessor described the possibility of a rival replacing the benchmark as an overriding concern.
Mercuria also presented examples of market participants questioning whether the rate could be meaningfully assessed amid unprecedented disruption around Hormuz.
According to evidence cited by the trader, a broker contributing to the benchmark described the task of assessing TD3C on April 2 as “utter nonsense.”
Mercuria further alleged that a Baltic Exchange assessor initially failed to enter a value into an internal system designed to record his independent view of the index. When a value was later submitted, accompanying comments reportedly questioned the usefulness of forming an opinion on the route under the prevailing conditions.
The trader says this evidence supports its argument that the exchange should have suspended the assessment rather than continue publishing a rate under extraordinary market conditions.
Baltic Exchange Defends Its Decision
The Baltic Exchange, established in 1774, maintains that it was still possible to assess freight costs and risks despite the disruption.
The organization said it consulted market participants throughout the crisis and continued to meet its statutory, contractual and regulatory responsibilities in calculating TD3C.
Chief Executive Officer Mark Jackson said the exchange was confident it had fulfilled its obligations and rejected Mercuria’s claim.
Lawyers representing the exchange also disputed the suggestion that the threat of competition influenced its decision. They argued that vessels could still transit the Strait of Hormuz, meaning a freight assessment remained possible.
In court documents, the exchange described its decision to continue publishing TD3C as one that had been carefully considered.
The Baltic Exchange’s legal team also accused Mercuria of failing to manage its exposure to the index. It argued that the trader was seeking to challenge the benchmark after being adversely affected by the sharp rise in tanker rates.
Mercuria is asking the court to declare that the exchange breached its obligations and should have suspended the TD3C route assessment.
Hormuz Disruption Upended Tanker Markets
The legal dispute stems from the impact of the Iran war on global energy transportation. Tehran declared the Strait of Hormuz closed in the early stages of the conflict, severely disrupting a vital route for crude oil shipments.
The resulting uncertainty drove major changes in tanker freight markets and complicated efforts to establish representative prices for voyages through the region.
The TD3C benchmark became particularly contentious because it measures freight costs on a route originating inside the Persian Gulf. Its movements affect tanker owners, charterers and traders with contracts linked to the assessment, while also influencing related freight derivatives.
Shipping volumes through Hormuz have since recovered toward levels recorded before the war, according to market tracking cited in the report. That recovery, however, has not resolved the disagreement over whether the benchmark should have continued operating during the most disruptive period.
Financial Stakes Remain Unclear
Mercuria previously estimated that the continued publication of TD3C had resulted in losses running into the hundreds of millions of dollars. The company has since removed that estimate from its latest claim.
A Mercuria spokesperson did not immediately respond to a request for comment, according to the source report.
The case places a spotlight on the role of benchmark administrators during periods of extreme market volatility. Shipping companies and commodity traders rely on freight assessments to price transportation contracts and manage financial exposure, but sudden geopolitical disruptions can make traditional pricing methods more difficult to apply.
The court’s consideration of Mercuria’s allegations could have implications for how benchmark providers assess routes during future crises. For now, the Baltic Exchange continues to defend its handling of TD3C, while Mercuria seeks a ruling that the index should have been suspended during the Hormuz disruption.
