The tanker rate behind India's crude freight bill goes on trial in London

Mercuria Energy Group opened its High Court case against the Baltic Exchange in London on October 26. It argues the exchange should have stopped publishing the TD3C tanker rate after the war with Iran choked traffic through the Strait of Hormuz^1, 5. The same day, UKMTO disclosed a tanker disabled by a projectile in the strait on October 23, and a vessel on fire in the northern Persian Gulf⁶.

The timing matters for Indian buyers. Middle Eastern crude was about 54% of India's oil imports in September, at roughly 2.8 million barrels a day³. Gulf cargoes are normally fixed on Worldscale terms, and the Baltic's assessments are the reference for those contracts^7, 8.

What TD3C is, and how it reaches a refinery

TD3C is the Baltic's assessment of the cost of hiring a 270,000 tonne very large crude carrier from Ras Tanura in Saudi Arabia to China². Rates are quoted in Worldscale points, a percentage of a published flat rate for the voyage⁸. In the latest weekly summary, TD3C stood at WS1,208.13, down 88 points on the week, equal to a round-trip time charter equivalent of $1,287,851 a day².

TD3C underpins contracts between owners and their customers and billions of dollars in derivatives, and it serves as a reference point for other routes, Bloomberg reported¹. Freight futures settle on the monthly average of Baltic assessments; TD3C was the most traded tanker contract, with 304,719 lots in 2021⁹.

How the index reaches a refinery gate depends on who charters the ship. Indian Oil planned to take about 47% of its crude from Middle Eastern producers under annual deals on a free-on-board basis in the year to March 2027¹⁰. On those terms the buyer pays the freight. Some producers now offer crude delivered and absorb part of the higher freight, so the pressure lands in the delivered price instead¹⁰.

The International Energy Agency put the cost of moving Gulf crude to Asia above $37 a barrel by mid-October, more than five times prewar levels¹¹. That is more than $74 million for a cargo of 2 million barrels, against less than $15 million before the conflict¹¹. Goldman Sachs put the global average crude freight rate above $20 a barrel from $3 a year earlier, with $7 of it a Hormuz war risk premium⁴.

The case: what Mercuria argues, what the Baltic says

Mercuria's lawyers said the exchange kept publishing the rate because it feared losing the business to a competitor, Bloomberg reported¹. They cited an April 14 call in which a senior assessor described the risk of being replaced by a rival as "the overriding fear of what we do here"¹. Mercuria wants a declaration that the Baltic breached its obligations and should have suspended the route, and it has dropped an earlier estimate of losses in the hundreds of millions of dollars¹.

The Baltic says the claim is "without merit". Chief Executive Mark Jackson said the exchange met its statutory, contractual and regulatory obligations¹. Its lawyers argued Mercuria had "huge index-linked exposures, which it has failed to risk manage", and that passage through Hormuz was still possible¹. Flows have recovered close to prewar levels; the IEA put Hormuz flows, including offshore transfers, at about 82% of prewar levels^1, 11.

What a ruling would mean for index-linked freight

A declaration would not set a freight rate, but it would land on a benchmark embedded in physical contracts and cash-settled derivatives^1, 7, 9. Mercuria's case is that the published number stopped being a usable price for the route during the disruption¹.

For a charterer or refiner that settled on TD3C in that window, the argument can run two ways. One side can say the index was the agreed reference and must stand; the other can say it did not measure what both parties assumed. The Baltic's lawyers cast Mercuria as a trading house caught out by sharp rises in the benchmark¹.

The risk premium and the queue, in voyage terms

JMIC kept a SEVERE threat assessment for Hormuz on October 25 and rated the wider Gulf SUBSTANTIAL, citing five attacks inside the Gulf since October 7⁶. It reported 156 confirmed incidents since March 1 and about 492 vessels waiting outside the strait⁶. Its count of US-facilitated transits was 101 between October 22 and 24, against a historical average of about 138 vessels a day in 2025; the US tally covers assisted transits only⁶.

Attack reporting lags. UKMTO disclosed on October 26 a verified report of a tanker struck outbound in Hormuz on October 23 at 0839 UTC, which disabled the vessel⁶. Damage counts also differ by compiler. The Washington Institute for Near East Policy logged 28 confirmed and reported attacks in October and 113 since February 28¹². The IMO recorded 120 incidents across Hormuz and the wider Middle East since the conflict began¹².

Goldman Sachs attributes $7 a barrel to the Hormuz war risk premium, $4 to ship-to-ship transfers that tie up tankers, $4 to marine fuel and $3 to inefficient tanker allocation⁴. Ship-to-ship work in the Gulf has kept VLCC rates at what Seatrade Maritime called stratospheric levels¹³. With about 492 ships in the queue and TD3C at a round-trip TCE of $1,287,851 a day, each extra day at anchor is expensive for the party holding the ship^6, 2.

What buyers should do now

Fix or cap where possible. A fixed rate, a Worldscale ceiling or a collar for the disputed period removes the argument about which number applies. The assessment is moving fast: TD3C fell 88 points in one week, and Fearnleys reported VLCC rates shedding WS 100-150 points^2, 14.

Write a fallback into index-linked deals. Name a second source, a broker panel average or an agreed range, and say what happens if the publisher suspends or restates a route, the question now before the court¹.

Split the war risk line from the freight line, stating who pays, on what evidence and with what limit⁴. Choose the basis deliberately: free-on-board leaves the buyer to carry the index, while delivered terms put the producer in the freight market¹⁰. Hedging remains an option, but settlement runs off the Baltic's monthly average, the number under challenge⁹.

What to watch

• The trial was expedited to October 26, and the report gave no date for a ruling^5, 1.
• JMIC and UKMTO advisories, updated weekly, where late reporting means counts trail events⁶.
• Suez: 63% of Far East to Europe capacity was back on the Red Sea route, though some operators kept Cape of Good Hope services¹⁵.