Dirty freight market report: Near-term TD3c outlook remains weak

TD25 rates should drift lower while TD20 should churn sideways. TD3c has sold off and now looks to be working to find a bottom

The Sparta RBI (relative basket index) compares the route in question against all material relevant global competing routes delivering crude grades into the same destination. It provides an under/overvalued signal and is an inverse leading indicator for freight demand and FFA price action.

– TD25 spot rates moved higher last week and started to look somewhat overvalued at the end of the week. After spiking the RBI has since moved closer to neutral. USGC Aframax tonnage in the 10-day ahead window is in line with the trailing 90-day average of 10 vessels. Given that the tonnage situation is close to neutral and the RBI is weakening June TD25 rates likely drift lower going into next week. USGC Afras into NWE are pricing roughly in line with the competition.

– TD20 RBI is relatively neutral now and available tonnage in the 10-day ahead window is in line with the average of 4 vessels. June TD20 rates should continue to churn sidewards. The neutral RBI indicates that WAF Suezmaxes are appropriately valued vs competing grades/routes out of other load region origins.

– TD3c has had quite the selloff, but the RBI remains in overvalued territory. This combined with a 14-day ahead tonnage list that is 16 vessels longer than the trailing 90-day average and it should mean even weaker rates. TD3c has come off a lot though so don’t expect another imminent material move lower. Rates likely now churn sideways with a bias to drifting lower. There is too much tonnage in the region and other load origins are still pricing better into China.

Michael Ryan, our Freight Commodity Owner at Sparta, brings over a decade of experience with Trafigura in the energy sector managing risk across products and regions before becoming Head of Risk for subsidiary Puma Energy. Michael then joined the Trafigura commercial team trading freight while successfully growing the physical fleet through strategic dealmaking.

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