Dirty freight market report: Spot TD20 and TD3c rates have more room to fall

More weakness expected in spot TD20 & TD3c while TD25 & TD22 look fairly valued.

Commentary summary:

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 RBI has moved back closer to neutral. USGC Afra open tonnage in the 7-day ahead window has been bouncing around the 90-day trailing average of 13 vessels over the last week. Spot TD25 valuation at 150 WS looks accurately priced given the neutral RBI and vessel supply in line with the avg. June could start to price higher narrowing the 15 WS point spread to spot.

• TD20 spot has moved lower over the last week while June TD20 has strengthened marginally. Spot/June spread is basically flat now. The RBI has moved slightly more undervalued since last week. Open Suezmax tonnage in the 10-day ahead window though has jumped higher and is now 7 vessels long compared to the 90-day trailing avg. There is room for TD20 to move deeper into undervalued RBI territory driven by the excess tonnage supply.

• TD3c RBI continues to slowly approach neutral. Spot TD3c has weakened by 10 WS points over the last two weeks. Over the same period open VLCC tonnage in the 14-day ahead window has grown by 10 vessels and now sits at 18 ships longer than the trailing 90-day average. The RBI could easily weaken further as TD3c prices lower to work to absorb excess tonnage.

• TD22 spot and June rally has stalled. The RBI is only marginally overvalued, in neutral range really. Available tonnage in the 14-day ahead window increased over the last week, but still only sits at two vessels longer than the trailing 90-day average. TD22 RBI likely stays in neutral territory over the next week as spot and June contracts churn sideways.

(TD25 RBI Analysis)

(TD20 RBI Analysis)

(TD3c RBI Analysis)

(TD22 RBI Analysis)

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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