Dirty freight market report: TD20 at most overvalued level in last twelve months

The rally in spot TD20 has pushed the RBI to levels not seen since April last year. TD25 is also overvalued and looks toppy with increasing tonnage supply. TD3c remains undervalued even after rates strengthened.

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 remains overvalued and has been for a month now. There will be growing pressure on rates to soften. The May FFA contract looks to already be topping out. USGC Afra tonnage supply in the 10-day ahead window is also increasing and is now longer than the 90-day trailing avg of 13 vessels. Spot rates will likely narrow the $5/mt spread lower to May.

• TD20 is now severely overvalued by $3.79/mt. The strength in spot has pushed the RBI higher while competing routes have not followed suit to the same extent. The rally in spot looks toppy basis the RBI. Prompt WAF tonnage though still looks tight going into May, but tonnage is now trending above the trailing 90-day avg of 6 open vessels in the 10-day ahead window. There is ample tonnage supply in the USGC and rates there look primed to weaken only emphasizing how overvalued WAF values look.

• TD3c RBI remains undervalued this week even after the rally in spot freight rates. This is a bullish signal and implies that, at the very least, the May TD3c contract should roll up towards spot values. TD3c has room to strengthen further.

• TD22 RBI remains undervalued over the last week even while spot and May TD22 rates have strengthened. This is a bullish signal as it implies there is more room to move higher. Spot TD22 looks mildly undervalued to the May contract.

(TD25 RBI signal)

(TD20 RBI signal)

(TD3c RBI signal)

(TD22 RBI signal)