Baltic Exchange Asserts Reliability of Tanker Rates During Iran Conflict
Dispute Over Tanker Benchmark Amid Strait of Hormuz Disruption
By Jonathan Saul and Robert Harvey
Background of the Conflict and Market Impact
LONDON, June 24 (Reuters) - The Baltic Exchange defended its flagship oil tanker benchmark in a London court filing, saying it accurately reflected market conditions during the U.S.-Israeli conflict with Iran despite disruption in the Strait of Hormuz.
The benchmark is used globally to price and settle billions of dollars of freight trades, and its reliability is at the heart of a dispute with one of the world's biggest commodity traders, Mercuria, which argues it mispriced the market.
Mercuria's Allegations and Legal Action
Mercuria said in an April 30 court filing it is suing the Baltic Exchange over losses it said were caused by pricing data that did not account for the effective closure of the strait after the conflict began on February 28.
It said it had suffered, or will suffer, losses estimated in the hundreds of millions of U.S. dollars on freight and freight derivative contracts linked to the TD3C route.
Baltic Exchange's Defense and Market Assessment
The Baltic Exchange, the world's biggest provider of shipping rates, said in a court filing that continued sailings through the strait meant its indices still reflected market conditions.
In its defence filing lodged on June 16, the Exchange said despite a reduced number of transits through the strait, lawful passage continued to be possible and panelists continued to provide freight market assessments.
Panelist Process and Data Integrity
"The Baltic considers that the input data represents the market or economic reality and that the benchmark can continue to be published," it said in the filing seen by Reuters.
Baltic Exchange panelists are shipbrokers who provide independent assessments of freight rates which are used to create indices. Shipowners and charterers cannot be panelists, according to the Baltic Exchange's website.
Consultations and Stakeholder Engagement
The London-headquartered Baltic Exchange, owned by Singapore’s SGX, said separately it had conducted "appropriate and adequate consultations with market participants, members of the Baltic and other stakeholders".
"The Baltic has full confidence in its processes, believes the claim from Mercuria is without merit and will defend it to the fullest extent," it told Reuters this week in a statement.
Ongoing Legal Proceedings
Mercuria said it would serve its response to the Baltic Exchange's defence as part of the court proceedings, declining further comment.
(Reporting by Jonathan Saul and Robert Harvey in London; Editing by Elaine Hardcastle)