Skip to content
Welcome, thoughtbot's Giant Robots listeners!Start here
Iran Conflict 2026
15JUN

Two Suezmaxes cost $2m more than one VLCC

2 min read
11:40UTC

Substituting two Suezmax tankers for one VLCC on the abandoned Bab el-Mandeb run costs roughly $2 million more per voyage and stretches transit to 54 days, a cost the Baltic's headline VLCC benchmark never prints.

ConflictDeveloping
Key takeaway

The Baltic's VLCC benchmark prices the wrong ship, hiding the Suezmax cost Saudi shippers now pay.

Chartering two Suezmax tankers to stand in for one VLCC on the Bab el-Mandeb run costs roughly $2 million more per voyage, and the passage stretches from 24 days to 54 by way of Suez or the Cape⁠1. A VLCC, or Very Large Crude Carrier, hauls about two million barrels; a Suezmax carries around a million, so replacing one with two roughly doubles the vessels tied up per barrel moved.

TD3C, the Baltic Exchange assessment for the Gulf-to-China VLCC route that most desks read for this conflict, captures none of that cost, because it prices a different ship on a different stretch of water. When the Baltic assessed TD3C at WS372 on 17 July, it was quoting the direct VLCC voyage, not the Yanbu-Suez Suezmax pair-up that Saudi shippers now pay for. The marginal freight on the rerouted flow never reaches the screen the market watches.

That gap is the structural point. Mediterranean aframax rates had already jumped 198% month-on-month to $151,308 a day, so the freight complex was tightening before the reroute added a second Suezmax leg on top. A desk hedging its landed cost on VLCC indices alone is left exposed to a Suezmax basis it cannot see moving, on the majority of Saudi export volume now leaving through the Red Sea. The cost is small against a large flat-price swing, but it is durable and route-specific, and it accrues on every cargo for as long as the strait stays shut.

Deep Analysis

In plain English

Big oil tankers called VLCCs are too large to use some alternate routes easily, so when the direct route through Bab el-Mandeb closes, shippers use two smaller Suezmax tankers instead. That costs about $2 million more per trip and takes over twice as long. The trouble is that the market's main price gauge for this shipping route, called TD3C, was built to track the old direct route and doesn't count this extra cost at all, so traders relying on it may be underestimating true shipping expenses.

Deep Analysis
Root Causes

TD3C prices a single VLCC on the direct Gulf-to-China route; it was built before Bab el-Mandeb closures were a standing feature of the market and has no mechanism to price a two-vessel Suezmax substitution.

Rebuilding a benchmark requires enough historical fixture data to backtest a new route definition, which takes the Baltic Exchange months to assemble and certify, so the pricing gap persists structurally even after the physical rerouting becomes routine.

What could happen next?
  • Risk

    Freight desks hedged purely against TD3C carry unrecognised basis risk on cargo actually moving via the Suezmax substitution route.

  • Opportunity

    A Baltic Exchange sub-index for the Suezmax substitution route would close the pricing gap once enough fixture data accumulates.

First Reported In

Update #20 · Saudi crude reroutes to Suez, freight bites

The National· 27 Jul 2026
Read original →
Different Perspectives
United States (Joint Maritime Information Center)
United States (Joint Maritime Information Center)
The JMIC, the US-led naval reporting cell, rated the Hormuz threat "severe" in its 25 October advisory, as reported by gCaptain, and warned of possible renewed mining. Eight days earlier it found no substantiation for the Guards' mine claims, while US-facilitated transits ran at about 34 a day.
United Kingdom (CPS and Counter Terrorism Policing)
United Kingdom (CPS and Counter Terrorism Policing)
The CPS charged two men under the National Security Act 2023 over the RAF Fairford incident, and Counter Terrorism Policing said it believes the foreign intelligence service involved is Iran's, LBC reported. The case now runs through the courts; both men are charged, not convicted.
Aden and Yemen's recognised government
Aden and Yemen's recognised government
The Houthis told people to leave Aden airport, in the government-held south, before a missile fell there on 28 October, AFP reported, and police reported a second attack that afternoon. The fight between Riyadh and the Houthis is landing on the south's main civilian airport.
Qatar (mediators)
Qatar (mediators)
Qatar-led mediators put new terms to Iran this week, which an Iranian official called "ideas, not a proposal". Riyadh framed the Tehran meeting as support for Qatari and Pakistani mediation, keeping Doha at the centre of the indirect channel.
Korea Shipowners' Association
Korea Shipowners' Association
The association said the ships Iran listed were sub-chartered to an overseas oil company, not owned by Sinokor, carried no South Korean crew, and that Sinokor was unaware of the warning. South Korea's shipowners are contesting whose vessels the notice covers before it takes effect.
Kuwait (foreign ministry)
Kuwait (foreign ministry)
Kuwait summoned Iran's ambassador, Mohammad Toutounji, and handed him a protest note over the embassy's denial that its citizen took part in the alleged plot against Interior Minister Fahad Al-Yousef. Kuwait is answering through its courts and a diplomatic protest, citing international law and the UN Charter.

Written with AI from Lowdown's published reporting. Not individually reviewed by an editor. Editorial standards.