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Iran Conflict 2026
23AUG

The freight bill VLCC indices can't see

2 min read
19:02UTC

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.

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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 Cape 1. 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.

Sources:The National
Mentions:Saudi Arabia →Suez Canal →TD3C →Baltic Exchange →VLCC →China →Worldscale →Mediterranean →Red Sea →Dated Brent →Yanbu →Clarksons Research →Bab al-Mandeb →Brent-WTI →
First Reported In

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

The National· 27 Jul 2026
Read original →
Causes and effects
Caused by
Saudi crude abandons its Red Sea route
The Suez reroute created the Suezmax freight penalty and transit-time cost this event quantifies.
Occurred 24 Jul 2026
Read story →
Med aframax freight doubles in a week
Med aframax freight rallying 198% month-on-month set the freight backdrop the Suezmax substitution cost extends.
Occurred 20 Jul 2026
Read story →
TD3C hits WS372 as hull cover reaches 5%
TD3C's Gulf-to-China VLCC pricing structurally excludes the Suezmax leg this event covers.
Occurred 16 Jul 2026
Read story →
This Event
The freight bill VLCC indices can't see
A crude book hedged on VLCC freight indices alone carries an unhedged Suezmax basis on the bulk of Saudi export volume, because the benchmark most desks watch prices a different ship on a different sea.
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