LONDON, Aug 26 (Reuters) - The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, fell on Thursday for a second day due to slower activity, growing vessel supply and a weaker outlook.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 2.52 percent, or 70 points, to 2,703 points. Prior to falling on Wednesday it had risen for 14 straight sessions.
"Last week's positive sentiment has not been sustained by sufficient fresh iron ore cargoes arriving in the market, and subsequently sentiment has turned more negative this week," said Derek Langston, a director with SSY Consultancy and Research.
"It's been a fairly quiet week in terms of chartering activity."
The recent rally had been driven by Chinese iron ore imports from Australia and Brazil on capesizes after Karnataka, India's second-largest ore producing state, banned exports from 10 of its ports last month.
The Baltic's capesize index .BACI fell 4.03 percent, with average capesize earnings falling to $32,942 a day. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.
"We continue to expect the (capesize) market to see positive catalysts in the coming weeks as iron ore prices for 4Q are finalized at discounts to current spot levels and vessels for October load begin to be booked," Dahlman Rose & Co said.
The Baltic's main index has been erratic this year, similar to 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.
The Baltic's panamax index .BPNI fell 2.01 percent, with average daily earnings down to $24,309. The supramax index .BASI fell 1.12 percent, while the handysize index .BHSI fell 0.28 percent.
Brokers said expectation of larger grain cargo activity in the U.S. Gulf, helped by Russia's grain export ban, was providing support to the smaller ship classes.
"Going forward, ballasters heading for the U.S. Gulf could prop up the market short term," Arctic Securities said.
More broadly, industry concerns about the pace of global economic recovery may hit shipping, given that about 90 percent of the world's traded goods by volume are transported by sea.
New U.S. claims for unemployment benefits fell more than expected last week but remained too high to signal a material shift in a weak labour market that is constraining economic growth. [ID:nN26186848]
Analysts said freight rates also were expected to be dampened this year due to the pace at which new ships are set to enter the market in 2010 and 2011, despite indications of some vessel cancellations and delays.
SSY's Langston said 130 capesizes had been delivered so far this year compared with 112 capes for all of 2009.
SSY forecast net fleet growth at 71 million deadweight tonnes (dwt) this year versus 38 million (dwt) last year and 27 million dwt in 2008.
"This has contributed to net fleet growth of 14.6 percent in the year to date for the capesize fleet, compared with 6.6 percent growth in the panamax fleet, which consequently has exerted disproportionate pressure on capesize earnings," Langston said.
By Jonathan Saul
Source: Reuters
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