Baltic index rises again, pace of gains slows

* Overall trend still seen fragile

* Smaller ships supported by grains activity

By Jonathan Saul

LONDON, Aug 24 (Reuters) - The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose to its highest in over two months on Tuesday helped by cargo enquiry although the pace of gains was slower.

The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 0.7 percent, or 20 points, to 2,861 points in a 14th session of gains and was at its highest since June 16. It has risen over 40 percent since it began moving higher on Aug. 5.

"It's definitely more quiet today and it seems that the momentum is much weaker," said Sverre Svenning, director of research at broker Fearnleys.

Brokers said chartering activity 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 rose 0.48 percent, with average capesize earnings rising to $37,607 a day. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.

"Capesize rates have flattened," Dahlman Rose & Co said. "Official 4Q benchmark iron ore pricing will become apparent next week, which should open the door for an acceleration of activity levels as the market gains full transparency."

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 rose 0.19 percent with average daily earnings rising to $25,141. The Baltic's supramax index .BASI rose 1.19 percent.

Brokers said grain cargo activity in the Atlantic market, helped by Russia's grain export ban, was supporting panamax rates.

"Strong coal demand, positive market sentiment and the beginning of vessel positioning to take advantage of U.S. grain exports in late Q3 early Q4 all had a positive effect on the market," Deutsche Bank said.

"We believe that news of the Russian grain ban may have been a catalyst in shifting market psychology to the positive into the Fall."

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.

Sales of previously owned U.S. homes took a record drop in July to their lowest pace in 15 years, suggesting further loss of momentum in the economic recovery. [ID:nN24249810]

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.

Fearnleys' Svenning said net fleet growth this year was estimated at 14.3 percent but was expected to rise to 15 percent as the pace of vessel deliveries would pick up in September, adding that rates would stay volatile in the coming months.

"We are in a downward trend for freight in general," he said. "I think it (rates) will simmer down to a lower level." (Editing by Alison Birrane)