Baltic index rises, fleet growth weighs on market

The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose on Wednesday although slower activity and growing fleet supply were weighing on market sentiment.The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 1.71 percent, or 43 points, to 2,558 points in a 10th session of gains. "After the very rapid rises last week in the capesize sector we are seeing some sideways movement with very little movement in rates,"

said Derek Langston, a director with SSY Consultancy and Research. Brokers said chartering activity had slowed after firmer business last week which 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 in the past month.

"Ultimately the (capesize) market remains relatively flat but could drive upwards again if the operators return to the market," broker Fearnleys said. "But it's unlikely to be dramatic as the influx of new tonnage has a dampening effect." The Baltic's capesize index .BACI rose 0.56 percent, with average capesize earnings rising to $30,344 a day. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.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 1.68 percent with average daily earnings rising to $23,859.

Brokers said grain cargo activity in the Atlantic market, helped by Russia's grain export ban, had help support panamax rates in recent days. "New buildings (ships) are still pouring out at a rate of two bulk carriers/day, and spot activity is relatively slow leaving mixed feelings to the recent upturn and market sustainability," Fearnleys said referring to the panamax market. 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.

U.S. President Barack Obama said on Wednesday that an over-supply of homes built during the property bubble was slowing the economic recovery. 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 estimated 121 capesizes had been delivered from January to the end of July with 19 entering the fleet last month alone. "The rapid fleet supply growth is being demonstrated by the fact that we have more capesize new buildings delivered so far this year than we did in the whole of 2009," SSY's Langston said. "What this shows is that we are on course for net fleet growth across all sizes of 71 million deadweight tonnes (dwt) this year which compares with 38 million dwt last year and 27 million dwt in 2008."

(Editing by Keiron Henderson)

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