Baltic index rises; Russian grain export ban eyed

* Capesize market stays firm - * Iron ore, coal activity supporting rates


LONDON, Sept 3 (Reuters) - The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose on Friday as firmer iron ore activity supported the larger capesize vessels.
Brokers also said Russia's plan to extend a grain export ban into 2011 was expected to be positive for the freight market.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 1.45 percent, or 41 points, to 2,876 points in a fifth straight session of gains.
"Capesize and panamax freight rates found support this week on the strength of firm demand for iron ore and coal. Moderate levels of congestion continue to support rates for these vessel classes as well,"
said Jeffrey Landsberg, senior analyst with Commodore Research.
"Supramax and handysize rates declined slightly this week but have remained at relatively robust levels."
The capesize market has seen volatile activity in recent weeks. A rally in August was 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 July.
The Baltic's capesize index .BACI rose 0.95 percent on Friday, with average capesize earnings up at $39,734 a day and at its highest level since June. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.
The Baltic's main index has been erratic this year, as it was in 2009, because of swings in Chinese demand for iron ore, the primary ingredient of steel.
The Baltic's panamax index .BPNI rose 2.94 percent, with average daily earnings rising to $25,099. The supramax index .BASI fell 0.3 percent.
Brokers said expectations of firmer U.S. grains export activity, helped by a Russian grain export ban, was providing some support to the smaller ships.
"The ban on wheat exports from Russia will be beneficial for the supramax vessels in particular," Pareto Securities said.
Russia's plan to extend its grain export ban destabilises markets but does not bring closer a repeat of the 2007/2008 food crisis, a senior UN economist said on Friday as new protests flared in Mozambique after food riots.
"A moderate amount of grain fixtures continue to come to the market, but 'panic buying' seen at the beginning of the Russian export ban has largely subsided," Commodore's Landsberg said.
"An extension of the Russian wheat export ban will certainly help freight rates over the medium term."
Analysts said the pace at which new ships are set to enter the market in 2010 and 2011 are expected to weigh on freight rates, despite indications of some vessel cancellations and delays.
"Fleet supply additions will continue to be a drag on rates, but so far firm cargo demand has allowed dry bulk freight rates to remain resilient," Landsberg said.
"We don't expect a large vessel supply-related crash to be in the cards for the near future. That being said, rates will certainly remain under pressure. Firm cargo demand must continue for rates to stay healthy."

By Jonathan Saul