* Indian state ore export ban watched - * Capesize market supported
LONDON, Sept 8 (Reuters) - The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose on Wednesday with firmer iron ore activity boosting positive sentiment seen in recent days. The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 1.95 percent, or 57 points, to 2,975 points in an eighth straight session of gains.
"There is good volume driven by iron ore activity and more business opportunities," said Tor Svelland, head of commodities at Pareto Securities. "The underlying market is very strong."
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 high court of Karnataka state will continue hearings this week on a case challenging the state-imposed ban on iron ore exports. Traders said the government may soften its stance and lift the ban. [ID:nSGE6860FI]
"If more iron ore comes onstream and they (Indian producers) export a lot, it will take the steam out of the market," Svelland said.
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.
"Chinese iron ore demand is showing signs of strength this week, which has been responsible for this week's increase in capesize freight rates," Commodore Research said.
The Baltic's capesize index .BACI rose 3.15 percent on Wednesday, with average capesize earnings rising to $40,904. Capesizes typically haul 150,000-tonne cargoes such as iron ore and coal.
The Baltic's panamax index .BPNI rose 1.57 percent, with average daily earnings rising to $27,028. The supramax index .BASI rose 0.65 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.
More broadly, industry concerns about the pace of global recovery may hit shipping, given that about 90 percent of the world's traded goods by volume are transported by sea.
Major developed economies are poised for a marked slowdown in coming quarters, led by the United States, although another recession still looks unlikely, a Reuters poll showed. [ID:nLDE6870Z2]
Analysts said freight rates were expected to be dampened this year due to the pace at which new ships are set to enter the market this year and next, despite indications of some vessel cancellations and delays.
"We maintain our forecast for a correction in dry bulk earnings in Q1 11, when weaker demand and increased supply will drag the rates down," consultants MSI said.
"The six month delivery outlook is extremely challenging, with, for example, the capesize fleet forecast to increase by more than 10 percent by February."
By Jonathan Saul (Editing by Alison Birrane)
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