Baltic index falls, capesize ships see coal boost:

• Panamax market still subdued
• Fleet growth still overhanging dry bulk industry

LONDON, June 22 (Reuters) - The Baltic Exchange's main sea freight index. BADI, which tracks rates to ship dry commodities, fell for a fourth session on Wednesday although firmer coal export trade boosted earnings for larger capesizes.

• The overall index fell 0.21% or 3 points to 1,406 points.
• It has declined 21% so far this year.

"Capes are marginally rebounding on the back of strong Australian coal exports," said Georgi Slavov, head of dry research and structured products at broker ICAP Shipping.

"Panamaxes should react soon. Unfortunately they are moving sideways in the last couple of weeks."

The outlook for dry bulk rates has been grim because ship supply has outpaced demand to ship commodities.

The situation has been compounded by the deployment of a vessel owned by top iron ore producer Vale (VALE5.SA) of Brazil, the first of the world's largest dry bulkers, known as very large ore carriers (VLOCs) to enter the fleet. [ID:nLDE75L128]

There were also expectations that India's monsoon would reduce iron ore exports as rivers rise, hampering goods transportation.

The Baltic's capesize index .BACI rose 1.31%, with average daily earnings to $10,453. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.

Brokers said they were looking for signs of a pick up in coal demand from China, facing its worst power shortages in years.

The Baltic's panamax index .BPNI fell 1.62%, with average daily earnings at $14,580. Earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, have more than halved since the same period last year.

Oversupply Pressures

The index has more than halved in the past 6 months, nearing levels last seen during the financial crisis in 2008.

Barclays Capital said fresh coal cargoes from Australia and Indonesia to China were expected to support capesize rates in the Pacific, with panamaxes set to benefit from Russia's grain export season which starts in the third quarter. Smaller supramax vessels were also likely to get a boost from India trades once the monsoon season ended there.

"Yet despite all these positives, the demand for ships to ply on these routes will not buoy freight rates up as the surplus feet will easily absorb all the orders," it said in a report this week.

Braemar Seascope said 13.6 million deadweight tonnes (dwt) of bulkers had been scrapped in the period from January to May, including 7.1 million dwt of capesizes.

The broker said if scrapping continued at the current pace for the rest of the 2011, it could reach 32.6 million dwt, more than three times the previous record set in 2009.

"These levels of demolition are very encouraging. Deliveries are also likely to run behind schedule this year. Nonetheless, oversupply will still be on the agenda in January 2012," said Braemar research manager Mark Williams.

Source: Reuters. By Jonathan Saul. 22 June 2011 

http://af.reuters.com/article/energyOilNews/idAFLDE75L1PN20110622