London, 16 May 2011: Reuters

The main global freight index will rebound in the second half of this year to average 1,500 points, driven by a recovery in Australian coal exports and strong shipping demand, a Reuters poll showed on Monday. Dry bulk freight rates have slowly inched up from a two-year low in February as major commodity producers ramp up exports of iron ore, coal and grains, alleviating some of the pressure from an oversupplied market, industry experts said.

The median of the poll of shipbrokers, shipowners and analysts showed the Baltic Dry Index (BDI) would average 1,500 points from July through December, up 15 percent from Friday's close of 1,306.

"The exceptionally weak day rates in the dry bulk market in the first quarter of 2011 were due to weather disruptions around the globe. We expect that to reverse over the coming months," said Doug Garber, analyst at FBR Capital Markets.

Shipments of iron ore and coal declined by 50 million tonnes in the first quarter -- or 11 percent below average -- due to bad weather in Australia and Brazil, export permit delays in Indonesia, and supply bottlenecks in South Africa, Garber said.

Iron ore and coal are the two biggest commodities in the dry bulk industry, each representing about 30 percent of the market.

COAL RECOVERY

The market was most affected by the devastating floods in Australia's eastern Queensland state, which lost up to 30 million tonnes of coal production. "Most of Australia's coal output will be coming back online later this year and that will allow exports to get back to normal again," said a senior broker working for a major Chinese shipping company.

"This can only help the market after a horrible first half." The return of the United States as a major coal exporter due to Asia's rising fuel needs was also seen supporting the market.

Global demand for dry bulk freight was forecast to rise by 5 percent this year, near the annual average over the past decade but only half of this year's expected fleet expansion. The Baltic Dry Index has tumbled nearly 70 percent in the past 12 months due to a flood of new vessels that were purchased by shipowners before the economic downturn two years ago.

Freight rates for capesize carriers, the largest in the dry bulk fleet, were expected to continue to trade at a discount to smaller panamax vessels because of the oversupply problem.

"There is a big volume of tonnage for exporting to China and only a limited number of charterers. I don't think capes will come back for another one or two years," said Hiroyuki Nagashima, managing director of Sanki Kaiun Shipbrokers.

Time chartered averages for capesize vessels were pegged at $13,000 per day, down from an average panamax rate of $16,000 per day in the second half of this year, according to the poll.

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