London, 18 May 2011: Reuters

The Baltic Exchange's main sea freight index, which tracks shipping rates, fell for a sixth session on Tuesday as a recordsized Brazilian ore freighter entered service, highlighting the market's oversupply. The index fell 1.33 percent, or 17 points, to 1,274 points Tuesday. Traders said dry freight rates continued to be under downward pressure as a large number of large new vessels were entering the market. This month, the world's biggest iron ore producer, Brazil's Vale , has put to service the world's largest dry bulk freighter.

The 400,000 deadweight tonne (dwt) Vale Brasil is officially classed as a very large ore carrier (VLOC), but mostly dubbed as Chinamax by the market as the ship was built to carry iron ore from Brazil to China. Analysts say they expect more than 100 carriers with a dwt of at least 230,000 to enter the market by 2014, reflecting around 10 percent of all new vessel orders.

"Eye-catching events like this always have an effect on prices, and with a large amount of new generation mega-freighters entering the market in the coming years, it is obvious that people are shying away from taking long-freight positions," one market analyst said.

Analysts said that Capesize bulk carriers, which so far were the biggest class of dry freight carriers with a typical dwt of 150,000, were expected to struggle most with the influx of new ships, while the smaller Panamaxes and Supramaxes were expected to be under less pressure because they are more versatile in their routes and do not compete with the new class of VLOCs.

The Capesize index was down 1.24 percent (18 points) to 1,457 points, Panamax was down 3.27 percent to 1,622 points, while Supramax was unchanged at 1,393 points. Handysize rates fell by two points to 786 points. Brokers said the winding down of South America's grain export season was weighing on Panamax availability.

Floods and cyclones in Australia in February had hit coal production, and some producers were still struggling to return to normal operations, hurting Capesize activity.

Weather-related and logistics problems at Brazilian ports had also disrupted iron ore shipments from there. Operators were also watching for further signs that China's economy was slowing, given how dependent the dry freight market is on Chinese imports, especially of coal and iron ore.

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By Henning Gloystein, Reuters – for Commodities Now