January 19, 2012 / 6:15 PM / 6 years ago

Baltic freight index continues slide in vessel glut

* Baltic Dry Index down almost 50 pct this year

* Handysize drops below 500 points

By Henning Gloystein

LONDON, Jan 19 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell on Thursday to nearly a three-year low as slow Chinese demand compounded fleet growth troubles.

The shipping sector in coming months is expected to face a supply glut and economic gloom, including concerns over the outlook for Chinese demand for raw materials, which will pressure earnings.

The overall index fell 33 points, or 3.7 percent, to 893 points, meaning that it remained below the crucial 1,000 point level for a third day, and reached its lowest since January 2009.

Since the beginning of the year, the contract has fallen almost 50 percent.

"The freight market is completely oversupplied because shippers put in orders for new vessels two years ago in expectation of a firm recovery by now," one freight paper trader said, and added: "They clearly did not expect the crisis to reignite as it has."

The Baltic's capesize index fell 1.54 percent on Thursday to 1,559 points.

The Baltic's panamax index fell 4.44 percent to 1,058 points.

Supramax was down almost 4 percent to 858 points, and handysize was 2 percent weaker at a settlement of 496 points.

It was the first time since February 2009 that handysize fell below 500 points.

Growing ship supply is set to cap dry bulk freight rate gains in the coming months, with economic uncertainty, a financing squeeze and a slowdown in China adding to headwinds. (Editing by Jane Baird)

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