The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, fell to its lowest in nearly two years on Friday as a glut of vessels available for hire swamped the market.
Brokers said flooding in Australia, the world's biggest coal exporter, was disrupting shipping activity at a time when the dry bulk industry was already pressured by growing vessel deliveries ordered before the economic turmoil of 2008.
The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, fell 0.4 percent, or 7 points, to 1,439 points and was at its lowest since Feb 4, 2009. It has fallen over 30 percent since first dropping on Dec. 7 last year.
"During the past three weeks capes have just collapsed because of a lack of demand and panamaxes are moving sideways to slightly upwards due to a large degree to what is happening in the Atlantic," said Sverre Svenning, director of research at broker Fearnleys.
Brokers said a fresh wave of vessels were coming onto the market looking for employment and that only a resumption in exports from Australia was likely to help bolster rates.
Weather-related problems in Colombia, South Africa, Russia and Indonesia were also compounding coal shipment disruptions.
"Flooding in Australia has resulted in closure of ports in Queensland leading to a halt in shipments of coal. This is expected to keep vessel rates under pressure in the first half of January," said brokerage ICICIdirect.
The growing competition for cargo deals has battered rates for capesizes, which typically haul 150,000 tonne cargoes such as iron ore and coal.
The Baltic's capesize index .BACI fell 0.81 percent, with average daily earnings weaker at $9,692, below the $10,000 level for the second day and at their lowest since Jan. 6 2009.
Brokers said more panamax vessels were expected to voyage towards the Atlantic from the Pacific in search of business, adding to rate pressure.
ECONOMIC HEADWINDS
The Baltic's panamax index .BPNI fell 1.33 percent, with average daily earnings dropping to $15,341, falling for a third day. Panamax vessels usually transport 60,000-70,000 tonne cargoes of coal and grains.
The Baltic's main index has remained erratic since 2009 because of swings in Chinese demand for iron ore.
Economic headwinds in the West, a major source of shipping demand, has been compounded by inflationary fears in China, potentially leading to monetary tightening and a pullback in demand for ore which may be another setback for shippers.
China's central bank raised lenders' required reserves on Friday for the fourth time in just over two months, stepping up the fight against inflation.
"Since these measures are not working, China will likely need to use harsher monetary tools, most likely being a solid interest rate hike," Arctic Securities said.
Despite indications of some vessel cancellations and delays, analysts expect deliveries to gather pace between 2011 and 2012.
Fearnleys estimated net fleet growth this year at 16 percent, on par with the 16 percent seen in 2010.
"The potential for an upward trend is extremely slim. I am not sure we will see capesizes making $9,000 to $10,000 on average this year," said Fearnleys' Svenning.