Dry bulk ship oversupply will pressure freight rates in the second half of 2010 and average earnings for larger capesize vessels could fall below $30,000 a day, a senior Credit Suisse official said.

While demand for commodities is picking up as the world economy recovers, the seaborne sector is struggling to absorb the growing pace of vessel deliveries.

"It is my personal opinion that oversupply will be the driver of the market for the rest of the year," Meindert Witteveen, head of European energy and freight at Credit Suisse, told Reuters.

Witteveen said freight levels for 2009 averaged well over $46,000 a day on capesizes, which typically haul 150,000 ton cargoes such as iron ore and coal.

There were spikes up to $100,000 a day in 2009 for capesizes helped by increased trade volumes into China and congestion at ports in Brazil, Australia and other key places.

"The return was much better than people expected as the fleet did grow but the demand grew harder," Witteveen said.

But he said average earnings for capesizes, would be "well below" current spot levels of $45,000 a day in the second half.

"Inevitably there will be the occasional spike but the levels will not be that lofty," he said in an interview. "I think settlement could be below $30,000."

Rates for smaller panamax ships have rallied in recent weeks helped by record coal imports by China.

Net coal imports to China, the world's biggest coal producer, could soar 70-100 percent to 170 million tonnes or more in 2010, boosting coal prices globally, if the country's power use boom continues.

"I don't believe coal demand will save the market. Thermal coal will give more relief and more support to the panamax market. What is going on is far more intra Asia business," Witteveen said.

Asia Expansion
Separately, the global slowdown has hit the ship container sector hard, especially on key routes from Asia to consumers in the West carrying finished goods from electronics to toys.

Witteveen said the container market was "battling with overcapacity" especially on the Far East to Europe route.

"It is a depressed sector. Container rates are off the lows but they are definitely not flying," he said.

Credit Suisse is focused on freight derivatives and is targeting expansion in Asia, aiming to take on a freight derivatives trader in Singapore in the coming months, Witteveen said.

"We have a focus on Asia at the moment -- we have people focusing on freight from Singapore and we see an increased trade flow in Asia," he said. (Reuters)