Baltic index rises again, recovery seen fragile

* Capesize market continues to rally

* Fleet growth still gathering pace

LONDON, The Baltic Exchange's main sea freight index .BADI, which tracks rates to ship dry commodities, rose on Wednesday with continuing Chinese iron ore interest boosting market sentiment.

The index, which gauges the cost of shipping commodities including iron ore, cement, grain, coal and fertiliser, rose 7.5 percent, or 166 points, to 2,378 points in a fifth session of gains.

Brokers said there had been active iron ore and coal fixture activity together with firmer period business.

"It's definitely being driven by iron ore," said Sverre Svenning, director of research at broker Fearnleys. "It will taper off once they have cleared out positions. Fundamentally there are far too many ships."

Brokers said a wheat export ban in Russia could also potentially boost freight rate activity with buyers having to source supplies from other origins including the United States. 

"The dry bulk fleet is currently expanding at an annualised rate of 14 percent," Nicolai Hansteen, chief economist with broker Lorentzen & Stemoco, said in a report. "The influx of new vessels will have a dampening effect on any market rebound.

Fearnleys' Svenning said the dry bulk fleet had already grown this year by 40 million deadweight tonnes.

"As of July 1 the entire bulk carrier fleet surpassed half a billion deadweight tonnes for the first time in history," he said. "From that point of view I don't think it (rising rates) can last."