Aug. 6 (Bloomberg) -- Freight rates to transport coal, iron ore and other dry goods in bulk may extend gains for at least another two years, boosted by global demand and port congestion, Credit Suisse said in a report.

``We think this upcycle will run harder and longer than previous ones, helped by strong demand and supply constraints at the shipyards, until 2009,'' Credit Suisse said in an Aug. 3 report. ``At the earliest, oversupply could happen in the second half of 2009.''

The Baltic Dry Index, an overall measure of commodity- shipping costs on different routes and ship sizes, has been closing at records since July 24. Rising demand for raw materials in Asia, led by China, has driven companies to import from outside the region, crimping vessel supply as ships have to travel longer distances.

Dry-bulk trade will rise 5 percent a year from 2007 to 2010 with China's and India's demand likely to continue to drive the need for iron ore and coal, Credit Suisse said. Freight rates will gain 5 percent in 2008 and be little changed in 2009, the firm said.

A round voyage from South Korea to China takes only seven to 10 days while the journey from South Korea to Australia requires three weeks even without port congestion, which typically adds 15 to 20 days to the total travel time, Credit Suisse said, citing industry estimates.

STX Pan Ocean Co., U-Ming Marine Transport Corp., and Sincere Navigation Corp. shares were rated an ``outperform'' by Credit Suisse, which maintained its ``overweight'' recommendation on the industry.

China's Net Imports

China's shift to being a net coal importer has driven other north Asian countries, which used to buy from China, to secure the fuel from alternative sources such as Australia and Latin America. The country's shipments have contributed to bottlenecks at major ports including Australia's Newcastle, the world's biggest coal-export harbor.

The Baltic Dry Index added 0.1 percent to 7007 on Aug. 3, bringing its gain from the start of the year to 58 percent according to the London-based Baltic Exchange. Today, the index fell 0.2 percent to 6990.

The Baltic Handysize Index, which tracks rates on six routes for ships with a capacity of 38,000 metric tons, rose 0.4 percent to 2386, a record for the year. The Baltic Supramax Index, made up of five time-charter routes based on a bulk carrier of 52,454 tons, gained 0.1 percent to 4719. It's been setting records since July 13.

Record Rates

Record freight rates have spurred new orders for bulk carriers and conversion of single-hull very large crude carriers, or VLCCs, to very large ore carriers, VLOCs. The order book for bulk carriers is currently at a high of 150 million deadweight tons or 39 percent of the existing fleet, Credit Suisse said. That compares to only 27 percent at the start of the year. VLCCs can carry as much as 2 million barrels of oil.

Vessel delivery is set to increase significantly in the second half of 2009, Credit Suisse said.

Still, the retirement of an aging fleet and port congestion could mitigate the impact of an excessive ship supply, Credit Suisse said.

There are still 49 ships waiting to load coal at Newcastle as of July 30, though lower than the 59 vessels the previous week, Newcastle Port Corp. said on its Web site. The average waiting time for ships to load coal was 25.7 days in the week ended July 30, compared with 25.3 days the week before, it said. General cargo took on average 58 minutes to load on each ship.

To contact the reporters on this story: Katherine Espina in Singapore at kespina@bloomberg.net.

Last Updated: August 6, 2007 10:53 EDT