* Capesize fall driving market weakness
* Fleet growth to keep rates pressured in 2012
LONDON, Jan 10 (Reuters) - The Baltic Exchange's main sea freight index, which tracks rates to ship dry commodities, fell to its lowest in five months on Tuesday as a growing slowdown in cargo bookings hurt sentiment.
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 50 points or 3.82 percent to 1,258 points and was at its lowest since Aug. 9.
"We expect low (Chinese iron ore) imports this month and thus see the current sharp decline in freight rates as a seasonal effect driven by lack of buying towards the end of January 2011," said Arctic Securities analyst Erik Nikolai Stavseth.
"We see further weakness in the dry bulk market going forward as charterers continue to fix vessels at easier numbers in both Atlantic and Pacific and would expect the trend to remain weak through Jan-11 due to holidays and influx of 'late arrivals', vessels scheduled for 2011," he added.
China's iron ore imports stayed near 10-month highs in December as lower prices encouraged stockpiling in the world's top buyer of the raw material despite uncertainty over the outlook for steel demand.
China imported 64.09 million tonnes of iron ore in December, down just 0.2 percent from a 10-month high in November, customs data showed on Tuesday.
Iron ore shipments account for around a third of seaborne volumes on the larger capesizes, and brokers said price developments remained a key factor for dry freight.
Capesizes, which typically transport 150,000 tonne cargoes such as iron ore and coal, had driven a rally late last year, helped by firmer coal and iron ore exports from Australia and Brazil to China as well as a pick-up in Japanese coal imports. A build-up of port congestion also provided support.
"With the Chinese New Year break falling earlier than usual in 2012; the recent freight rate developments suggest a weak start to the year, with our expectations of a weak 1H12 on the horizon and fortunes of the dry bulk market closely linked to the Chinese import policy," RS Platou Markets said.
The Baltic's capesize index fell 5.11 percent on Tuesday, with average daily earnings sliding to $13,386 and at their lowest since Aug. 17.
The overall index, which gauges the cost of shipping commodities including iron ore, coal and grain, has remained erratic and is down more than 12 percent from the same period last year.
The Baltic's panamax index fell 3.39 percent. Average daily earnings for panamaxes, which usually transport 60,000-70,000 tonne cargoes of coal or grains, reached $11,602.
"Our expectations of fleet growth in 2012 surpassing demand growth will keep a cap on any major upside recovery to freight rates with our 2012 rate estimates for dry bulk markets slightly lower than the freight rate development in 2011," RS Platou Markets said in a report.
Growing ship supply, which is outpacing commodity demand, 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.
"Overall, we remain cautious in our dry bulk rate outlook, as we expect the oversupply of tonnage to keep rates under pressure into 2013," said Wells Fargo Securities senior analyst Michael Webber.