CIMB remains Neutral on dry bulk shipping, as it believes the sector “is in for rough seas in 2011-2012 as supply growth is outstripping demand, particularly for capesize.”

The house says the BDI dropped 3.4% last week, and has declined 9.5% over the past month, dragged by the capesize sector where rates ended last week 26% below the Nov. 12 close.

The house adds, higher Chinese steel output and iron ore imports have been overwhelmed by capesize fleet growth. But the house expects a harsh Chinese winter to lift coal imports, and rising Chinese steel production to raise iron ore demand.

“This could prompt Vale to return to the market and increase tonne miles shipped...we may see a freight rate rally in the next few weeks though the overall outlook for 2011 is clouded by high newbuilding deliveries.” Rates STX Pan Ocean (GZ9.SG) at Underperform with a $13.85 target. The shares are up 0.2% at $13.12.