* Raw materials demand picking up
* Fleet growth still a dominant factor

By Jonathan Saul
LONDON, Oct 20 (Reuters) - The Baltic Exchange's main sea freight index <.BADI>, which tracks rates to ship dry commodities, rose to over a two-month high on Tuesday helped by stronger demand for coal and iron ore cargoes.
The overall index, which gauges the cost of shipping resources including iron ore, cement, grain, coal and fertiliser, rose 2.39 percent or 66 points to 2,832 points on Tuesday in a fourth straight session of gains and was at its highest since Aug. 6.
"It's a combined effect of strong coal movements over the last three to four weeks and more recently in the last week iron ore," Georgi Slavov, head of dry freight research and structured products at ICAP Shipping, said.
In recent weeks there had been better appetite for iron ore in Europe, South Korea, Japan and Taiwan. Chinese iron ore and coal imports were also picking up, brokers and analysts said.
Brokers said firmer demand to lease ships in the Atlantic and active freight derivatives trading had boosted sentiment this week, adding the interest had helped give a lift to rates for Capesize vessels typically hauling coal and iron ore cargoes.
The Baltic's Capesize index <.BACI> rose 4.4 percent on Tuesday, also notching up a fourth session of gains.
In recent months Chinese demand for iron ore -- the primary material in the manufacture of steel -- has dominated freight market activity while adding to swings on the main index.
Slavov said global raw materials consumption still remained far below levels seen over a year ago before the economic downturn.
"Demand is rising from a very very low level," Slavov said. "We are not going to reach 2008 volumes any time soon."
"There will be volatility," he said, referring to freight rates.
The main sea freight index hit a more than eight-month high on June 3 of 4,291 but has been erratic since then.
Maritime information provider Lloyd's Register-Fairplay estimated this month that the dry bulk carrier fleet will grow by an average of 9.5 percent from 2009 to 2013, versus 6.5 percent annual average growth in the previous five years.
Concerns have grown over the rising number of new ships set to hit the market in 2010 despite indications of some vessel cancellations and delays, analysts said.
The value of second-hand ships has continued to drop in recent weeks as new vessels come on stream and scrapping activity has dropped. ((jonathan.saul@reuters.com; +44 207 542 4357; Reuters Messaging: jonathan.saul.reuters.com@reuters.net))