NEW YORK (AP) ¿ Drybulk shipping stocks fell Monday, as a key index slumped and a Morgan Stanley analyst said an oversupply of ships is overshadowing improving demand.

The Baltic Dry Index, which is run by the Baltic Exchange in London, fell 38 points Monday to close at 2,318. The index measures shipping rates on 40 routes throughout the world.

Morgan Stanley analyst Ole Slorer cut his view of commodity shipping, which includes the transport of dry goods as well as petroleum, to "In-Line" from "Attractive."

He thinks drybulk stocks will struggle over the next two years as more ships are being built. And since rates were "artificially inflated" this year because of port congestion and other factors, stocks are now too expensive.

"While the impressive recovery in dry bulk markedly lifted rates and values in 2009, it also resulted in a near-halt in scrapping and less incentive to cancel newbuildings from a total orderbook that currently stands at 65 percent of the fleet," Slorer wrote. "In the context of this outlook, dry bulk equity valuation is also starting to look stretched, in our view."

Rates for Capesize vessels, the biggest drybulk ships on the seas, are up 25 percent so far this year. Slorer expects these rates to come down over time as the number of new shipping contracts remains sluggish. Capesize vessels are so named because they are too big to fit through the Panama or Suez Canal and must instead sail around the Cape of Good Hope or Cape Horn to travel between oceans.

In afternoon trading, shares of DryShips Inc. fell 37 cents, or 5.1 percent, to $6.90. Diana Shipping Inc. lost 37 cents, or 2.6 percent, to $13.64. Eagle Bulk Shipping Inc. gave up 24 cents, or 4.2 percent, to $5.42.

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