GLBS

HCL

GPRT

A rising tide of demand for freight capacity after the summer and Olympic hiatus is expected to float several vessels

by Rachel Robson

The conclusion of the Olympic Games in China and the expected seasonal upswing from September through to December mean now could be the time to take advantage of share price weakness and start investing in shipping stocks such as Globus Maritime (GLBS:AIM) Hellenic Carriers (HCL:AIM) and Goldenport (GPRT).

Summer witnessed a slow down in Chinese iron-ore imports and steel production, particularly as the Olympics prompted the temporary closure of several steel mills in and around Beijing to improve the air quality surrounding the Games' venues. The Baltic Dry Index has also dropped around 43% since May's all-time high of 11,793.

This slowdown has also been reflected in the shares of many shipping groups, with several currently trading lower than the peaks seen in early summer. The shares of marine transportation group Globus Maritime have slipped 23% from 555p to 425p, and at 335p Goldenport's shares are 15% below the 394p at which they began July.

This weakness should provide the perfect buying opportunity, and Hellenic Carriers offers an encouraging precedent. The dry bulk carrier’s shares had slipped to 220p in August from May's 247.5p high, but rebounded to 239p after positive interim results.

A shortage of adequate vessels and a lack of port infrastructure and demand boosts strength in the dry bulk market.

The longer-term picture is less clear as the global bulk carrier fleet is due to expand by 240 million deadweight tons between 2007 and 2011, or 64% of 2007's capacity, according to equity strategy think tank Mirabaud Securities. This is likely to depress freight rates in time, although much will depend on how quickly this capacity comes onstream. 'We could be wrong in our cautious view on the long term, given better than expected dry bulk demand, cancellations/delays in new deliveries, and worsening port congestion,' says Alex Chan, analyst at NBG International.

Shares says: Definitely worth a punt for the next few months.

Buy Hellenic Carriers, Globus Maritime, Goldenport