LONDON, (Reuters) – Uncertainty over the pace of world economic recovery and fleet oversupply are set to dog the sea freight container sector into 2010, spelling more pain for shippers carrying manufactured goods.

The global downturn has hit the container sector hard especially on key routes from Asia to consumers in the West carrying finished goods from electronics to toys.

"It is a pretty unprecedented situation — demand is weak globally on all trade lanes," said Neil Dekker, with London-based shipping consultancy Drewry. "It has particularly hit the East-West trade lanes."

Poorer prospects are expected to keep freight rates under pressure across the whole sector including the dry bulk market which transports resources such as grain, iron ore and coal.

London-based shipbroker Clarksons forecast that the volume of container trade will contract 8.3 percent this year versus growth of 4.8 percent in 2008.

"Every player within the box shipping market is feeling the crunch in one way or another," it said in a report this month.

"Though there may well be a light at the end of the tunnel, it certainly remains switched off for now."

World container trade, as measured in twenty-foot equivalent units (TEUs), is forecast by Drewry to grow one percent in 2010, while IHS Global Insight sees growth of 6.8 percent next year.

"It is not as if trade in 2010 will rebound to the levels we saw globally during 2006 or 2007 during the strong world recovery from the last global recession in 2001," said Paul Bingham, Washington-based managing director of forecaster IHS Global Insight.

While economic indicators have pointed to a recovery in the world economy in 2010, the outlook for the container sector remains cautious.

"An obvious risk would be that the global economy goes back into a negative direction," said Marc Pauchet, shipping analyst with London-based maritime consultants MSI.

Drewry's global supply demand index, a key measure of the container industry, is set to reach an all-time low this year of 83.4.

The index uses 100 as the base level with a figure above that indicative of a strong market. The index is forecast to drop to 79.6 in 2010 versus 100.1 in 2008 and 105 in 2007.

"The free-fall in container trade volumes has slowed compared with the month-to-month drops we saw early in the year," said IHS Global Insight's Bingham.

Container shippers hope the traditionally busy period which normally starts around August leading up to Christmas, when consumer goods are ferried to the West for the festive period, will be better than last year's recession-shortened season.

"We expect the peak season to be longer than last year," said MSI's Pauchet.

"This year we expect it to start at a regular time and finish early November — that is back to a regular pattern. But it is not the same volume as it was two years ago."

Swiss logistics group Kuehne & Nagel on Monday forecast a slump in global air and sea freight markets in 2009 with no substantial improvement in the short-term.

"There is less cargo to transport and there is competition for cargoes," said Pauchet.

A survey by Paris-headquartered market intelligence provider Alphaliner showed first quarter revenues of 11 of the main container shipping groups had dropped 35 percent in the first quarter versus a year ago to $14.45 billion. The survey included Maersk Line, the world's largest container shipper and a unit of of Danish shipping and oil group A.P. Moller-Maersk. "Further revenue reductions are expected for the rest of the year and liner operators could face a $40-$50 billion combined revenue shortfall for 2009 versus 2008, much larger than that currently predicted by analysts," Alphaliner said.

A glut of container ships is also expected to hit the market. The container fleet is estimated around 4,716 vessels.

Alphaliner forecast fleet growth of 13.2 percent this year and 10.7 percent in 2010. "There is a significant amount of supply coming in this year and next year," said Dekker, who is editor of Drewry's Container Forecaster. "There will be a capacity overshoot."

The growing imbalance between supply and demand is expected to pressure profitability further for carriers despite their cost cutting measures and attempts to delay vessel deliveries.

"There's going to be some fall-out," said Dekker. "There is no way that all companies can continue with those sorts of losses."