SINGAPORE, - Neptune Orient Lines, the world's seventh largest container carrier, said on Wednesday it will shed 9 percent of its workforce and warned the outlook was grim as the shipping sector faces up to a prolonged downturn.

NOL shares fell almost 3 percent after the firm said in a statement it will cut 1,000 jobs, mostly in North America, as it battles to weather a global economic slowdown.

The Singapore-based firm said last month its container shipping business, APL, will reduce capacity in Asia-Europe trade by about 25 percent. NOL said this capacity reduction will save $200 million in costs next year.

In the latest statement on Wednesday it said the firm will incur a $33 million restructuring cost in its fourth quarter.

While analysts were positive about NOL's move to cut costs, they expected NOL to incur losses over the next two years as the shipping industry faces a double-whammy of slowing demand and growing supply.

Deutsche Bank analyst Joe Liew said in a client note that he expects NOL to lose $100 million in 2009 and $115 million in 2010. Regional brokerage CIMB said the job cuts alone would not be enough to keep NOL in the black.

"While we are positive on the measures announced by NOL, the cost-cutting initiatives may not be able to offset the severe top-line pressure at the Asia-Europe trades," said Raymond Yap, CIMB analyst.

OUTLOOK GRIM

The container shipping industry is closely correlated to the health of the world economy. Shipping freight rates have fallen this year as major economies such as Germany and Japan slipped into recession.

NOL also issued a "grim" outlook for next year and said it did not see a recovery in the near-term.

"This reflects our considered view that what we are seeing goes beyond a normal cyclical downturn," Chief Executive Ron Widdows said in a statement.

NOL, which is 66 percent owned by Singapore state investor Temasek Holdings, last month posted an 82 percent plunge in third-quarter net profit to $35 million and forecast an operating loss in the fourth quarter.

The firm dropped out of a race to acquire TUI AG's Hapag-Lloyd container shipping unit in early October, leaving TUI to sell the world's fifth largest container shipping firm to German investors for 4.45 billion euros ($5.62 billion) including debt.