GENEVA - The world shipping industry is struggling with overcapacity and falling productivity in the face of the economic downturn and shrinking world trade, a U.N. agency said on Tuesday.

As the world's shipping capacity continues to increase even during the economic downturn, the industry finds itself confronted with a surge of oversupply and tumbling charter and freight rates, the United Nations Conference on Trade and Development (UNCTAD) said.

At the same time ship operators are having to deal with an upsurge in piracy, particularly off the Somali coast and in the Gulf of Aden, and with efforts to reduce carbon emissions from ships, it said in its Review of Maritime Transport 2009.

With scrap metal prices at relatively low levels, vessel owners prefer to hold on to their ships rather than laying them off, despite overcapacity, UNCTAD said.

UNCTAD said growth in international trade slowed to 3.6 percent in 2008 from 4.5 percent in 2007, to an estimated 8.17 billion tonnes of goods loaded, with dry cargo accounting for two thirds of that.

UNCTAD cited a forecast by shipping broker Fearnleys that world seaborne trade would contract by 1.4 percent this year then grow 2.0 percent in 2010, while Clarkson Research Services expects dry cargo volumes to fall by 4.4 percent this year.

Overcapacity is leading to falling productivity.

In 2008 the average deadweight tonne of cargo-carrying capacity transported one tonne of cargo over 29,300 nautical miles in 2008, or 194 km per day, UNCTAD said.

This is expected to fall below 28,000 tonne-miles in 2009.

The fundamental reason for the decline in average productivity in recent years is the oversupply of tonnage available, which contrasts with the reduced growth in world seaborne trade, UNCTAD said.

The surplus tonnage of oil tankers, dry bulk carriers and general cargo ships rose to 25.9 million deadweight tonnes, or 2.9 percent of the total world merchant fleet in April this year from 19.0 million deadweight tonnes or 2.2 percent in December last year, UNCTAD said.

Overcapacity for oil tankers rose to 4.0 percent in April from 3.5 percent (14.4 million deadweight tonnes) last December, and oversupply of large dry bulk vessels also rose.

The container shipping fleet is expected to grow by 9.6 percent in 2009 as demand falls 9.1 percent, it said.

The recent boom in container shipping... is now bound to be followed by a historical bust, UNCTAD said.

Falling oil and commodity prices during 2008 prompted a drop in freight rates, down by as much as 90 percent on some routes in the second quarter of 2009 against the northern summer in 2008, UNCTAD said.

(Reporting by Jonathan Lynn)