CORRECTED - CORRECTED-UPDATE 1-China COSCO H1 net doubled, challenges ahead

(Corrects fourth paragraph to specify time period for the freight rate rise was in the 12 months to end June, not in the first half alone; adds attribution in same paragraph)

(Adds analysts comments and details)

By Alison Leung

HONG KONG, Aug 27 (Reuters) - China COSCO Holdings Co Ltd (1919.HK), the listed flagship of the country's premier shipping conglomerate, beat forecasts to more than double its first half earnings as China's unabated demand for raw materials boosted freight rates for dry bulk ships.

But the slowdown in terminal throughput and the rapid cyclical downturn in container shipping triggered concerns over its earning growth in the second half, analysts said.

Although the U.S. sub-prime mortgage crisis is still affecting the world economy, the shipping market faces both challenges and opportunities, China COSCO (601919.SS), said in a statement on Wednesday.

China COSCO's freight rates outperformed the Baltic Exchange's chief sea freight index .BADI in the year through June, rising 80 percent against a 60 percent gain in the index, according to a JP Morgan research report. China COSCO operates the world's largest bulk cargo fleet.

Margins for its container shipping business also improved in the first half from the second half of 2007 even as the sector has faced a margin squeeze, JP Morgan said.

"COSCO's strategy to increase its exposure to China's domestic market and Intra-Asia trade paid off," said Johnson Leung, an analyst at JP Morgan.

But China Shipping Container Lines (2866.HK), which vies with China COSCO for the world's No. 5 container fleet position, on Wednesday posted a 45 percent drop in net profit to 637 million yuan ($93.03 million) for the first six months of 2008.

Shares in China COSCO rose 2.7 percent after the results on Wednesday but have also lost 22 percent of their value since July after it outperformed the broader market by 16 percent in the first half. CSCL shares also gained 2.6 percent in early trade, beating a 0.9 percent rise in the index for Chinese shares listed in Hong Kong .HSCE, or H-share index.

"Container shippers could see losses in the fourth quarter and in 2009 amid high oil prices and a slowing global economy," said Geoffrey Cheng, an analyst at Daiwa Institute of Research.

BEATING FORECASTS

China COSCO posted a net profit of 15.12 billion yuan for the six months ended June against 7.23 billion yuan a year ago and an average forecast of 13.9 billion yuan from three analysts polled by Reuters.

The net also beat the company's July forecast of at least 90 percent growth in the first half.

China COSCO's terminal and container leasing arm, COSCO Pacific (1199.HK), reported a 3 percent rise in first half net profit to $153 million.

But oversupply of freight capacity, with the global Capesize fleet set to double by 2011, will drive down dry bulk freight rates, Goldman Sach said.

"That will likely lead to a multi-year bear market for bulkers beginning in 2009 and possibly lasting through 2011," Tom Kim, an analyst at Goldman, said in a research note on Wednesday.

The Baltic Exchange Index, which monitors shipping costs on major export routes for commodities excluding oil, have came down about 40 percent from its peak in May and back to its last August's level.

China COSCO shares fell 11.6 percent in the first six months, beating a 26 percent loss in the H-share index. ($1=6.847 Yuan) (Reporting by Alison Leung; Editing by Ken Wills)