Citigroup has downgraded Neptune Orient Lines (N03.SG) to Sell from Buy, cuts target price to $1.70 from $2.00, based on 1.1x P/B vs 1.4x previously, according to Dow Jones.

Citi says expectations of shipping group returning to profitability this year on higher freight rates, increased volume already reflected in share price.

“Investors should sell into current strength in the run-up to the 3Q peak season and 2Q10 reporting season. We fear earnings may head downhill after the peak season on weaker US retail sales and accelerating newbuild deliveries,” says the research house.

Citi cites high unemployment rate, reduced government support, lack of consumer credit availability as negative factors for US consumer demand.

Shares flat at $2.06.