The rating on Wan Hai Lines Ltd. reflects the highly cyclical nature of the container shipping industry, rising fuel costs, as well as its somewhat limited operating scale. Counterbalancing factors include the company's strong market position in intra-Asia container routes, its moderate leverage, and its high operational flexibility. In our view, Wan Hai is not immune from the high cyclicality of the global container shipping industry. Wan Hai experienced its deepest ever market downturn in the company's history in 2010, from which it has now recovered. However, the global container shipping market is likely to experience weakening freight rates, particularly in the long-haul market over the next few quarters due to the resumption of new capacity additions by major carriers.
