International credit rating agency S&P Global Ratings has assessed that South Korean petrochemical companies are facing a deeper downturn cycle. The agency diagnosed that, with no clear signs of a market recovery, another challenging year is expected in 2025.
On May 8, S&P stated in a related report, "The downturn cycle that began at the end of 2022 still shows no clear signs of recovery."
S&P analyzed, "Profitability pressures caused by oversupply and weak demand continue, while aggressive capacity investments in China and the Middle East will contribute further to oversupply." In addition, the agency pointed out, "Uncertainty in the global trade environment is an additional risk factor that could further dampen demand for chemical products, potentially leading to lower plant utilization rates."
Accordingly, S&P projected, "Although companies may see a temporary rebound in profitability through cost reductions and other measures, it will still fall significantly short of mid-cycle levels." The agency also evaluated that "the current downturn is too deep to be overcome within the next two years."
Furthermore, S&P judged that the capacity to maintain credit ratings for Hanwha TotalEnergies (BBB), LG Chem (BBB+), and SK Innovation (BBB-), for which S&P assigns ratings, is limited. The agency added, "Even under the base-case scenario, downside risks related to profitability and leverage remain high."
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