HD Hyundai Chemical Outlook Downgraded to 'Negative'... "Prolonged Slump in Olefin Market"

Korea Ratings announced on June 26 that it has revised the outlook for HD Hyundai Chemical's unsecured bond rating from 'Stable' to 'Negative'.

Korea Ratings cited several reasons for the downgrade of HD Hyundai Chemical's credit rating outlook: sluggish market conditions, increased debt burden, and deterioration in financial stability.

Korea Ratings explained that the prolonged downturn in the olefin market, combined with shrinking margins in aromatics, has weakened the company's profit-generating ability. It stated, "Due to intensified supply pressure in the petrochemical sector, the performance of the HPC (PE, PP production) facility, completed in 2022, continues to be sluggish."

The agency added, "Although the impact of the PX production facility fire at an MX demand source is expected to be resolved starting from the second quarter of 2025, the MX spread has not recovered meaningfully due to stagnant demand caused by the US-China tariff dispute and other factors. Furthermore, the burden of capacity expansion is expected to persist until around 2027, and the oversupply trend in the olefin segment is also likely to continue for the time being."

Korea Ratings assessed that the increased debt burden following large-scale facility investments has not been alleviated. The agency stated, "As of the end of March 2025, the debt ratio was 282.1% and the dependence on borrowings was 62.5%, indicating excessive financial burden." It also noted, "Since 2023, accumulated net losses have caused financial leverage indicators to deteriorate rapidly, which is another source of concern."

Korea Ratings expects it will take time for HD Hyundai Chemical's financial stability to improve, given the company's weakened cash generation capacity. The agency said, "HD Hyundai Chemical is currently reviewing measures to restore financial stability, such as capital increases through its shareholders." It emphasized, "Considering the decline in cash inflows due to poor performance and the annual interest expense burden of approximately 200 billion KRW, it will be difficult to significantly reduce the financial burden in the short term."