Major South Korean companies are facing a wave of credit rating downgrades amid the influx of low-cost Chinese goods and a prolonged economic downturn.

According to sources from the securities industry on Tuesday, the country’s three major credit rating agencies - NICE Investors Service, Korea Investors Service, and Korea Ratings - simultaneously downgraded the credit ratings or outlooks of key petrochemical companies such as LG Chem Ltd., SK Advanced Co., SK geo centric Co., and Hanwha TotalEnergies Petrochemical Co. in their regular credit evaluations for the first half of 2025.

The petrochemical sector, already struggling with the influx of cheap Chinese products, now faces additional pressure from low-priced supplies from the Middle East, raising doubts about a potential market recovery.

In particular, Lotte Chemical Corp. was downgraded one notch from AA to AA- due to continued operating losses and delayed performance recovery, while its parent company Lotte Corp. also saw its rating downgraded.

This is the first downgrade for Lotte Chemical and Lotte in two years since 2023.

Other Lotte affiliates such as Lotte Property & Development Co., Lotte Rental Co., and Lotte Capital Co. also faced one-notch downgrades due to the impact of the rating downgrades of the core affiliates.

In the secondary battery sector, EcoPro Co. and EcoPro BM Co. saw their credit ratings downgraded by one notch.

Analysts say that a slowdown in electric vehicle demand, combined with price competition from China, is making it difficult for these companies to quickly recover their cash-generating capacity.

According to NICE Investors Service, a total of 47 companies saw their credit ratings or outlooks downgraded in the first half of the year, while only 34 companies were upgraded.

In the first half of last year, downgrades (47) also outnumbered upgrades (27).

Global rating agency S&P Global Ratings (S&P) noted in a recent report that major Korean companies are facing increased credit risk as they struggle to adapt to changing business environments.

S&P downgraded the credit ratings of Hanwha TotalEnergies, LG Chem, and LG Energy Solution Ltd. in the first half of the year and revised the rating outlooks for POSCO Holdings Inc. and its affiliates POSCO Co. and POSCO International Corp. to “negative.”

“Structural changes such as tariffs, the transition to electric vehicles, oversupply, and artificial intelligence (AI) are reshaping the competitive landscape of key industries, and business conditions could deteriorate further over the next one to two years,” said S&P Credit Analyst Park Jun-hong. “The chemical, steel, automotive, and battery industries will face even greater pressure on profitability.”

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