[Edaily Marketin KIM YEON-SEO Reporter] As the downturn in the petrochemical industry drags on, downward pressure on the creditworthiness of major companies in the sector is intensifying. In the first-half regular ratings by domestic credit rating agencies, the credit ratings of LGCHEM,LTD and Yeocheon NCC were downgraded, and the rating outlooks for LOTTE CHEMICAL CORPORATION and KumhoPetrochemical were also revised downward. Weak earnings due to oversupply and mounting financial burdens appear to be leading to a decline in creditworthiness.

LGCHEM,LTD Downgraded to ‘AA’ Due to Weak Performance in Chemical Division

Korea Ratings Corporation downgraded

LGCHEM

,LTD’s credit rating from ‘AA+’ to ‘AA0’. The rating outlook was changed from ‘Negative’ to ‘Stable’. Korea Credit Rating Agency maintained LGCHEM,LTD’s credit rating at ‘AA+’ but lowered the outlook from ‘Stable’ to ‘Negative.’ Meanwhile, NICE Credit Rating, which had previously adjusted the outlook to ‘Negative’ last year, maintained LGCHEM,LTD’s credit rating at ‘AA+ (Negative).’

The factors commonly cited by the rating agencies were poor performance in the chemicals division and increased financial burdens resulting from large-scale investments. According to Korea Ratings, LGCHEM,LTD’s operating profit in the petrochemicals division plummeted from 4.0815 trillion won in 2021 to 1.0745 trillion won in 2022. Operating losses continued after 2023, and by 2025, the loss had expanded to 3564억원.

The expansionary investment strategy also increased the financial burden. LGCHEM,LTD executed a cumulative 50.3230 trillion won in capital expenditures from 2022 to 2025. During the same period, the free cash flow (FCF) deficit reached 29.7594 trillion won. Net debt increased from 7.4522 trillion won at the end of 2022 to 22.9092 trillion won at the end of 2025.

Han Min-soo, a senior researcher at Korea Ratings, assessed, “While the burden may be partially alleviated by moderating the pace of investment and liquidating assets, it will be difficult to restore financial stability to pre-2023 levels within the near term.”

LOTTE CHEMICAL CORPORATION Maintains ‘AA-’ Rating, but Outlooks Unanimously ‘Negative’

The likelihood of a credit rating downgrade for LOTTE CHEMICAL CORPORATION has increased. While Korea Ratings, Han Shin Ratings, and Na Shin Ratings maintained LOTTE CHEMICAL CORPORATION’s credit rating at ‘AA-’, they unanimously lowered the outlook from ‘Stable’ to ‘Negative’. If the rating is downgraded further from its current level, LOTTE CHEMICAL CORPORATION will fall to the single-A tier.

Although earnings improved temporarily in the first half of this year due to supply disruptions caused by the Middle East crisis and lag effects, the rating agencies focused on the burden of structural oversupply and the difficulty in reducing debt. Key factors cited for the downgrade of the outlook include: △ a temporary improvement in first-half performance following a massive net loss in 2025; △ the possibility of renewed pressure from global oversupply in the second half; and △ limited capacity to alleviate debt burdens through internal operating cash flow.

Kim SEOYON, a senior researcher at NICE Ratings, stated, “LOTTE CHEMICAL CORPORATION’s performance was significantly weak, recording a net loss of 2.5 trillion won in 2025 due to an operating loss of 943.1 billion won and impairment losses,” and “The return to an operating profit in the first quarter of this year and the improvement in second-quarter performance were primarily driven by a temporary improvement in supply and demand resulting from supply disruptions in the Middle East, as well as positive lag effects,” she assessed.

Kumho Petrochemical: Profit Recovery Delayed Despite Strong Financial Stability

Despite its strong financial stability, KumhoPetrochemical has lost its positive outlook due to a delayed recovery in market conditions. NICE Ratings maintained KumhoPetrochemical’s credit rating at ‘A+’ but downgraded the outlook from ‘Positive’ to ‘Stable.’ HanKi Ratings and HanShin Ratings, which had previously adjusted their outlooks, maintained KumhoPetrochemical’s credit rating at ‘A+ (Stable)’ in this regular review.

KumhoPetrochemical maintains stable cash generation in its synthetic rubber products and combined heat and power (CHP) segments. However, analysts note that the company’s overall profit-generating capacity has not improved as much as expected due to the ongoing oversupply of nitrile butadiene latex (NB-Latex) and persistent losses in the phenol derivatives segment of its subsidiary, Kumho P&B Chemical.

Kim SEOYON, a senior researcher at Korea Ratings, stated, “While the company maintains excellent financial stability, we reflected the fact that its overall profit-generating capacity has not strengthened as much as previously expected due to the delayed recovery of the NB-Latex market—one of its key products—and the ongoing oversupply of phenol-based products at its subsidiary, Kumho P&B Chemicals.”

Yeocheon NCC Downgraded from ‘A’ to ‘BBB’ Grade

Yeocheon NCC has been downgraded to a non-investment-grade rating. Korea Ratings and Han Shin Rating downgraded Yeocheon NCC’s credit rating from ‘A-’ to ‘BBB+’. The rating outlook was changed from ‘Negative’ to ‘Stable’.

The downgrade was attributed to the prolonged unfavorable conditions in the petrochemical industry and poor earnings performance. Given the high volatility of the industry, analysts assess that a rapid recovery in earnings over the short to medium term will be difficult. Although the earnings of upstream chemical companies generally improved in the first quarter of this year due to the war in the Middle East, Yeocheon NCC posted a loss of 24.2 billion won on an EBIT (earnings before interest and taxes) basis.

Although discussions on structural reorganization are ongoing across the petrochemical industry, credit rating agencies believe that restructuring alone is unlikely to alleviate credit concerns. They explain that the key lies in whether the company can restore its fundamental operating cash flow generation capacity.

Jang Mi-su, a senior researcher at Korea Ratings, stated, “Even if the financial structure improves in the short term through restructuring, financial burdens could increase again if fundamental operating cash flow generation is not restored.” She added, “It is necessary to monitor not only short-term changes in the financial structure but also whether financial burdens can be controlled through performance improvements over the medium to long term.”