[Alpha Biz= Kim Jisun] Major South Korean credit rating agencies have begun a wave of downgrades on affiliates of conglomerates such as Lotte and SK, citing deteriorating business conditions and continued underperformance.
According to industry sources on June 26, a number of corporate credit ratings have been revised downward this month. On June 25, NICE Investors Service downgraded Lotte Aluminium’s short-term credit rating from A2+ to A2. The agency cited weakening business performance due to declining demand for aluminum foil used in electric vehicle batteries and low yield rates at new overseas production facilities.
The agency also forecast that Lotte Aluminium’s operating profit margins are likely to remain under pressure in the near term. Earlier, on June 18, both NICE and Korea Investors Service downgraded Lotte Engineering & Construction’s (Lotte E&C) rating from A+ to A0, pointing to prolonged stagnation in the real estate sector and rising business uncertainty.
Lotte E&C continues to face unsold inventory in regional developments, such as those in Daegu and Gwangju, exacerbating project risk. Although the company has extended the maturity of KRW 2 trillion in project financing (PF) asset-backed securities to March 2027 through fund restructuring, analysts remain cautious about its liquidity resilience.
“While the refinancing of PF exposures has helped alleviate immediate liquidity risks, potential capital injections may still be required depending on financial market conditions,” said Kwon Joon-sung, an analyst at NICE.
SK Group affiliates have also come under pressure. On June 25, Korea Investors Service downgraded SK Advanced’s credit rating from A– to BBB+, citing ongoing operating losses for four consecutive years. Although the company may benefit from China’s recent tariffs on U.S. propane, the rating agency warned that oversupply in the sector may persist until at least 2027.
Meanwhile, on June 19, NICE maintained its A0 rating on SK IE Technology (SKIET) but revised its outlook from “Stable” to “Negative.” The company recorded a KRW 291 billion (approx. USD 210 million) net loss last year amid a slowdown in EV battery material demand, which analysts expect will take time to recover.
The spate of downgrades underscores mounting headwinds for Korean industrial companies amid global demand uncertainty and intensifying competition, particularly in the energy and materials sectors.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
