Global credit rating agency S&P announced on 6th that it has downgraded the credit rating outlook for POSCO Holdings, POSCO, and POSCO INTERNATIONAL from 'stable' to 'negative.' S&P explained that all three companies have poor performance and uncertain revenue.
In its report on the same day, S&P projected that POSCO Holdings would remain at a low level of revenue. S&P analyzed that the group’s core business, the steel institutional sector, is facing difficulties, and demand is weak amid ongoing supply chain issues from China. Additionally, it noted that there is a high possibility that the secondary battery materials business will continue to incur losses.
S&P also anticipated that large-scale facility investments would pose a burden. According to S&P, the annual facility investment scale, which was between 2.5 trillion won and 3.5 trillion won before 2022, jumped to 7.1 trillion won in 2023 and is expected to reach 8.4 trillion won in 2024. S&P estimated that the company will spend 7.5 trillion won on facility investments this year.
Furthermore, S&P noted, 'The uncertainty regarding U.S. steel tariffs and future demand recovery still exists,' adding that 'the direct export ratio to the United States is in the low single digits compared to total sales; however, the margin for those exports is relatively high.'
It continued, 'There are also bypass export volumes through third countries such as Mexico,' estimating that 'in the worst case, the revenue decline will be in the low single digits, while the operating profit decline will be in the mid-to-high single digits.'
S&P stated, 'The negative rating outlooks for POSCO and POSCO INTERNATIONAL reflect the strategic importance of both companies within the group and the rating outlook for their parent company, POSCO Holdings.'
However, S&P expressed, 'The probability of a significant deterioration in the credit metrics for POSCO and POSCO INTERNATIONAL is low,' stating that 'while the poor performance in the steel institutional sector will impact both POSCO and POSCO INTERNATIONAL, the downward pressure on their own creditworthiness (SACP) does not seem high.'