This report does not constitute a rating action. Korea's petrochemical industry faces another tough year. The downcycle that started in late 2022 shows no signs of meaningful recovery. We expect a bump in companies' EBITDA due to cost-cutting, but it will remain considerably below mid-cycle levels. The downturn is too deep to exit over the next two years. Structural overcapacity, partly from China's push for self-sufficiency, will persist longer than we expect. Another factor likely to exacerbate excess supply is the Middle East's aggressive investment in petrochemicals, including Saudi Arabian Oil Co.'s (Saudi Aramco) Shaheen project under S-Oil and ongoing investments in China. While the direct effects of the U.S. tariffs on Korea's petrochemicals appear limited, indirect effects caused by
