News Brief
EU Blocks Merger Of Shipping Giants Daewoo And Hyundai, Rules That Combined Entity Will Control Over 60% Of Global Market For LNG Carriers
India Infrahub
Jan 15, 2022, 01:56 PM | Updated 01:56 PM IST
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The Competition Commission Of European Union has blocked the proposed merger between South Korean shipbuilding giants Daewoo Shipbuilding and Hyundai Heavy over concerns that the merged entity will reduce competition in the worldwide market for the construction of carriers supplying large liquefied natural gas (LNG).
Noting that large vessels are essential element in the supply chain of LNG and holds the key to Europe's energy security, the competition regulator ruled that the merger between Daewoo Shipbuilding and Hyundai Heavy will lead to a dominant position in the global market for the construction of large LNG vessels.
Daewoo Shipbuilding and Hyundai Heavyare global leaders in the construction of large LNG carriers, and two of the three largest players in this very concentrated market.
The EU regulator determined that the combined market shares in the LNG carreier industry of the two companies would be of at least 60%, which in itself is an indicator of a dominant position.
The EU observed that two Korean shipping giants also did not offer any remedies to address the Commission's concerns.
"Large LNG carriers are highly sophisticated and differentiated vessels that are extremely complex to build." the EU said on the entry barriers for newer players
The commission said that the coronavirus pandemic had little impact on large LND carriers and found and future demand outlook is very positive.
Large LNG carriers are an essential element in the supply chain of LNG. They are highly sophisticated vessels that can carry large quantities of LNG at a temperature of minus 162 degrees Celsius.
Over the past five years, the worldwide market for the construction of large LNG carriers represented up to €40 billion, with European customers accounting for almost 50% of all orders.
Deal Announced in 2019
In March 2019, Hyundai Heavy, the world's second-largest shipbuilder, signed an agreement to acquire rival Daewoo Shipbuilding.
Hyundai hoped to expand its global market share to 22.6% by acquiring Daewoo Shipbuilding, overtaking China State Shipbuilding as the world's largest shipbuilder.
Daewoo Shipbuilding and Hyundai Heavy also were hoping that the merger as an opportunity to alleviate the cutthroat price competition that has plagued the industry and driven prices to lower level.
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