The European Commission has prohibited the acquisition of Daewoo Shipbuilding & Marine Engineering by Hyundai Heavy Industries Holdings. The merger between the two South Korean shipbuilders would have created a dominant position on the part of the new company resulting from the merger and reduced competition in the world market for the construction of large ships for liquefied gas. The parties have not formally offered remedies to address the Commission’s concerns. This is the first decision to block a merger since the European Antitrust blocked the Tata Steel / Thyssenkrupp joint venture two and a half years ago.
Vestager: large ships essential element for the supply of natural gas
Competition manager Margrethe Vestager recalled that “large ships are an essential element in the supply chain of liquefied natural gas and allow the transport of this energy source all over the world“.
LNG contributes to the diversification of the European energy source and, therefore, improves energy security. «The merger would have led to a dominant position in the world market for the construction of large LNG ships, for which there is a strong demand from European carriers. As no remedies were presented, the merger would have resulted in fewer suppliers and higher prices for large LNG-carrying vessels. This is why we have prohibited the merger ».
The Community decision follows an in-depth investigation by the Commission into the proposed operation, which would have united Dsme and Hhih, two global shipbuilders in the construction of large LNG carriers and two of the three largest players in a very concentrated market. Large LNG carriers are an essential element in the LNG supply chain. These are highly sophisticated ships that can carry large quantities of LNG (145,000 cubic meters or more) at a temperature of minus 162 degrees Celsius.
A 40 billion euro market
Over the past five years, the world market for the construction of large LNG carriers has accounted for up to € 40 billion, with European customers accounting for nearly 50% of all orders. During the investigation, the Commission received comments from a large number of customers, competitors and other third parties. These companies “feared that the operation would create a company with a dominant position in the world market for the construction of large LNG carriers, reduce competition and raise the prices of these ships”.