One of China’s most senior shipbuilding executives has claimed the mega merger between the country’s top two yard groups will not create a monopoly, as likely anti-trust reviews hove into view.
The merger between CSSC and CSIC is expected to create one of the two largest shipbuilding groups in the world, competing with the South Korean shipbuilding conglomerate about to be created by the merger of Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering.
Hu Wenming, the chairman of CSIC, denied market concerns that the Chinese merger would create a monopoly in a recent interview with China Securities Journal.
Hu maintained the merger between CSSC and CSIC is a necessary strategic restructuring, and it will not be creating a monopoly in the market.
According to Hu, the combined capacity of CSSC and CSIC accounts for less than 50% of the total shipbuilding capacity in China and the merger will further shed the capacity of the two groups, while the total orderbook of the two shipbuilders only accounts for less than 15% of the global orderbook. HHI and DSME’s combined orderbook in gt terms stands at just over 20% today.
Hu stressed that the aim of the merger is not only to solve the overcapacity issue but also to promote technological innovation capabilities.
Before joining CSIC as chairman, Hu served as chairman of CSSC.
CSIC and CSSC were one conglomerate until 1999 when they were spilt in two with the Yangtze river serving as a geographic marker, with CSIC in charge of northern yards and CSSC taking yards south of the river.
According to Hu, the “divorce” of the two groups 20 years ago was to make the shipbuilding industry more competitive by changing the group from a government administrative body into business corporations and the “re-marriage” is a reconsolidation of the resources of both groups to create a stronger Chinese shipbuilder in the global market.
CSSC and CSIC officially confirmed their intentions for a long expected merger in July. The merger will involve eight listed companies of the two groups.