The European Commission has ruled against a merger between South Korean shipbuilding giants Daewoo Shipbuilding & Marine Engineering (DSME) and Hyundai Heavy Industries (HHI), claiming the move would create a dominant construction force in the liquefied natural gas (LNG) carrier market.
The decision came after an in-depth probe by the commission, which found that the merged company would also reduce competition and increase prices for LNG carrier newbuilds. The EU estimated that over the past five years, the global LNG carrier market represented up to €40bn ($45.8bn), with European customers accounting for almost 50% of all orders.
“The merger between HHIH and DSME would have led to a dominant position in the global market for the construction of large LNG vessels, for which there is significant demand from European carriers. Given that no remedies were submitted, the merger would have led to fewer suppliers and higher prices for large vessels transporting LNG. This is why we prohibited the merger,” said executive vice president Margrethe Vestager.
The EU said that a combined entity would have been by far the largest player in the world, in an already concentrated market, with a combined market share of at least 60%. The $1.8bn merger, in which HHI would take over 55.7% of DSME, was made public in March 2019. The move has already been approved by China and Singapore.
Today’s prohibition is only the tenth merger that the European Commission has blocked over the past 10 years. A couple of years ago it gave its blessing for the merger of China’s two largest shipbuilding groups, creating a shipyard entity larger than anything in South Korea.