Daewoo-Hyundai, EU halts the merger of 2 billion South Korean shipyards – Corriere.it

The European Commission has banned the merger of Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries Holdings, the two most important South Korean shipbuilders. The reason that the operation, which would have been worth two billion dollars, would have created a dominant position on the world market for the construction of large ships of liquefied natural gas (LNG) by the new company.

The consequences on the world market

Since no remedies were presented – he explained the head of competition in Brussels Margrethe Vestager -, the merger would have resulted in fewer suppliers and higher prices for large ships carrying LNG. This is why we have forbidden the merger. This type of vessels are an essential element in the supply chain of matter, chand contributes to the diversification of the European energy source also improving energy security, and allow it to be transported all over the world. Thus, Vestager added, the merger between the two shipbuilders 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.

The European Commission investigation

The decision is only the culmination of a long investigation. The market for the construction of large LNG carriers is already concentrated in the control of a few players. They are highly sophisticated vessels that can transport large quantities of liquid natural gas – over 145,000 cubic meters – at very high temperatures. For the past five years European customers accounted for 50% of all orders, in a market that reached € 40 billion in value. The European Commission investigation started precisely from the reporting of a large number of customers who feared a sharp reduction in competition, with a limited choice of suppliers, and an increase in the prices of these ships, explains the EU in a statement. The institution had expressed concerns about the markets for the construction of oil tankers, container ships and LNG ships for liquefied petroleum gas (LPG) but the decision came only on the market for large LNG carriers.

The competition

Already currently Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries Holdings they have very large and growing market shares. The combination of the two companies would be the origin of the actor by far the most influential on the market, with shares equal to 60%. According to the note released by the Commission, the remaining shipbuilders would not be able to limit the price increase, as demonstrated by the fact that in recent years they have not entered into any contracts with any large LNG vessel. Furthermore, the capacity of the other construction companies would not have covered the expected market demand.

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