EU blocks $ 2 billion shipbuilding merger of South Korean companies Daewoo and Hyundai
The two South Korean companies dominate the market for the construction of vessels carrying super-refrigerated LNG.
An EU official said blocking the merger would help prevent European consumers from paying higher prices for LNG, which emits less carbon dioxide than coal but remains a source of gas emissions at greenhouse effect.
Ships carrying LNG to Asia have been redirected to Europe, where consumers are willing to pay extra for the fuel needed to generate electricity. The EU is the world’s third largest importer of LNG.
The proposed merger was first announced by Hyundai Heavy in 2019. Brussels had asked the companies to provide solutions to limit concerns about preserving competition.
South Korean shipbuilders are major suppliers to EU companies and account for around 30 percent of global cargo demand, according to the commission.
The two companies won new orders for 45 large LNG ships out of a total of 75 last year, together accounting for 60% of the global market, according to industrial tracker Clarksons Research.
The merger has been approved by regulators in Singapore, China and Kazakhstan, but it needs the green light from the EU, Japan and South Korea for the deal to go through.
To address competition concerns, Hyundai Heavy had offered not to raise prices for LNG ships at this time and to transfer some technology to smaller domestic shipyards, industry officials said.
But the offer was unsuccessful, officials said, adding that Hyundai Heavy had not made a formal proposal to meet the EU’s request for other remedies.
Hyundai Heavy has said the EU should approve the merger unconditionally.
“It is impossible to assess market dominance by market share alone in the shipbuilding market and the market structure makes it difficult for a certain company to monopolize it,” the company said.
Daewoo Shipbuilding declined to comment.