The European Commission has resumed the screening of Hyundai Heavy Industries’ acquisition of Daewoo Shipbuilding & Marine Engineering after temporarily suspending the review amid the coronavirus pandemic, according to the commission on June 4.
The EC said the “provisional deadline” of the screening would be Sept. 3 -- a delay from the initial plan of July -- on its website. Two months earlier, the site had shown the deadline of the screening as “suspended” amid the pandemic.
Hyundai Heavy Industries’ LNG carrier (HHI)
“Cargo shipbuilding is an important industry for the European Union. Maritime transport represents a substantial portion of the EU’s internal and external freight trade, with European shipping companies regularly purchasing vessels from DSME and HHI, two of the leading cargo shipbuilders in the world,” said the commission’s Executive Vice President Margrethe Vestager, who is responsible for competition policy.
“This is why we will carefully assess whether the proposed transaction would negatively affect competition in the construction of cargo ships, to the detriment of European consumers.”
In November last year, HHI had submitted its main review of its merger with DSME to the EU, which completed the first stage of preliminary screening among two steps.
The deal is completed when the world’s two largest shipbuilders get approval from antitrust watchdogs of six regions: South Korea, the European Union, Japan, China, Singapore and Kazakhstan. Last year, Kazakhstan’s competition authority declared its approval of the merger between the world’s two largest shipbuilders, the first among the regions.
The commission said it has concerns that the proposed merger may remove DSME as an important competitive force in the markets of large container ships, oil tankers and LNG and liquefied petroleum gas carriers.
Among the markets, liquefied natural gas carriers are expected to be key in the EU’s in-depth review, according to industry watchers. Currently, HHI and DSME hold about 60 percent of the global LNG market share. Three Korean shipbuilders’ recent deal with Qatar for $20 billion worth of LNG vessel project may further increase their global share.
“The Qatar deal could adversely affect the screening. But it doesn’t necessarily mean it will make Korean shipbuilders dominant in the market because Chinese shipbuilders are fast emerging as strong competitors,” said an industry source.
In April, Qatar Petroleum separately signed a $2.86 billion contract to construct LNG carriers with China State Shipbuilding Corporation. China’s global LNG market share is 20 percent, a huge jump from zero two years.
An HHI official said, “We are having a constructive dialogue with the EC. We will continue explaining that the proposed merger will allow the formation of a stronger business with a more efficient cost structure, which brings significant benefits and values to all stakeholders.”
By Shin Ji-hye (firstname.lastname@example.org)