With the European Commission less than two weeks away from its scheduled deadline to announce a decision on the proposed merger of South Korea’s two largest shipbuilders, reports are again surfacing that the regulators will rule that the transaction is anticompetitive. The Financial Times is reporting that unnamed officials said the EU will announce its decision this week to effectively block the nearly $2 billion merger of Hyundai Heavy Industries shipbuilding operations with Daewoo Shipbuilding and Marine Engineering.
Rumors of potential problems in obtaining approval from EU antitrust regulators began circulating months ago in South Korea. The review process, however, has been delayed several times since the transaction was first announced in 2019, mostly due to the pandemic and the inability to deliver materials to the EC. The review resumed in November 2021 with January 20, 2022, set as the target date for the final decision.
“One EU official said blocking the merger would help protect European consumers from paying higher prices for LNG,” writes tie Financial Times. The newspaper reports that Hyundai failed to offer proposals to the regulators that addressed the concerns over South Korea’s dominance in building LNG carriers. In November 2021, The Korea Times also reported that the EU’s concerns regarding the proposed merger were honed in on the LNG market. The two shipyards currently build as much as two-thirds of the LNG ships and the reports have said the regulators are concerned over the potential for the Koreans to raise prices in this segment.
Many EU countries have come to depend on LNG as a fuel source as regulators move to tighten environmental restrictions across Europe. The EU is currently the world’s third-largest importer of natural gas that is used in many places to generate electricity. The regulators’ concerns may have increased in recent weeks as Europe experienced a strong increase in demand for LNG imports as winter temperatures set in across the region. With prices rising sharply, there were reports that shippers were redirecting their gas carriers in mid-voyage to Europe to take advantage of the spike in market demand.
Read Also: India’s Deendayal Port Crosses The 100 Million Metric Ton Mark
The Financial Times reports that Hyundai felt it was unfair to judge market dominance based on one sector of the shipbuilding business, citing that it competes in a broad range of segments including primarily with containerships, other gas carriers, and tankers. Data for 2021 orders showed that the Korean shipyards saw strong increases in business but fell overall to second place for new orders behind the Chinese. China’s shipbuilders are anxious to gain a larger part of the market to build LNG carriers in part because of the belief that it will open new business opportunities as methanol, ammonia, and hydrogen are developed.
Reports in Korea said that Hyundai had made offers to the European regulators to support the transfer of knowledge to European shipyards so that they could enter the market to build LNG carriers and even proposed selling one of Hyundai’s shipyards to win approval of the transaction.
In addition to the approval from the EU, the South Korean authorities have also yet to rule on the merger, although they were expected to follow shortly after the EU. Japan’s antitrust authorities are also yet to approve the merger.
Kindly like us on Facebook
Discussion about this post