EU to block $2bn Korean shipbuilding merger between Daewoo and Hyundai
Brussels concerned about dominance of LNG carrier market as European energy prices soar
EU competition officials are preparing to block a $2bn merger between two of the world’s biggest shipbuilders in South Korea, the first time since 2019 that Brussels has decided to veto a corporate tie-up.
Officials told the Financial Times that a proposed merger between Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries would be stopped as anti-competitive. The decision is likely to be announced this week, said three people familiar with the matter.
The European Commission declined to comment.
The veto will be the first by the EU’s competition authorities since Brussels prevented a tie-up between India’s Tata Steel and Germany’s Thyssenkrupp more than two years ago over concerns it would drive up prices for consumers.
The latest decision comes as energy prices have soared in Europe this winter, with freight costs for liquefied natural gas in Asia rising to record levels of more than $300,000 per day on surging global demand. The two South Korean companies dominate the market for making ships that carry super-chilled LNG.
One EU official said blocking the merger would help protect European consumers from paying higher prices for LNG, which emits less carbon dioxide than coal but is still a source of greenhouse gas emissions.
Ships carrying LNG to Asia have been rerouted to Europe, where consumers are willing to pay a premium for the fuel to generate electricity. The EU is the world’s third-largest importer of LNG.
The proposed tie-up was first announced by Hyundai Heavy in 2019. Brussels had demanded that the companies provide remedies to limit concerns about preserving competition.
The South Korean shipbuilders are significant suppliers to EU companies and represent about 30 per cent of global demand for cargo vessels, according to the commission.
The two companies won new orders for 45 large LNG vessels out of the total of 75 last year, together commanding 60 per cent of the global market, according to industry 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 be completed.
To address competition concerns, Hyundai Heavy had proposed not raising LNG vessel prices for the time being and transferring some technology to smaller domestic shipyards, according to industry officials.
But the offer fell short, said the officials, adding that Hyundai Heavy had not made a formal proposal to address the EU’s request for other remedies.
Hyundai Heavy said the EU should approve the merger unconditionally. “It is impossible to evaluate market dominance by just market share alone in the shipbuilding market and the market structure makes it difficult for a certain company to monopolise it,” the company said.