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Fear of monopoly called off the union

It has finally come to pass, the calling off of DSME’s and HHIH’s merger

The marriage plans were announced in March 2019. Unfortunately, the European Union (EU) made it official that the merger between Korean shipbuilders, Daewoo Shipbuilding & Marine Engineering (DSME) and Hyundai Heavy Industries Holdings (HHIH) would not proceed for fear of industry monopoly.

Writings were on the wall
It should come as no surprise to industry observers. Since July, speculations swirled the industry on whether the merger would even take place. After 3 rounds of adjournment, it should be crystal-clear the possibility was zero. The most incriminating factor was only China, Kazakhstan and Singapore gave their blessings, while Japan, South Korea and the EU remained silent.

The EU and Korea are important trade partners. Korea is the EU’s 9th largest export market for goods, and the EU is Korea’s third largest export destination. Both signed a free trade agreement which came into effect end of 2011. With only 3 countries’ approval, it mirrored possibly the same concerns from the other countries that remained silent.

Latest rationale from EU was along the lines of possible impact of industry domination for LNG carriers. This was clear as day the EU has been observing Korea in an almost microscopic level and noticed both mega shipbuilders were actively moving towards cleaner fuels for newbuildings. The EU found European customers accounted for almost half of all liquefied natural gas (LNG) orders from DSME and HHIH.

The EU explained, “The combination of the 2 would create a company holding a dominant position in the global market for the vessels, holding a market share of at least 60 per cent, which would result in reduced competition and higher prices.” Margrethe Vestager, the Commission’s Executive Vice-President in charge of competition policy added, “Large LNG vessels are an essential element in the supply chain of LNG and enable the transport of this source of energy around the globe. LNG contributes to the diversification of Europe’s source of energy and therefore improves energy security.

“The merger between HHIH and DSME would have led to a dominant position in the global market for the construction of large LNG vessels, for which there is significant demand from European carriers. Given that no remedies were submitted, the merger would have led to fewer suppliers and higher prices for large vessels transporting LNG. This is why we prohibited the merger.” Would it wound Korea’s mission towards a cleaner environment with this reasoning?

Marine Online News Team
Please email us at marketing@marineonline.com to contact the author for this article.

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