Brussels puts brakes on Daewoo-Hyundai shipbuilding merger

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The European Commission has blocked the proposed merger between Daewoo Shipbuilding & Marine Engineering (DSME) and Hyundai Heavy Industries (HHI), arguing that it would create an overly dominant player in the construction of large Liquefied Natural Gas (LNG) vessels.

The proposed merger would lead to a reduction in competition in the global market for LNG shipbuilding, the Commission said, and neither company had offered remedies or solutions to address these concerns.

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"Large LNG vessels are an essential element in the supply chain of liquefied natural gas (LNG) and enable the transport of this source of energy around the globe," said EC vice-president Margrethe Vestager. 

"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."

The decision follows an investigation of the proposed merger, which would have seen the two major shipbuilding companies become one. DSME and HHI and two of the three largest players in a very concentrated market, the Commission found.

Large LNG carriers are an essential element in the supply chain of LNG. They are highly sophisticated vessels that can carry large quantities of LNG at a temperature of -162°C. Over the past five years, the worldwide market for the construction of large LNG carriers represented up to €40 billion, with European customers accounting for almost 50% of all orders.

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During the investigation, the Commission received feedback from a large number of customers, competitors and other third parties. These companies were concerned that the transaction would create a company with a dominant position in the worldwide market for the construction of large LNG carriers, reduce competition and increase prices for these vessels.

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