The European Commission is blocking a major takeover in the global shipbuilding industry. Two South Korean shipyards together would be by far the world’s largest producer of, among other things, tankers for liquefied natural gas (liquefied natural gas, LNG).
The European Commission announced on Thursday that the shipbuilders together would get too strong a market position. This would indirectly push up the already high energy prices in Europe even more.
It is the first time the Commission has blocked a major corporate takeover since the ban on the merger between Germany’s Thyssenkrupp and India’s Tata Steel two years ago.
The shipbuilding merger involves Hyundai Heavy Industries Holding (HHIH), the world’s largest ship manufacturer, and Daewoo Shipbuilding & Marine Engineering (DSME). In 2019, HHIH, known in the maritime sector with subsidiary Korean Shipbuilding & Offshore Engineering, announced that the company wanted to buy a majority stake in DSME from the Korean Development Bank. Hyundai offered 1.7 million euros.
162 degrees below zero
HHIH and DSME together have a very strong position in the market for LNG tankers. In the past year, the two companies won orders for the construction of 45 new tankers for a total of 75 orders for the entire shipping industry. They would have a joint market share of more than 60 percent. In addition, the market shares of both HHIH and DSME have grown in recent years.
The European Commission has investigated the markets for all types of cargo ships, such as oil tankers, LPG tankers (liquefied petroleum gas) and container ships. The dominant position of both South Korean shipbuilders in LNG tankers was the deciding factor. Liquefied natural gas must be transported highly refrigerated, at 162 degrees Celsius below zero.
Liquefied natural gas is seen as an important element in the transition to cleaner fuels. LNG is still a fossil fuel; combustion still releases carbon dioxide. But, or so the thinking goes, LNG is in any case cleaner than coal for electricity production and cleaner than heavy fuel oil, the preferred fuel for seagoing vessels. In recent years, the port of Rotterdam has invested heavily in bunkering options for LNG ships.
“Large LNG carriers are an essential link in the global transport of liquefied natural gas,” said European Commissioner Margrethe Vestager (Competition). “LNG contributes to the diversification of Europe’s energy sources and thus improves ‘energy security’.” Over the past five years, European companies have accounted for half of all LNG tanker orders, the Commission said.
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