European Union bans the purchase of South Korean naval Daewoo by Hyundai

The European Union prohibited the acquisition of the South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering by the company from the same sector and country Hyundai Heavy Industries Holdings, considering that it harms competition.

Brussels said in a statement that the operation would have given rise to a company with a dominant position and would have reduced competition in the global market for the construction of large ships that transport liquefied natural gas.

The Community Executive added that the companies did not present “formally” remedies to solve the doubts of the European Commission (EC) about the purchase.

The vice president of the Commission in charge of Competition, Margrethe Vestager, assured that the large ships that transport liquefied natural gas are “an essential element in the supply chain” of that type of gas and “allow the transport of that source of energy around the world”.

“Liquefied natural gas contributes to the diversification of Europe’s energy sources and thus improves energy security”, he exposed.

In addition to creating a company with a dominant position in the market for the construction of large ships that transport liquefied natural gas, the operation would have reduced the supply of suppliers and increased prices for customers in the European Union and, ultimately, for energy consumers.

The two firms are global leaders in the construction of large ships that transport liquefied natural gas and “two of the three largest players in this highly concentrated market”, according to the Commission.

He added that these ships are “highly sophisticated” and that can transport large amounts of liquefied natural gas (145,000 m3 or more) at a temperature of minus 162 degrees Celsius.

According to the EC, in the last five years the global market for the construction of these ships represented up to 40,000 million euros and European clients represent “nearly 50% of all orders”.

Brussels already announced the opening of an in-depth investigation in December 2019 and during its analysis received the contributions of customers, competitors and third parties. These companies were concerned that the transaction would create a company with a dominant position, reduce competition and increase prices.

When the Community Executive launched its investigation, it also raised its doubts about the effects of the purchase in the construction of oil tankers, ships that transport liquefied petroleum gas, container ships and large and small ships that carry liquefied natural gas, but Today’s decision is only related to large ships that transport liquefied natural gas.

Brussels insisted that the ban is based on the fact that the parties already have market shares “very large and growing”. Together they would have arrivedat least 60%”.

He also underlined thevery few alternatives for customers“, the capacity “limited” in the market, the “very high barriers to entry” and lack of purchasing power.

Likewise, he stressed that the demand for large ships that transport liquefied natural gas has not been affected by the coronavirus pandemic.