Hyundai Heavy Industries Group’s grand plan to own its local rival shipyard Daewoo Shipbuilding & Offshore Engineering (DSME) under its arm is likely to fall through as the European Union concerned about HHI’s dominance in the global market is expected to deny approval.

According to a report from Reuter on Sunday, the deal between Hyundai Heavy Industry (HHI) and DSME “is set for an EU antitrust veto after the companies declined to offer remedies to allay competition concerns,” and the European Commission “is concerned the deal would create two large players from the current three.” The concerns centered on liquefied natural gas (LNG) carriers, it added.

HHI first announced the plan to acquire DSME and merge it with its shipbuilding holding entity Korea Shipbuilding & Offshore Engineering (KSOE) in 2019. It applied for international approval for the tie-up in China, Singapore, Kazakhstan, Japan, South Korean and the EU, and received the green light from China, Kazakhstan and Singapore. The EU resumed its examination on the deal last month after postponing three times citing the industry uncertainties caused by the pandemic. The deadline is set on Jan. 20.

The EU has demanded for remedies to prevent HHI’s monopoly on LNG carriers. KSOE proposed some remedial measures including technology transfers but they fell short of the EU’s expectations, according to sources.

The EU is worried that the deal could give HHI market dominance when the shipbuilding industry is entering an upcycle.

According to Clarkson Research Services, global ship orders from January to November jumped 138 percent from the same period a year ago to 45.07 million compensated gross tonnages (CGT). Korean shipyards brought home the second largest 38 percent or 16.96 million CGTs, following China that took 49 percent. Korean shipbuilders almost swept orders for LNG carriers, which surged 119 percent on year to 63 from Jan-Nov.

By Lee Yu-sup and Choi Mira

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