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European Commission vetoes merger between Korean shipbuilders Daewoo and Hyundai

The Vice President of the European Commission, Magrethe Vestager, present the decision on the merger of Daewoo and Hyundai.OLIVIER HOSLET (EFE)

The European Commission has finally made a decision on the merger planned by the Korean shipbuilders Daewoo and Hyundai: it rejects the operation, as announced this Wednesday by the vice president of the Community Executive and head of Competition, Margrethe Vestager. His department had been studying the intentions of the Asian conglomerates since November 2019 and they have finally decided to veto them because it would lead to a company with a “dominant position” in the market and monopoly situations.

According to the numbers that the Danish commissioner has exposed, if the Commission authorized the operation, a manufacturer would emerge that, in Europe, would take over 60% of the market. “Given the did not present alternatives, the merger would have resulted in fewer suppliers and higher prices for large ships carrying liquefied natural gas. That is why we forbid the merger”, she added.

The situation described by the European Vice President would have occurred mainly in the manufacturing segment of large methane tankers, which are an essential element in the liquefied natural gas (LNG) supply chain. These ships require very sophisticated technology, as they transport up to 145,000 cubic meters of LNG at a temperature of -162º. To get an idea of ​​the dimensions of this market, Vestager has estimated the volume of the world market for large methane tankers in the last five years at 40,000 million and European demand would represent almost 50% of the total.

The European decision goes in the opposite direction to that adopted by other countries such as China, Singapore or Kazakhstan. This is due, as Vestager herself has argued, to the fact that in those markets the merger would not give rise to a situation of overwhelming dominance: “For China it is not a problem because they do not have many clients in this country.”

It is unusual for the European Commission to block a merger. In fact, it had not made such a decision since it vetoed the union between Thyssenkrupp and Tata Steel in 2019. Then he used the same arguments: possible price increases and reduced competition. That same year he vetoed the merger of Siemens and Alstom, which did cause an earthquake in Berlin and Paris, who welcomed the creation of a champion European industrial.

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