Tuesday, September 26, 2023
HomeHeadlinesBlocked Hyundai-Daewoo merger leaves shipbuilders at sea


To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

Blocked Hyundai-Daewoo merger leaves shipbuilders at sea

Europe’s rejection of Hyundai Heavy Industries’ acquisition of Daewoo Shipbuilding Marine & Engineering has scuppered what would have been a major step toward consolidation in an industry where excessive competition weighs heavily on profits.

The European Commission on Thursday vetoed the deal between the world’s second- and fourth-largest shipbuilders, on the grounds that the South Korean companies’ combined market share of at least 60% in large liquefied natural gas carriers would have reduced competition.

Hyundai Heavy issued a statement shortly afterward objecting to the decision, arguing that market share “is not a proper indicator of market power in the shipbuilding industry.” Yet South Korea’s Fair Trade Commission said Friday it would end its own review of the proposal as the company indicates it will withdraw it.

Hyundai Heavy’s effort to regain its top spot has been sent back to square one, but this is not necessarily the good news for rivals that it may appear to be.

Integrating Hyundai Heavy and Daewoo Shipbuilding “should have led to higher ship prices,” said a disappointed executive at a major Japanese shipbuilder. The hope had been that the acquisition would alleviate the cutthroat price competition that has plagued the industry, creating better leverage across the board that would outweigh the disadvantage of creating a larger rival.

As shares of Hyundai Heavy’s holding company closed down 1.6% on Friday, its competitor Samsung Heavy Industries also fell 1.2%. Daewoo Shipbuilding ended the day flat.

The industry is enjoying a period of brisk demand as global supply chain bottlenecks boost purchases of container ships. Shipbuilding orders doubled last year, according to U.K.-based Clarkson Research. Yet this boom is not reflected in builders’ earnings.

Even Hyundai Heavy, a top player, reported 8.31 trillion won ($7 billion) in sales for 2020, and an operating profit of 33 billion won, for a razor-thin margin of 0.4%. The company booked total operating losses of 320 billion won for the first nine months of 2021.

During an industry downturn between 2016 and 2018, shipbuilders took orders at low prices to keep shipyards running, even at the risk of losing money. In 2021, they were hit by surging costs for steel and other materials. The industry has struggled for years with a combination of a market prone to ups and downs and a crowded field of competition that tends to drive prices lower.

Consolidation to address this problem has moved more quickly in China, where the country’s two top shipbuilders, both state-owned enterprises, underwent a government-led merger in 2019. The fact that both serve mainly domestic customers made for a simpler approval process.

South Korean players have been hampered by their focus on foreign demand. Hyundai Heavy and Daewoo’s strength in LNG carriers worked against them here, torpedoing their merger plans.

Source: Nikkei Asia

Related Posts


Finance & Economy
Shipping News

Star Bulk Announces the Repurchase of 10 Million of Its Common Shares

Star Bulk announced that it entered into a Repurchase Agreement (with OCM XL Holdings, LP, a limited partnership incorporated in the Cayman Islands, pursuant...

Trafigura announces executive leadership changes

Trafigura Group Pte Ltd. has announced an evolution of its executive team to further strengthen leadership and focus across its global activities during a...

Woori, HMM, KOBC to buy Polaris in prospective $448 mln deal – report

Polaris Shipping Co. is poised to sell its entire stake at around 600 billion won ($447.5 million) to Woori Private Equity Asset Management Co....

Pyxis Tankers Announces Closing of Ultramax JV Investment

Pyxis Tankers, an international shipping company, reported that on September 14, 2023, the Company closed on its previously announced newly formed drybulk joint venture...

Korea’s STX denies rumor that it is backed by Chinese fund

South Korean general trading company STX Corp. has said its largest shareholder is a local investment firm, while refuting the false reports appearing through...

Baltic index rises to over 4-month high on stronger capesize rates

The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry...

Houston-Japan VLGC freight rates reach multi-year high

VLGC freight rates from Houston to Chiba, Japan, reached $245/mt Sept. 21 for the...

Baltic index snaps 11-session rally as rates for larger vessels ease

The Baltic Exchange’s main sea freight index, tracking rates for ships carrying dry bulk...

Baltic index rises for 11th straight session on strong vessel rates

The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry...

The elite of the Shipping Industry meets at the “Maritime Cyprus 2023” Conference

The main theme of this year’s Conference is “Shipping in Action: An agenda for...

Drewry: Port Throughput Index Down 2.1% in July

The Global Container Port Throughput Index fell 2.1% MoM in July 2023, with the small rises recorded in Africa and Oceania having been insufficient...

Vopak: Agreement with Infracapital on sale of Rotterdam chemical terminals

Vopak announces that it has reached an agreement with Infracapital on the sale of its three chemical terminals in Rotterdam (Botlek, TTR and Chemiehaven)...

Port Hedland Iron Ore Exports Edge Up 4% in August

Pilbara Ports Authority has delivered a total monthly throughput of 62.8 million tonnes (Mt) for August 2023, consistent with the August 2022 throughput. The Port...

Thessaloniki, Gdańsk ports to explore synergies

Thessaloniki Port Authority S.A is expanding its role as a port of international importance through a new cooperation with the Port of Gdańsk Authority...

Hapag-Lloyd CEO: Counteroffer for HHLA would not be in our interest

Hapag-Lloyd CEO Rolf Habben Jansen said on Thursday that it would not be in the container shipper’s interest to make an offer for HHLA...