Amid a storm of controversy over its proposed merger with fellow South Korean shipbuilder Hyundai Heavy Industries (HHI), Daewoo Shipbuilding & Marine Engineering (DSME) has received an order to build a 174,000-m3 LNG carrier from Greek shipowner Maran Gas Maritime.
Maran Gas Maritime, the gas shipping arm of Angelicoussis Shipping Group, will take delivery of the LNGC from DSME in the first half of 2021.
The new LNGC order for DSME comes as South Korea’s largest shipbuilder Hyundai Heavy Industries has signed a conditional agreement to acquire DSME. The proposed mega-merger has raised concerns about competition in the LNGC shipbuilding sector. South Korea’s Hana Financial Group analyst Moo-hyun Park said the “unrealistic merger bid looks on the skids” in his analysis of the deal on 13 February.
Mr Park said the merger of HHI and DSME is “about monopoly and duopoly” in the LNGC, VLCC, mega-container ship, drillship and submarine businesses. “The total market shares of LNGC and VLCC (would) exceed 50%. It seems hard to draw permission of the merger from WTO (World Trade Organisation) and EU Commission.”
According to Mr Park, the total LNGCs on order at HHI and DSME stands at 72, which represents 59.5% of the global order book of 121 vessels. The combined entities would also have a dominant position in the mega-container ship market, with a 43.5% share of newbuild orders.
“Considering the progress and failure of the merger between Siemens and Alstom,” said Mr Park, “and between Fincantieri and STX France, deciding about the anti-competitive practices of the merger between HHI and DSME must be examined on the basis of LNGC and VLCC as DSME’s main products, not all vessels. This is the global standard. HHI and DSME, which are global giants in the global shipbuilding industry, should follow this global standard.”
Mr Park said the acquisition of DSME by HHI also offered no synergy and would “not be helpful to the Korean shipbuilding industry.” He said the “unrealistic merger bid” would shift the failure in offshore business to the commercial vessel business. He pointed out that if the merger were to succeed, DSME would wind up as a subcontract factory similar to HHI’s Gunsan Yard. “Moreover,” he added, “trial of ‘competition ease’ and ‘price recovery’ urged by HHI and KDB (Korean Development Bank) is the violation of anti-competitive practices from WTO and EU Commission.”
Shipowners should also be concerned about the merger, said Mr Park, because the deal would create “obvious cartels for raising newbuilding prices. As the merger deal will be the monopolistic and oligopolistic behaviour harming fair competition, it seems that shipowners claim this violation to the international anti-trust authorities.”
A combined company would also threaten local jobs, which has raised a red flag among the powerful labour unions for both HHI and DSME. Local reports suggest labour leaders of the HHI and DSME unions have met and agreed to take a united stand against the merger. Strikes could occur as soon as 18 February.
Maran Gas Maritime continues to grow fleet
With this latest contract, Maran Gas Maritime would have nine LNGCs and one floating storage and regasification unit on order for a total capacity of 1,734,600 m3. The Greek shipowner currently has 27 LNGCs in its fleet, with capacity of 4,405,880 m3. All of the ships, ranging from 145,700 m3 to 174,000 m3 capacity, fly the Greek flag.
Thus far this year, DSME has obtained US$740M worth of orders to build seven ships, including crude oil tankers.
DSME is aiming to win US$8Bn worth of new orders in 2019, up 10% from last year's order target of US$7.3Bn.
Last year, DSME won signed contracts valued at US$6.81Bn.