Page 5 - EurOil Week 03 2022

EurOil COMMENTARY EurOil

remains potentially months away, and faces con- HHI has said that it may challenge the EC’s
siderable opposition. decision, and criticised its focus on market
Against this backdrop, a growing number shares.
of US LNG cargoes have been diverted from “It is impossible to evaluate market domi-
Asia – a traditional winter market – to Europe. nance by just market share alone in the ship-
According to ship-tracking data compiled by building market and the market structure makes
Bloomberg, 41 US LNG cargoes either had it difficult for a certain company to monopolise
declared destinations in Europe or were on it,” HHI stated.
a likely path to the continent as of January 13, The shipyard first started pursuing the
compared with 24 heading to Asia. acquisition of DSME in 2019, in part to tackle
“LNG imports have been the saving grace for overcapacity in the shipbuilding sector, though
European supply in the short term,” an Energy demand for new ships is now picking up.
Aspects LNG industry analyst, David Seduski, South Korea’s Ministry of Trade, Industry
was quoted by Bloomberg as saying. and Energy also criticised the Commission’s
And while short-term supply pressures may decision, saying it regretted the rejection of a
ease, current trends could cause EU countries – deal that had already been endorsed by China,
among others – to view LNG imports as more Singapore and Kazakhstan.
of a priority. However, the South Korean government also
said the decision might have a limited impact
What next? thanks to the recovery in global ship orders.
These developments have informed the EC’s “The industry is seeing much better condi-
thinking on the HHI-DSME merger. tions than in 2019 and we will continue search-
“Large LNG vessels are an essential element ing for the right ‘civilian’ operator for DSME,” the
in the supply chain of liquefied natural gas government said in a statement jointly released
(LNG) and enable the transport of this source by multiple ministries. The statement referred to
of energy around the globe. LNG contributes to the state-run Korea Development Bank’s deci-
the diversification of Europe’s source of energy sion to sell its majority stake in DSME to HHI.
and therefore improves energy security,” stated The merger also needs approval from Japan
the Commission’s executive vice-president, Mar- and South Korea, as well as the EU, before it
grethe Vestager, who is also the Commissioner can be finalised. Indeed, the Korea Fair Trade
for Competition. “The merger between HHIH Commission, which is also looking at the
and DSME would have led to a dominant posi- merged company’s hold over the shipbuild-
tion in the global market for the construction of ing materials and parts market, is expected to
large LNG vessels, for which there is significant make a decision on the transaction after hear-
demand from European carriers. Given that no ing the EU’s decision. However, the EC’s veto
remedies were submitted, the merger would makes the merger unworkable in its current
have led to fewer suppliers and higher prices for form, as the new company would be prevented
large vessels transporting LNG. This is why we from doing business with the EU under the
prohibited the merger.” bloc’s competition law. ™

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