Subscribe
E-Paper
 |
| Large LNG ship built by Hyundai Heavy Industries. Courtesy of Hyundai Heavy Industries |
By Kim Hyun-bin
Hyundai Heavy Industries (HHI) Group has won orders worth 3 trillion won ($2.51 billion), already achieving 14.3 percent of this year's sales target of $17.44 billion in just the first 10 days of the year. This exceeds market predictions which set a 20 percent decrease in global new building orders compared to last year.
Despite the robust orders, HHI Group is on its toes, as the European Union's decision whether to approve the Korean shipbuilder's takeover of Daewoo Shipbuilding & Marine Engineering (DSME) is scheduled to be announced next week. The decision has been dragging on since 2019 due to monopoly concerns and was on the verge of cancellation due to strong opposition from EU competition authorities.
At the end of last year, the European Commission announced that it would make a decision on the deal by Jan. 20.
For now, the EU is highly likely to disapprove the deal itself or issue a conditional approval. The EU is concerned that the acquisition will lead to monopoly concerns such as price hikes, as the two companies account for around 60 percent of the global eco-friendly ship market, including LNG carriers and dual fuel-powered large container ships.
Global container shipping companies such as Maersk and MSC as well as large shipbuilding equipment companies such as MAN are concentrated in Europe, a reason the bloc is not welcoming a dominant player in the shipbuilding industry.
In response, the EU is known to have requested HHI Group to artificially reduce its LNG carrier business. A shipbuilding industry official said that this condition is unacceptable as it will result in a drastic market share reduction.
If HHI's acquisition of DSME falls through due to the opposition from the EU, the impact on the two companies is expected to be limited, as the shipbuilding industry continues to move forward in the eco-friendly shipbuilding sector.
From the standpoint of HHI Group, the 1.5 trillion won capital increase, which was originally planned to be used on the DSME acquisition, could be used to finance new growth businesses such as autonomous operation or ammonia-powered ships. However, DSME will be burdened with having to open up to creditors once again or find a new owner.
The dominant analysis is that the failure of the acquisition will lead to a decrease in the competitiveness of the Korean shipbuilding industry in the long term.
Korea Shipbuilding & Offshore Engineering (KSOE), an intermediate holding company in the shipbuilding division of HHI Group, inked a 1.33 trillion won deal, Monday, to construct nine ships, including one LNG carrier and three medium-sized container ships measuring 2,500 TEU each.
When including orders for 10 ships worth 1.67 trillion won received on Jan. 4, the total order amount reaches 3 trillion won, achieving 14.3 percent of this year's order target of $17.44 billion in the first 10 days. Meanwhile, Clarkson's predicted that this year's volume of global new orders will decrease by 23.3 percent compared to last year.
Industry officials say as the prices of eco-friendly ships are set to rise, shipping companies have been forwarding their orders.
"Inquiries for eco-friendly ship orders have been on a rise since the beginning of this year," a KSOE official said. "We will focus our capabilities on technological advancement so that we can maximize our strengths in the eco-friendly ship sector."
