President Joe Biden has followed up on his threat to block the $15 billion acquisition of US Steel by Japan’s Nippon Steel.In a statement released early on Friday January 3, President Biden cited national security concerns for his decision, despite US Steel’s own objections and an inconclusive Committee on Foreign Investment in the United States report.
“It is my solemn responsibility as president to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad; and it is a fulfillment of that responsibility to block foreign ownership of this vital American company,” President Biden said. “US Steel will remain a proud American company — one that’s American-owned, American-operated, by American union steelworkers — the best in the world.”
US Steel, which has been entertaining buyers for the past year, did not respond to requests for comment at the time of publication. Nor did Nippon Steel.
Contentious from the start
The national security concerns have been met with skepticism, because Japan is a long-time ally of the United States and foreign investment isn’t a new phenomenon in the steel industry.
The possibility of US Steel moving production from its older, legacy facilities in the union North to its state-of-the-art — but non-union — Big River facility in Arkansas, however, has appeared alongside the national security concerns.
US Steel has answered these concerns in the past by noting that Nippon Steel has pledged to invest in its legacy facilities, something the company cannot do on its own. Blocking the deal, the company has said, may mean closure of legacy facilities and the company’s exit from its headquarters in Pittsburgh, Pennsylvania.
The day before President Biden’s decision, US Steel offered Fastmarkets a statement in response to another letter from the United Steelworkers (USW) — one of many parties opposed to the proposed sale.
That coalition included President Biden, President-elect Donald Trump, the USW and a smattering of steel-interested lawmakers, plus potential buyer and integrated competitor Cleveland-Cliffs.
“But the bottom line remains: Nippon Steel’s plans threaten the long-term security of our facilities,” the USW wrote on Thursday January 2. “During all of our meetings with Nippon Steel, including those in the past few weeks, we brought our pressing concerns to the table, namely Nippon Steel’s stated intention to ultimately transfer production from our facilities to Big River, reducing blast furnace capacity/capability and endangering national security.”
US Steel countered with its bottom-up view of union member desires.
“The voices of our USW represented workers continue to call for President Biden to approve the proposed merger in order to protect and preserve the livelihoods of union workers across the country,” US Steel said in direct response. “The truth remains that this transaction is the best way to ensure that US Steel, including its employees, communities and customers, will thrive well into the future, and Nippon Steel has made extraordinary commitments, including over $2.7 billion of investments in our USW facilities, that will be in a binding legal agreement enforceable by the US government, to ensure these virtues are realized.”
Cleveland-Cliffs did not immediately respond to requests for comment. Chief executive officer Lourenco Goncalves hinted at his renewed plans for the company should the deal fall through in September — and should US Steel follow through on its plans to scale back operations.
“So if they go ahead and shut down the [Northern legacy] assets, so do it,” he said during a CNBC interview on September 5. “Because that will make for an easy transaction.”
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