The US Steel logo (©Getty/Kyodo)
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The United States president has blocked Nippon Steel's plan to acquire US Steel. Unless the decision is overturned, Nippon Steel will be forced to revise its growth strategy, which was centered on strengthening its US business base.
However, the biggest loser may be US Steel itself. The company has now lost its best partner. President Joe Biden's decision poses risks of undermining US-Japan competitiveness in the steel industry against China. Even the United Steelworkers Union (USW), which opposed the acquisition (as distinguished from actual US Steel employees, which supported it), may find itself on the losing side.
Ending a Legacy
In a December 22 New York Times op-ed, US Steel CEO David Burritt outlined the detrimental consequences of rejecting the proposed takeover. He warned that the move would "bring close to an end more than 100 years of Pittsburgh being the Steel City."
The acquisition bid originated from US Steel's own inability to survive as an independent company. Nippon Steel aimed to modernize and enhance US Steel's operations with its technology. It sought to secure steady growth in the US market and form a US-Japan alliance to counter China, the world's largest steel producer. As part of the plan, Nippon Steel pledged an additional $2.7 billion USD to modernize US Steel's facilities.
Plans Derailed
While lobbying for approval, Nippon Steel invested in securing raw material resources and developing high-quality iron ore for next-generation hydrogen steelmaking. Through this, it achieved a global milestone of a 43% CO₂ reduction in manufacturing trials. However, the profits expected from these synergies have evaporated with the deal's collapse.
By rejecting the acquisition under the pretext of national security, the US president has taken a definitive stance. This decision effectively blocks US Steel from pursuing comprehensive partnerships with foreign companies.
Although Cleveland-Cliffs, a Canadian (but also foreign) steelmaker, has shown interest in acquiring US Steel. Such a merger could lead to greater questions of anti-trust and industry rationalization.
President-elect Donald Trump, who opposed the acquisition, stated last year that he would make US Steel great again through tax incentives and tariffs. Without advanced technology, however, true manufacturing competitiveness cannot be restored. The fact that US Steel opted to sell itself despite government protection highlights the limits of such support.
During the 2024 presidential race, Mike Pence, former vice president under Trump, warned in October that rejecting the acquisition would cost thousands of American jobs. Pence argued that this would hollow out industrial regions like Pennsylvania's Rust Belt.
Revival or Decline?
USW might appear to have triumphed politically by blocking the acquisition. Nevertheless, the decision could misdirect the US steel industry at a critical crossroads between revival and decline.
Globally, China continues to flood the market with excess steel despite weak domestic demand, disrupting fair pricing. Many now expect Nippon Steel to focus on its high-growth business in India and strengthen its existing US operations. However, hopes of weakening China's grip on global steel production through a US-Japan alliance have faded.
Who truly benefits from Biden's decision? It is clear that US Steel, including its shareholders and employees, lost by being shielded under national security concerns.
RELATED:
- Nippon Steel Deal Will Strengthen US Steel and National Security
- The Evolution of Nippon Steel and Where It's Headed
- The US Steel Deal: Why is Washington Undercutting the US-Japan Alliance?
Author: Noboru Ikeda
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