EDITORIAL | Opposition to Japan's US Steel Acquisition an Impending Crisis

Nippon Steel's plan to acquire American industry giant US Steel faces growing opposition in the United States. 

At the end of January, former US President Donald Trump said that, if he is returned to the Oval Office, "I would block it instantaneously, absolutely." 

In early February, the United Steelworkers of America (USW), a labor union opposing the takeover, issued a statement. It said that it had received assurances that President Joe Biden would support its position. 

In response, Takahiro Mori, executive vice president of Nippon Steel, appeared at a February 7 press conference. He said that, while continuing dialogue with the US side, the company hoped to complete the acquisition by September. That schedule is as originally planned. 

Mori characterized the blowback in the US as an "anticipated reaction." However, we must wonder if Nippon Steel's thinking is not too optimistic.

Protectionist Policies for Vital Industries

Steel is a basic material used in motor vehicles and countless other manufactured goods. Since it is a vital industry related to national security, the US has consistently favored protectionist policies to protect the industry in the past. It cannot be denied that if the buyout plan becomes more politicized, it could impact Japan-US relations. 

Nippon Steel has vowed that it will honor US Steel's collective bargaining agreements with the USW after the acquisition. Nevertheless, opposition to the deal within the US has not abated. 

Nippon Steel should approach the negotiations with a sense of crisis. They must demonstrate the understanding that if things continue as they are, the acquisition might not be approved by US regulatory authorities. In other words, it must continue to do everything possible to dispel concerns on the American side. 

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Understanding the Deal

The acquisition plan was announced in December 2023. Nippon Steel would pay an enormous amount of roughly ￥2 trillion JPY ($13.3 billion USD). It hopes by making US Steel a 100% subsidiary, it will be in a perfect position to capture business in the US steel market. Furthermore, the US is a market that continues to expand. 

This also comes against the backdrop of continuing US competition with China. It would be highly significant if steelmakers in Japan and the US, which are close allies, should join forces. 

Within the steel industry, excess production of steel by Chinese steelmakers has flooded overseas markets with cheap steel products. This has resulted in deteriorating global market conditions.

It has also impacted earnings by steelmakers in Japan, the US, and other countries. Expansion of their scale of production is necessary if they are to achieve international competitiveness to rival China. 

Focusing on High-Grade Products

Hopefully, we can also bolster the supply structure for high-grade products, such as electromagnetic steel sheets. These are in demand for use in electric vehicles, and this demand is expected to expand. 

Nippon Steel has high technological capabilities in this very area. If US Steel becomes its wholly-owned subsidiary, its own competitiveness should increase through technology sharing and so on. 

In the US, the Committee on Foreign Investments (CFIUS) screens deals involving foreign entities. Hopefully, CFIUS and the USW will bear these things in mind and dispassionately consider the acquisition purely on its merits. 

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(Read the editorial in Japanese.)

Author: Editorial Board, The Sankei Shimbun

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