US Steel Deal Approved, But Challenges Loom

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On June 14, Nippon Steel announced that it had secured approval to acquire 100% of the common shares of the major American steel company US Steel. The green light came out of a national security agreement signed with the United States government.

With US Steel as a wholly-owned subsidiary, Nippon Steel can transfer its patented technologies to the company, expand its operations, and strengthen both companies' global competitiveness. At the heart of the plan is the creation of a Japan–US steel alliance. The goal is to counter Chinese manufacturers, who now account for nearly half of the world's steel output.

Nearly a year and a half after the plan was first announced, that vision is finally coming together.

The 'Golden Share' Compromise

Despite local and company support, the acquisition became a political flashpoint due to strong opposition from the United Steelworkers (USW), a powerful labor union with sway in US presidential elections.

Both presidential candidates stated their opposition to the deal during the election. And then-President Joe Biden blocked the deal with an order issued on January 3, 2025, in the last days of his presidency.

To resolve the standoff, a compromise was reached: the US government would hold a special "golden share." This grants the sitting US president veto power over key management decisions at US Steel that are deemed to affect national security.

Nippon Steel also agreed to grant the US government a degree of oversight after the acquisition, covering areas such as corporate governance, production, and trade policy.

The exact scope of the golden share's veto power and the details of the national security agreement have not been disclosed. However, Washington's ability to intervene is believed to be limited.

US Oversight and Market Conditions

During the American government's review, Nippon Steel pledged that a majority of US Steel's board members would be US citizens. It also committed to appointing Americans to key management roles.

With the golden share's powers considered to be within acceptable bounds, Nippon Steel determined that it would still maintain sufficient control over operations to warrant the deal.

Meanwhile, China's ongoing overproduction and growing exports continue to destabilize the global steel market.

In contrast, the US market remains protected from low-cost steel imports thanks to President Donald Trump's high-tariff policies.

*US President Donald Trump (©AP via Kyodo)*

Demand is expected to rise for specialty products like electrical steel sheets used in electric vehicle motors, where Nippon Steel holds a competitive edge through patented technologies.

A Tough Strategy for Growth

By making US Steel a wholly owned subsidiary, Nippon Steel will be able to fully deploy its proprietary technologies and build a growth strategy focused on capturing the American market.

But turning that vision into reality won't be easy.

When the acquisition was first announced, Nippon Steel, then the world's fourth-largest steelmaker, was expected to climb to third place after merging with US Steel.

However, according to 2024 data from the World Steel Association, the combined company still ranks fourth.

While the deal was delayed by political battles in the US, China's Ansteel Group, the third-largest steelmaker, ramped up production. At the same time, US Steel's performance declined.

In 2024, US Steel dropped from 24th to 29th in global output rankings and recorded two straight quarters of losses in the first three months of 2025.

Investment Risks

Beyond the $14.1 billion spent on the acquisition, Nippon Steel plans to invest an additional $11 billion by 2028. Those funds will go toward upgrading US Steel's existing facilities and building new ones.

The company aims not only to enhance US Steel through the transfer of its proprietary technologies but also to pursue a Japan–US partnership in emerging fields like hydrogen-based steelmaking. Nippon Steel is prepared to shoulder the significant costs involved.

However, those investments come with serious risks. In May, credit rating agency S&P Global Ratings warned that the financial strain from the deal could result in a substantial downgrade of Nippon Steel's credit rating.

President Trump's unpredictable tariff hikes may help shield the US from Chinese steel imports, but they also carry potential downsides. Inflation and high interest rates could suppress car sales and construction spending, both major drivers of steel demand.

That makes the path to recouping Nippon Steel's massive investment an especially steep one.

Author: Noboru Ikeda, The Sankei Shimbun

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