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Why Does Nippon Steel Want to Acquire US Steel?

Nippon Steel envisions the two companies becoming the "best steelmaker with world-leading capabilities." Both can move forward by combining their strengths.



The signboard sits in front of the building that houses Nippon Steel headquarters in Tokyo's Chiyoda district. (©Kyodo)

In December, Nippon Steel Corp (NSC) announced the acquisition of America's US Steel Corporation. What is behind the move of Japan's biggest steelmaker, and why would it engage in such large-scale M&A? Trends in the global steel industry provide some much-needed insight. 

An overview of the deal follows.

Cost of the Deal

The cost of Nippon Steel's latest acquisition (total value) is $14.126 billion USD. US Steel's closing share price on December 15, 2023, was $55.00 per share. This represents a 40% premium to the original closing share price of $39.33 per share. 

NSC purchased all of US Steel's outstanding common shares. They numbered 223,135,077 as of December 14, 2023. By acquiring these outstanding shares, NSC made US Steel a fully-owned subsidiary. Loans from Japanese institutions will finance the acquisition. 

Acquisition Schedule 

First half of 2024: A resolution and approval of the buyout must be approved at a general meeting of US Steel shareholders.

Second or third quarter of 2024 (April-June or July-September): The acquisition will be completed. 

Movements in the Global Steel Industry

Global steel demand is expected to increase due to population growth and economic development. Other factors include increasing demand for automobiles, infrastructure, and electronic and electrical goods. 


Furthermore, the recent outbreak of various conflicts has seen an increased demand for weapons. Steel is also used in many of these.

According to World Steel Association (WSA) statistics, global crude steel production in 2022 was 1,887.8 million tons. WSA predicted growth forecasts of +1.8% and +1.9% for 2023 and 2024, respectively. With a production volume of 1,017.95 million tons, China is the fastest-growing country in steel production. The country accounts for 54% of the global total. China surpassed Japan as the top steel producer in the mid-1990s. Since then, it has increased its crude steel production and economic growth.

World Crude Steel Production in 2022 (million tons) 

Global total1,887.87
South Korea65.84
(Data from the World Steel Association)

China's Steel

China is exporting its steel surpluses to other Asian countries. In doing so, it is pushing down steel prices. 

Among industrialized nations, the United States, with its long-term population growth, is a market with growing domestic demand for steel. Along with semiconductors, steel is another crucial necessity for modern societies. 

Steel forms the foundation of the US industry. Therefore, increasing the domestic production of steel is the country's basic policy. This requires a stable domestic production system that does not rely on imports.

Notably, the US has been shifting back to domestic steel manufacturing. Increased demand for steel due to fiscal spending under the Infrastructure Investment and Jobs Act has boosted this trend. Deteriorating US-China relations have also influenced this change in the structure of the US steel industry to center on domestic demand. The US is now wary of cheap steel imports from China. 

(Data from Nippon Steel)

Significance of the Merger

In March 2021, Nippon Steel Corp (NSC) announced its medium- to long-term management plan. In its strategy, the company set the goal of becoming "the best steelmaker with world-leading capabilities." The plan's four pillars are: 

  1. Rebuilding Nippon Steel's domestic steel business and strengthening its group management.
  2. Promoting a global strategy to deepen and expand overseas business.
  3. Taking on the challenge of zero-carbon steelmaking.
  4. Promoting digitalization transformation strategies. 

NSC's strategic goal is to achieve 100 million tons of global crude steel capacity. 

In 2022, NSC produced approximately 44 million tons of crude steel. US Steel produced about 14 million tons. With their combined outputs, NSC will become the world's third-largest producer of crude steel. 


The company states that its global crude steel production capacity will increase at manufacturing facilities in which it has a 30% or higher stake. It estimates that after acquiring US Steel, production capacity will increase from 66 million tons annually to 86 million tons. In addition to its bases in Japan, NSC has plants in ASEAN countries and India. However, the significance of this acquisition is that it will also allow the company to expand its integrated steelmaking operations in the US.

Corporate Ranking in Crude Steel Production in 2022 (10,000 tons)

1Baowu Steel Group (China)13,184
2Arcelor Mittal (Luxembourg)6,889
3Anshan Iron and Steel Group (China)5,565
4Nippon Steel Corp4,437
5Jiangsu Shagang Group (China)4,145
27US Steel Corp1,449
(Data from the World Steel Association)

Strengths of Nippon Steel

Let us now consider the respective characteristics of NSC and US Steel. NSC differentiates itself from its competitors through its world-class technology for producing high-grade steel materials. It also possesses superior technologies for ultra-high-strength steel sheets for automobiles. These are three times stronger than standard steel sheets. This technology also allows it to manufacture corrosion-resistant steel sheets for construction materials and electromagnetic steel sheets used in motors and electrical components. 

In 2022, the company produced the world's first high-grade electromagnetic steel sheet by electric arc furnace. Furthermore, its nickel-plated steel sheets are also used in car battery cell cases. The company has an extensive range of popular high-grade steel products for electric vehicles.

Nippon Steel's electromagnetic steel sheets (©Kyodo)

Production Methods

In Japan, two methods of steel production are becoming increasingly prominent. The first method is the blast furnace method, which uses iron ore as the raw material and coal-derived coke as the reducing agent. 

The second is an electric arc furnace (EAF) method. It uses considerable electricity to melt down scrap metal and refine it into steel. Blast furnaces, which require large amounts of coal, generate significant CO2 emissions. 

There is a caveat to promoting EAFs (which recycle scrap metal) while trying to meet global steel demands. We cannot meet annual crude steel production needs with EAFs alone. That is why iron ore will still be necessary in steelmaking. 

Carbon Neutrality Commitment

The steel industry accounts for a considerable share of the world's CO2 emissions. However, in 2020, the Japanese government declared that Japan would become carbon neutral by 2050. In other words, Japan will reduce its greenhouse gas emissions to net zero. 

NSC aims to strengthen its industrial competitiveness through collaboration with other Japanese steel giants. It seeks to become a world leader in developing next-generation innovative technologies to achieve carbon neutrality. Injecting hydrogen into blast furnaces will prove crucial to realize this goal. Using hydrogen generated in steel mills can reduce CO2 emissions from blast furnaces. 


In addition, the company is working to develop a process of 100% hydrogen use in direct reduction. This technology substitutes coal for hydrogen to cut CO2 emissions. NSC also plans to upgrade its technology to high-grade steel production in large EAFs. With a production capacity equivalent to that of blast furnaces, this technology utilizes reduced iron. 

Strengths of US Steel

Meanwhile, US Steel is the third largest producer of crude steel in the United States. The integrated steelmaker uses both blast furnaces and EAFs in its production. It has state-of-the-art EAF technology capable of producing high-grade steel. 

In the US, where energy costs are low, the use of EAFs has grown to approximately 70%. US Steel is currently promoting a plan to increase its EAF capacity. Several iron ore mines in Minnesota are under US Steel ownership. This allows for a great deal of self-sufficiency at its North American production facilities and favorable production conditions. 

Like NSC, US Steel is also actively investing in becoming carbon neutral. The company can manufacture value-added automotive steel sheets at multiple locations in the US and aims to expand its global business. In this respect, US Steel and NSC share a high degree of synergy. 

US Steel was founded in 1901. Since the 1970s, however, its competitiveness has declined. As a consequence, the company has repeatedly restructured and replaced assets. 

In August 2023, the company announced it was considering a management strategy that included a possible sale to a third party. While several companies offered to buy out the company, management accepted NSC's proposal. NSC has been operating in the US since the 1980s.

NSC announced the acquisition on December 18, 2023. In its official press release, NSC stated that the two companies would unite to become the "best steelmaker with world-leading capabilities." Both companies will move forward by combining their world-class technological capabilities and products with a commitment to carbon neutrality. This is the future NSC envisions for the two companies. 

A Great Lakes Works sign is seen at the US Steel plant in Ecorse, Michigan, on September 24, 2019. (©REUTERS/Rebecca Cook)

Tasks and Challenges

US Steel has supported the US economy and industry for decades. Although the acquisition schedule is as outlined above, NSC must negotiate with US Steel's labor union. It must also receive approval at the general shareholders' meeting. Convincing shareholders is necessary for the acquisition to proceed. 

The deal will also be subject to review by US regulators. Even though Japan is an ally, Washington will closely examine security risks before deciding whether to approve the acquisition. Political debate is inevitable, with the takeover scheduled for completion in the middle of the US presidential election.


Japanese buyouts have faced strong opposition from American citizens and lawmakers with strong "patriotic" sentiments in the past. For example, when Mitsubishi Estate acquired the iconic Rockefeller Center in New York City in the 1980s. But times have changed, and the global industrial structure is changing dramatically. Persuasive merger terms and convincing the company and stakeholders of the mutual benefits will determine the fate of this acquisition. 


(Read the article in Japanese.)

Author: Hidemitsu Kaito

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