Noise on the line between Tokyo and Washington: Biden puts a stop to Japanese takeover of US Steel

The plans for the merger dated back to December 2023 and immediately encountered a ‘no’ from the powerful steel union United Steelworkers (USW). However, United States (US) Steel management was favorable to the takeover.

Nippon Steel, the fourth largest steel producer in the world with 44 million tons of steel annually, had 14.9 billion dollars (14.3 billion euros) ready for US Steel. US Steel was founded in 1901 and was once the steel pride of the US, but now ranks 24th on the global list of steel companies. Chinese companies now dominate that list.

A merger of Nippon with US Steel would have made the group the third largest steel company in the world. This would put them behind ArcelorMittal, which operates from Luxembourg, and ahead of the Chinese Ansteel Group. Nippon has more than 113,600 employees, while US Steel has 21,800 employees. Both companies are struggling with Chinese competition in the global steel market. (Read more below the photo)

Risk

“Putting a major steel producer under foreign control would pose a risk to critical supply chains,” the White House said on Friday. The Democrat is therefore following the advice of the CFIUS security committee. He already warned about the same risk in August, but did not reach a consensus and passed the final decision on to Biden.

US Steel and Nippon Steel now responded jointly, describing Biden’s torpedoing as “politically motivated.” Japanese Prime Minister Shigeru Ishiba also made himself heard. He underlined that the two are allies but “they must clearly explain why there are security concerns.” Japan’s Foreign Ministry — Japan is the top investor in the U.S. — warned in a letter to the U.S. government that blocking the takeover “sends a clear message that investments from Japan, regardless of the lack of security concerns, are not welcome in the US”.

Battle state

Biden had already made his decision in September, but waited until after the presidential elections to scuttle the deal. US Steel’s headquarters are located in Pittsburgh (Pennsylvania), which was a crucial battleground state. A decision could possibly have cost votes. Incidentally, Kamala Harris and President Donald Trump, who will be sworn in later this month, are also opposed to a takeover.

US Steel CEO David Burritt states that the company itself does not have the resources to make much-needed investments in its American facilities. Nippon Steel wants to compromise with the promise to leave crucial management positions to US citizens. The US government would also have a veto on any planned reduction in production capacity. A takeover by the American Cleveland-Cliffs then? But he only wants to put $7.3 billion on the table.

In a last-ditch attempt to make the merger successful, the steel companies jointly filed three lawsuits. USW union president David McCall, among others, has been personally summoned.