Nippon has confirmed it intends to go ahead with its US$14.9 billion acquisition of US Steel after President Joe Biden said it was "vital" for the company to remain "domestically owned and operated". The president is currently campaigning for re-election against Donald Trump, who has said that if elected he would immediately block Nippon's acquisition of US Steel.
Meetings between the Japanese steel company and the United Steelworkers union were brief and unproductive. The union wants assurances about workers' contracts but has also raised concerns about supply chains and national defense.
Nippon's acquisition of US Steel is being investigated by the Committee on Foreign Investment in the United States (Cfius). This body scrutinizes the potential effects of foreign business acquisitions of U.S. companies to determine the national security implications of such transactions.
In addition, a political campaign began in March aimed at protecting US steel producers from cheap steel imports.
Senators Oppose Mexican Imports
The U.S. Senators Alliance is calling for the restoration of Section 232's 25% import tariff on materials imported from Mexico. Earlier this month, they introduced a bill to Congress called the Mexico Steel Industry Stopping Growth Act.
Mexican steel producers are currently exempt from tariffs as the country is a party to the USMCA free trade agreement, which replaced NAFTA.
Limiting the volume of materials crossing the border could ease the downward pressure on prices that have driven further declines since the start of the year. In March, MEPS respondents reported “extremely short” lead times and “ample inventory” of coils and rebar. Capacity exceeds current US demand.
The American Iron and Steel Institute (AISI) supports the senators' bill. Market participants indicated that the implementation of the duty could continue, although they expected the duty to be applied temporarily for 12 months.
Rising US rebar imports
Data released by AISI in late February showed that Mexico was the third-largest source of US steel imports in January. Volumes were up 36% month over month to 396,000 short tons.
However, preliminary 2023 import data showed that imports from Mexico overall fell 21.1% in 2023 to 4.2 million short tons. Imports of rebar and semi-finished products grew by 1,732% (to 222,416 short tons) and 108% (to 1.60 million short tons), respectively, from the 2015-2017 period, which determined the terms of the USMCA.
Steel buyers have advised MEPS that imports from Mexico would become unprofitable if Section 232 tariffs were applied. In a market where supply currently exceeds demand, the loss of this material may have a limited impact on prices.
The outcome of the presidential election and the prospect of lower interest rates later this year are likely to have a greater impact on demand growth and higher steel prices.
