The Committee on Foreign Investment in the United States (CFIUS) was investigating to determine whether the $14.9 billion proposal should be blocked on national security grounds. Once the findings of the investigation are presented, President Biden will be given 15 days to decide whether to block the takeover of the Japanese company.
However, reports in the Financial Times, New York Times and Washington Post indicated that the president had agreed to allow Nippon Steel to refile its application with CFIUS. That would trigger a 90-day extension to the committee's review deadline, making it unlikely that a decision would be made before January — just days before the next U.S. president is inaugurated.
Democratic presidential candidate Vice President Kamala Harris and Republican candidate Donald Trump oppose foreign ownership of US Steel. The desire to keep the company in US hands, as the United Steelworkers union has strongly advocated, could have a significant impact on US supply chains.
Possible restructuring and plant closures
US Steel CEO David Burritt said the company would be forced to close plants and focus on mini-mills without Nippon's promised $2.7 billion in modernization funds old objects. The company may also move its headquarters from Pittsburgh to Arkansas.
According to US Steel's 2023 annual report, its minimills accounted for about 15% of its total production of 22.4 million short tons. However, much of US Steel's recent investment has been focused on the Big River Steel (BRS) mini-mill in Arkansas. Its current capacity of 3.3 million short tons will double with the construction of the BRS2 EAF plant, which is expected to be operational by the end of 2024.
American steel producer Cleveland-Cliffs submitted a bid to buy US Steel at $35 per share in August last year. Nippon's follow-on offer is priced at US$55 per share. Cleveland-Cliffs continues to say it will rebid US Steel if Nippon's bid is blocked.
However, antitrust concerns could stop Cleveland-Cliffs' takeover of the entire US Steel business. It was estimated that such a deal would put 65–90% of the steel used by American automakers under the control of one company.
Hopes for improved demand for domestic steel
The closure of old US Steel plants as a result of the blocked takeover of Nippon will not have a significant impact on the US steel market, which is currently struggling due to low demand. US coil prices recovered slightly in September after falling to their lowest levels since December 2022 in July and August. Sheet prices are now at their lowest levels since January 2021 after further declines.
However, the Federal Reserve's decision to cut interest rates by 0.5 percentage points on September 19 could help strengthen US demand. Reducing the cost of financing can lead to an increase in investment activity, especially in construction. The rate is expected to fall by another half a percentage point by the end of this year.
As demand for steel rises again, the importance of domestically produced steel will grow. Increased trade protection measures, including Section 301 tariffs, which will increase on September 27, will continue to curb imports.
Amid this protectionist stance, however, US Steel CEO David Burritt insists that foreign ownership of the nation's third-largest steel producer "will enhance national security, economic security and job security."
