After months of protests, US President Joe Biden on Friday blocked Japan’s Nippon Steel’s proposed purchase of United States Steel Corporation, or US Steel.
The second-largest US steelmaker had earlier approved a $14.9 billion (€14.5 billion) takeover bid, saying it would help insulate the ailing company from intense competition from abroad, including China.
Nippon Steel expected the acquisition to help increase its global steel production by about a third to 85 million tonnes.
However, the merger became an important issue for Democrats and Republicans in the November US presidential election, as Pennsylvania, where US Steel is headquartered, was a key swing state.
In an effort to protect American jobs, the United Steelworkers union fiercely opposed the transaction.
Why did Biden stop the deal?
Biden has cited national security concerns and risks to key supply chains as the main reasons for vetoing the purchase.
“This acquisition would bring one of America’s largest steel producers under foreign control and pose a risk to our national security and our critical supply chains,” Biden said in a statement. “That’s why I’m taking action to stop this deal.”
The President had earlier said that important industries like the steel sector should remain under the control of domestic players.
In December, the Committee on Foreign Investment in the United States (CFIUS) – which reviews mergers and acquisitions of US companies by foreign entities – failed to reach consensus on whether to approve the deal and referred the decision to Biden. Sent to those who are leaving the post. 20 January.
The panel, led by Treasury Secretary Janet Yellen, warned that the purchases could cut U.S. steel production, leading to a supply shortage that would hit the transportation and energy sectors the most.
CFIUS warned that the deal could thwart Washington’s effort to prevent dumping of cheap steel from China, where heavy industries receive massive subsidies from the Beijing government.
According to American newspaper Washington PostThe committee was also concerned that Nippon Steel might shift production to its sites in Brazil, Mexico and India after gaining control of US Steel.
Senior White House advisers had reportedly tried to convince Biden to go ahead with the purchase, as it would represent a major investment in an ailing US company. He also thought a veto could damage relations with Japan, one of Washington’s closest allies in the Indo-Pacific.
Both Biden and former President Donald Trump implemented protectionist policies in recent years to protect the U.S. steel sector from global oversupply, which has depressed prices. These measures included a 25% tariff on imported steel, while holding China accountable for unfair trade practices.
Biden’s veto is unlikely to be overturned by President-elect Trump, who campaigned on reviving U.S. heavy industry, and wrote on his Truth Social social messaging platform last month that he would “defund the once great and mighty U.S. steel industry.” Were totally against being bought by a foreigner.” Company.”
Trump has promised to use a mix of more tariffs and tax incentives to protect the US steel sector.
What did Japan, Nippon Steel say about the veto?
In a last-ditch effort to get the deal approved, Nippon Steel proposed giving Washington a say in any potential production cuts at U.S. steel, the Reuters news agency reported earlier this week, citing a source familiar with the deal. Was.
In December, Nippon Steel defended the merger, and promised “significant” investment in US Steel’s facilities and employees to “ensure a vibrant future for American steel manufacturing.” The company said it was “confident that the acquisition will protect and grow U.S. Steel, creating a best-in-class steelmaker with world-leading capabilities for the benefit of American workers and customers.”
Nippon Steel has pledged capital investments of more than $2.7 billion for US Steel’s facilities in Pennsylvania and Gary, Indiana, and has offered to move its US headquarters to Pittsburgh, where US Steel is based. It has also promised to respect existing agreements with unions.
In November, Japanese Prime Minister Shigeru Ishiba urged Biden to approve the merger to avoid weakening relations between the two countries.
Both Nippon Steel and US Steel have insisted that the deal poses no national security concerns and have vowed to take legal action, claiming that US authorities failed to follow proper procedures when reviewing acquisitions. Failed.
What could be the impact of Biden’s decision?
While it could preserve U.S. Steel’s independence, Biden’s veto could leave steelmakers struggling to secure the capital and technology needed to modernize.
This would leave the company unable to compete against larger, better-funded global steelmakers or Chinese rivals like ArcelorMittal.
US Steel may now face difficulties in finding a buyer for the entire company. A cash and stock deal by rival Cleveland-Cliffs in August 2023 was valued at about half the amount of Nippon Steel’s bid. At the time, US Steel rejected the union-backed deal, and a few months later Nippon Steel approved the merger plan.
By blocking the acquisition, Biden is also signaling to other international investors that they may face political and regulatory hurdles when bidding for US companies considered critical to national security.
The decision is also likely to increase China’s grip on the global steel sector and may also prompt the EU to seek foreign investment from companies like Nippon Steel for its steel players.
Edited by: Uwe Hessler