Decision on US Steel takeover delayed until 2025

Joe Biden could determine the future of US Steel in one of his last acts as President of the United States after postponing a decision on whether to block Nippon Steel’s proposed takeover for at least 90 days.

The Committee on Foreign Investment in the US (CFIUS) had been carrying out an investigation to determine whether the USD14.9 billion bid should be blocked on national security grounds. Following the submission of its findings, President Biden will be allowed 15 days to decide whether to block the Japanese company’s takeover.  

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However, reports in the Financial Times, New York Times and Washington Post revealed that the President had agreed to allow Nippon Steel to resubmit its filing with CFIUS. This will activate a 90-day extension to the committee’s considerations, making any decision unlikely before January – just days before the inauguration of the US’s next President.   

Democratic presidential candidate, vice-president Kamala Harris, and Republican candidate Donald Trump both oppose the foreign ownership of US Steel. A desire to keep the company in US hands – strongly argued by the United Steelworkers union – could significantly affect US supply chains.  

Potential restructure and plant closures  

The chief executive of US Steel, David Burritt, said that the company would be forced to close plants and concentrate on its minimill operations without the USD2.7bn pledged by Nippon to upgrade its older facilities. The company may also move its headquarters to Arkansas, from Pittsburgh.  

According to US Steel’s 2023 annual report, its minimills accounted for around 15% of its total 22.4 million short ton production. However, most of US Steel’s recent investment has been focused on the Big River Steel (BRS) minimill facility in Arkansas. Its current 3.3 million short ton capacity will double following the construction of the BRS2 EAF plant, which is expected online by the end of 2024.  

US steelmaker Cleveland-Cliffs submitted a USD35 per share bid for US Steel in August last year. Nippon’s subsequent offer is worth USD55 per share. Cleveland-Cliffs has continued to state that it would resubmit a bid for US Steel if Nippon’s bid was blocked.  

Antitrust concerns could stall a Cleveland-Cliffs takeover of the entire US Steel business, however. It has been estimated that such a deal would place 65% to 90% of steel used by US carmakers under the control of a single company.  

Hopes for improved demand for domestic steel   

The closure of US Steel’s older mills, resulting from a blocked Nippon takeover, would have little effect on a US steel market currently challenged by low demand. MEPS respondents can readily source material and are apprehensive about buying stock following months of price decline. MEPS’s US coil prices recovered slightly in September after falling to their lowest level since December 2022 during July and August. Plate prices are now at their lowest since January 2021, following a further decline.   

However, the Federal Reserve’s decision to lower interest rates by 0.5 percentage points, on September 19, could help to strengthen demand in the US. A reduction in the cost of finance could prompt increased investment activity, particularly in construction. A further half of a percentage point cut is expected by the end of this year.  

As steel buying demand increases once more, the importance of domestically produced steel will grow. Increasing trade protection measures – including Section 301 tariffs that will be increased from September 27 – will continue to deter imports.   

Against the backdrop of this protectionist stance, however, US Steel chief executive David Burritt insists that foreign ownership of the country’s third-largest steelmaker would “strengthen national security, economic security and job security”.