Nippon Steel enters definitive agreement to buy US Steel
Nippon Steel has asserted that it expects to complete the acquisition of US Steel by quarter three 2024 after entering into a definitive agreement to acquire the company.
The USD55 per share bid made by Japan’s largest steelmaker represents a 40% premium over the US steelmaker’s December 15 closing price. It values the US Steel operation at USD14.9 billion, including the assumption of its debt.
Confirmation that the transaction has been unanimously approved by the board of directors at both Nippon Steel and US Steel was made ahead of an investor presentation on December 19.
Protracted US Steel sale
It ends months of speculation about the future ownership of US Steel. Cleveland-Cliffs – one of several major steelmakers linked to a potential takeover – had a bid worth around USD35 per share rejected in August. MEPS respondents had suggested that a merger of Cleveland-Cliffs and US Steel would have attracted the attention of US regulators. Competition laws may have demanded that US Steel’s operations were broken up to prevent market dominance in certain sectors.
In October, a letter to Congress and US regulators from the Alliance for Automotive Innovation raised concerns that such a merger could force up the price of steel. It warned that 100% of the metal needed to produce electric vehicle motors, known as e-steel, would be produced by a joint Cleveland-Cliffs/US Steel operation. It would also produce a dominant share of the market for steel used to produce car body panels, it said.
Growth of Nippon Steel
Nippon Steel will aim to leverage US Steel’s position in the automotive steel sector. Steel suppliers serving the US automotive sector are currently hoping for a strong start to 2024 following November’s resolution of the six-week United Auto Workers (UAW) strikes targeting the ‘Detroit Three’. MEPS’s December price analysis also reveals that flat steel prices continue to rise in the United States and Canada.
Nippon is currently the world’s fourth largest steel producer, with an output of 44.4 million tonnes in 2022 – down by approximately 10% year-on-year. Its acquisition of US Steel is expected to grow its total annual crude steel capacity to 86 million tonnes. The growth accelerates the company towards a strategic goal of producing 100 million tonnes annually.
US Steel will expand its EAF-based steel production capacity with its Big River 2 development near Osceola, Arkansas. Nippon’s acquisition announcement confirmed that work would proceed to create the USD240 million operation, which is projected to produce three million tonnes of low-emissions steel per year when completed.
Nippon and US Steel share a commitment to be carbon neutral by 2050. They will aim to use hydrogen injecting technology in blast furnaces, hydrogen in its DRI process, and high grade steel production in large EAFs to achieve the goal.
As a supplier to the renewable energy industry these developments, and future developments from US Steel, will benefit from the US government’s Inflation Reduction Act (IRA). This provides tax credits and other incentives.
- This content first appeared in the December edition of MEPS International's International Steel Review. The monthly report provides subscribers with steel prices, indices and market commentary from key steel markets across the globe.