For more than a year, U.S. Steel pursued ambitious solutions to mounting challenges. The company, once a symbol of American industrial power, had agreed to be acquired by Japanese rival Nippon Steel to avoid obsolescence.
U.S. Steel warned that it would have to close plants and lay off workers if the deal lapses, citing the need to fund costly plant modernization.
Now, with the $14 billion acquisition blocked by President Biden on national security grounds and outspokenly opposed by President-elect Donald J. Trump, the company has few easy alternatives.
Without a merger partner, the company could be forced to close its traditional steel mills, threatening the livelihoods of workers and the communities that depend on them. If we attempt to integrate with another competitor, we may face antitrust concerns. The technology transition from blast furnaces to electric furnaces is also delayed.
US Steel has not acknowledged defeat in the acquisition by Nippon Steel. The companies are suing the federal government, alleging that politics tainted the vetting process.
“Nippon Steel and U.S. Steel continue to believe that this transaction is the best path forward to securing U.S. Steel's future and is committed to achieving this objective,” U.S. Steel spokeswoman Amanda Murkowski said in a statement. We will vigorously defend our rights.” .
U.S. Steel primarily manufactures flat steel sheets used in automobiles, trucks, and home appliances. For decades, increased foreign competition has weakened not only the company, but also the entire domestic steel industry, especially as Chinese steel has come to dominate international markets.
In its heyday, U.S. Steel was the world's largest steel producer. However, according to the World Steel Association, in 2023 it was ranked 24th in the world, far behind powerhouses such as China's Baowu and Nippon Steel.
The company has recently experienced a resurgence thanks to efforts to protect itself from competition. Tariffs imposed during the first Trump administration and a surge in demand for steel, fueled in part by the construction boom of the early part of the decade, pushed steel prices to record highs and boosted U.S. Steel's profits.
But that doesn't eliminate concerns about U.S. Steel's long-term viability. Compared to their overseas rivals, domestic steel companies have been slow to introduce “mini mills,” which are more energy-efficient and cost-effective than traditional steel mills. Smaller plants melt steel scrap in electric furnaces, a faster and cheaper process, while larger plants make steel from iron ore and coal-derived coke.
Alden Abbott, a senior fellow at George Mason University's Mercatus Center and former general counsel for the Federal Trade Commission during the first Trump administration, said U.S. Steel “has done a poor job of modernizing. ” he said. “If there were no tariffs, it would have gone down years ago.”
Some U.S. companies, including Nucor, which has become the nation's top producer, are making a more concerted effort to innovate production methods. Murkowski, the U.S. Steel spokeswoman, said the company will continue to exit blast furnaces regardless of the outcome of the deal with Japan. In 2023, U.S. Steel opened an electric furnace-powered plant in Arkansas.
U.S. Steel has argued that Japan is the only buyer willing and able to make major investments in multiple steel mills and protect jobs. That includes at least $1 billion to build a new plant at its Mon Valley plant outside Pittsburgh and $300 million to renovate a blast furnace at its Gary plant in Gary, Indiana.
“Blocking this deal would mean denying U.S. Steel billions of dollars of committed investments to extend the life of its aging facilities, reducing thousands of high-wage, family-sustaining investments,” the companies said last week. “This means putting people's union jobs at risk.”
JPMorgan Chase equity analyst Bill Peterson said in a research note that if U.S. Steel were to operate as an independent company, it could focus on a new plant in Arkansas and reduce its blast furnace assets. said.
But the United Steelworkers, a powerful union representing 11,000 U.S. Steel employees, strongly opposes the Nippon merger. The company has accused the Japanese company of illegal trade practices and dishonesty in its dealings with labor unions.
The union had previously lobbied for a merger with Cleveland-Cliffs, an American company that had bid to acquire U.S. Steel in 2023, but lost out to Nippon in a bidding war. Unlike Japan, labor unions are organized. (On Monday, U.S. Steel and Nippon Steel filed suit against Cleveland-Cliffs Corp., alleging that the company conspired with Steelworkers Union President David McCall to undermine Nippon Steel's contract.)
After Biden blocked the deal, the union said in a statement: “There is no question this is the right thing to do for our members and our national security.”
If U.S. Steel were sold to a competitor like Cleveland-Cliffs, the combined entity would be formidable but potentially subject to federal antitrust scrutiny. However, it is unclear whether the Trump administration will take the same aggressive approach to enforcement as the Biden administration.
John Newman, a University of Miami law professor and former deputy director of the Federal Trade Commission's Bureau of Competition, said the merger with Cleveland-Cliffs will likely be challenged in court, primarily because domestic steel production is already He said it was because it was exclusive. by several players. Nucor, Cleveland-Cliffs and U.S. Steel accounted for half of U.S. steel production in 2023, according to the Commerce Department.
Regardless of political administration, “everyone agrees that these types of mergers are problematic,” Newman said. In contrast, “if you have a very competitive market, a few players won't have much to worry about.”
But George Mason's Mr. Abbott said a domestic merger is more likely for U.S. Steel than remaining as a standalone entity. He said federal regulators under the Trump administration could argue that consolidating domestic steel companies would make them more competitive internationally.
“There are also political concerns that we can't let U.S. Steel go out of business,” Abbott added.
Cleveland-Cliffs did not respond to requests for comment.
Sara Bauerle-Dansman, a senior fellow at the Atlantic Council and an associate professor at Indiana University, said that the more one company controls domestic steel production, the more expensive steel it becomes, including steel produced for defense purposes. He said it would be.
“We want to diversify the locations where steel is produced,” says Bauerle-Duntzmann.
Trump, who has vowed to block the Nippon deal, wrote in a social media post on Monday that U.S. Steel should “lead this business to greatness” and not sell it to anyone.
“Why would you want to sell now when tariffs would make U.S. Steel a more profitable and valuable company?” Trump wrote in Truth Social.
Cheap imported steel has been a target for decades. Presidents George W. Bush and Barack Obama imposed tariffs on Chinese steel. Trump went further, imposing 25% tariffs on steel from most countries in 2018. In addition to expanding tariffs on some steel melted outside the United States, Biden has used quotas to limit steel imports.
Frank Giarratani, a professor emeritus of economics at the University of Pittsburgh who has studied the steel industry for decades, said steel tariffs have primarily served to protect jobs. But domestic steel companies' productivity and international competitiveness have not improved, he said, although investment in new technology will make that happen.
“The aim is to protect jobs, but that is only a temporary benefit,” Giarratani said. “In terms of making the industry more competitive, the tariffs don't seem to be doing that.”
Bill Farrier, leader of United Steelworkers Local 1557 in Clairton, Pennsylvania, said he was pleased that Mr. Biden rejected the deal with Japan and was encouraged by Mr. Trump's opposition to the merger. Mr. Farrier, a mechanic at the Mon Valley mill, said he hopes Cleveland-Cliffs will be the ultimate buyer, but said any suitor would need to commit to major improvements to the steel mill.
“I would like to see modernization and new equipment,” Farrier said. “Then you can compete with anyone.”
