The Raw Steels Monthly Metals Index (MMI) remained sideways with a slight downside bias, falling 1.49% from December to January. Meanwhile, the blocked sale of U.S. Steel could significantly affect steel prices in 2025.
After the Committee on Foreign Investment in the U.S. (CFIUS) came to a split decision, the sale of U.S. steel met a bitter end. In early January, President Biden made good on his promises to block Japan’s Nippon Steel Corporation from acquiring the mill. Nippon’s $14.9 billion bid came roughly a year ago, in late December 2023. The amount beat out others, including Cleveland-Cliffs, who had offered $7.3 billion to buy the oft-underperforming company.
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The sale has faced a multitude of setbacks since U.S. Steel shareholders accepted Nippon’s bid. A number of prominent voices came out against the sale. In addition to Biden, these included President-elect Trump, J.D. Vance and the USW.
Vance argued that foreign ownership of a critical American manufacturing entity could undermine the nation’s industrial base and compromise security interests. He also suggested that such acquisitions might serve as a form of tariff arbitrage, allowing foreign companies to bypass trade barriers without contributing to domestic production expansion.
Executives from Cliffs were also quick to cast doubt on the acquisition, noting the U.S. Steel was “denying reality” by believing that the deal would go through. The company noted, “After decades of unfair trade practices causing harm to American steel companies and union jobs, it is no surprise to us that the United Steelworkers union (USW) adamantly opposes any transaction involving Nippon Steel, a company with an extensive track record of injurious trade practices.”
Critics of the deal mostly pointed toward national security concerns, and it is true that the U.S. has placed increased focus on its critical industries in the years following the pandemic.
As a result, mergers involving foreign-owned companies can raise concerns about dependence on foreign entities regarding sensitive technologies and crucial materials. For instance, the widespread use of steel in vital industries, including the defense, infrastructure and automotive industries, makes the sector of strategic importance.
Other concerns stemmed from United Steelworkers. For example, Nippon made several promises to the USW in an effort to gain the union’s support. This included roughly $2.7 billion worth of investments in the company, $5,000 payouts to steelworkers and a vow to honor collective bargaining agreements.
The firm also promised not to sell steel from its overseas mills to the U.S and made a 10-year commitment to preserve production capacity. While many rank-and-file union members supported the transaction, the USW remained opposed, accusing Nippon of “empty promises” and being a “serial trade cheater for decades that would undermine our domestic industry.”
Despite high-profile support for President Biden’s decision, the blockage of the deal comes with many drawbacks. As MetalMiner’s own Lisa Reisman states, “In the end, politics won out.” Moreover, the CFIUS started to face fresh accusations of corruption in the wake of its inability to come to a decision, which left an open door for Biden block.
Considering that Japan remains a U.S. ally and Nippon agreed to unravel a joint venture with China’s Baoshan, concerns over national security have been heavily scrutinized. Instead, many believe “that a strengthened partnership with Japan can enhance U.S. supply chain resilience and foster technological collaboration.”
Beyond that, the deal would have brought several other benefits to the U.S. For instance, the significant investments in a number of U.S. Steel’s facilities and capacity agreements would have meant job security for steelworkers. Indeed, U.S. Steel’s under-performance will continue to put both jobs and the fate of certain facilities in limbo. Many believe that the next steps will see the mill looking for cost-cutting solutions.
A significant number of industry insiders also believe that Nippon’s ownership would have promoted competition within the steel space, including for electrical steel and BOF-produced steel. This would mean more competitive pricing for buyers. As of September, Cliffs had maintained its willingness to buy U.S. Steel, albeit now at a much lower price.
Whether by Cliffs or another U.S. producer, another merger in the U.S. market would further consolidate the industry, giving mills more control of steel price dynamics. Historically, that has meant higher prices regardless of underlying demand conditions.
There will be plenty of anti-trust concerns should Cliffs attempt to purchase U.S. Steel, which might undermine their efforts. For example. Cliffs is the only other U.S. producer with BOF facilities as part of their operations. This would give the company complete national control over that production method, which is favored by the automotive industry. As a result, the UAW will likely oppose the potential sale to Cliffs.
While the deal appears to be dead in the water, the legal battle is far from over. Both Nippon and U.S. Steel leveled lawsuits in hopes of overturning Biden’s decision. The companies allege that the sitting president unfairly influenced the CFIUS’s panel. According to a statement, “As a result of President Biden’s undue influence to advance his political agenda, the Committee on Foreign Investment in the United States failed to conduct a good faith, national security-focused regulatory review process.”
The companies also set their legal sights on Cleveland-Cliffs and the USW. In a second lawsuit, the companies allege Cliffs, Cliffs’ CEO Lourenco Goncalves and USW’s McCall conspired to quash the deal through “illegal and coordinated actions,” which would ultimately allow Cliffs to “monopolize the domestic steel markets.”
While it remains unclear what will come from the most recent lawsuits, the end of the deal seems to mean bad news for buyers. Purchase by another domestic mill or the closure or curtailment of certain facilities should U.S. Steel look to cut costs would mean higher steel prices. Still, this may take time to come to fruition, and the result of the lawsuits could change the course of events. Nevertheless, the risk to steel prices remains to the upside.
