Nippon Steel’s bid to buy US Steel unlikely to be “resuscitated”: Cleveland-Cliffs CEO
“At the moment, the deal has been legally blocked, and I don’t see how this deal can be resuscitated,” the CEO said in an interview with Fox Business on Tuesday January 7.
President Biden issued an order on Friday January 3 prohibiting Nippon Steel’s acquisition of US Steel following lengthy reviews by the Committee for Foreign Investment in the United States (CFIUS), saying it would “place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chains.”
When asked if Cleveland-Cliffs is now prepared to make a new bid for US Steel, Gonçalves said, “No, I’m not.”
Gonçalves reiterated that his original bid for US Steel, if successful, would not have been anti-competitive.
“There are several other [competing US steelmakers]. Nucor is bigger than Cliffs. Steel Dynamics is almost the same size as Cliffs. A lot of [imported] steel comes into this country. [And] aluminum can compete against steel. [But all that] doesn’t mean I need to buy US Steel,” the CEO said.
In August 2023, Cleveland-Cliffs bid an initial $35 per share for US Steel, or about $7.3 billion. Goncalves said that the bid was raised over the auction period to about $54 per share, or slightly lower than Nippon Steel’s $55-per-share bid, but it was still rejected.
Cleveland-Cliffs’ final bid would be close to $14.7 billion, an industry analyst told Fastmarkets. Nippon Steel’s bid was around $14.9 billion.
This might be the first public disclosure that Cleveland-Cliffs was the unknown bidder who offered $54 per share to buy US Steel in 2023, the analyst said.
US Steel and Nippon Steel did not immediately respond to a request for comment.
Nippon Steel and US Steel also separately sued Goncalves and United Steelworkers president David McCall, alleging racketeering and monopolistic conspiracies in trying to block the deal.
“I’ve never had so much time to prepare for a lawsuit, as I knew that was coming,” Goncalves said.
The CEO said three 90-day reviews by CFIUS had failed to produce a consensus on whether it posed a national security threat, leaving the matter up to President Biden to decide.
Goncalves also said that the prospects for US Steel and all other steelmakers are set to improve markedly during the Trump administration in ways that will make it even more difficult for Nippon Steel or any other potential foreign company to acquire US steelmakers.
“The situation has changed. The backdrop of the market changed. We have a new President coming to town, and tariffs are coming,” Goncalves said in the interview.
The CEO added that Senator Marco Rubio, nominated to be Secretary of State in the Trump administration, is a fierce critic of Nippon Steel’s bid for US Steel and foreign ownership of critical US industries.
Gonçalves also faulted Japan and China for creating “overcapacity” in steel production by producing more than they can consume and, thus, being motivated to export the excess production.
Separately, Cleveland-Cliffs’ $2.5 billion bid last July to acquire Canadian steelmaker Stelco was approved by shareholders and cleared antitrust review in October.
Joe Biden ends Nippon Steel’s $15 billion bid for US Steel
In a statement released early on Friday January 3, President Biden cited national security concerns for his decision, despite US Steel’s own objections and an inconclusive Committee on Foreign Investment in the United States report.
“It is my solemn responsibility as president to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad; and it is a fulfillment of that responsibility to block foreign ownership of this vital American company,” President Biden said. “US Steel will remain a proud American company — one that’s American-owned, American-operated, by American union steelworkers — the best in the world.”
US Steel, which has been entertaining buyers for the past year, did not respond to requests for comment at the time of publication. Nor did Nippon Steel.
Contentious from the start
The national security concerns have been met with skepticism, because Japan is a long-time ally of the United States and foreign investment isn’t a new phenomenon in the steel industry.
The possibility of US Steel moving production from its older, legacy facilities in the union North to its state-of-the-art — but non-union — Big River facility in Arkansas, however, has appeared alongside the national security concerns.
US Steel has answered these concerns in the past by noting that Nippon Steel has pledged to invest in its legacy facilities, something the company cannot do on its own. Blocking the deal, the company has said, may mean closure of legacy facilities and the company’s exit from its headquarters in Pittsburgh, Pennsylvania.
The day before President Biden’s decision, US Steel offered Fastmarkets a statement in response to another letter from the United Steelworkers (USW) — one of many parties opposed to the proposed sale.
That coalition included President Biden, President-elect Donald Trump, the USW and a smattering of steel-interested lawmakers, plus potential buyer and integrated competitor Cleveland-Cliffs.
“But the bottom line remains: Nippon Steel’s plans threaten the long-term security of our facilities,” the USW wrote on Thursday January 2. “During all of our meetings with Nippon Steel, including those in the past few weeks, we brought our pressing concerns to the table, namely Nippon Steel’s stated intention to ultimately transfer production from our facilities to Big River, reducing blast furnace capacity/capability and endangering national security.”
US Steel countered with its bottom-up view of union member desires.
“The voices of our USW represented workers continue to call for President Biden to approve the proposed merger in order to protect and preserve the livelihoods of union workers across the country,” US Steel said in direct response. “The truth remains that this transaction is the best way to ensure that US Steel, including its employees, communities and customers, will thrive well into the future, and Nippon Steel has made extraordinary commitments, including over $2.7 billion of investments in our USW facilities, that will be in a binding legal agreement enforceable by the US government, to ensure these virtues are realized.”
Cleveland-Cliffs did not immediately respond to requests for comment. Chief executive officer Lourenco Goncalves hinted at his renewed plans for the company should the deal fall through in September — and should US Steel follow through on its plans to scale back operations.
“So if they go ahead and shut down the [Northern legacy] assets, so do it,” he said during a CNBC interview on September 5. “Because that will make for an easy transaction.”
Biden imposes melted-and-poured requirement on Mexican steel
US President Joe Biden has ordered that steel items imported from Mexico must be melted and poured in Mexico, Canada or the US to be eligible for Section 232 exemptions. This effectively slaps a 25% tariff on any steel trans-shipped through Mexico that originated in China or other sources outside North America.
“In my judgment, these measures will provide an effective, long-term alternative means to address any contribution by Mexican steel articles imports to the threatened impairment of the national security by restraining steel articles imports to the United States from Mexico, limiting transshipment, and discouraging excess steel capacity and production,” Biden says in a White House statement seen by Kallanish.
In a presidential proclamation Wednesday, Biden says US domestic steel production utilisation rates remain below the recommended 80% threshold due to the effect of imports. The administration is monitoring unfairly traded foreign entries and circumvention of existing tariff orders.
Commerce Secretary Gina Raimondo has determined that “steel articles are being imported into the United States in such quantities and under such circumstances as to threaten to impair the national security of the United States,” the proclamation states.
In particular, “imports of steel articles from Mexico have increased significantly as compared to their levels at the time of Proclamation 9894,” which was issued by then-President Donald Trump in 2019.
Biden’s new duty order is effective immediately, the proclamation specifies.
The presidential proclamation states that importers will be required to inform US Customs and Border Protection of the melted-and-poured origin of their steel and derivative steel items. That rule will be implemented “as soon as practicable”.
