Cleveland-Cliffs CEO continues quest to acquire US Steel
In the meantime,Cleveland-Cliffs will be headed downstream to capitalize on its dominance of the grain-oriented electrical steel market.
Goncalves held a press conference on Monday January 13 at the company’s Butler Works in Butler, Pennsylvania, to stress the role that Cleveland-Cliffs should play on the national security front.
Safeguarding national security was ultimately the argument used by President Joe Biden to block the hotly contested $14.9-billion purchase of US Steel by Japan’s Nippon Steel. Cleveland-Cliffs had been a rival bidder, ultimately being outbid by a single dollar per share.
Gonçalves stressed to the audience on Monday that the question of whether he would have another chance at US Steel was a “when” question, as opposed to “if.”
“I want to buy. I have a plan. I have an all-American solution in place,” he said. “I know we can make American steel great again.”
To take that shot, however, US Steel must formally abandon its merger agreement with Nippon Steel. The company has been granted an extension to appeal Biden’s decision, through June 18.
Goncalves declined to comment on the dollar-value of any offer Cleveland-Cliffs might make, and he likewise declined to discuss potential partners or asset-carve out agreements. He said that if Cleveland-Cliffs were to buy US Steel, he would personally move to Pittsburgh, Pennsylvania; keep the company’s headquarters in Pittsburgh; and christen the steelmaking portion of Cleveland-Cliffs’ business “United States Steel,” while the iron ore portion would retain the Cleveland-Cliffs brand.
It had been reported by mainstream news outlets earlier in the day that one potential path for the acquisition could be an all-cash deal for US Steel, immediately followed by the sale of its electric-arc furnace (EAF) jewel Big River Steel to competitor Nucor.
Weirton reimagined
Throughout the press conference, Gonçalves referenced the company’s former tinplate works in Weirton, West Virginia, which was shuttered in February.
In July, Cleveland-Cliffs committed to spending at least $150 million to reopen Weirton as a captive transformer production facility, using the company’s grain-oriented electrical steel (GOES).
The company inherited the GOES-making capabilities of AK Steel when it acquired the latter five years ago. Former AK competitor Allegheny Technologies Inc no longer produces GOES.
Cleveland-Cliffs is currently in the process of buying equipment for the Weirton project. Start-up is slated for early 2026.
“You can’t have a country that’s not able to make the steel that goes in a transformer,” Gonçalves said.
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.”
Trump reiterates intention to block USS/Nippon merger
US President-elect Donald Trump is reinforcing his campaign promise to block the acquistion of US Steel by Japan’s Nippon Steel, Kallanish reports.
“I am totally against the once great and powerful US Steel being bought by a foreign company, in this case Nippon Steel of Japan,” Trump proclaims in a message on social media platform Truth Social.
On Monday, Trump reiterated his objections to the deal and offered insight into how he imagines US Steel will thrive in an alternative scenario.
“Through a series of Tax Incentives and Tariffs, we will make U.S. Steel Strong and Great Again, and it will happen FAST!” wrote Trump.
The United Steelworkers (USW) labour union applauds Trump’s position.
“The USW welcomes President Trump’s continued opposition to Nippon Steel’s acquisition of US Steel, a deal with serious long-term implications for US economic and national security. Our union thanks him for his continuing commitment to American manufacturing and agrees with him that with proper attention, US Steel will flourish well into the future as a domestically owned and operated company,” the USW says in a statement after the latest Trump social media post.
The president-elect adds: “As President, I will block this deal from happening. Buyer Beware!!!”
David Burritt, chief executive of US Steel, has said the 123-year-old company would move out of its move out of its Pittsburgh, Pennsylvania, headquarters if the acquisition is not allowed to proceed. The USW later called that statement a “bullying” tactic, which caught the attention of legislators who accused Burritt of being financially motivated if the deal succeeds.
Currently, the Committee on Foreign Investment in the US (CFIUS) is auditing the deal to assess potential national security risks to the US. The CFIUS initially had penned a letter to USS/Nippon noting its concerns that the acquisition would jeopardise America’s best interests. US President Joe Biden agreed to allow Nippon to refile essential paperwork and postpone the decision to allow CFIUS more time for consideration. The committee is expected to reach its decision this month and Biden would then be able to exert action for or against the deal.
Japanese Prime Minister Shigeru Ishiba sent Biden a letter requesting that the US government approve the transaction. Biden has been vehemently opposed to the deal, vowing to oppose it.
Kristen DiLandro USA
US Steel Kosice third-quarter shipments decline, anticipates further weakening
US Steel expects its Kosice (USSK) plant’s fourth-quarter performance to be weaker versus Q3 given weak underlying demand and pricing conditions, and the absence of positive CO2 allocations. A one-time favourable CO2 allocation adjustment offset the weak market environment in Q3, Kallanish notes.
USSK’s steel shipments fell 6% on-year in Q3 to 899,000 net tons, with averaged realised sales price also down 6% to $802/net ton. Raw steel production was down only 2% to 970,000nt, meaning 77% capacity utilisation versus 79% a year earlier.
Net sales dropped 12% on-year in Q3 to $721 million but Ebitda almost quadrupled to $39m. The latter was due to the adjustment related to the reserve for CO2 emissions and lower coal, PCI, and iron ore costs. Moreover, USSK enjoyed lower energy cost and favourable foreign exchange impact.
In Q4, USSK anticipates lower volumes and average selling prices versus Q3. It also foresees negative impact from volume inefficiencies, higher energy costs and repair costs related to unplanned downtime at the #1 Caster. There should be a favourable impact from inventory adjustments.
USSK’s blast furnace no.1 remains offline following a planned 30-day outage in August, reflecting weak demand. This means 1.6m nt/year of the plant’s 5m nt/y hot metal capacity is idle.
The firm’s shipments in the nine months through September inched down only 1% on-year to 2.85mnt, with raw steel output down 8% to 3.03mnt and capacity utilisation at 81% versus 88%. Net sales fell 11% to $2.43 billion, while Ebit fell 48% to $13m.
Adam Smith Poland
Trump: I will stop Japan from buying United States Steel
Former US president Donald Trump, a Republican, and Democratic Pennsylvania governor Josh Shapiro are providing fresh criticism of Nippon Steel’s proposed takeover of US Steel (USS), with each politician renewing their opposition to the deal.
Speaking at his presidential campaign rally in York, Pennsylvania, Trump again promised to block the transaction if voters return him to the White House.
“I will stop Japan from buying United States Steel,” Trump said. “They shouldn’t be allowed to buy it.”
Shapiro mentioned the controversial deal at the Democratic National Convention in Chicago, Illinois. Speaking with news reporters, Pennsylvania’s chief executive emphasised that the Nippon takeover of the 123-year-old Pittsburgh-based steelmaker is not in the interests of the USS employees or the communities in his state. His new comments come less than a week after the United Steelworkers labour union repeated their concerns that there is a lack of financial transparency regarding Nippon’s investment plans for the USS mills.
“I’ve been very clear that I’m not supporting any deal that the US Steel workers don’t support,” Shapiro stated. “Nippon has a lot of work to do in order to get right with the steelworkers, if they’re ever able to.”
The acquisition is under review by federal antitrust and trade regulators. It is also the subject of arbitration, which began last week. While arbitration has progressed and after the Trump and Shapiro remarks, USS shares have lost almost 10% of their value.
Dom Yanchunas USA
US Steel for sale, one year on: a look-back at the $15 bln saga of the acquisition of an American icon
Rather, a press release on August 13, 2023, stated the steelmaker had set forth a process to “evaluate strategic alternatives” after “receiving multiple unsolicited proposals.”
On the same day, it emerged that Cleveland-Cliffs, the only other integrated steelmaker in the country, was one such suitor, and that US Steel had rejected a $7.8 billion cash and stock acquisition offer from its rival.
The tale should have ended when Japan’s Nippon Steel emerged the victor in the ensuing bidding war, with an announcement on December 18, 2023, that Nippon would acquire the Pittsburgh-based steelmaker in an all-cash buy of $14.1 billion plus the assumption of $800 million in debt. This would have created one of the world’s largest steelmakers, producing 86 million tonnes per year; and with a goal of 100 million tpy.
But the only story with more twists than US Steel’s acquisition is the US presidential elections race. And the way things stand, it is unlikely the near $15 billion saga will find a resolution before the country elects its next president.
Currently, the deal faces the opposition of incumbent president Joe Biden, former president Donald Trump, politicians from both sides of the aisle, and most importantly, the influential United (USW) labor union, which had thrown its weight behind Cleveland-Cliffs during the bidding process.
“It has been a political roller coaster for the proposed acquisition,” Fastmarkets steel analyst Felix Bello said. “However, the synergies and financial fundamentals are still sound, and more so now that the proposal has been intensely scrutinized.”
Bello noted that in early May, a new closing date was announced for the proposed deal, “likely to lighten the political exposure and to let the idea simmer with those opposed.”
“That would be three months later than the original September date, but still in 2024,” Bello said, and listed his reasons for a positive outcome.
“It has a chance for a few reasons: new presidential and vice president Democratic candidates that will likely focus on positive scenarios after the acquisition,” Bello said, referring to the last-minute replacement in the lineup for the 2024 presidential election after Biden dropped out of the presidential race on July 21 and endorsed current vice president Kamala Harris as the new nominee of the Democratic Party.
Since then, Harris’s choice of Minnesota governor Tim Walz as her running mate was endorsed by the USW.
“Vice president Harris couldn’t have chosen a stronger champion of workers to be her running mate, and the USW applauds her decision,” USW International president David McCall said on August 6, the same day Walz was certified as the Democratic Party’s vice-president nominee.
Bello also drew attention to Cleveland-Cliffs snapping up Canadian steelmaker Stelco for $2.5 billion, the cash and stock transaction announced on July 15, as one of the factors favoring the closing of the Nippon-US Steel deal.
“Cleveland Cliffs committed to acquire Canada’s Stelco last month for $2.5 billion, within its budget and capturing synergies that contribute to further rationalizing and restructuring the industry in North America,” Bello said.
The most important factor supporting the Nippon deal, is that “at stake is the future competitiveness of downstream industries going head-to-head against the best the world has to offer, and to head that Nippon Steel is the best suitor US Steel has,” Bello said.
“Nippon Steel’s $14.9 billion all-cash offer is by far a better offer than that of Cleveland Cliff’s $7.8 billion,” Bello said.
“In addition to the all-cash offer, Nippon will also invest $1.4 billion and honor the USW agreement currently in place,” Bello said, referring to the announcement the Japanese company made in its second-quarter earnings on August 1 that it will invest an additional $1.4 billion in capital expenditures into facilities covered by the current basic labor agreement with the USW, above the existing commitment of $1 billion, and bringing the total capex to $2.4 billion.
“It goes without saying that a Nippon Steel acquisition will also include technology transfer and more competitive access to the most profitable markets,” Bello said.
“It is also difficult on a political/national security basis to make a case against the transaction,” Bello added, addressing the line of criticism taken by some politicians against the deal.
“Japan is a staunch ally of the US, both politically and economically and physically, in the US and in Japan – just look at a roster and magnitude of domestic automakers,” Bello said.
Other market pundits hold less optimistic views, among them Samir Kapadia, principal and chief operating officer at the Vogel Group, a bipartisan government affairs and consulting firm based in Washington DC.
“I think there’s a near zero chance that the deal gets done this year,” Kapadia told Fastmarkets.
“Nippon Steel grossly miscalculated the domestic politics around the transaction and have hit a complete reset button to recalibrate their position,” Kapadia said. “It would make no sense to push it forward this year, prior to the presidential election.”
“Even if we see a change in power in the White House, this deal is fraught with major challenges,” Kapadia added.
The timeline
The news breaks in August 2023
Market participants were abuzz on August 14, 2023, the day after the news broke that Cleveland-Cliffs was trying to acquire US Steel, and that the latter had rejected its offer because “US Steel was unable to properly evaluate the proposal because Cleveland-Cliffs refused to engage in the necessary and customary process to assess valuation and certainty unless US Steel agreed to the economic terms of the proposal in advance.”
One of the dominant views expressed by steel market sources was that spot prices would go up if the two integrated producers were to combine.
The impact would be felt most keenly in the automotive sector, the sources said, noting that Cleveland-Cliffs and US Steel may represent as much as 80% of the market for automotive steel.
Also, the consolidation of the two integrated producers would give the combined entity a 100% monopoly in the non-grain oriented electrical steel (NOES) market.
USW throws its weight behind Cliffs bid
The United Steelworkers union (USW) told US Steel on August 17, 2023, that it has transferred to Cleveland-Cliffs its “right to bid” provisions.
Before that, the USW had affirmed in a letter on August 3 – that was later shared by Cleveland-Cliffs – that it supported the proposed acquisition, would not exercise its right of a counteroffer and would not endorse anyone other than Cleveland-Cliffs for such a transaction.
In response to that, Pennsylvania-based industrial conglomerate Esmark – which had placed an $7.8-billion all-cash bid for US Steel on August 14 – said on August 23 it was withdrawing from the process to “respect” the USW support for a Cleveland-Cliff’s acquisition.
There were also anonymous reports on August 16 that Luxembourg-based ArcelorMittal SA was considering a bid for US Steel.
Increasing acrimony between US Steel and Cleveland-Cliffs; auto group opposes Cliffs bid
August remained a busy news month, with almost daily developments emerging from the very public pursuit of US Steel by its Cleveland, Ohio-based rival.
US Steel published a letter on August 22 noting that its existing basic labor agreement “does not grant the USW, or any party it assigns its rights to, the right to prevent a potential transaction – with any party – that our board decides is in the best interest of our stockholders.”
This was disclosed by US Steel in a filing with the US Securities and Exchange Commission (SEC) on August 22.
On the same day, Cleveland-Cliffs demanded that US Steel reveal its potential buyers, in a filing with the SEC.
In response, US Steel said on August 29 it has entered into confidentiality agreements with “numerous third parties” and is “starting to share” due diligence information under those pacts, the company said in a filing with the SEC, but declined to disclose the name of those bidders.
In fact, the full process of the sale would not become public till much later, in an SEC filing that US Steel made on January 24. It revealed that Cleveland-Cliffs was one of the five entities that sent US Steel an indication of interest during its strategic alternatives review process.
The concerns surrounding an outsized impact of Cliffs acquiring US Steel was laid bare in a letter filed on October 31 by an automotive industry group, citing increased costs.
The Alliance for Automotive Innovation addressed US antitrust lawmakers in the letter, stating that: “If permitted to proceed, this transaction could have negative implications for the auto industry and increase costs for average drivers.”
Nippon Steel emerges the winner of a “historic deal”
US Steel executed a merger agreement with Japan’s Nippon Steel on December 18, with Nippon agreeing to pay $55 per share for the steelmaker – a 40% premium on the closing price for US Steel shares on December 15.
The pro forma company will be the third-largest global steelmaker, with a combined production capacity of 86 million tpy, including 15 million-16 million tpy in the United States.
David Burritt, US Steel’s chief executive officer, and Takahiro Mori, Nippon Steel’s executive vice president, said during a conference call on December 18 that, under Japanese ownership, US Steel’s brand name and assets would remain protected, while the company would benefit from Nippon Steel’s technological expertise, especially in the automotive and electrical steel segments.
After Cleveland-Cliffs, US Steel is the second steelmaker in the United States to produce non-oriented electrical steel, which is aimed at the electric-vehicle industry.
Lourenco Goncalves, chairman, president and CEO of Cleveland-Cliffs, congratulated US Steel on the news on December 18, while the USW slammed the announcement, saying it was caught unawares in a statement released the same day.
Political backlash
US senators and representatives from both sides of the aisle opposed the deal almost immediately, citing concerns around the national security implications of selling a US manufacturer for the defense and infrastructure industries to a foreign entity.
A letter written on December 19 by three lawmakers from US Steel’s home state of Pennsylvania begged Treasury Secretary Janet Yellen to block the deal.
The Biden administration pledged “serious scrutiny” of the tentative deal in a statement released on December 21 by National Economic Advisor Lael Brainard.
US Steel said in a statement sent to Fastmarkets that it notified the Biden administration on the day the acquisition was announced that it would voluntarily file for review.
The pushback came from former president Trump as well, who said on January 31 he would block Nippon Steel’s deal to buy US Steel “instantaneously” if he wins the November election.
Following this, President Biden cemented his opposition to the deal as well, stating on March 14 it was “vital for it [US Steel] to remain an American steel company that is domestically owned and operated.”
The USW labor union welcomed the president’s statement. “We’re grateful for his unfailing support and his ongoing commitment to advancing the interests of working families and their communities,” David McCall, international president of the USW, said on March 14.
“Allowing one of our nation’s largest steel manufacturers to be purchased by a foreign-owned corporation leaves us vulnerable when it comes to meeting both our defense and critical infrastructure needs,” McCall said.
Realizing the uphill battle it is facing, Nippon Steel retained a team of nearly a dozen lobbyists from Akin Gump Strauss Hauer & Feld – including two former members of Congress.
Nippon Steel president Eiji Hashimoto and executive vice president Takahiro Mori stated their commitment to preserving American jobs and investing in US Steel’s blast furnaces in an op-ed published in The Wall Street Journal on January 22.
Additionally, Nippon Steel said on March 15 that its acquisition of US Steel would boost American supply chains and economic defenses against China.
“Through increased financial investment and the contribution of our advanced technologies to US Steel, Nippon Steel will advance American priorities by driving greater quality and competitiveness for customers in the critical industries that rely on American steel while strengthening American supply chains and economic defenses against China,” Nippon Steel said. “No other US steel company on its own can meet this challenge while also meeting antitrust requirements.”
USW signs NDA with Nippon; USS shareholders vote in favor of deal
The USW’s vocal opposition emerged as a major hurdle for the deal completion, with the labor union noting on January 29 that Nippon Steel Corporation (NSC) will transfer its obligations to a holding company called Nippon Steel North America (NSNA).
“This means that NSC would not assume our labor, pension, retiree insurance and other agreements itself. Instead NSNA would acquire the business and take responsibility for our contracts,” the USW said on January 29.
However, the USW union has signed a non-disclosure agreement (NDA) with Nippon Steel, the union told Fastmarkets on February 26, adding that the NDA was a not crucial development in their negotiations.
The USW said on March 7 that a meeting with Nippon Steel “yielded no progress” and that the company has still not earned the union’s trust.
Despite continued opposition from the USW, pending antitrust and national security regulatory reviews, and widespread political backlash, US Steel shareholders overwhelmingly voted in favor of Nippon Steel Corp’s $14.1 billion takeover offer on April 12.
Goncalves gloats as deal faces opposition; US Steel board claps back
The top executive of US Steel’s former suitor Cleveland Cliffs fired several missives at the proposed deal over April and May.
“It still baffles me to this day that… individuals representing Nippon Steel… felt that they could do this without union support,” Lourenco Goncalves said in his company’s earnings call on April 23. “You just cannot do it without a USW-represented workforce.”
After this, Goncalves also said that Nippon Steel’s pursuit of US Steel has “zero chance” of winning government approval. Goncalves made these comments at a press conference at the American Iron and Steel Institute (AISI) general meeting in Washington on May 14.
The USW rejected fresh assurances that Nippon Steel sent in a letter on May 17 to abide by the terms of the current labor contract with US Steel, a move the union called a “backward step.”
The assurances did not address the union’s concern that agreements are being made with Nippon Steel USA, not with Nippon Steel in Japan, and therefore would not be legally binding on the parent company, the labor union said.
US Steel’s board of directors released a letter on May 21 to “correct the record.”
“We have found ourselves in the midst of a long-running misinformation campaign targeting our company, our investors, our employees and our business partners. For that reason, we must correct the record,” the letter said.
“While Cleveland-Cliffs is pushing false rumors to influence the market into believing we are working to unwind the transaction, nothing could be further from the truth,” the board said in the letter.
Goncalves responded to the letter on the same day, characterizing the Nippon-US Steel acquisition as an “uncloseable deal.”
“At Cleveland-Cliffs, we only deal with transparency,” Goncalves said on May 21. “It is unfortunate that the US Steel Board of Directors is just now realizing that it announced an un-closeable deal and is trying to blame Cliffs for its terrible decision-making.”
Department of Justice antitrust review
Nippon Steel said on May 2 it is pushing back its acquisition of US Steel to the second half of 2024 – compared with earlier estimates it would close in the second or third quarter – following a request for additional information and documents from the US Department of Justice (DOJ). The request is in connection with the DOJ’s review of the acquisition.
“Following receipt of the second request and following careful deliberation with respect to the regulatory processes, Nippon Steel revises the estimated date of closing of the transaction,” Nippon Steel said.
On the same day, US Steel said it is continuing to make “progress” toward clearing regulatory scrutiny from the DOJ in its heightened antitrust review of Nippon Steel’s bid to acquire the 123-year-old company.
However, it was announced on May 30 that US Steel and Japan’s Nippon Steel have received all regulatory approvals outside the United States for the proposed acquisition of the legacy American steelmaker.
“Steel mined, melted and made in the USA, baby… Red, White and Blue!”
David Burritt, president and chief executive officer of US Steel defended the proposed deal at an industry event in June, tackling each of the points raised by detractors.
“It is steel mined, melted and made in the USA, baby… Red, White and Blue!” Burritt told delegates at the Global Steel Dynamics Forum in New York City on June 18, noting that “in our future events, we will say the Pledge of Allegiance and sing the Star-Spangled Banner – we did it with Nippon Steel recently.”
Additionally, conservative thinktanks came out in defense of the proposed deal, with the Committee to Unleash Prosperity noting in a July thought piece the widespread opposition to the deal is unwarranted.
The Heritage Foundation noted in a similar thought-piece in April that US Steel is not the prize it once was, and that blocking the deal is denying it a chance to return to greatness.
“…Once a crown jewel of American industry, US Steel in recent decades has shuttered factories, sold others, and exited segments of the industry,” the foundation wrote. “Today’s market cap of just $9.42 billion is less than 1/100th of its size in 1901 as a proportion of the overall economy. US Steel is now the 648th largest American company, a stark contrast to seventh – where it would be had it maintained its size relative to GDP since 1901.”
Nippon promises additional $1.4 billion in capex; USW remains unmoved
Nippon Steel said it will invest an additional $1.4 billion in capital expenditures into facilities covered by the current basic labor agreement (BLA) with the USW, above the existing commitment of $1 billion.
The facilities to receive the additional investment through 2026 include Gary Works, Mon Valley, Granite City, Nippon Steel said on August 1.
On the same day US Steel said in its second-quarter earnings presentation that Nippon Steel North America’s headquarters will relocate to Pittsburgh from its existing US headquarters in Houston, Texas.
These assurances seemingly fell on deaf ears as the USW lambasted the two companies as continuing “their high-priced public relations campaign as they seek to sell out domestic workers, retirees and communities.”
In a press statement released on Monday August 12, the USW said that “Nippon still has not provided any true guarantees that our jobs, wages or benefits will be protected beyond the expiration of our current agreements in 2026, and our national security and critical supply chains remain vulnerable under the terms of the current deal.”
In an accompanying video, USW international president David McCall said on Monday that “our collective bargaining agreement says that any company that’s going to purchase our plants, or the company, has to be the ultimate parent that signs that contract.”
“Under this transaction, it’s not Nippon Steel that is signing the contract, it’s Nippon Steel North America, a subsidiary,” McCall said. “And the way they have structured this deal, US Steel will be a subsidiary of Nippon Steel North America.”
US Steel and the USW have set a date of August 15 to arbitrate grievances the union filed in January.
Nippon executive returns to US, continues acquisition negotiations
Nippon Steel is sending vice chairman Takahiro Miro back to the US as the Japanese steelmaker lobbies for support of its deal to acquire US Steel, Kallanish learns from a report by Reuters.
Miro’s itinerary is unavailable, but a source mentions that the Nippon executive will meet with various community officials and workers in states where US Steel operates.
The Nippon vice chairman has been acting as the company’s primary negotiator in the acquisition. His travels to the US in May and June failed to shore up any support from the United Steelworkers
(USW) union. Nor have political opponents of the deal publicly changed their positions. US President Joe Biden has said US Steel should remain American-owned (see Kallanish passim).
USW leadership has told union members that language in correspondence with Nippon is inconsistent and potentially harmful to workers and US national security (see Kallanish 1 July).
US Steel and its shareholders agreed to sell to Nippon Steel for roughly $15 billion after refusing a bid from domestic steelmaker Cleveland-Cliffs.
Kristen DiLandro USA
USS ceo ‘extremely confident’ Nippon deal will close
US Steel’s (USS) top executive still expects that the takeover of the iconic Pittsburgh, Pennsylvania-based company by Japan’s Nippon Steel will receive all approvals by the end of 2024, Kallanish hears at the Global Steel Dynamics Forum in New York.
Speaking on the conference stage late Tuesday, USS president and chief executive officer David Burritt reiterates that a merger with Nippon is “the right choice” for his 123-year-old company and for US national security and economic well-being.
“I’m extremely confident that we will be able to close the deal this year,” Burritt proclaims.
The acquisition agreement, announced last year, has faced opposition not only from the United Steelworkers but also from both major US presidential candidates and members of Congress in Pennsylvania and other states. The arrangement is undergoing an in-depth review by the US Department of Justice (DoJ).
Burritt says his employees will come to understand that they will benefit from the takeover. He says Nippon pledges to honor current labour contracts through 2026 and will invest over $1 billion in the business, a capex commitment that exceeds existing thresholds in pacts with the union.
“They’re experts in integrated mills, and they want to invest here,” Burritt explains. “They’re upping the ante beyond what’s in the basic labor agreement.”
He argues that the “friendshoring” arrangement with a buyer based in Japan, a key US ally in the Asia-Pacific region, “strengthens national security.” Additionally, Burritt finds it a breath of fresh air that there will be technology transfer into the US instead of the usual route out of the US.
The USS ceo says there was so much interest in acquiring his company that “something like 19 NDAs” were signed, referring to non-disclosure agreements that precede negotiations. Some proposals would have bumped into antitrust roadblocks, but not with Nippon.
“Customers love it so much that they have written letters to the DoJ saying this deal will strengthen competition,” Burritt states.
Dom Yanchunas USA
European Commission approves Nippon-US Steel acquisition
The European Commission has approved the acquisition of US Steel by Nippon Steel Corporation, it says in a note seen by Kallanish.
The Commission concluded the transaction would not raise competition concerns, given the companies’ limited market positions resulting from the proposed transaction. The notified transaction was examined under the simplified merger review procedure.
US Steel owns the 4.5 million tonnes/year crude steel capacity blast furnace-based steelworks in Kosice, which has been touted to transition to electric arc furnace steelmaking. Although the investment has received Slovakian government backing, the plant’s new owner will also need to provide capital for the project’s financing requirement to be covered.
In the US, the Nippon acquisition has hit a political stumbling block, with President Joe Biden and the US Steel union both opposing the deal.
The Japanese steelmaker said last week the transaction will be delayed to the third or fourth quarter. Nippon and US Steel have each received a request for additional information and documentary materials from the US Department of Justice in connection with the DOJ’s review of the proposed acquisition.
Adam Smith Poland