This step of Biden administration on Friday Stop proposed purchase of Nippon Steel US Steel has raised questions about the future of the once-iconic American company, with industry sources saying the producer may struggle to boost growth or attract rival takeover bids.
President Biden blocked the $15 billion deal over national security and supply-chain concerns.
US Steel CEO David B. Burritt criticized the decision in a statement to CBS News, calling Mr. Biden's actions “shameful” and “corrupt.”
“He repaid a union boss politically out of touch with his members, harming the future of our company, our employees, and our national security. He insulted Japan, a vital economic and national security ally, and endangered American competitiveness. Put.” Said.
Burritt said the proposed deal “guarantees a great future for U.S. Steel, our employees, our communities and our country.”
limited options
Without outside investment from Japan, the US-based steelmaker's path forward is unclear, industry experts said.
“With foreign ownership less likely, we see limited paths forward,” JPMorgan metals and mining analyst Bill Peterson said in a research note.
American steel leaders warned that without capital from Nippon Steel, it would be forced to reduce its aging blast furnace investments and shift to cheaper nonunion electric arc furnaces. Additionally, officials said US Steel may move its headquarters out of Pittsburgh.
The company could still entertain bids from domestic rivals, Peterson said, noting that US Steel's mini-mill assets could be attractive to peers such as steel products company Nucor Group, which has avoided exiting due to value concerns. Had previously considered buying parts of US Steel.
Others consider rival bids unlikely.
“No one was willing to follow Nippon Steel up and down the cliffs [$50 per share] a year ago,” BNP Paribas analysts said in a report, referring to Nippon Steel's $55-a-share offer, which offered a hefty premium to U.S. Steel shareholders. “Cliffs no longer has enough firepower, While foreign interested parties are likely to be in a good position now. “Given the backlash that Nippon Steel faced.”
Should U.S. Steel continue to operate as an independent company, it could focus on developing its Big River Steel plant in Arkansas, which it acquired in 2021 and which, according to JPMorgan, will be the largest in the world for General Steel. Produces 70% to 80% fewer emissions than manufacturing processes. Analyst. In that scenario, the company could also write down its aging blast furnace assets over time, he said.
challenges from both sides
Although doing so would be an uphill battle, both companies are expected to challenge the Biden administration's decision.
“The President's statement and order present no credible evidence of a national security issue, making it clear that this was a political decision,” the companies said. Said In a joint statement on Friday. “Following President Biden's decision, we have no choice but to take all appropriate action to protect our legal rights.”
The companies said the transaction would “revitalize communities” that depend on the steel industry, provide job security for steel workers and improve the U.S. steel supply chain. Specifically, Nippon had committed to invest in Mon Valley Works and Gary Works – two troubled US steel plants – as part of the deal.
“Blocking this transaction means denying the billions of investments committed to extending the life of U.S. Steel's aging facilities and putting thousands of good-paying, family-sustaining union jobs at risk,” the companies said in the statement. “
Meanwhile, the United Steelworkers, a union representing 850,000 workers, praised the administration's move.
“US Steel's recent financial performance makes it clear that it can easily remain a strong and resilient company. We now call on US Steel's board of directors to do what it needs to continue to grow and remain profitable,” the union said in a statement. Call for action.” statement.
antitrust concerns
Even if another domestic rival, such as Nucor Corporation or Cleveland-Cliffs, were interested in acquiring some or all of U.S. steel, anti-competitive concerns could scuttle those aspirations.
Corporate consultant Jay McDonald said, “I think when it comes to mergers of companies they have issues with the Federal Trade Commission in terms of monopolistic practices.”
Jeremy Flack, CEO of Flack Global Metal Supply, a medium-sized metals supplier and a U.S. Steel customer, echoed that concern.
“One good thing about the Nippon deal was that there was a new entrant into the market to buy assets, as opposed to continued consolidation, in which you end up getting an oligopoly, if the steel mills here are one,” he told CBS MoneyWatch. -Continues to buy others.”
The end of US steel?
If U.S. Steel can't turn around the facilities he says are currently unprofitable, he may have to close them, Flack said, adding, “Blocking this deal won't do anyone any good – customers, shareholders, workers or national security.”
Right now, the only way to describe the American manufacturer's future is “uncertain,” Flack said. “It will be challenged in court and we have a new administration coming in, so the story hasn't been written yet,” he said.
However, President-elect Donald Trump in December expressed his opposition About the proposed acquisition deal in a social media post.
Trump said, “I am completely opposed to the once great and powerful American Steel being purchased by a foreign company, in this case Nippon Steel of Japan.” wrote Truth on Social.
In December, US Steel Said It expected fourth-quarter adjusted earnings of about $150 million, short of Wall Street's forecast of about $262 million. The company reported net income of $119 million in the third quarter, down from $299 million in the year-ago period. The company's annual revenue, which reached $24 billion in 2008, is projected to decline to $18 billion by 2023, highlighting its struggle to increase sales.
US Steel shares fell 6.5% on the day to $30.47 and are down 36% from the same period last year.
According to the World Steel Association, the company is ranked 27th in the world in terms of output and Nippon Steel is ranked fourth.
Contributed to this report.