U The Monthly Crude Steel Metals Index (MMI) remained on the side with a slight downside bias, falling 1.49% from December to January. Meanwhile, the blocked sale of US Steel could significantly affect steel prices in 2025.
After the Committee on Foreign Investment in the United States (CFIUS) came to a split decision, the sale of US steel met a bitter end. In early January, President Biden made good on his promise to block Japan’s Nippon Steel Corporation from acquiring the mill. of Nippon 14.9 billion dollar offering arrived about a year ago, at the end of December 2023. The amount beat others, including Cleveland-Cliffs, who had offered $7.3 billion to buy the company often under pressure.
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The sale faced a multitude of setbacks as US Steel shareholders accepted Nippon’s offer. A number of prominent voices have come out against the sale. In addition to Biden, these include President-elect Trump, JD 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 purchases could serve as a form of tariff arbitrage, allowing foreign companies to circumvent trade barriers without contributing to the expansion of domestic production.
Cliffs executives were also quick to cast doubt on the acquisition, noting that US Steel was “deny reality” to believe that the deal was going through. The company noticed“After decades of unfair business practices that harm American steel companies and union jobs, it comes as no surprise to us that the United Steelworkers (USW) union strongly opposes any transaction involving Nippon Steel, a company with a long history of harmful trading practices.”
Critics of the agreement have pointed mostly to national security issues, and it is true that the United States has placed a greater focus on its critical industries in the years following the pandemic.
As a result, mergers involving foreign companies may raise concerns about dependence on foreign entities regarding sensitive technologies and crucial materials. For example, the widespread use of steel in vital industries, including defense, infrastructure and the automotive industry, makes the sector of strategic importance.
Other concerns stem from the United Steelworkers. For example, Nippon made several promises to the USW in an effort to gain union support. This included about $2.7 billion in investments in the company, $5,000 in payments to steelworkers and a vote to honor collective bargaining agreements.
The company also promised not to sell steel from its overseas mills to the United States and made a 10 years 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 cheat for decades that undermines our domestic industry.”
Despite the high-profile support for President Biden’s decision, the deal block comes with many downsides. Like MetalMiner’s own Lisa Reisman states“In the end, politics won out.” In addition, the CFIUS began to face fresh accusations of corruption following his inability to come to a decision, which left an open door for the Biden block.
Considering that Japan remains an ally of the United States and Nippon agreed to clear out a joint venture with China’s Baoshan, national security concerns have been closely scrutinized. Instead, a lot I believe “that a strengthened partnership with Japan can strengthen the resilience of the US supply chain and promote technological collaboration.”
Beyond this, the agreement would have brought many other benefits to the United States For example, significant investments in a number of structures of US Steel and capacity agreements would have meant job security for steel workers. Indeed, US Steel’s underperformance 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-effective solutions.
A significant number of industry insiders also believe that Nippon’s ownership would have promoted competition in the steel space, including for electric steel and steel produced BOF. This would mean a more competitive price for buyers. By September, Cliffs had maintained his willingness to buy US Steel, although now at a much lower price.
Whether from Cliffs or another US producer, another merger in the US market will further consolidate the industry, giving mills more control over steel price dynamics. Historically, this has meant higher prices, regardless of underlying demand conditions.
There will be antitrust concerns if Cliffs tries to buy US Steel, which could undermine its efforts. For example. Cliffs is the only other US producer with BOF facilities as part of its operations. This would give the company complete national control over that production method, which is favored by the automobile industry. As a result, the UAW is likely to 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 US Steel leveled processes in hopes of overturning Biden’s decision. The companies allege that the sitting president improperly influenced the CFIUS 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 regulatory review process, focused on national security”.
The companies also set their legal sights on Cleveland-Cliffs and the USW. In a second suit, the companies allege Cliffs, Cliffs CEO Lourenco Goncalves and USW McCall conspired to void the deal through “illegal and coordinated actions,” ultimately allowing Cliffs to “monopolize domestic steel markets “.
While it is not clear what will come of the most recent lawsuits, the end of the agreement seems to mean bad news for buyers. The acquisition by another domestic mill or the closing or limitation of certain facilities should US Steel seek to reduce costs would mean a higher price of steel. However, this may take time to be realized, and the outcome of the proceedings could change the course of events. However, the risk to steel prices remains on the upside.
