U.S. Steel Corp.'s stock tumbled nearly 18% on Wednesday following reports that President Joe Biden plans to block the company’s proposed $14.9 billion merger with Japan’s Nippon Steel due to national security concerns. The Biden administration's stance reflects bipartisan opposition to the merger, underscoring a preference for U.S. Steel to remain under American ownership amid rising geopolitical and economic sensitivities.
The potential move to block the merger comes despite promises of significant investment and expansion. Nippon Steel has committed to a $3 billion investment in plant improvements for U.S. Steel, which it claims would preserve jobs and enhance its competitiveness. The merger would create the world’s third-largest steel producer, positioning the combined entity to better compete with Chinese steel giants. However, the decision also risks straining relations with Japan, a key U.S. ally in Asia.
The Committee on Foreign Investment in the United States (CFIUS) is currently reviewing the deal, focusing on its implications for national security. Although CFIUS has not yet made a formal recommendation, White House sources have indicated that President Biden is inclined to prevent the merger. The administration's stance aligns with broader efforts to safeguard critical industries from foreign control, particularly those strategically important to national security.
U.S. Steel CEO David Burritt has actively defended the merger, highlighting the benefits of Nippon Steel’s investment as a means to sustain U.S. Steel’s operations and workforce. At a rally in Pittsburgh, Burritt called on political leaders to recognize the merger's potential benefits and warned of the negative consequences should the deal fail. "We want elected leaders and other key decision makers to recognize the benefits of the deal as well as the unavoidable consequences if the deal fails," Burritt stated.
The proposed merger has garnered mixed reactions from various stakeholders. The United Steelworkers Union has been vocal in its opposition, criticizing the deal for including Burritt's $70 million change-in-control bonus and arguing that U.S. Steel should remain under U.S. control. The union characterized U.S. Steel’s recent rally as a "pathetic attempt" to save the deal, reflecting growing frustration over the potential foreign takeover.
Political leaders have also weighed in, with Vice President Kamala Harris expressing a preference for U.S. Steel to remain domestically controlled. However, she has stopped short of explicitly stating she would block the merger. Conversely, Republican presidential nominee Donald Trump has stated he would terminate the deal if elected, further politicizing the merger amid the ongoing presidential campaign.
While the merger is fraught with political and security challenges, it is also positioned as a strategic move to advance decarbonization in the steel industry. Nippon Steel and U.S. Steel have committed to reducing carbon emissions by 2050, and the merger is seen as a way to accelerate the adoption of innovative, low-carbon technologies. This includes the increased use of electric arc furnaces and hydrogen-based steel production methods, which are critical for the industry’s contribution to a sustainable, clean energy future.
Despite the focus on decarbonization, the acquisition has sparked concerns over the loss of U.S. control over a key industrial asset at a time when domestic supply chains are crucial for clean energy development. Critics argue that maintaining U.S. ownership is essential for ensuring the strategic alignment of the steel industry with national interests, particularly as the sector plays a pivotal role in building renewable energy infrastructure.
