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US warned Nippon Steel its bid poses national security risk: Reuters

  • By Al Mayadeen English
  • Source: Reuters
  • 5 Sep 2024 09:58
  • 27 Shares
3 Min Read

The Biden administration has informed Nippon Steel that its $14.9 billion acquisition of US Steel would threaten national security by hurting the US steel industry.

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  • A rally by U.S. Steel employees is held outside the United Steel Tower in downtown Pittsburgh to display their support for the transaction with Nippon Steel on September 4, 2024. (AP)
    A rally by US Steel employees is held outside the United Steel Tower in downtown Pittsburgh to display their support for the transaction with Nippon Steel on September 4, 2024. (AP)

The Biden administration informed Nippon Steel, Japan's largest steelmaker, on Saturday that its $14.9 billion bid to acquire US Steel would threaten national security by weakening the American steel industry, according to three sources, signaling that the US is likely to block the deal.

The deal is facing bipartisan opposition, with Democrats and Republicans pushing back. On Monday, Vice President and Democratic presidential candidate Kamala Harris stated she wants US Steel to stay "American owned and operated." Meanwhile, Donald Trump has vowed to block the acquisition if he wins the presidency.

In a previously undisclosed letter, the Committee on Foreign Investment in the United States (CFIUS) warned that the deal would harm US steel production and reduce US Steel’s efforts to pursue trade remedies, according to sources familiar with the matter. The companies were given until Wednesday to respond.

"The committee has identified risks to the national security of the United States arising as a result of the transaction," the letter said, according to one of the sources.

In their written response, according to excerpts shared with Reuters, the companies reiterated concerns that US Steel had publicly disclosed on Wednesday. "Rejection of this transaction will lead to the idling of US Steel's blast furnace facilities; ... likely cost thousands of jobs; and ultimately weaken the quality and resiliency of steel supply to US industries."

They added that the US was "acting in this matter not on the basis of the facts, the law, or the United States national security interests, but on the basis of politics and the cynical exploitation thereof by third parties."

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The White House declined to comment. The Treasury Department, which leads CFIUS, did not respond to a request for comment.

It is worth noting that Nippon Steel shares were up 0.8% around midday on Thursday, while US Steel shares closed down 17.5% on Wednesday.

Risks of deal falling through? 

A statement released by US Steel on Wednesday stated that if Nippon Steel's $14.1 billion acquisition falls through, it may be forced to liquidate some of its steel plants and relocate its Pittsburgh headquarters.

"Without the Nippon Steel transaction, US Steel will largely pivot away from its blast furnace facilities, putting thousands of good-paying union jobs at risk, negatively impacting numerous communities across the locations where its facilities exist, and depriving the American steel industry of an opportunity to better compete on the global stage," the announcement stated.

It pointed to "serious questions" concerning the remaining headquarters in Pittsburgh without a deal with Nippon Steel.

CEO David Burritt previously told The Wall Street Journal that Nippon Steel's anticipated $2.7 billion investment in US Steel's older plants was vital to maintaining the company's competitiveness and jobs. Nippon has also vowed not to lay off hourly workers until 2026.

If the transaction fell through, US Steel would continue to shift output to less capital-intensive operations at an enlarged Arkansas plant that uses melted scrap instead of iron ore, Burritt said. It would also close its remaining steelmaking facility in Pittsburgh and would likely relocate its headquarters south.

  • United States
  • Nippon Steel
  • Japan

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