President Joe Biden on Jan. 3 blocked the $15 billion sale of US Steel Corp. at Nippon Steel Corp. under the federal Defense Production Act, citing national security concerns and “credible evidence” that the Japan-based steelmaker “could take actions that threaten to harm the national security of the United States.”
In recent days, Nippon Steel had offered to allow any US president to halt layoffs or production cuts at US Steel as part of its bid to approve the deal. Biden criticized foreign steel companies around the world in an accompanying statement for illegally dumping steel into other markets at artificially inflated prices, hurting the domestic steel industry, he said.
The president also claimed that steel represents an “essential national security priority and is critical to resilient supply chains,” an argument cited by opponents of the deal, including rival domestic manufacturer Cleveland-Cliffs that was rejected by US Steel in a proposed $7.3 billion purchase. agreement in 2023.
“We need the big American companies that make up the bulk of US steelmaking capacity to continue to lead the fight on behalf of America’s national interests,” Biden said in the statement. “As determined by an executive branch panel of national security and commerce experts, this acquisition would place one of America’s largest steel producers under foreign control and create risk to our national security and our supply chain. critical supply”.
Biden’s order gives US Steel and Nippon Steel 30 days to abandon the transaction. The companies could receive an extension from the US Treasury-led Committee on Foreign Investment, but that is unlikely. The committee ruled on Dec. 23 that the deal may pose national security risks, but did not formally recommend to Biden that it be blocked or allowed.
Timna Tanners, managing director of equity research at Wolfe Research, wrote in a Jan. 3 note to investors that President Biden’s block on the deal sets a precedent that limits foreign ownership of U.S. steel and possibly other assets, but the research firm does not anticipate a sale to Cleveland. Cliffs or other potential new owners. He wrote that US Steel management will likely shut down one of two blast furnaces at its 2.8-million-ton-a-year Monongahela Valley Works site in West Mifflin, Pa., this year, with a full shutdown possible in 2026 , if the production of Appliance customers can be moved to its remaining blast furnaces in Gary, Ind.
Both Biden and President-elect Donald Trump opposed the takeover by Nippon Steel during the 2024 presidential campaign, with the latter recently saying he would block it if there was no action by the current administration of Biden.
US Steel had previously said layoffs and production shutdowns could occur if the deal is blocked, but has not made any definitive statements about production of structural steel and other construction products since Biden’s action.
This article was updated at 12:59 PM EST on January 3 with comments from Timna Tanners, Wolfe Research Managing Director of Equity Research.
