WASHINGTON: President Joe Biden blocked Nippon Steel’s proposed $14.9 billion purchase of US Steel on Friday, citing national security concerns, dealing a potentially fatal blow to the contentious plan after a year of review.
Nippon paid a hefty premium to clinch the deal and made several concessions, including a last-ditch gambit to give the US government veto power over changes to output, but to no avail. In a statement, Nippon and US Steel blasted Biden’s decision, calling it a “clear violation of due process” and a political move, and saying they would “take all appropriate action” to protect their legal rights.
Pittsburgh-based US Steel had warned that thousands of jobs would be at risk without the deal. But the United Steelworkers union, which opposed the merger from the outset, praised Biden’s decision, with USW president David McCall saying the union has “no doubt that it’s the right move for our members and our national security”.
The deal was announced in Dec 2023 and almost immediately ran into opposition across the political spectrum ahead of the Nov 5 US presidential election. Both then-candidate Donald Trump and Biden vowed to block the purchase of the storied American firm, the first corporation valued at more than $1 billion, which once controlled most of the country’s steel output.
“A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains,” Biden said in a statement. “Without domestic steel production and domestic steel workers, our nation is less strong and less secure.”
Nippon Steel has previously threatened legal action if the deal was blocked. Japanese newspaper Nikkei reported on Friday that the company would sue the US government. Lawyers have said Nippon Steel’s vow to mount a legal challenge against the US government would be tough.
The Committee on Foreign Investment in the United States spent months reviewing the deal for national security risks, but referred the decision to President Biden last month, after failing to reach consensus.
It is unclear whether another buyer will emerge. US Steel has reported nine consecutive quarters of falling profits amid a global downturn in the steel industry. Cleveland-Cliffs, a US company which previously bid for the steel behemoth, has seen its share price fall to the point where its market value is lower than that of US Steel.
Shares of US Steel were down 5.5 per cent to $30.75 on the New York Stock Exchange.
Key Asia ally
Japan’s Trade Minister Yoji Muto expressed disappointment over Biden’s decision, saying it was both difficult to understand and regrettable.
“There are strong concerns from the economic circles of both Japan and the US, and especially from Japanese industry regarding future investments between Japan and the US, and the Japanese government has no choice but to take this matter seriously,” he said in a statement via email.
Japan is a key US ally in the Indo-Pacific region, where China’s economic and military rise and threats from North Korea have raised concerns in Washington. In November, Japanese Prime Minister Shigeru Ishiba urged President Biden to approve the merger to avoid marring efforts to improve economic ties.
Japan is the top investor in the US and Keidanren, its biggest business lobby, has previously aired concerns that the review was facing political pressure.
Published in Dawn, January 4th, 2025
