Introduction and Executive Summary
On December 18, 2023, Nippon Steel, the fourth largest steelmaker in the world, announced it was buying United States Steel (US Steel) for $14.9 billion. Though US Steel is an iconic company central to the construction of modern America, it is now only the twenty-fourth largest steelmaker in the world and the third largest in the United States. Most observers regarded the deal as a win-win. It would have combined two companies with complementary capabilities to strengthen the American steel industry at a time when the country needs to secure its supply chains and prioritize reindustrialization.
However, opposition to the deal came from numerous quarters. President David McCall of United Steelworkers (USW) criticized it, claiming the union did not trust Nippon Steel to stick to existing labor agreements. Political leaders, such as President Joseph Biden and Senator Sherrod Brown, also opposed it, both for national security reasons and out of a desire to keep US Steel “American-owned and American-operated.”
Though Nippon Steel and US Steel had met all legal obligations to conclude the deal by the end of August 2024, in early September, the Committee on Foreign Investment in the United States (CFIUS) indicated it was ready to block the transaction for national security reasons. Following the outcry from US Steel leadership and union steelworkers, CFIUS allowed Nippon Steel to re-file the purchase for re-review and estimated it would give a final report in late December.
To contrast the rhetoric concerning this purchase, this report provides a comprehensive, fact-based analysis of the deal. We examine Nippon Steel’s acquisition of US Steel from industrial, antitrust, labor, technology, trade, national security, and community perspectives. Our research findings determine that this proposed transaction would advance American economic, national security, and political interests at a time when the needs for secure domestic steel production and supply chains are paramount.
Transaction History
On December 18, 2023, Nippon Steel, the fourth-largest steelmaker in the world, made an all-cash $14.9 billion offer to buy the entirety of US Steel. Despite its pivotal role in building modern America, US Steel had shrunk in recent decades and was only the twenty-fourth largest steelmaker in the world and only the third largest in the United States. It was an unprecedented move by Nippon Steel, which was paying a 40 percent premium on US Steel’s share price to acquire the company. This beat out a previous unsolicited smaller offer of cash and stock totaling $7.25 billion from Cleveland-Cliffs, the twenty-second largest steelmaker in the world and the second largest in the United States.
In Nippon Steel’s press release, Executive Vice President Takahiro Mori said, “We believe this transaction is in the best interests of our two companies” and would unlock their potential in ways that would benefit customers, employees, and communities. Nippon Steel pledged to uphold all existing labor agreements with the United Steelworkers union and to move the headquarters of Nippon Steel North America (NSNA)—the subsidiary that oversees all its plants in North America—to Pittsburgh. It also promised $2.7 billion in capital investments for aging US Steel plants and the transfer of its cutting-edge blast furnace technology to US Steel.
Initial Reaction
Under its basic labor agreement (BLA) with US Steel, the USW had the right to bid for the steelmaker in the event of a sale or to assign that right to another entity—Cleveland-Cliffs in this case. However, it expressed opposition. It claimed that neither US Steel nor Nippon Steel had reached out to the union in advance of the deal, as the partnership agreement required. Therefore, the USW argued, union workers could neither believe that Nippon Steel understood its BLA obligations nor trust that it possessed the capacity to fund the existing contract. It made no mention of how its consignment agreement with Cleveland-Cliffs complicated US Steel’s ability to inform what was effectively a rival bid from USW.
Nationwide political figures backed USW’s opposition to the proposed deal. At the White House, National Economic Adviser Lael Brainard expressed belief that the deal deserved “serious scrutiny in terms of its potential impact on national security and supply chain reliability.” Senators Bob Casey and John Fetterman of Pennsylvania criticized US Steel for selling to a foreign company; it “should remain under American ownership,” they said. Senator Sherrod Brown, in a letter to the White House, urged the administration to use CFIUS authority to examine the deal from the perspective of workers, consumers, national security, and trade protection.
Outside observers of the deal viewed these pronouncements as negotiation maneuvers ahead of the 2024 election. The merits of the deal seemed obvious because it would strengthen American steelmaking capacity and technology. Nippon Steel is a company from Japan, a trusted American ally that the bipartisan Select Committee on the Chinese Communist Party (CCP) recommended for CFIUS expedited review. The likely importance of Pennsylvania to the 2024 election gave USW additional influence, but observers assumed the USW was using its purported opposition to secure maximum concessions from Nippon Steel in negotiations.
Continued Opposition
However, the following months did not reveal any progress in negotiations. The USW continued to oppose the deal and refused to negotiate with Nippon Steel to address its grievances. On January 12, 2024, it filed an arbitration grievance against US Steel over the successorship issue and Nippon Steel’s potential lack of commitment to the BLA despite its $14.9 billion outlay. Nippon Steel attempted to negotiate with USW leadership to address concerns and provide assurances concerning the BLA. The two parties met on March 7, 2024, at the conclusion of which McCall repeated his skepticism of Nippon Steel’s commitment to the agreement. Since then, the two parties have not met despite Nippon Steel’s persistent outreach, and USW claims it wants ironclad guarantees from the company but refuses to meet to negotiate them.
National political voices continued to express opposition to the deal. Most notably, President Biden announced on March 14 that US Steel had to remain “domestically owned and operated.” In January, Donald Trump, then running for the Republican presidential nomination, also expressed opposition. Senator Sherrod Brown raised national security concerns, pointing to a report by Horizon Advisory examining Nippon Steel’s entanglements with China; Horizon later heavily revised the report. Though some locals were supportive, such as the chairman of the Republican Committee for Allegheny County, Samuel DeMarco III, much of the media coverage focused on national-level opposition.
Over the next several months, there was little apparent movement. Nippon Steel continued to reach out to McCall to address USW concerns to no avail. But it also expanded its outreach to ordinary steelworkers in town halls, explaining the terms of the deal and its commitments to invest in US Steel over the long term.
A False End
However, things changed near Labor Day 2024. On August 31, CFIUS sent Nippon Steel a letter expressing concern that the steelmaker’s presence in India and its influence on US Steel might create a national security risk related to steel supply. Nippon Steel rejected those national security claims. India was a growth market, but “that growth will not come at the expense of Nippon Steel’s commitment to the US market,” it said. As for interfering in US Steel’s participation in US government trade actions, Nippon Steel pointed to its commitments to US Steel governance independence as well as its own support for anti-China dumping tariffs in Japan.
Despite this correspondence, the Biden administration still planned to block the acquisition in early September. However, US Steel responded that it would shut down its aging blast furnaces in western Pennsylvania and Indiana if the transaction failed. It organized an employee rally in downtown Pittsburgh in support of the deal. Local union and community leaders also expressed support, citing the opportunity “to keep steel industry jobs in the region and communities from being erased.” Likely due to the public pushback against its plans, the Biden administration allowed Nippon Steel to resubmit its CFIUS filing, effectively delaying a final decision on the deal until late December 2024.
Production and Technology
To understand the impact of the Nippon Steel–US Steel deal, one should examine each company’s industrial, strategic, and technological outlook.
Production and Strategy Profiles
US Steel produces 15.75 million tons (MT) per year, and most of its facilities are in the United States. Historically, it has relied on unionized blast furnace mills most prominently located in the Gary Works in Indiana and the Mon Valley Works in Pennsylvania. However, these facilities are aging and need significant investment, which Nippon Steel has promised. More recently, US Steel has diversified its production methods, buying the Big River Steel electric arc furnace (EAF) facility in Arkansas in 2019 and a second facility in the area (Big River 2), which it has slated to begin production in 2024.
Nippon Steel produces 43.6 MT, with holdings in Japan, Southeast Asia, India, China, and the United States. It first entered the US market in 1984 and holds a substantial interest in 11 facilities. Of note are Wheeling-Nippon Steel in West Virginia, Standard Steel in Pennsylvania, and its joint venture with ArcelorMittal at AM/NS Calvert in Alabama. In all of these facilities, it has shared its innovative technologies. Wheeling-Nippon produces ZAM, a zinc-aluminum-magnesium coating that provides superior anti-corrosion qualities. Calvert EAF produces advanced, high-strength steels necessary to produce more efficient vehicles, including hybrid and electric cars.
Nippon Steel’s desire to purchase US Steel is part of its strategic vision of expanding its production to 100 MT in the next decade and ensuring secure global supply chains in an era of uncertainty. Due to Japan’s declining population and decreased demand in China, the company is looking to three regions for growth: the United States, India, and Southeast Asia. However, though India and Southeast Asia are experiencing growing steel demand, they also carry the risk of more volatile business and political conditions. In contrast, the United States offers the only growing steel market in the developed world, a robust regulatory and infrastructure framework, and an emphasis on domestically produced steel. This is why Nippon Steel is willing to pay a 40 percent markup for US Steel and to adhere to the existing US Steel–USW BLA of no layoffs before September 2026: it is a vote of confidence in the strength of the US market.
Nippon Steel’s Technology
To achieve its business objectives, Nippon Steel wants to acquire US Steel’s electric arc and blast furnace mills. It intends to make significant technological investments and share its $500 million annual research and development (R&D) budget with US Steel under its ownership.
At first glance, Nippon Steel’s desire for US Steel’s blast furnace mills makes little sense. Blast furnace mills are expensive to maintain because they must operate constantly and need relining every 15–20 years. They also generate a great deal of carbon dioxide due to the use of coal and oxygen, which may account for 10 percent of all greenhouse gases emitted into the atmosphere.
However, electric arc mills, which use electricity to melt scrap steel to produce steel, have their own limitations. For one, there is a finite amount of scrap steel in the world; as more countries switch to electric arc furnaces, they produce less so-called virgin steel, and competition for scrap steel intensifies. In addition, electric arc steel is not suitable for several applications, limiting its use. The need for blast furnace steel is why Nippon Steel promises to invest $2.7 billion to upgrade US Steel facilities, including the $1.3 billion it has specifically tagged for Gary and Mon Valley.
Nippon Steel also has cutting-edge technology that will make blast-furnace steel more efficient. Since 2008, it has been developing the COURSE50 blast furnace, which partially replaces the carbon that steel mills use in their furnaces with hydrogen. It expects this upgrade to reduce CO2 emissions by 50 percent by 2050. In February 2024, Nippon Steel was able to achieve a 33 percent reduction in CO2 emissions. Its rival bidder for US Steel, Cleveland-Cliffs, received a $575 million grant from the US Department of Energy to engage in similar decarbonization efforts but has not yet achieved similar results. At the same time, China is not standing still when it comes to steelmaking innovation. It recently announced the invention of a new process for producing cleaner steel more efficiently.
However, Nippon Steel has stated that it would transfer this high-end blast furnace technology to US Steel only if it owns the company outright. Regions such as Europe have begun adopting carbon border adjustment mechanisms, which tax imports based on the amount of greenhouse gases they emit during production. US Steel’s ability to produce such low-carbon steel would strengthen the American steel industry domestically as well as internationally through more competitive exports in the decades to come.
Legal and Antitrust
Legal
There are no current legal obstacles to Nippon Steel’s acquisition of US Steel. After the announcement of the sale, USW accused the two companies of not reaching out to the union ahead of the sale, which it called “a violation of our partnership agreement that requires U.S. Steel to notify us of a change in control or business conditions.” However, this accusation conflicted with USW leaders’ decision to consign its negotiation rights to Cleveland-Cliffs, which would have given any information US Steel shared with the USW to a rival bid, especially one that initiated a takeover.
On January 12, 2024, USW leaders filed a series of grievances alleging that the deal did not satisfy the successorship clause in the BLA. The Board of Arbitration heard the case between US Steel and USW on August 15. On September 25, it ruled that Nippon Steel had satisfied the successorship clause and fulfilled its obligations to the BLA by taking the following measures:
- Recognizing USW as the bargaining representative for USW-represented employees at US Steel
- Providing assurances that it was willing and capable of honoring the commitments between US Steel and USW regarding USW-represented employees
- Assuming all USW agreements were applicable to USW-represented employees at US Steel
Moreover, Nippon Steel’s commitments to invest $1.4 billion in USW-represented US Steel plants—to avoid plant closures or layoffs during the term of the BLA, and to protect the best interests of US Steel in trade matters—bolstered its case. With the Board of Arbitration ruling, there was no more legal basis to block the deal.
Antitrust
The sale of US Steel to Nippon Steel would raise few or no antitrust concerns. In contrast, a sale to Cleveland-Cliffs would create a great deal of antitrust concern from the federal government because the new entity would control nearly all US iron ore mining and processing facilities, 100 percent of America’s blast steel furnaces, and 65–90 percent of the steel in US-built automobiles. US Steel and Cleveland-Cliffs agree that antitrust divestiture would be necessary in the event of a sale but disagree on the value: Cleveland-Cliffs estimated $2 billion in divestitures, while US Steel estimated $7 billion, which would almost equal the $7.25 billion Cleveland-Cliffs offer.
In contrast, Nippon Steel’s American operations have very little overlap with those of US Steel, making it a complementary acquisition. To forestall any antitrust concerns, Nippon Steel has agreed to sell its joint venture stake in Calvert, Alabama, with ArcelorMittal once the US Steel sale goes through.
A potential Cleveland-Cliffs acquisition of US Steel, as USW leadership desires, would not be in the interest of consumers or business customers. Industry groups, aware of the potential antitrust issues that would arise with a Cleveland-Cliffs acquisition of US Steel, have been vocal in their opposition. For instance, the Alliance for Automotive Innovation (AAI), the leading industry group for automakers active in the United States, sent a letter to the White House in March 2024 in response to President Biden’s comments earlier in the month. The letter affirmed support for the administration’s earlier conclusion that a Cleveland-Cliffs acquisition of US Steel was infeasible for antitrust reasons. If the White House has concerns about Nippon Steel, “it must seriously consider alternative outcomes,” the AAI stated. “One option that should not be on the table is an arrangement that creates a market concentration of domestic steel production in a single company.”
National Security
Nippon Steel’s purchase of US Steel would strengthen American national security in numerous ways. Criticisms that the deal would threaten US national security are unfounded upon closer inspection.
First, though steel is a strategic resource that is crucial to the American national security supply chain, US Steel does not supply any steel to the Department of Defense. Its primary customers are in consumer sectors such as automobiles, appliances, construction, and containers. In addition, the American steel industry operates at only 73.3 percent capacity, and the Pentagon consumes only 3 percent of that total annual production. In the case of a security contingency, there is sufficient domestic steel production overhead to cover American defense needs. In this circumstance, US Steel under Nippon Steel would likely participate in wartime production expansion out of consideration for its security and business interests.
Second, Nippon Steel is headquartered in America’s closest and most important ally, Japan. As the global security situation becomes increasingly uncertain, Japan has emerged as a global partner to the United States, taking on a more active role to preserve the rules-based order that underpins US security and prosperity. Japan hosts more than 50,000 American troops, will increase its defense spending to 2 percent of gross domestic product by 2027, and is a key customer and joint production partner for key American defense priorities, missiles for air and ballistic missile defense, aircraft, and ship repairs. The US is strengthening its partnerships with Australia, South Korea, and the Philippines in close cooperation with Japan.
The United States and Japan have been allies since 1952; it is extremely unlikely that Nippon Steel’s purchase of and investment in US Steel would harm American national security. Rather, Japan is the leading foreign direct investor in the United States, signaling its faith in the alliance and in American national security. In recognition of Japan’s crucial place in America’s economy and security, the bipartisan House Select Committee on the CCP advocated for Japan to join US allies, such as the United Kingdom and Australia, on CFIUS’s whitelist and receive fast-tracked American investment approval. The committee should regard Nippon Steel’s investment in US Steel favorably in the same way.
Third, Nippon Steel’s acquisition of US Steel would bolster American economic security against China’s economic aggression. As the House select committee makes clear, China has undertaken a multidecade campaign to use “extensive mercantilist and coercive policies to hollow out the American economy and displace American workers.” Its objective is to acquire US technology, expertise, capital, and market share to dominate supply chains in key strategic sectors, such as manufacturing, electric vehicle batteries, and critical minerals. As China has already proven in recent years, its control of vital supply chains allows it to use economic coercion as a diplomatic tool and to safeguard itself from foreign pressure.
Steel plays an important role in this effort. Until recently, China’s growth has enjoyed an artificial boost from the country’s real estate sector, which has absorbed much of its would-be consumer spending. As Leland Miller, chief executive officer of China Beige Book, said in 2022, “the [Chinese] steel sector was built on a China that wanted artificial growth forever.” This explains its enormous size. It produces over 1 billion tons a year and accounts for more than half of global steel output. As China’s property market has crashed in recent years, its steel industry suffers from overcapacity. As House Select Committee on the CCP Ranking Member Raja Krishnamoorthi noted in June 2024, China produces 108 percent of the steel it needs; that 8 percent of overcapacity is equivalent to all of America’s production. Thanks to generous subsidies from Beijing, Chinese steel sells for 40 percent less than American steel.
A strengthened US Steel under Nippon Steel counters China’s economic aggression through greater competitiveness and capacity. Nippon Steel plans to invest $2.7 billion in US Steel facilities, transfer cutting-edge blast furnace technology, and share its $500 million annual R&D budget. These improvements would empower America to resist Chinese dumping of excess steel into US markets. Moreover, as both the current and next presidential administrations have made strengthening American manufacturing a priority, a more capable US Steel would provide high-quality, cost-efficient steel to US industry.
Fourth, Nippon Steel’s presence in China is a small legacy presence that is shrinking. In the 1980s, like many American businesses, such as Coca-Cola and Kentucky Fried Chicken, Nippon Steel entered China to participate in its growing economy. The Japanese steelmaker began working with Chinese steelmaker Baosteel, constructing the latter’s first blast furnace in 1985. However, Nippon Steel’s presence in China remained small: its partnerships with Baosteel and with Wuhan Iron and Steel Co. (WISCO) accounted for only 3.6 MT of annual production, about 5 percent of its total worldwide capacity. Other than these two, the Japanese steelmaker’s ventures in China are with other Japanese firms. Moreover, its activities in China were in nonstrategic sectors: its collaboration with Baosteel was for automotive sheets, none of which it exported to the US.
However, though its activities in China were small-scale, Nippon Steel proactively took steps to mitigate national security concerns by divesting its stake in the joint venture with Baosteel. On July 23, 2024, it announced that it would cease the partnership by August 29. China’s own faltering economy and weakening demand for automobiles also likely played a role in this decision. By doing so, Nippon Steel cut its capacity in China from 3.6 MT to under 1 MT. China now accounts for only about 2 percent of its total global production capacity. Compared to many American companies, Nippon Steel has extremely low exposure to China, so Beijing has little leverage for coercion.
Fifth and finally, Nippon Steel’s investment would contribute to the long-term industrial and economic competitiveness of the United States, which has historically been the basis of America’s security. America’s victories in both world wars and the Cold War are a testament to the fundamental fact of American strength. Strengthening American steel production in capacity, quality, and cost-effectiveness will be crucial to preparing for any future challenge. Nippon Steel’s investment in US Steel would advance all those qualities.
Trade
Foreign Direct Investment and the US Economy
Nippon Steel’s attempted purchase of US Steel is an example of inbound foreign direct investment (FDI), which receives widespread and bipartisan support. Former Treasury Secretary Steve Mnuchin noted “how important it is to create a positive environment for foreign investors in the US.” Commerce Secretary Gina Raimondo has championed the SelectUSA Program, pointing out that its FDI program has “supported more than 200,000 jobs throughout the United States and its territories.”
Recent administrations’ industrial policies have aimed to preserve and expand domestic industry. They have done so through tariffs to protect domestic industries and through subsidies to encourage investment. FDI is one of the intended effects of the steel and aluminum tariffs and of the subsidies from the Inflation Reduction and CHIPS Acts. FDI efforts lead to valuable jobs, economic growth, and technologies in the US. Notable cases include Honda’s entry to the United States in 1982, Samsung’s recent semiconductor investments in Texas, and Nippon Steel’s investments in Wheeling-Nippon since 1984.
Nippon Steel and Trade Action
Nippon Steel’s intended purchase of US Steel should bring steelmaking capacity and technological benefits to the American industry. However, in its August 31 letter, CFIUS raised two hypothetical ways in which the deal might threaten national security.
The first cites Nippon Steel’s India-based steelmaking operations, which are some of its largest overseas. Analysts estimate production costs in India are 20 percent lower than in the United States. CFIUS claims that “a robust commercial steel market is essential for national security” and that American steelmakers are unable to meet domestic critical infrastructure and commercial demand alone. If imports are necessary to meet demand, it reasons, then Nippon Steel might be able to shut down US Steel after acquisition and import lower-cost steel from India instead.
However, this argument is weak and unconvincing. First, Nippon Steel has stated it has no intention to shut down US Steel in favor of any of its foreign operations. Second, this claim ignores the Japanese company’s plans to increase US Steel’s capabilities and competitiveness. Third, a company owning foreign operations by itself should not be a concern; US Steel has operations in Slovakia, and in July 2024, Cleveland-Cliffs spent $2.5 billion to acquire Canadian steelmaker Stelco. Fourth and finally, this hypothetical concern defies the business logic of spending $14.9 billion on an asset in the attractive, growing American market and immediately liquidating it.
The other concern CFIUS raised was that Nippon Steel would not support American tariff, antidumping, and countervailing duty cases due to the steelmaker’s global presence. In its response, Nippon Steel stated it would not interfere with US Steel on trade issues. To ensure this, it would create a “trade committee” of American citizens to make recommendations to the US Steel board.
CFIUS may have raised this concern in light of Cleveland-Cliffs’ failed trade action in January 2023, when it petitioned the US International Trade Commission (ITC) to launch an anti-dumping duty investigation against foreign importers of tinplate steel. US Steel was a major tinplate producer but did not participate in the subsequent hearing, for which Cleveland-Cliffs criticized it.
However, this case highlights the need for high-quality steelmaking. The ITC’s February 2024 report on the tinplate issue found that American clients were not buying foreign tinplate because it was cheaper and were not benefiting from dumping. They were importing the tinplate because US steel producers could not provide sufficient “quality and availability.” The report specifically listed Cleveland-Cliffs’ tinplate as not receiving qualification for food products. In this regard, CFIUS concerns about Nippon Steel’s willingness to participate in American trade actions are misplaced considering (1) Nippon Steel’s governance measures to ensure US Steel’s trade independence and (2) the need for higher quality steel, which Nippon Steel’s investments in US Steel would advance.
Local Perspectives
Nippon Steel’s 40 Years in the United States
When David McCall opposed the acquisition because “we don’t know Nippon,” he ignored Nippon Steel’s 40-plus-year history in the United States and with USW steelworkers. The company first entered the US in 1984 when it acquired a stake and eventual full ownership of Wheeling-Nippon Steel. In the 40 years since, its American operations have produced 6.3 MT of steel a year. It works with USW steelworkers at two of its holdings, Wheeling-Nippon in West Virginia and Standard Steel in Pennsylvania.
In both plants, Nippon Steel has had a positive record as a producer and employer. In February 2024, steelworkers celebrated the 20 millionth ton of steel produced at Wheeling-Nippon. The Follansbee plant regularly operates on a round-the-clock schedule, a testament to its productivity and client demand. This contrasts with Cleveland-Cliffs’ tinplate plant down the road in Weirton, which it shuttered in February 2024, citing foreign competition despite the shortfalls in quality and capacity that the ITC found in its report. As a counterpoint, Wheeling-Nippon demonstrates the technological benefits of Nippon Steel: it is the first ZAM alloy producer in the US. It is also the only North American steelmaker to produce all five major hot-dip coated products for the corrosion-resistant steel that the automotive and appliance industries need.
Standard Steel had struggled to make a profit for decades when Nippon Steel purchased it in 2011. However, with $220 million of investment and engineering from Nippon Steel, it was able to boost productivity and make a profit in just two years. It has remained profitable since 2013 and achieved a record-high profit in 2022.
Nippon Steel is also an engaged member of its communities. In Follansbee, Wheeling-Nippon contributes to annual college scholarships for locals, country fairs, disaster relief, and community infrastructure. Wheeling-Nippon has also received credit for kick-starting foreign investment in the area from countries such as Canada and Italy.
Local Impact
Based on Nippon Steel’s 40-year track record and promises, its acquisition of US Steel would likely yield similar benefits for productivity, product competitiveness, and local communities. As mentioned, Nippon Steel has promised a $2.7 billion investment on top of its $14.9 billion purchase of US Steel. This includes—at the behest of local USW leaders—at least $1 billion to replace or upgrade the existing hot strip mill in Mon Valley Works and $300 million to revamp Blast Furnace 14 at Gary Works.
A 2023 US Steel study of its own economic impact found that it generated $3.6 billion of local impact in Pennsylvania, supported 11,417 jobs, and generated $138.2 million in local and state taxes. Such figures would grow with Nippon Steel’s additional $1 billion investment in the Mon Valley: Parker Strategy group estimates Mon Valley Works could generate an additional $1.2 billion in economic impact for Pennsylvania, $47.9 million in local and state taxes, and 6,080 jobs in two years. Even in the low-end scenario, Nippon Steel’s additional investment would generate $576 million in economic impact for the state, $19.1 million in additional taxes, and 2,432 jobs in two years.
Furthermore, Nippon Steel has promised to invest $500 million annually in R&D and to share its COURSE50 technology to ensure that US Steel and its steelworkers are producing cutting-edge, competitive steel. Finally, though it has made no promises of local philanthropy, its commitment to moving its North American headquarters from Houston to Pittsburgh should provide assurance.
In contrast, if the deal does not go through, the impact would be catastrophic for the local community. US Steel CEO David Burritt stated that without Nippon Steel’s investment, the American steelmaker would shut down the older blast furnaces in Mon Valley and Gary. This would devastate local communities such as Clairton, which draws 30 percent of its tax revenue from US Steel. West Mifflin Mayor Chris Kelly estimates that the local steel mills generate a seven-times job multiplier for the local economy. These communities would lose all this if the furnaces shut down. If Cleveland-Cliffs bought US Steel, it would likely move the company’s headquarters to Cleveland from Pittsburgh. Furthermore, US Steel would lose out on Nippon Steel’s technology transfers and $500 million annual R&D budget. For perspective, Cleveland-Cliffs spent only $24 million and $17 million on R&D in 2022 and 2021 respectively.
Local Voices
Most importantly, steelworkers and community leaders in the region express vocal support for the deal. While many locals showed initial discomfort at the sale of US Steel to a foreign steelmaker, their views changed as they reached out to numerous counterparts at Wheeling-Nippon and Standard Steel, who overwhelmingly expressed positive support for their parent company. Nippon Steel Executive Vice President Takahiro Mori’s town halls with steelworkers—despite opposition from USW headquarters—clarified and gave weight to the company’s plans. According to local USW leaders, roughly 95 percent of the union’s members support the purchase. As a result, when the White House planned to kill the acquisition in September, US Steel workers participated in rallies to support it.
Steelworkers and local community leaders have been clear about what they want: secure jobs making quality products that strengthen their communities and American industry. Nippon Steel’s investments and technology would give them the ability to do so for generations. As Jason Zugai, vice president of Local 1227 in West Mifflin, said at a recent event, US Steel “provided a very good life for our families for a lot of years, and we feel that with the Nippon deal that a lot more families in the future to come will be able to share the same.”
Conclusion
CFIUS and possibly President Biden are preparing to make their final decision about whether the Nippon Steel–US Steel deal threatens national security. Opposition voices remain unmoved. In the meantime, it is worth reexamining how the proposed $14.9 billion acquisition would be a win-win for all stakeholders: union steelworkers, their communities, American consumers, and the US government:
- It would strengthen American steelmaking capacity through $2.7 billion of capital investment and $500 million in annual R&D to ensure the production of high-quality, technologically advanced, and economically competitive steel for future generations.
- It would honor existing USW–US Steel labor agreements and prevent antitrust dilemmas that would adversely affect consumers and union steelworkers.
- It would protect American national security by boosting steelmaking capacity and competitiveness to counter China’s economic aggression, such as dumping, and its military aggression in the Pacific.
- It would make the American market more resistant to low-cost imports. Nippon Steel would take governance measures to ensure the independence of US Steel on trade matters.
- It would continue Nippon Steel’s strong legacy of investing in its American facilities and listening to communities to ensure the greater productivity and economic well-being of its employees and local partners.
At this time, it appears that the Departments of State, Defense, and Treasury agree that the Nippon Steel acquisition of US Steel poses no national security threat to the United States. The most important stakeholders, US Steel’s union steelworkers and their communities, also want this deal.
It remains to be seen whether the inveterate opponents of this transaction will make a case against it as convincing and detailed as the case for it.
View PDF