January 12, 2024
Given most of the headlines we read today, we should welcome good news wherever we can find it, which is why word that Nippon Steel Corporation is making a bid to acquire U.S. Steel should be greeted with applause if not a standing ovation by U.S. consumers, workers, and businesses alike.
U.S. Steel has faced economic challenges. Its production levels and stock market value have fallen behind other American companies, and it’s far from the behemoth it was in the 20th Century.
No doubt U.S. Steel is an iconic American company, but one whose days may be numbered had it not put itself on the market to save its operations, plants, and workers. One unsolicited bid came from Ohio-based Cleveland-Cliffs, whose offer was concerning not just for their unreasonable lowball offer but primarily because the combined company “could effectively control 100% of the U.S. iron ore market, and dominate the production of other goods like automotive steel and food cans.”
That monopoly threat is what caused America’s automakers to oppose Cleveland-Cliffs’ bid. With Nippon as the buyer, American consumers will avoid the higher car prices that surely would have resulted from this market consolidation.
Some politicians have announced knee-jerk opposition to the deal, sensing political upside in denouncing the acquisition of an American company by a foreign one – despite the fact that Japan is not just our closest military ally, but a nation whose very security and survival in an adversarial Pacific Rim depends on a strong U.S. military.
Caught up in concerns that may have existed 40 years ago but do not apply to today’s geo-political realities, critics miss the mark entirely regarding the acquisition, especially the enormous benefits to consumers and domestic manufacturers who require steel.
Nippon is investing over $14 billion in the U.S. economy (nearly twice that of Cleveland-Cliffs) to vastly upgrade U.S. Steel’s technological capabilities, resulting in an enhanced company that will be more innovative, more productive, and more cost efficient. Higher-quality steel, more efficient operations, and lower prices are clearly good for consumers.
U.S. Steel’s products feed into countless consumer goods, from cars, to appliances, to electronics, and just as importantly into manufacturing, construction, and infrastructure. Across our entire economy a new and improved U.S. Steel will be better able to meet increasing demand for steel with upgraded technology that produces a better product at less cost than U.S. Steel now does. And they will accomplish this while keeping the Pittsburgh headquarters open and bringing currently shuttered plants back online.
Another consumer benefit is the Nippon deal preserves competition in the domestic steel market, creating a downward force on prices. With this significant investment into U.S. Steel, the combined company will be far better positioned to innovate, produce in the U.S., and optimize operations – all to the benefit of American consumers. As detractors fumble the issue with entreaties to outdated sentiment there is no argument that Nippon’s bid for U.S. Steel is a good deal and good news for America.
