Will US President Joe Biden intervene to block the sale of US Steel to its Japanese peer Nippon Steel? “It has been an iconic American steel company for more than a century and it is vital that it remains an American steel company in own land is managed and exploited,” he said this week.
He thus makes it clear that he is not in favor of the takeover that was announced at the end of last year. Nippon Steel is willing to pay nearly $15 billion for the company.
Stock price down
Shareholders of the listed American steel company immediately drew their conclusions. Before Biden’s statement, the share price fluctuated around the price that Nippon Steel is willing to pay for it. Afterwards the stock price fell by 12 percent.
President Biden’s move has everything to do with the American presidential elections. US Steel has its headquarters and a series of steel mills in the US state of Pennsylvania, a state that is important for winning the elections.
Both Joe Biden and his Republican opponent Donald Trump are doing a lot to keep the American steelworkers union friendly. The United Steelworkers Union, which also operates from Pennsylvania, strongly opposed the arrival of the Japanese. This union claims to have 1.2 million members across the US. Trump has long said that he finds the takeover plan “terrible.” He has also promised to block the deal if he defeats Biden in November. Biden cannot afford such language, but neither can he afford to offend the steel union and its supporters.
Moreover, it is becoming a very difficult balancing act for the American president. Because he risks offending Japan, one of the United States’ staunchest allies, if he thwarts the takeover. It would also seem strange, because shortly after announcing the deal at the end of December, he said it was historic. It could also have a negative impact on a state visit to the US by Japanese Prime Minister Fumio Kishida in early April.
American subsidies
The British business newspaper Financial Times was told that Biden will avoid effectively blocking the deal. The government can do this according to the law if it believes that this would jeopardize national security. It is expected that the American president will not shy away from making it clear a few more times that he is not in favor of the deal.
The two steel companies, meanwhile, are trying to temper resistance from the steelworkers’ union by jointly stating that there will be no job losses in the US and that no factories will be closed or production relocated. They also say they are having discussions with the union. But the union does not hide the fact that this has not yielded any results so far.
Nippon Steel’s interest in gaining a foothold in the US has everything to do with the energy transition and the comeback of heavy industry there. Further expansion of steel production in Japan itself is particularly difficult, because it cannot be reconciled with reducing CO₂ emissions. This is already particularly high due to the coal-fired blast furnaces.
A combination with US Steel helps the Japanese to accelerate the rollout of green technology because in the US they can count on generous subsidies from the US government for industrial redevelopment in combination with greening.
