U.S. politicians have expressed opposition to Nippon Steel’s acquisition of U.S. Steel (Reuters)
Takashi Sugimoto:Nippon Steel will acquire US steel giant US Steel. Why invest 2 trillion yen in the established company U.S. Steel? Behind the scenes lies the old order (ancien regime) established by the steel industry after World War II to share markets in Europe, America and Asia.
The United States has been a tricky market for Japanese steel companies for years. Although automobile manufacturers, which are the most important customers, regard it as a profit pillar, steel companies cannot easily enter. What stands in the way are trade protection barriers.
Protectionism in the U.S. steel industry is deeply entrenched. It has deep connections with the parliamentary alliance known as the Steel Caucus and has always rejected steel made in other countries.
Since the late 1990s, when the Asian financial crisis had a huge impact, the United States has initiated anti-dumping lawsuits at will. Japan is also a target. During the financial crisis in 2009, the United States even included a “Buy American” clause in its economic stimulus plan that favored the country.
As a result, exporting steel from Japan becomes negative. Nippon Steel has a local steel plate processing plant that supplies large Japanese automobile manufacturers. Among its global peers, Europe’s ArcelorMittal has also acquired backbone steel companies in the United States, but does not own a large-scale steel plant. For overseas companies, the U.S. steel market is actually a blank space.
On the other hand, there are perceived to be invisible barriers to European companies. This is the so-called “Eastern Myanmar Agreement” pointed out by the Office of the United States Trade Representative (USTR) in the mid-1990s. It is believed that a secret agreement for separate coexistence with present-day Myanmar as the dividing line has existed since the 1970s. Now, with Nippon Steel entering the Indian market, this barrier has begun to collapse.
If Nippon Steel’s acquisition of U.S. Steel succeeds, it means that the separate coexistence between the world’s steel giants established after World War II will completely disappear.
Nippon Steel’s move means new global competition in the steel industry. The driving force behind this is China, which accounts for half of the world’s crude steel production. Excess steel often worsens market conditions in East Asia, a situation that has been a headache for Japan Steel, but the reasons for turning to the United States are not the only ones.
Eiji Hashimoto, the president of Nippon Steel, also considers China, saying that “new economic security” is the foundation of global strategy. In the modern era when the confrontation between China and the United States continues to intensify, it is a natural trend for Nippon Steel to look for a way out in the United States.
Nippon Steel will make a big bet on global expansion by turning to the United States. It will also bear the test of huge risks.
The author of this article is Takashi Sugimoto, editorial member of Nihon Keizai Shimbun (Chinese version: Nikkei Chinese website)
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2023-12-20 02:20:51
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