On the 18th local time, Japanese steel giant Nippon Steel announced that it would acquire American Steel, a U.S. steel company, for $14.1 billion. According to the report, the purchase price of $55 per share represents a 40% premium to U.S. Steel's closing price on Dec. 15. U.S. steel shares soared after the announcement, while Nippon Steel shares fell. There are reports that for the American industry, the acquisition will mark the end of an era.
The boards of directors of both companies have already approved the deal, which is still subject to approval from U.S. steel shareholders and U.S. competition regulators. U.S. Steel said the transaction is expected to close in the second or third quarter of 2024. It has also been reported that the United Steelworkers (USW) and a number of U.S. lawmakers have made it clear that they will oppose the deal to "sell U.S. steel to foreign buyers." However, some analysts believe that the US government is not expected to block the deal given the high price promised by Nippon Steel.
It was the world's first "billion-dollar company"
Falling behind due to outdated technology
Founded in 1901 by the merger of more than a dozen companies, including Carnegie Steel and United Steel, Pittsburgh-based American Steel was the world's first company with a "valuation of more than $1 billion" and is also known as an iconic American enterprise.
According to relevant introductions, it was once the world's largest company and a symbol of America's industrial strength. At the beginning of the last century, the company's steel production, the "engine of American industrial development," helped the United States become a global economic powerhouse. In addition to providing building materials for skyscrapers, bridges and dams, the company's steel products also provide raw materials for automotive manufacturing, electrical appliances and other products.
In 1916, the company was at its peak overall. Charles Bradford, an analyst who has been focusing on the steel industry for a long time, analyzed. According to the report, the company was almost dominant in the U.S. steel industry at the time, which also contributed to the enactment of the U.S. national antitrust law.
In 2001, American Steel's centennial report mentioned that the company's employment peak occurred in 1943, during World War II, when the company employed 340,000 people. The company's steel production peaked in 1953, producing 35.8 million tonnes of steel, while Japanese and European steel producers were still struggling to recover from the effects of the war.
Constrained by outdated technology, U.S. steel began to lag behind emerging competitors in the U.S. and abroad
However, due to outdated technology, the company began to lag behind emerging competitors in the United States and abroad. "The company still uses technology from the 40s of the 20th century. Charles concluded. Although U.S. Steel has upgraded its smelting equipment, it still relies on old technology to make steel by melting raw materials in giant blast furnaces, the report said. Such an approach is clearly lagging behind emerging competitors, who are using more efficient EAFs to convert scrap into new steel products.
According to the report, U.S. steel only used electric arc furnaces for the first time in 2020. In addition, the energy-intensive nature of the industry has exposed it to pressure from regulators around the world. According to the World Steel Association, U.S. steel production in 2022 was 14.49 million tons.
Japanese companies may acquire special steel products through acquisitions
Many in the United States oppose the deal
Nippon Steel is already one of the world's largest steelmakers, and a successful acquisition of 122-year-old U.S. Steel would make the company one of the most important suppliers to the U.S. auto industry, the report said. In addition, the deal may also give Nippon Steel access to special steel for electric vehicles in the United States. David Burritt, CEO of U.S. Steel, said: "We believe this format is the best for all. It will also strengthen our global presence. ”
However, the USW, which represents North American steelworkers, has made clear its opposition to the deal. David McCaul, chairman of USW, said, "The deal between the two companies demonstrates the long-standing greedy, short-sighted attitude of U.S. Steel. Mr. David said the USW had been open to working with U.S. Steel, but the company had now opted to sell it to a foreign company despite employee concerns.
The USW and a number of lawmakers have made it clear that they will oppose the deal to "sell U.S. steel to foreign buyers."
In addition to trade unions, a number of U.S. lawmakers have also expressed opposition to the acquisition. Senator Vinson, Republican of Ohio, said significant parts of U.S. industry are being sold to foreigners for cash, and "I will continue to oppose this deal for months to come." Senator John Fetterman, Democrat of Pennsylvania, also lashed out at the deal and vowed to do everything in his power to prevent it from happening. "It's outrageous that U.S. Steel has agreed to sell itself to a foreign company. The steel industry has always been a matter of national security, and I will do everything in my power to stop this transaction. John said.
Gerald Johnson, an analyst at GLJ Research, an agency that focuses on the steel industry, believes the deal could eventually lead to layoffs at U.S. steel, though he said he does not expect the government to block the deal given the high price promised by Nippon Steel.
Red Star News reporter Li Jinrui
Editor: Guo Yu, Editor-in-charge: Li Binbin
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