Commentary: Evaluating Nippon Steel's acquisition of US Steel

The proposed acquisition of one of the largest steel producers in the United States by a Japanese steel manufacturer is a highly politicized one. Supporters of the deal argue that Nippon Steel’s investment could breathe new life into U.S. Steel—a company that is struggling to keep up with innovations in clean technologies and global competition—keeping the company afloat and protecting American jobs. Proponents fear the purchase could steal manufacturing jobs out of the U.S. and even threaten national security. 

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As one of the largest steel producers in the world, Nippon Steel is known for its innovative steelmaking technologies and focus on research and development to improve product quality, enhance manufacturing processes and reduce environmental impact. It has pioneered developments in high-strength steel and advanced coating technologies.

U.S. Steel was created to consolidate America's steel industry, which was highly fragmented at the time of its formation. The new company quickly became one of the largest steel producers in the world, providing steel for railroads, skyscrapers and bridges during the infrastructure boom of the early 1920s and for military equipment during World War I and World War II.

Increased competition from international steel manufacturers and changing technologies were among the challenges that triggered the start of many restructuring and cost-cutting efforts at the company. Despite its efforts to implement clean technologies, U.S. Steel has come under scrutiny for its lack of investment and failure to meet certain environmental regulations.

Pros of the acquisition

Nippon Steel’s investment in U.S. Steel could provide the U.S. company access to new sustainable technologies and foster advancements in green steel, which it would presumably bring to U.S. Steel.

The combined operations also could bring operational efficiencies, reduce overhead and cut costs, boosting U.S. Steel’s financial stability. Integrated supply chains reduce waste, improve profitability and create resilience against market fluctuations, which could make the combined company more competitive in the global steel marketplace. The purchase also could allow for a broader range of products and services which, in turn, require additional skilled labor.

Cons of the acquisition

The deal has faced loud opposition from both the steel union and the Biden administration, which see the merger as a threat to jobs and to national security. Mergers often result in redundancies and, therefore, layoffs. While supporters of the union argue that without the large investment Nippon Steel is offering, plants will close, disrupting the communities that rely on the steel industry for economic vitality and jobs, Cleveland-Cliffs said it will purchase those mills to keep them open and operational.

The foreign ownership of an American company, even by an ally like Japan, raises several questions about supply chain vulnerability, especially during geographic tensions. Steel is an essential metal used for military vehicles and other defense applications, and the transfer of any intellectual property pertaining to national security is understandably concerning.

America’s steel manufacturers have faced an ongoing battle with trade and tariff policy and the illegal dumping of cheap steel in the U.S. Permitting a global company to own a company on U.S. soil could increase volumes of imported steel and influence trade and tariff decisions.

The addition of U.S. Steel could give Nippon Steel increased pricing power, putting pressure on smaller steel manufacturers to keep up with innovations and output. Increased competition could have both positive and negative implications; while spurring innovation, some American manufacturers could falter.

Steel’s future: Environmental considerations

Steel production in the United States is among the cleanest in the world, with many manufacturers having transitioned to electric arc furnaces (EAFs) that use recycled steel. U.S. Steel has been slower to adopt these sustainable technologies than some of its competitors. Nippon Steel's current commitment to sustainable practices would likely promote cleaner production methods at U.S. Steel facilities.

Nippon Steel’s commitment to building a circular economy also could carry over to the U.S., leading to enhanced recycling and waste reduction practices and more efficient use of raw materials. The investment also could help introduce alternative green steel production methods, including the use of renewable energy like hydrogen or nuclear to power operations.

Final thoughts

What started with an unsolicited bid for U.S. Steel by American manufacturer Cleveland Cliffs in August of 2023 has quickly turned into a global conversation. Certainly, both national and international steel manufacturers might fear the impending merger and the increased pricing power it would lend to an even larger Nippon Steel.

Steel is the backbone of American manufacturing and a major pillar in the U.S. economy. Union concerns should be given the highest weight when considering whether the purchase should go through. That this decision incited action from the president himself speaks to the importance of steel issues on the country as a whole. The careful consideration given to this matter is commendable. 

The proposed acquisition of one of the largest steel producers in the United States by a Japanese steel manufacturer is a highly politicized one. Supporters of the deal argue that Nippon Steel’s investment could breathe new life into U.S. Steel—a company that is struggling to keep up with innovations in clean technologies and global competition—keeping the company afloat and protecting American jobs. Proponents fear the purchase could steal manufacturing jobs out of the U.S. and even threaten national security.

Dale L. Crawford is the executive director and director of Conduit for the Steel Tube Institute. He is responsible for the organization’s activities to promote the growth and competitiveness of steel pipe and tubular products throughout North America. In addition to these responsibilities, he is in charge of activities, strategies and programs of the Steel Tube Institute’s Conduit Section, which consists of North America’s leading steel conduit manufacturers. Dale is a Certified LEED Green Associate (LEED GA) by the U.S. Green Building Council.