Following reports that President Joe Biden is considering blocking the Nippon Steel deal, US Steel’s stock fell a staggering 18%. The Biden administration’s concern over the more than $14 billion acquisition stems from perceived national security risks that cannot be easily mitigated.
Biden Administration’s National Security Worries
The administration, after assessing the situation, believes that the sale poses significant national security risks that cannot be sufficiently addressed by the collaborating US and Japanese groups. This sentiment has been echoed in various reports from reputable sources like the Financial Times, The Washington Post, and Bloomberg.
Expected Blocking Decision and Industry Response
Although no official decision has been made, Biden’s intent to block the deal is expected to be revealed in the coming days. This move comes after the Committee on Foreign Investment in the US (CFIUS) indicated to Nippon Steel that the transaction raised insurmountable national security concerns.
US Steel is vehement in its defense, asserting that there are no national security implications attached to the deal due to Japan being a steadfast ally. The company remains optimistic, expressing its commitment to exploring all legal avenues to ensure the completion of the transaction for the benefit of Pennsylvania, American steelmaking, and all stakeholders.
Notably, the US National Security Council emphasized Biden’s stance on maintaining US Steel as an American-owned entity. While reports speculate on the blocking of the deal, no official confirmation has been provided.
Statements from Key Figures and Industry Players
Vice President Kamala Harris’s recent comments underscored the importance of keeping US Steel domestically owned and operated. Former President Donald Trump also expressed intentions to thwart the deal if he regains presidency.
US Steel CEO, David Burritt, in an interview with the Wall Street Journal, highlighted the repercussions of deal failure, mentioning potential plant closures and headquarters relocation from Pittsburgh. Burritt emphasized the critical role of Nippon Steel’s substantial investment in US Steel’s older mills to maintain competitiveness and job stability.
Market Impact and Historical Context
US Steel (X) shares, which were trading at $39.33 before the announcement of the Nippon Steel deal, have experienced substantial volatility following these developments.
The current saga reflects a broader trend in US foreign policy, where national security considerations are increasingly integrated into economic decisions, impacting major industrial acquisitions. The fate of US Steel stands at a crossroads, awaiting the final decision that could reshape the company’s trajectory.
