Federal Illinois lawmakers demand answers from Japanese company buying U.S. Steel
Source: First Alert 4
Three federal lawmakers for Illinois sent a letter questioning the Japanese company buying U.S. Steel.
On Friday, U.S. Senators for Illinois Dick Durbin and Tammy Duckworth and U.S. Representative for Illinois Nikki Budzkinski sent a list of questions to Nippon Steel about its pending acquisition of U.S. Steel.
The letter inquires about the plans for the Granite City plant.
The transaction is worth about $14.9 billion when including the assumption of debt. The combined company will be among the top three steel-producing companies in the world, according to 2022 figures from the World Steel Association.
The price tag for U.S. Steel is nearly double what was offered just four months ago by rival Cleveland Cliffs. U.S. Steel, which rejected that offer, confirmed the offering price from Nippon early Monday.
That tie-up would have created one of the top four outside of China, which dominates global steel production. U.S. Steel executives were asked about a potential pushback from U.S. regulators over security concerns on Monday.
U.S. Steel will keep its name and its headquarters in Pittsburgh, where it was founded in 1901 by J.P. Morgan and Andrew Carnegie. It will become a subsidiary of Nippon.
China and Chinese companies have come to dominate global steel production. Of the nearly 2 billion metric tons of steel produced annually across the globe, about 54% comes from China, according to the World Steel Association.
China’s Baowu Group, a state-owned iron company based in Shanghai, churned out nearly 120 million metric tons of steel in 2021. The combined Nippon and U.S. Steel companies will produce less than 90 million metric tons of steel combined, with most of that coming from Nippon.
In 2022, U.S. Steel produced about 14.5 million tons.
The U.S. currently ranks No. 4 behind China, India and Japan, and the blast furnace steel plants operated by U.S. Steel are among the more costly to operate, compared with more modern facilities that melt down scrap using arc furnaces.
But U.S. Steel plants with blast furnaces remain integral to U.S. manufacturing, particularly automakers.
Earlier this year, U.S. Steel idled one of its blast furnaces in Granite City, Illinois, in anticipation of a lower demand for steel, citing a strike against the big three automakers in Detroit.
“Disappointment. We were given no prior notice,” said Dan Simmons, Local 1899 Steelworkers president. “They [Nippon] were good partners in the past, and I like to believe they would come in here and look at things differently.”
On Thursday, the Biden Administration said the proposed deal needs some “serious scrutiny.”
Soaring prices have fueled consolidation in the steel industry this decade. Steel prices more than quadrupled near the start of the pandemic to nearly $2,000 per metric ton by the summer of 2021 as supply chains experienced gridlock, a symptom of surging demand for goods and the lack of anticipation of that demand.
Nippon, which will pay $55 per share for U.S. Steel, said Monday that the deal will bolster its manufacturing and technology capabilities. It will also expand Nippon’s production in the U.S. and add to its positions in Japan, India and the ASEAN region.
Nippon said the acquisition is anticipated to bring its total annual crude steel capacity to 86 million tons and help it capitalize on growing demand for high-grade steel, automotive and electrical steel.
U.S. Steel CEO David Burritt said that the sale is beneficial to the United States, “ensuring a competitive, domestic steel industry, while strengthening our presence globally.” The company will continue to run its mining and steel operations in the U.S. for its domestic customers, he said during a conference call Monday.
Nippon said Monday that it will honor all collective bargaining agreements in place with the United Steelworkers and other employees and is committed to maintaining its relationship with workers. Nippon has had a presence in the U.S. for almost 40 years, starting with a joint venture with Wheeling-Pittsburgh Steel in 1984 that later became a wholly owned subsidiary.
The United Steelworkers International, however, pushed back immediately against the deal.
The union “remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company,” said David McCall, president of United Steelworkers, in a statement.
McCall said U.S. Steel and Nippon didn’t reach out to the union regarding the deal, and that the union plans to exercise all the measures of its agreements to protect jobs.
“We also will strongly urge government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers,” he added.
U.S. Steel has been a symbol of industrialization since it was founded in the early 20th century and the domestic steel industry dominated globally before Japan, then China, became the preeminent steelmakers over the past 40 years.
The company survived the Great Depression and became an integral part of U.S. efforts in World War I and II, supplying hundreds of millions of tons of steel for planes, ships, tanks and other military gear, in addition to steel for automobiles and appliances.
The acquisition has been approved by the boards of both companies and is targeted to close in the second or third quarter of 2024. It still needs approval from U.S. Steel shareholders.
By: Deion Broxton