Nippon Steel’s Acquisition Plan: Blocking of Deal by U.S. Govt Would Be Incomprehensible

Editorial

14:29 JST, September 9, 2024

U.S. President Joe Biden reportedly plans to block the planned acquisition of steel giant U.S. Steel Corp. by Nippon Steel Corp. for security reasons. This would be an incomprehensible decision against Japan, a U.S. ally.

Nippon Steel announced in December a plan to acquire U.S. Steel for about ¥2 trillion.

The U.S. government’s Committee on Foreign Investment in the United States reportedly plans to recommend that the acquisition plan not be approved, after conducting a review and concluding the plan would create insurmountable national security risks.

In the past, most such recommendations have been made against Chinese companies, and this is believed to be the first such recommendation for a Japanese company. Biden is expected to take this recommendation into consideration and order the acquisition be blocked.

With the world market flooded with inexpensive Chinese steel, the deal is likely to be blocked over claims including the assertion that U.S. Steel’s acquisition by a foreign company would undermine the steel production base, which is essential for infrastructure development.

However, the reality is that U.S. Steel is not as competitive as it once was, due to such factors as aging facilities, and it needs assistance. If the acquisition fails, the company has been said that it may even be forced to close some of its steelworks and relocate its headquarters, putting thousands of jobs at risk.

If the advanced technologies and funds of Nippon Steel can be utilized to increase U.S. Steel’s international competitiveness, it would strengthen its production base in the United States. The U.S. government’s plan is utterly unconvincing.

But there is also no overlooking that a failure in the planned acquisition would be a serious blow to Nippon Steel’s business strategy. This is because the company is aiming to strengthen its production base in the United States, as demand rises there for steel products with the spread of electric vehicles and the Japanese market shrinks.

With the security environment becoming increasingly severe, Japan should be the United States’ most important ally. Blocking investment from Japan could damage trust between the two countries.

As for economic security, Japan and the United States have been working to rebuild supply chains for semiconductors and other goods so as to correct their excessive dependence on China. Blocking the deal could disrupt closer cooperation between the two countries.

Such a move would be aimed at appealing to workers in states being fiercely contested by Vice President Kamala Harris and former President Donald Trump in the close U.S. presidential election.

Pittsburgh, Penn., where U.S. Steel is headquartered, is a city that represents the “rust belt,” and is also home to the headquarters of the United Steelworkers, which is strongly opposed to the takeover.

However, using these reasons to turn the matter into a political issue is absurd. The Japanese and U.S. governments should hold sincere talks to find a way out of this situation.

(From The Yomiuri Shimbun, Sept. 8, 2024)