Nippon Steel’s Reapplication for Buyout Review: Continue Dialogue to Reach Rational Conclusion

Editorial

16:25 JST, September 29, 2024

The U.S. government has extended the period for its review of Nippon Steel Corp.’s proposed buyout of major steel maker United States Steel Corp.

It is crucial to continue dialogue to reach a rational conclusion while looking at what will benefit the United States from an economic point of view, without being influenced by political considerations.

Nippon Steel announced its plan to acquire U.S. Steel for about ¥2 trillion in December 2023.

In early September this year, it was reported that U.S. President Joe Biden intends to block the buyout based on screenings by the Committee on Foreign Investment in the United States (CFIUS). However, this stance raised many objections from both inside and outside the country.

The Japan Business Federation (Keidanren) issued an unusual statement, saying, “We sincerely hope that the review procedure will be conducted with the utmost integrity and fairness in accordance with the law.” Japanese and U.S. business organizations also have sent a letter to the U.S. government, expressing their concerns about political pressure over this matter.

It is encouraging that opposition has also spread in the United States regarding Washington’s hard-to-understand stance of trying to prevent a company from Japan — which is an ally of the United States — from acquiring a U.S. company out of concern over potential risks to national security.

These unusual developments were partly spurred by the fact that the buyout plan has become a political issue in the upcoming neck-and-neck U.S. presidential election.

The United Steelworkers union has strongly opposed the buyout on the grounds of job security concerns. Both U.S. Vice President Kamala Harris and former U.S. President Donald Trump are competing to appeal to the union by expressing their concerns about and opposition to the planned takeover.

The U.S. government has approved Nippon Steel’s request to reapply for a review, so the deadline for the review has been reportedly extended by 90 days from the original date of Sept. 23. The U.S. government is highly likely to postpone its decision until after the presidential election in November. Discussions on the matter are expected to be conducted calmly.

It is hoped that the further review will rationally determine the possible impact of the planned buyout on the U.S. economy and employment.

As China has excessively produced steel and exported products at cheaper prices, steelmakers around the world have been forced to cut costs significantly.

If Nippon Steel acquires U.S. Steel, it will rise to become the world’s third-largest company in terms of crude steel production. If the company improves its competitiveness by investing in technology and capital, it can also strengthen its production base in the United States.

It is hoped that Nippon Steel will persistently stress these merits of the acquisition.

Japan and the United States have worked to restructure their supply chains, in light of the investment risks posed by China’s increasingly coercive stance. It will likely help these efforts if Nippon Steel’s buyout takes place and the rebuilding of the U.S. steel industry progresses.

In terms of direct investment in the United States, Japan ranked No. 1 for five consecutive years through last year. It is hoped that the U.S. government will make a final decision after giving due consideration to the importance of Japan-U.S. relations.

(From The Yomiuri Shimbun, Sept. 29, 2024)