This photo, taken on February 16, 2024, shows the logo of Nippon Steel Corporation’s Kyushu manufacturing base in Kitakyushu, Fukuoka Prefecture. U.S. President Joe Biden plans to express concern about Nippon Steel Corp’s proposed $14.9 billion takeover of U.S. Steel Corp, a person familiar with the matter said on Wednesday, sending the U.S. company’s shares down nearly 20% on bets the deal could face greater political opposition. 13%.
Fang Philips | AFP | Getty Images
The United States said in a letter to U.S. Steel seen by Reuters that Nippon Steel’s proposed $14.9 billion acquisition of U.S. Steel would pose a national security risk because it could harm critical transportation, construction and agricultural projects. Required Steel Supplies.
The letter cited a global glut of cheap Chinese steel and said U.S. steel companies, led by Japanese company Nippon, were unlikely to impose tariffs on foreign steel importers.
The Committee on Foreign Investment in the United States said in a 17-page letter sent to the United States on Saturday Nippon Steel and United States Steel CorporationReuters first reported that Japan Steel’s decision could “lead to a reduction in domestic steel production capacity.”
CFIUS added that “U.S. Steel’s decisions in the (trade) case will be influenced by Nippon Steel and may take into account Nippon Steel’s business interests and competitive position in the global steel market.”
The letter provides the first glimpse of how the Biden administration could use national security grounds as the basis for its anticipated move to block mergers, although the companies and many industry experts question the strength of those arguments.
Sarah Bauerle Danzman, a professor at Indiana University and a fellow at the Atlantic Council, said CFIUS appears to be “significantly broadening” its definition of national security risk.
“While it is clear that the ability of U.S. domestic steel production capacity to recover is in the national interest, it is not clear that ownership of a company located in a major treaty ally would fundamentally threaten this,” she said.
Many Republican and Democratic lawmakers have expressed opposition to the deal. Vice President and Democratic presidential candidate Kamala Harris said Monday at a rally in Pennsylvania, the battleground state where U.S. Steel is headquartered, that she wants U.S. Steel to remain “American owned and operated.” Her Republican rival, Donald Trump, has pledged to block the deal if elected.
The Committee on Foreign Investment in the United States said China’s “continued use of market-distorting government intervention” resulted in it exporting large amounts of excess steel and artificially depressing international prices, thereby unfairly gaining a dominant position in the global steel market.
Data for 2022 show that China’s crude steel production accounts for approximately 54% of the world’s total crude steel, making it the largest exporter.
CFIUS said that while U.S. Steel has aggressively sought trade remedies against foreign imports, Nippon Steel has at times opposed U.S. relief efforts.
In a 100-page response letter sent on Tuesday and seen by Reuters, Nippon Steel said it would invest billions of dollars to maintain and upgrade U.S. steel facilities that would otherwise sit idle, “without a doubt. ” enabling it to “maintain and potentially increase domestic steel production” in the United States. “
Echoing previous statements, Nippon Steel also stated that it will not transfer any U.S. Steel capacity or jobs outside the United States, nor will it interfere with any U.S. Steel decisions on trade issues, including targeting U.S. steel companies under U.S. law. Decision to take trade measures for unfair trade practices.
Japan has even proposed a national security deal aimed at allaying the concerns of the Committee on Foreign Investment in the United States. It also commits that a majority of U.S. Steel’s board of directors will be non-dual U.S. citizens, including three independent directors approved by the Committee on Foreign Investment in the United States to oversee compliance with the agreement.
Nicholas Klein, a CFIUS attorney at DLA Piper, said: “Japanese Steel provides U.S. Steel a financial lifeline while allowing it to continue to be led by Americans and subject to government oversight. Management. “I think CFIUS can reduce the risk of reduced steel capacity through supply assurances and other common mitigation measures. “
The committee, which reviews whether foreign investments pose a national security threat, also sees risks posed by Japan’s growing operations in India, where production costs are far lower than in the United States
“Nippon Steel has no financial incentive and will not import Indian or other non-U.S. steel into the United States to compete with or undercut U.S. steel, which would directly contradict the basis of Nippon Steel’s billions of dollars of investment,” the companies said in a statement. Tuesday’s letter rebutted.
