Nippon Steel, or 日本製鉄株式会社 (Nippon Seitetsu Kabushiki Gaisha), was founded in 1950. It originated from two separate companies, Yahata Iron & Steel Co. and Fuji Iron & Steel Co., both established in 1950. A year later, in 1951, Shin-Fuso Metal Industries was founded. In 2012, these three steel companies merged to form Nippon Steel & Sumitomo Metal, which was later renamed Nippon Steel in 2019.
Since November of 2023, the Nippon Steel Corporation has aimed to bolster and expand its influence in the Western market, primarily focusing on creating stronger ties with the United States with a US$14.9 billion deal. The deal to acquire US Steel for US$14.9 billion dollars at the time was viewed favourably, with Japan paying a 40% premium to US Steel’s share price. Nippon Steel committed to further investing US$1.4 billion into US steel facilities and a further US$2.7 billion into US steelworker facilities in certain states. This additional investment towards US steelworker facilities, specifically in Indiana and Pennsylvania, aimed to garner support from local communities. This action would turn out to be prudent and convince steel employees to rally and agree on the deal.
The deal itself has seen mixed reviews from US Steelworkers employees. The majority are positive due to the benefits provided by the Nippon Steel company. A study showed that if Nippon Steel would commit to only a US$600 million investment in Pennsylvania over a 2-year period, the investment would yield US$952.9 million. Even if only 40% of the investment is spent in-state, it would generate an almost half-a-billion-dollar economic impact and 2,500 jobs over the same period. On the other hand, US steel facilities will have to abandon their blast furnace facilities, resulting in thousands of lost union jobs. This outcome primarily highlights the short-term effects of the deal if it were to take place. Over the span of two years, while new jobs would be created, the initial phase would likely involve mass layoffs due to the transition. This suggests that no person or company truly gets what they wish for, and the potential outcomes of this deal portray that. Looking further into the future, why did Joe Biden decline this deal?
The deal, as mentioned, has winners and losers, but the problem stems from the potential national security risks. The CFIUS, or Committee on Foreign Investment in the United States, leads investigations into potential security risks with foreign entities taking control of U.S. businesses, providing recommendations to either block or allow transactions to go through. When this deal was put on the table, the CFIUS overall was split on the recommendation to President Biden, leaving the decision to him. Biden inevitably blocked the Japanese company from acquiring US Steel, suggesting that foreign ownership of US Steel (being one of the largest steel companies in the United States), even by an ally like Japan, puts the United States at an unmitigable and unacceptable national security risk. Following this, Prime Minister Ishiba and US Secretary of State Antony Blinken met. They agreed that bilateral ties were more important than ever and highlighted the importance of foreign investment between the two countries.
The decision by President Biden to block the monumental deal poses many questions about the reputation of the United States towards its allies. While the agreement provided both countries with a surplus of benefits, the refusal ultimately opened up an enormous can of worms between the U.S. and its allies. Even though the outcome of the refused deal strengthened the ties between the two countries, overall, the decision came down to the president, who valued the security of the United States over its reputation and allyship.
Edited by Isaac Yong
This is an article written by a Staff Writer. Catalyst is a student-led platform that fosters engagement with global issues from a learning perspective. The opinions expressed above do not necessarily reflect the views of the publication.
4th Year McGill student pursuing an East Asian Studies major with a minor in Communications.