U.S. Steel Stock Falls on Biden’s Nippon Steel Block Report

Shares of U.S. Steel have taken a sharp dive of over 20% following reports that President Joe Biden is preparing to block the $14.9 billion acquisition proposal by Nippon Steel. This drastic drop has sent U.S. Steel’s stock to its lowest point since August 2023, with shares trading at approximately $27.75 each as of 2:07 p.m. EDT. This significant decline, exceeding 22%, reflects the heightened investor anxiety and uncertainty surrounding the future of the company amid growing regulatory scrutiny.

According to the Financial Times, Biden’s administration is poised to intervene and obstruct the takeover due to national security concerns. The administration’s apprehension stems from the potential risks associated with allowing a foreign entity to gain control of a major American steel producer. The national security concerns are part of a broader pattern of increased vigilance regarding foreign investments in critical infrastructure and industries deemed essential to national interests.

On the other side of the globe, Nippon Steel’s shares on the Tokyo Stock Exchange saw a modest decline of 0.38%, closing at ¥3,151, or approximately $21.95. Despite this dip, Nippon Steel remains firm in its position that the acquisition does not pose a national security threat. Nippon Steel spokesperson Tucker Elcock has underscored the company’s confidence that the U.S. government will process the matter appropriately according to legal protocols. Elcock’s statements reflect the firm’s belief that Japan’s status as a key ally should mitigate concerns over the deal’s security implications.

The potential block has prompted U.S. Steel CEO David Burritt to voice significant concerns about the impact on the company’s Pittsburgh headquarters and the security of “thousands of good-paying union jobs.” Burritt’s remarks highlight the broader economic and employment consequences of the failed acquisition, emphasizing how the loss of the deal could jeopardize not just the company’s operations but also the livelihoods of its workers and the local economy dependent on the steel industry.

In response to the anticipated block, U.S. Steel spokesperson Andrew Fulton has noted that the company has yet to receive any formal updates or executive orders related to the Committee on Foreign Investment in the United States (CFIUS) process. Fulton reaffirmed U.S. Steel’s stance that the acquisition does not present national security issues, stressing Japan’s role as a staunch ally of the United States. Fulton expressed confidence in pursuing all available legal options to ensure the deal proceeds, emphasizing the potential benefits of the transaction for Pennsylvania, American steelmaking, and all stakeholders involved.

The impact of the potential deal collapse is starkly reflected in U.S. Steel’s share price, which has fallen dramatically from $47.96 at the start of the year to its current level, marking a more than 42% decrease. This steep decline highlights the broader market impact and investor response to the regulatory challenges facing the acquisition. The substantial drop in stock value underscores the financial and operational uncertainties that U.S. Steel faces amidst the ongoing controversy.

Additionally, Cleveland-Cliffs, a competitor of U.S. Steel, had previously proposed a $54-per-share bid for the company last year. However, this offer was ultimately withdrawn. U.S. Steel had expressed concerns that such a merger could encounter significant antitrust issues, with potential regulatory opposition due to the consolidation of the U.S. steel supply. The proposed merger would have placed approximately 95% of U.S. iron ore production under a single company, raising concerns about market concentration and competitive fairness.

The Nippon Steel acquisition is also subject to investigations by both the Justice Department and CFIUS. The Justice Department is conducting an antitrust investigation, while CFIUS is reviewing the national security implications of the deal. As of now, CFIUS has not yet provided a formal recommendation to President Biden, leaving the outcome of the review process uncertain. Elcock has noted that Nippon Steel has not received any updates from the committee regarding its review, adding to the uncertainty surrounding the deal.

Biden’s opposition to the deal aligns with his previous statements advocating for the preservation of domestic ownership and operation of critical American industries. His stance reflects a broader concern about potential job losses and the impact on American steelmaking. The United Steelworkers union, representing 1.2 million members, has voiced strong opposition to the acquisition, citing fears of job cuts and plant closures. Burritt has highlighted a $3 billion commitment from Nippon Steel to keep U.S. Steel’s older mills operational and protect jobs, aiming to mitigate concerns raised by the union.

The acquisition has also faced opposition from Vice President Kamala Harris and former President Donald Trump, both of whom have emphasized the importance of maintaining domestic control over U.S. Steel. Trump has vowed to block the deal “instantaneously” if re-elected, reflecting a strong bipartisan sentiment against foreign control of vital American assets. Trump’s running mate, Ohio Senator JD Vance, has echoed concerns about the national security implications, framing the acquisition as a potential sale of a critical component of America’s defense industrial base to foreign interests.

As the regulatory and political challenges continue to evolve, the future of the U.S. Steel-Nippon Steel deal remains uncertain. The decision by the Biden administration will have far-reaching implications for both companies, the steel industry, and broader national security considerations.