President Joe Biden on Jan. 3 blocked the $15-billion sale of U.S. Steel Corp. to Nippon Steel Corp. under the federal Defense Production Act—citing national security concerns and "credible evidence" that the Japan-based steelmaker "might take action that threatens to impair the national security of the United States."
Nippon Steel had, in recent days, offered to allow any U.S. president to stop layoffs or cuts in production at U.S. Steel as part of its bid to get the deal approved. Biden criticized foreign steel companies all over the world in an accompanying statement for illegally dumping steel in other markets at artificially inflated prices, harming the domestic steel industry, he said.
The president also claimed steel represents an "essential national security priority and is critical for resilient supply chains," an argument cited by opponents of the deal—including rival domestic manufacturer Cleveland-Cliffs that was rebuffed by U.S. Steel in a proposed $7.3-billion purchase deal in 2023.
"We need major U.S. companies representing the major share of US steelmaking capacity to keep leading the fight on behalf of America’s national interests," Biden said in the statement. "As a committee of national security and trade experts across the executive branch determined, this acquisition would place one of America’s largest steel producers under foreign control and create risk for our national security and our critical supply chain."
Biden's order gives U.S. Steel and Nippon Steel 30 days to abandon the transaction. The companies could receive an extension from the U.S. Treasury-led Committee on Foreign Investment, but that is unlikely. The committee ruled on Dec. 23 that the deal may carry national security risks but did not formally recommend to Biden that it be blocked or allowed.
Timna Tanners, Wolfe Research Managing Director of Equity Research wrote in a Jan. 3 note to investors that President Biden blocking the deal sets a precedent limiting foreign ownership of U.S. steel and possibly other assets, but the research firm does not foresee a sale to Cleveland Cliffs or other potential new owners. She wrote that U.S. Steel management will likely shut down one of the two blast furnaces at its 2.8 million ton per year Monongahela Valley Works site in West Mifflin, Pa., this year—with the possibility of a full shutdown in 2026, if production for appliance customers can be transferred to its remaining blast furnaces in Gary, Ind.
Both Biden and President-Elect Donald Trump opposed the acquisition by Nippon Steel during the 2024 presidential campaign, with the latter recently saying he would block it if there was no action by the current Biden administration.
U.S. Steel had said previously that layoffs and production shutdowns could result if the deal was blocked, but it made no definitive statements on production of structural steel and other construction products since Biden's action.
This article was updated at 12:59 PM EST on Jan. 3 with comments from Timna Tanners, Wolfe Research Managing Director of Equity Research.
