Nippon Steel Acquires US Steel To Strengthen Economic Security

Nippon Steel is set to acquire U.S. Steel, a major American steel company, aiming to tap into the growing demand in the U.S. steel market while mitigating the decline in steel demand within Japan.

The acquisition involves a substantial investment of 2 trillion yen (approximately $13.9 billion), financed primarily through bank loans, with plans for Nippon Steel to make U.S. Steel a wholly owned subsidiary in 2024.

Steel is a fundamental material for various industrial products, including automobiles. The collaboration between the leading companies in Japan and the U.S. is poised to fortify the supply chain for technology development, raw materials and products, ultimately enhancing economic security. The expansion of Japan-U.S. collaboration into the materials sector, similar to areas like semiconductors, is a welcome development.

However, the Biden administration has expressed caution in approving the acquisition, saying it deserves scrutiny in response to opposition from the United Steelworkers union.

U.S. Steel symbolizes the longstanding presence of industry in the U.S. Despite resistance from U.S. Steel employees and potential considerations related to the upcoming presidential election, Japan remains a U.S. ally. Therefore, it is crucial that Nippon Steel thoroughly explain how this acquisition will benefit U.S. national security by increasing domestic steel production.

In the global steel industry, Chinese manufacturers currently dominate more than half the world’s crude steel production. The excessive production by Chinese manufacturers has negatively impacted the international market, affecting the profits of domestic steel manufacturers in Japan, such as Nippon Steel.

Expanding the scale of production is essential to achieve competitiveness and match Chinese manufacturers.

Nippon Steel has primarily focused on expanding its business in Asia, and adding U.S. Steel to its portfolio in the United States, considered the largest market among developed countries, is significant.

The World Steel Association ranked Nippon Steel fourth in global crude steel production in 2022. The acquisition of U.S. Steel, currently ranked 27th, will propel it to third place.

This move is also expected to advance decarbonization efforts in the steel industry.

U.S. Steel excels in electric arc furnace technology, melting iron from scrap with heat generated by electricity and reducing carbon dioxide emissions, compared to using coal in blast furnaces.

In the medium to long term, Nippon Steel needs to establish manufacturing methods using hydrogen instead of coal. To allocate significant funds for research and development in this direction, enhancing profitability is indispensable. Acquiring U.S. Steel therefore makes sense.

We hope that by deepening collaboration between the U.S. and Japan, we will refine decarbonization technology and lead the world.