[Text/Observer Network Qi Qian] After a year and a half, on June 18th local time, Nippon Steel Corporation (Nippon Steel) finally completed the acquisition of United States Steel Corporation (U.S. Steel). Previously, U.S. President Trump signed an executive order to conditionally "approve" Nippon Steel's acquisition plan for U.S. Steel.

According to Nikkei Asia, after many twists and turns, Nippon Steel's CEO Hideji Hashimoto seemed to have become overconfident. On the 19th, Hashimoto said that Nippon Steel could help the United States regain manufacturing influence in its ongoing competition with China for global economic leadership.

"In terms of manufacturing, the United States has clearly lost out to China," Hashimoto said that day, adding that the United States even said it could not independently manufacture warships.

He continued to tell reporters that this long-delayed agreement would make U.S. Steel competitive again, thereby reviving American manufacturing.

When talking about the reasons why Trump approved it, Hashimoto said, "He may have originally thought that high tariffs could revive manufacturing. But I think he eventually concluded that utilizing Nippon Steel was the optimal solution."

Nippon Steel CEO Hideji Hashimoto held a press conference on the 19th - Japanese media

On the 13th local time, Trump signed an executive order approving the partnership between Nippon Steel and U.S. Steel. These two companies said they had signed a national security agreement with the U.S. government and would grant the U.S. government veto rights over important matters concerning the company, known as the "golden share." Reuters reported that these measures meant that the company rarely ceded significant control to the government during negotiations aimed at saving the deal.

In addition, Nippon Steel also promised not to change U.S. Steel's company name; not to relocate U.S. Steel's headquarters from Pittsburgh; not to cancel, reduce, or delay investments in U.S. Steel; not to close or suspend factories; and the U.S. government could exercise veto rights over any violations of these conditions through the "golden share."

On the 18th, Nippon Steel announced that it had completed the acquisition of U.S. Steel, making it a wholly-owned subsidiary. According to Japanese media reports, Nippon Steel completed the full acquisition of U.S. Steel shares, paying approximately $14.1 billion in acquisition costs, and all necessary procedures for the acquisition were completed.

Nikkei Asia reported that this transaction will consolidate Nippon Steel's position as the fourth largest steel manufacturer globally, with its crude steel production expected to increase from 43.64 million tons to 57.82 million tons, bringing it closer to the third largest steel producer, Ansteel Group of China, whose output last year was 59.55 million tons. However, this transaction has sparked skepticism domestically in Japan, with concerns that the terms regarding "national security" and the "golden share" are significant concessions.

On the same day, Hashimoto argued that Nippon Steel would still maintain management flexibility. He also stated that even without mandatory requirements from the U.S. side, the company originally planned to invest $11 billion in U.S. Steel by 2028 and maintain U.S. capacity. "When you examine these regulations one by one, you won't worry about us being hindered from doing what we want to do."

In response to questions about financial burdens, Hashimoto defended the acquisition price, calling it "logical" and even "cheap."

"The cost of building steel mills worldwide has skyrocketed," he said, noting that the current cost of building a new steel mill in India is equivalent to more than 200,000 yen ($1,380) per ton of steel production; in the U.S., it would be twice that amount. Therefore, acquiring U.S. Steel's 23 million-ton capacity for $14 billion equates to a cost of only 100,000 yen per ton.

Global steel manufacturer capacity rankings - Nikkei Asia chart

The acquisition of U.S. Steel by Nippon Steel was indeed fraught with difficulties. Since announcing the acquisition plan in December 2023, over the past year and a half, Nippon Steel went to great lengths to successfully acquire it, even hyping up the "China threat," claiming that this deal "would help counter Chinese competition and enhance U.S. national security." However, the Biden administration opposed this acquisition case, and Trump showed little interest after taking office.

On January 3rd, former U.S. President Biden signed an executive order citing national security to officially block Nippon Steel's acquisition of U.S. Steel. On January 6th, the two companies formally filed a lawsuit against Biden and the U.S. Committee on Foreign Investment, requesting the court to revoke Biden's blocking order and re-examine the acquisition case. On May 23rd, Trump finally agreed that U.S. Steel and Nippon Steel would reach their "planned partnership."

Hashimoto said on the 19th, "For the company, the United States is a highly promising market."

The report pointed out that Nippon Steel viewed this transaction as its top priority for medium- and long-term growth. Affected by factors such as the growth of electric vehicles and infrastructure updates, demand for U.S. Steel is expected to grow. This contrasts sharply with Japan, where steel demand is expected to decline with population growth.

UBS analysts said that this transaction represents a major step in Nippon Steel's strategic transformation from an export-centric model to a scalable localization model. However, analysts added that Nippon Steel still needs to outline specific strategies and goals to manage risks such as rising capital costs.

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Original source: https://www.toutiao.com/article/7517873604009198106/

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