Lawmakers push to stop ‘fundamentally troubling’ sale of US Steel

Lawmakers in both parties are up in arms about the $15 billion acquisition of U.S. Steel by Japanese Nippon Steel Corporation (NSC), warning the deal could threaten national security, shift steelworking jobs to low-wage states and undermine U.S. industrial capacity.

In a letter sent Tuesday to Treasury Secretary Janet Yellen, Republican senators said the Committee on Foreign Investment in the United States (CFIUS) should block the sale.

“[CFIUS] can and should block the acquisition of U.S. Steel by NSC, a company whose allegiances clearly lie with a foreign state and whose record in the United States is deeply flawed,” Sens. JD Vance (R-Ohio), Marco Rubio (R-Fla.) and Josh Hawley (R-Mo.) wrote.

The CFIUS is a panel chaired by the Treasury secretary that has the power to block the sale of U.S. businesses to foreign firms if the acquisition would threaten national security.

The senators said the deal was too focused on making money for shareholders and didn’t consider the full range of economic implications.

“The transaction was not the product of careful deliberation over stakeholder interests, but rather the result of an auction to maximize shareholder returns,” they wrote.

The Treasury Department declined to comment to The Hill on the feasibility of the deal or what a CFIUS approval process would entail for Nippon to turn U.S. Steel into a subsidiary.

Democrats are also pushing back against the acquisition that would see the world’s fourth-largest steelmaker subsume the 27th-largest.

“This is a major blow to the American steel industry which has been instrumental in making us the superpower of the world and a direct threat to our national security,” Sen. Joe Manchin (D-W.Va.) said in a Tuesday statement. “We must be doing everything we can to prevent any further deterioration of American ownership.”

Senate Banking Committee Chair Sherrod Brown (D-Ohio) criticized the deal for stemming unilaterally from management and failing to include union employees in the decision-making process.

“Nippon and U.S. Steel have insulted American steelworkers by refusing to give them a seat at the table and raised grave concerns about their commitment to the future of the American steel industry,” he said in a statement Monday.

Union jobs were also top of mind for Sen. Bob Casey (D-Pa.), who called the merger a “bad deal” for his state, where U.S. Steel is headquartered in Pittsburgh.

“I’m concerned about what this means for the Steelworkers and the good union jobs that have supported Pennsylvania families for generations, for the long-term investment in the Commonwealth, and for American industrial leadership,” he said in a Monday statement.

Brown and Casey are up for reelection in 2024 in states where former President Trump remains broadly popular. Both have touted their stalwart support of labor unions and attempts to hold major industrial firms accountable to their constituents.

The United Steelworkers union said the proposed deal already constitutes a violation of the union’s agreement with management and that it’s relying on regulators to scrutinize it closely.

“Neither U.S. Steel nor Nippon reached out to our union regarding the deal, which is in itself a violation of our partnership agreement that requires U.S. Steel to notify us of a change in control or business conditions,” union President David McCall said in a statement Monday.

“We … will strongly urge government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers,” he said.

U.S. Steel would become an unlisted company as a result of the deal and a wholly owned subsidiary of NSC’s North American division. Its brand name and headquarters location will remain the same, according to a purchase plan from the NSC.

The company expects to finalize the deal in the second or third quarter of 2024, pending approval by U.S. Steel shareholders and government regulators.

The company specifically cited recent U.S. legislative packages as creating favorable conditions for the purchase.

“The infrastructure bill and spending is expected to drive steel demand uptick moving forward,” the NSC said, referring to the 2021 Infrastructure Investment and Jobs Act.

“Energy and manufacturing industries [will] return to the U.S. under changes in the world economy structure and cheap energy in the U.S.”

Sen. Dick Durbin (D-Ill.) told The Hill in an interview Tuesday he thought there was something “fundamentally troubling” about the merger and that he’s been concerned for years about U.S. Steel’s production cuts.

“We have U.S. Steel facilities in Illinois, and we’ve been troubled by their announcements over the past several years of reducing production. They once led the world in production and now have fallen behind even in the United States, so there’s something fundamentally troubling about this situation,” he said.

The changing global economic conditions cited by the NSC likely refer in part to a practice known as “near-shoring” or “friend-shoring,” which is the restriction and curtailment of global production pipelines prompted by the pandemic and the war in Ukraine.

Fears about an overreliance on Chinese production capacity during the pandemic has led to closer coordination among U.S. economic allies, especially in the Asia-Pacific region, notably Japan, South Korea and Taiwan.

Rep. Ro Khanna (D-Calif.) told The Hill in a Tuesday interview that part of the corporate intention behind the deal is to boost Japanese exports of high-end steel while shifting U.S. production to lower-end steel in states where companies don’t have to pay union wage rates.

“People need to understand the economics of what’s going to happen. What you’re going to allow Nippon to do is eliminate union jobs in Pennsylvania, Michigan, Ohio; send those jobs down South; move to mini-mills and get rid of blast furnaces; and have the blast furnace jobs, which are the high-end, high-specification steel, come from Japan. It is mind-boggling to me that we’re even considering approving something like this,” Khanna said.

“The Biden administration needs to stand up to a deal that is going to further erode good union jobs,” Khanna added.

The economic fallout from the pandemic has been catalyzing some longer-term tailwinds away from uniformly globalized production and toward increased domestic capacity, which may be another reason the U.S. Steel sale isn’t sitting well with lawmakers.

“We will unapologetically pursue our industrial strategy at home,” national security adviser Jake Sullivan said in a programmatic speech earlier this year on U.S. economic strategy.

Sullivan qualified his embrace of “industrial policy” — a doctrine of more centrally planning the economy that fell out of fashion in the mid-1970s — by saying Asian allies and international partners would be a central part of this shift in strategy.

“Through our trilateral coordination with Japan and Korea, we are coordinating on our industrial strategies to complement one another, and avert a race-to-the-bottom by all competing for the same targets,” he said.

According to estimates by the World Steel Association industry group, the total production capacity of the combined entity would be nearly 59 million metric tonnes, pushing it up to the No. 3 position of global steel producers.

Al Weaver contributed.