For over a year, US Steel pursued an ambitious solution to the mounting challenges. Once a symbol of American industrial power, it had agreed to a takeover by Nippon Steel, a Japanese rival, in an effort to reverse obsolescence.
Citing the need to finance a costly modernization of its factories, US Steel warned that if the deal were foiled, it would have to close factories and lay off workers.
With President Biden's $14 billion takeover blocked on national security grounds — and President-elect Donald J. Trump outspokenly opposing it — the company has few easy alternatives.
Without a merger partner, the company could be forced to close its traditional steel mills, threatening the livelihoods of workers and the regions that depend on them. An attempt to combine with another competitor could face antitrust concerns. And it lags behind the technological transition from blast furnaces to electric furnaces.
US Steel is not admitting defeat in a takeover by Nippon Steel. The two companies are suing the federal government, claiming that politics corrupted the review process.
“Nippon Steel and US Steel remain convinced that the transaction is the best path forward to secure the future of US Steel, and we will vigorously defend our rights to achieve this goal,” said Amanda Malikowski, a spokeswoman for US Steel , in a statement. .
US Steel primarily makes flat-rolled sheet steel, which is used in cars, trucks and appliances. For decades, booming foreign competition weakened the company and the entire domestic steel industry, especially when Chinese steel began to dominate the international market.
In its heyday, US Steel was the largest steel producer in the world. However, according to the World Steel Association, it ranked 24th globally in 2023, far behind powerhouses such as China's Baowu and Nippon Steel.
The company has recently enjoyed a resurgence, partly due to efforts to protect it from competition. Tariffs imposed during the first Trump administration and a surge in steel demand — driven in part by a construction boom early this decade — led to record high steel prices, boosting US Steel's earnings.
But that hasn't allayed concerns about US Steel's long-term viability. Compared to their foreign rivals, domestic steel companies have been slower to adopt “minimills,” which are more energy-efficient and cost-effective than traditional mills. The smaller factories melt steel scrap in electric furnaces, a faster and cheaper process, while the larger factories make steel from iron ore and coke, which comes from coal.
US Steel has “done a poor job of modernization,” said Alden Abbott, senior research fellow at George Mason University's Mercatus Center and general counsel to the Federal Trade Commission during the first Trump administration. “If there had been no tariffs, it would have gone under years ago.”
Some U.S. companies have made more concerted efforts to modernize their production methods, including Nucor, which has become the largest domestic producer. Ms. Malikowski, the US Steel spokeswoman, said the company will continue to move away from blast furnaces regardless of the outcome of the Nippon deal. In 2023, US Steel opened a factory in Arkansas that runs on electric furnaces.
US Steel has maintained that Nippon is the only buyer willing and able to make major investments in multiple steel mills and protect jobs. That includes at least $1 billion to build a new plant at the Mon Valley Works plant outside Pittsburgh and $300 million to reline a blast furnace at the Gary Works plant in Gary, Indiana.
“Blocking this transaction means denying billions in committed investments to extend the life of US Steel's aging facilities and jeopardizing thousands of good-paying, family-sustaining union jobs,” the two companies said last week.
Bill Peterson, an equity analyst at JPMorgan Chase, wrote in a research note that if US Steel were to operate as a standalone company, it would focus on its newer plant in Arkansas and possibly cut back on its blast furnace assets.
But the United Steelworkers, the powerful union representing 11,000 U.S. Steel workers, has strongly opposed the Nippon merger. It has accused the Japanese company of illegal business practices and bad faith in its relations with the union.
The union previously lobbied for a merger with Cleveland-Cliffs, an American company that made a bid for US Steel in 2023 but lost to Nippon in a bidding war. Unlike Nippon, it is a union. (On Monday, US Steel and Nippon sued Cleveland-Cliffs, accusing the company of colluding with David McCall, the head of the steelworkers union, to undermine the Nippon Steel deal.)
“We have no doubt that this is the right step for our members and our national security,” the union said in a statement after Mr. Biden blocked the deal.
If US Steel were sold to a competitor like Cleveland-Cliffs, the combined entity would be formidable but could come under federal antitrust investigation. However, it is not clear whether the Trump administration would take as aggressive an enforcement approach as the Biden administration.
John Newman, a professor at the University of Miami School of Law and former deputy director of the Federal Trade Commission's Bureau of Competition, said a merger with Cleveland-Cliffs would be challenged in court, largely because domestic steel production is already being dominated. by a few players. Nucor, Cleveland-Cliffs and US Steel would account for half of US steel production by 2023, according to the Commerce Department.
Regardless of political leadership, “everyone agrees that these types of mergers are problematic,” Newman said. By contrast, “If you have a super competitive market, a few players shouldn't be that worrying.”
But George Mason's Mr. Abbott said a domestic merger was more likely for US Steel than continuing as a standalone entity. He said federal regulators under Trump could argue that a combined domestic steel company would be more competitive internationally.
“There is also a political concern,” Mr. Abbott added, “that 'we can't let US Steel go under.'”
Cleveland-Cliffs did not respond to a request for comment.
Sarah Bauerle Danzman, a senior fellow at the Atlantic Council and associate professor at Indiana University, said if one company had more control over domestic steel production, steel — including steel produced for defense purposes — would become more expensive.
“You want to diversify where steel is made,” Ms. Bauerle Danzman said.
In a social media post on Monday, Mr Trump, who vowed to block the Nippon takeover, wrote that US Steel must “lead the way to greatness” and not be sold to anyone.
“Why would they want to sell US Steel now when the tariffs will make it a much more profitable and valuable company?” Mr. Trump wrote on Truth Social.
Cheap imported steel has been a target for decades. Presidents George W. Bush and Barack Obama imposed tariffs on Chinese steel. Mr. Trump went further, imposing 25 percent tariffs on steel from most countries in 2018. Mr. Biden has used quotas to limit steel imports, in addition to raising tariffs on steel smelted outside the United States.
Frank Giarratani, a professor emeritus of economics at the University of Pittsburgh who has studied the steel industry for decades, says the steel tariffs have largely helped protect jobs. But they have not made domestic steel companies more productive or internationally competitive, he said, while investing in new technology would.
“It was about protecting jobs, and that only has a temporary benefit,” Mr Giarratani said. “When it comes to making the sector competitive, tariffs don't seem to have done that.”
Bill Farrier, a leader of Local 1557 of the United Steelworkers in Clairton, Pennsylvania, said he was pleased that Mr. Biden had rejected the Nippon deal and was encouraged by Mr. Trump's opposition to the merger. Mr. Farrier, a mechanic at the Mon Valley Works plant, said he wanted Cleveland-Cliffs to be the eventual buyer, but that any suitor would have to commit to a major upgrade of the steel mills.
“I would like to see some modernization and new equipment,” Mr Farrier said. “Then we can compete with everyone.”
