With every sign pointing toward this year’s election hanging on the outcome in Pennsylvania, both parties are paying particular attention to the Keystone State. Part of that strategy is playing to win over union members here.
And with ABC News talking to representatives from both camps right before Tuesday’s debate and based on the assumption that union workers oppose the proposed buyout of U.S. Steel by Nippon Steel, both former President Donald Trump and President Joe Biden have expressed opposition to it.
Vice President Kamala Harris chose Labor Day to tweet about it:
However, business leaders with both U.S. Steel and Nippon Steel disagree. They are pushing back on politicians, urging them to get government to stay out of the deal. They expect it to go through, and they are predicting economic disaster if it doesn’t.
Sensitive to election-year realities, Nippon Steel Vice Chairman Takahiro Mori said in a press release, “We seek to provide the highest-quality American-made steel products to American customers, fueled by American workers, while also securing American steel supply for the future.”
Putting his money where his press release is, Nippon Steel has announced it’s expanding domestic steel production at U.S. Steel’s facilities in Pennsylvania and Indiana – all in preparation for how business will explode after the proposed merger between the two companies goes through. Those upgrades “will extend the production life of two of U. S. Steel’s critical integrated assets and enhance the security of steel supply to American manufacturers.” Specifically, the companies are upgrading:
- Mon Valley Works. (Allegheny County, Penn.) U.S. Steel is going to replace and upgrade existing hot strip mill and other facilities with a budget of $1.1 billion.
- Gary Works. (Gary, Ind.) U.S. Steel will revamp its blast furnace to increase its capabilities while limiting its environmental impact on a budget of $300 million.
Now, I have no idea what hot strip mills and blast furnaces do. My only exposure to that kind of industrial power is that scene in “Terminator 2” where they need a vat of molten steel to kill the T-1000. What I do know is businesses don’t spend $1.4 billion unless they’re going to get a lot more than $1.4 billion back.
However, the rest of the market seems to have missed the news. As of Sept. 12, the stock price has been relatively stable so far this month.
Pennsylvania-based U.S. Steel has been entertaining bids for its business. Last year, Ohio-based Cleveland-Cliffs offered $7.3 billion to acquire the company, which prompted Tokyo-based Nippon Steel to offer $14.1 billion – almost double – not long afterward. Having been outbid, Cleveland-Cliffs stock values have been in decline.
A merger between Nippon and U.S. Steel will be a game changer for both companies. Nippon’s annual production is 44.4 million tons of steel, while U.S. Steel’s is 14.5, according to data from the World Steel Association.
Should the merger go through, which based on the recent investment in the region would be the most logical move no matter what side of the political aisle you are on, it would surpass Chinese-owned Ansteel Group become third-largest steel producer in the world.
Cleveland Cliff has been accused of trying to exploit bogus national security Japanophobia to scare people away from the deal. But world security would be far better served if a U.S. company and Japanese company joined forces to outmatch a Chinese one – you remember China, that country that wants to blow up our battleships, invade Taiwan, and take over the world.
Doing business with our friends in Japan seems like a much better option than letting China steamroll everyone. Keeping politics out of the U.S. Steel-Nippon Steel deal is better for the companies’ stakeholders, investors, and incidentally, world security.
