Billions ain’t what they used to be

IMAGE: “Pouring Metal Into The Pig Machine,” (1921) by Roderick D. MacKenzie

These last two weeks brought bittersweet poetry to business news. Relatives gathered around the bedside of our grandfather, U.S. Steel, after financial doctors warned he may not have much longer. Even his own board of directors said it might be time to pull the plug.

Or perhaps you prefer mythology. The god Promethe-USX brought the fire of modern corporatism to the market in 1901, only to be punished by having an eagle eat his liver every morning.

It certainly felt that way watching bids for U.S. Steel emerge after the company announced Aug. 13 that it might be sold outright or in parts.

First, it seemed rival Cleveland-Cliffs would seize hold of U.S. Steel.

Cliffs is a logical suitor. It would create the world’s 10th largest steel company if the deal went through and the only fully integrated steel company in America. But U.S. Steel rejected their first $7.3 billion offer.

Analysts suggest that antitrust regulations would prevent Cliffs from owning all the iron ore mines in the United States. Furthermore, Cliffs still holds significant debt from its rapid expansion in recent years. But Cliffs CEO Lourenco Goncalves still thinks his scrappy company can pull off this feat. The United Steelworkers of America back his efforts, threatening to reject offers from any other company.

A couple days later, privately-held steelmaker Esmark bid $7.8 billion for U.S. Steel in an all-cash offer. Esmark might not be a household name on the Mesabi Range, but the last few years of surging steel prices apparently left the company with $10 billion in the bank. Esmark CEO James Bouchard said he’s willing to spend to get what he wants. [But then, later this week, Esmark backed out of its bid.]

In more recent days, insiders have suggest that ArcelorMittal might be mulling a bid for U.S. Steel. Four times larger than Cleveland-Cliffs, ArcelorMittal mostly retreated from North America when it sold its regional assets to Cliffs in 2020 to focus on Asian markets. But it might see opportunity here if the price is right. The company can summon enormous assets if it wants U.S. Steel.

Fundamentally, the historically high prices for iron ore and steel are what started this industrial feeding frenzy. Some companies with full pockets see opportunity in expansion, while others mull selling while the selling is good.

Perhaps the most sobering observation about the potential sale of U.S. Steel comes from the scale of the deal. The outcome holds tremendous importance for the Mesabi Iron Range. Jobs and even the future of entire communities are at stake. And yet, the story remains only a small blip in the larger economy.

In 2022, Elon Musk bought Twitter for $44 billion, even though it was nowhere near the most profitable or popular social media site. That’s between 5-6 U.S. Steels. Even when Musk bought Twitter, some analysts estimated its actual value at just a third of what he paid. To them, Twitter was only worth two U.S. Steels.

Of course, in the time since, Musk drove users and revenue away from Twitter, now called X, in a flurry of self-important bluster. The point being, the world’s richest and most powerful people have no reservations about setting fire to more money than it would take to buy U.S. Steel. For a century, miners complained that distant robber barons profited from their toil without dampening their brows. Now, even that is too much work for those with billions to spend.

U.S. Steel runs big equipment to make big products. Once, its groaning, smoking machinery inspired admiration, but in Wall Street their production of real goods represents the company’s biggest liability. Perhaps the most damning thing about our economy, and our broader culture, is that it’s better business to make nothing, disconnect from community, and hoard money.

That’s a story that ends badly, no matter how it is told.

Aaron J. Brown

Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog and co-hosts the podcast “Power in the Wilderness” on Northern Community Radio. This piece first appeared in the Saturday, Aug. 26, 2023 edition of the Mesabi Tribune.

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