On the Mesabi Range, we spend lifetimes hoping for change before complaining when it happens. We’re like a dog that can’t decide whether to give back the ball for another throw or to keep gnawing on it.
For two generations, steel industry stakeholders lamented a lack of investment in U.S. Steel’s mines and mills. Instead, the company squeezed profits to benefit its stockholders, a strategy the “Steel Trust” practically invented more than a century ago. Dozens of companies eclipsed the once largest corporation on Earth, including American competitors Nucor and Cleveland-Cliffs.
Five years ago, U.S. Steel announced several major infrastructure investments, only to gradually back off many of them after investors balked. When the company put itself up for sale late last summer, employees were nervous, but hopeful this would mean investment in the future.
Well, critics finally got what they wanted — new money. It’s just not the kind of money they wanted. Japan’s Nippon Steel bid a robust $14.9 billion to buy the company, much more than anyone else. Both companies’ boards approved the agreement last month.
Unfortunately, this whopping investment mostly goes to U.S. Steel stockholders. The sale retires the company’s debt, which is helpful. But it does not yet assure that U.S. Steel’s mines and mills will join the technological advances found in the steel industry. For its part, Nippon said that they are committed to doing so.
The United Steelworkers of America bristled at the news.
“To say we’re disappointed in the announced deal between U.S. Steel and Nippon is an understatement, as it demonstrates the same greedy, shortsighted attitude that has guided U.S. Steel for far too long,” lamented the union’s Dec. 18, 2023 statement.
On Jan. 11, the Times of Northwest Indiana reported that the Steelworkers demand to meet with U.S. Steel CEO David Burritt. The union argues the company failed to honor the right to bid clause of its labor contract, which would have given them the right to veto the Nippon bid.
To be clear, U.S. Steel often disappoints its union. The Steelworkers enjoy a much better relationship with Cleveland-Cliffs which is why they pushed for a deal with them. But that arrangement would have required a nimble defense against antitrust complaints. Furthermore, the nation’s automakers actively campaigned against Cliffs acquiring U.S. Steel on the grounds that they’d jack up steel prices. (As if to explain how inflation really works, Cliffs raised steel prices anyway).
Responding to the union and complaints in Congress, President Biden ordered a probe of the potential Nippon/U.S. Steel merger. A Jan. 11 Bloomberg report suggests the investigation might take a year. That would push the outcome past this year’s presidential election and invite all manner of political grandstanding.
Election year politicking can’t be avoided. But this creates a practical challenge.
The union, President and Congress could try to kill the deal. They might succeed, at great cost, given that the aforementioned stockholders won’t surrender their windfall without a fight. And if they do, U.S. Steel will be in no better position to invest in new technology.
The real beef seems to be that Nippon is a Japanese company. In this argument, foreign ownership threatens American steelmaking during times of global duress.
The thing is, we’re already in global duress. China threatens to repossess Taiwan. Russia threatens Europe with its unprovoked invasion of Ukraine. The Israel-Hamas conflict is objectively horrifying, and kindles flames that Iran and our own government might well flare into a broader war.
Japan is our ally. It wants security against China, same as us. Maybe more than us. Japan wants to work with us, not Russia. And Japan is using its money to boost our steel industry. Not ideal, and certainly inexplicable to those whose American history classes stopped at World War II, but nevertheless true.
In a Jan. 8 essay in “The New Atlanticist,” Sarah Bauerle Danzman writes that “The US Steel deal is a test of friendshoring—and the US is failing.” Danzman said that U.S. diplomats have been buttering up allies for years trying to get them to support U.S. industry. She argues that spiking the Nippon deal could close off vital foreign investment throughout the American economy.
About two years ago, a shiny new event center named for a Toyota dealership replaced the Miners Memorial Building in Virginia, Minnesota. No one said boo. We’re in business with the Japanese whether we like it or not. The question is whether companies that mine our iron ore invest in modern technology to compete in the modern steel market. This includes hydrogen steelmaking and more value-added iron products to support jobs and American interests.
It’s reasonable to be cautious about the sale of U.S. Steel to a foreign company. Investigation is always wise. But if that investigation reveals more opportunity than risk, we should not hesitate to advance American industry into the future.
Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog MinnesotaBrown.com and co-hosts the podcast “Power in the Wilderness” on Northern Community Radio. This piece first appeared in the Saturday, Jan. 20, 2024 edition of the Mesabi Tribune.
I do not watch much tv. All well all I can commercials are snuffed. Ot II will pay to bot have them appear. I will wartch CNN on your tube TV occasionally where commericals are not preventable, So suddnly at least for me about the time of the sale commercials for USSteel began to appear on CNN. Is the zone of analysis being flooded ? Ot are they somethong that was always there. I learned with the strikes of the 50’s to never ever trust USSteel. You nicely bring that mistrust and cynicism into the equation. If the purchase goes through so will boom and bust. As the the man says As It Always Has…
As an ally, Japan is important to the U.S. so I think your comments are spot on: “Japan is our ally. It wants security against China, same as us. Maybe more than us. Japan wants to work with us, not Russia. And Japan is using its money to boost our steel industry. Not ideal, and certainly inexplicable to those whose American history classes stopped at World War II, but nevertheless true.”