Nippon Steel's $14.1 billion deal to buy the legendary Pittsburgh company U.S. Steel sent shockwaves through Minnesota's Iron Range on Monday, drawing mixed reactions from local leaders and the United Steelworkers union on what the purchase would mean for three of the region's taconite mines.
The union, which represents workers at the U.S. Steel-owned Minntac mine in Mountain Iron and the Keetac mine in Keewatin, came out against the deal. U.S. Steel also has a stake in the Hibbing Taconite mine.
Eiji Hashimoto, president of Nippon, said in a statement that the transaction "brings together two companies with world-leading technologies and manufacturing capabilities, demonstrating our mission to serve customers worldwide, as well as our commitment to building a more environmentally friendly society through the decarbonization of steel."
U.S. Steel has vastly reduced sway since its heyday. The acquisition would be a further consolidation for the U.S. industry, which is made up of three other major companies: Cleveland-Cliffs, Nucor and Steel Dynamics.
Cleveland-Cliffs, the Iron Range's largest mine operator, also made a bid for U.S. Steel, the storied company founded in 1901 by Andrew Carnegie, J.P. Morgan and Charles Schwab.
Nippon is buying the company for nearly twice as much as Cliffs offered, the Associated Press reported. Nippon will pay $55 per share, the company said.
The deal would add to Nippon Steel's portfolio of plants around the world, and elevate the Japanese firm to be the world's third-largest steel maker, after China Baowu Group and ArcelorMittal, according to 2022 production figures from the World Steel Association.
Nippon said U.S. Steel would keep its name and headquarters in Pittsburgh, and the company would honor existing union contracts. But the deal was panned immediately by the United Steelworkers (USW) union, which had preferred Cleveland-Cliffs buy U.S. Steel.
"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," said USW president David McCall in a statement.
"We remained open throughout this process to working with U.S. Steel to keep this iconic American company domestically owned and operated, but instead it chose to push aside the concerns of its dedicated workforce and sell to a foreign-owned company," McCall said.
McCall said neither company reached out to the union regarding the deal, which USW views as violating a partnership agreement requiring U.S. Steel to notify the union of a change in control or business conditions. McCall said the company does not believe Nippon understands the full breadth of contract obligations and doesn't know if Nippon has the capacity to live up to the contract, including funding pension and retiree insurance benefits.
Local USW leaders in Eveleth deferred to McCall's statement. But the union's opposition could make the deal a political issue in the 2024 election season.
American presidents have directed trade protections and subsidies at domestic steel makers in recent years to try to bolster the industry. Former President Donald Trump imposed a 25% tariff on most steel imports during his term. Trump and President Joe Biden later renegotiated many of those tariffs into quota arrangements, in which foreign governments agreed to limit the amount of steel they exported to the United States.
Mike Jugovich, a St. Louis County commissioner based in Hibbing and a retired USW member, said local reaction Monday was surprise at a buyer that wasn't on anyone's radar. He said the deal price is "shocking" and it would be hard to fathom the company being owned by a corporation outside the U.S.
"How could you turn it down?" Jugovich said. "But at the same time U.S. Steel is an American icon."
Jugovich said Cliffs has signed good contracts with USW, building good will. "This is a big deal," Jugovich said. "The Range is always big on unions and it's big on making sure that pensions are taken care of. All the unknown comes into play and hopefully things work out."
State Rep. Spencer Igo, a Republican from Wabana Township, whose district includes the Keetac mine and Hibbing Taconite, said in an interview he was excited Minnesota ore operations would "continue as normal."
Nippon has "a lot of interesting technologies," including some to reduce carbon emissions in the steel industry and for electric furnaces known as "mini mills" that are becoming more common, Igo said.
"If this company has got this much capital to offer a deal like this to U.S. Steel, maybe in the future we're going to see that capital invested in northern Minnesota like U.S. Steel has already started to," Igo said, referencing a $150 million investment to produce a higher-grade iron ore pellet at Keetac that are used in the electric furnaces.
Igo said he understood USW frustrations but emphasized Nippon's pledge to honor existing contracts.
"The moral takeaway of the story here is that economic diversity in the mining industry on the Range is a good thing for the men and women of labor," Igo said.
State Sen. Robert Farnsworth, R-Hibbing, said in a statement he was concerned U.S. Steel is being sold to a foreign company, even if he's "cautiously optimistic" Nippon will support local mines and honor collective bargaining agreements.
So far, prominent DFL lawmakers are quiet. One DFL legislator representing an Iron Range district did not respond to requests for comment and another declined. Gov. Tim Walz's office had no comment.
Cliffs Chief Executive Lourenco Goncalves said in a statement that even though U.S. Steel chose to go with a different buyer, the move "validates our view that our sector remains undervalued by the broader market."
The acquisition has been approved by the boards of both companies and is targeted to close in the second or third quarter of 2024. It still needs approval from U.S. Steel shareholders.
U.S. Steel stock soared 26% to close at nearly $50 per share Monday. Company executives were asked Monday in a call with investors whether there would be pushback in a political climate that might be hostile to foreign ownership, even from a U.S. ally.
"This is going to increase competition here in the United States with a great ally to the United States," U.S. Steel CEO David Burritt said in response. "It's a great fit and we do not see that as a high level risk."
This article includes reporting from the New York Times and the Associated Press.