LORAIN, Ohio — U.S. Steel, the Pittsburgh steel producer that played a key role in the nation's industrialization, is being acquired by Japan-based Nippon Steel in an all-cash deal valued at approximately $14.1 billion.
The transaction is worth about $14.9 billion when including the assumption of debt. The combined company will be among the top three steel-producing companies in the world, according to 2022 figures from the World Steel Association.
The price tag for U.S. Steel is nearly double what was offered just four months ago by rival Cleveland Cliffs. U.S. Steel, which rejected that offer, confirmed the offering price from Nippon early Monday.
That tie-up would have created one of the top four outside of China, which dominates global steel production. U.S. Steel executives were asked about a potential pushback from U.S. regulators over security concerns on Monday.
"This is going to increase competition here in the United States with a great ally to the United States," answered U.S. Steel CEO David Burritt. "It’s a great fit and we do not see that as a high level risk factor. We'd say low level of risk."
Meanwhile, along the shores of Lake Erie on East 28th Street in Lorain, the sounds of steelmaking have been silent for more than three years. However, Mayor Jack Bradley has high hopes that the plant may one day return to its previous glory.
"We're hoping to have some communication with Nippon, and hopefully have some positive vibrations regarding opening the plant back up in Lorain," said Bradley, who spoke to 3News while on vacation in South Carolina.
When the U.S. Steel Tubular Operations plant in Lorain closed in 2020, the city lost income tax revenue from more than 1,500 jobs. The impact of the loss was dramatic.
"Without those tax dollars, the city of Lorain actually went through somewhat of a recession," Bradley, whose grandfather was a steelworker at that very plant, admitted.
Steelmaking has a rich history in Lorain that dates back to the late 1800s and early 1900s, when steel companies brought in immigrant workers from Mexico and Puerto Rico. They settled in neighborhoods along East 30th Street and Vine Avenue, which grew to become one of the largest Latino communities in Ohio.
While Bradley is disappointed that Cleveland Cliffs was outbid by Nippon, he hopes the new owner will bring back not just any jobs, but good-paying union jobs.
"Lorain is a union town, and we want to make sure that we have good union jobs in the city of Lorain," he said.
U.S. Steel will keep its name and its headquarters in Pittsburgh, where it was founded in 1901 by J.P. Morgan and Andrew Carnegie. It will become a subsidiary of Nippon.
Case Western Reserve University economics professor Dr. Jonathan Ernest will be watching whether Nippon positions itself to expand.
"Hopefully, this is a good sign where Nippon is saying, 'Well, rather than have steel produced somewhere else and then importing it into the U.S., we might as well just take over the production process, produce it there, and be able to not have to pay as much to transport it, etc.'," Ernest explained.
But not everyone's optimistic about the deal, with critics raising national security concerns.
"Steel is security, national security," Pennsylvania U.S. Sen. John Fetterman told reporters. "And the fact that now they're claiming that they're going to sell this to a foreign company? It's outrageous."
Meanwhile, both of Ohio's senators are blasting the agreement, with Democrat Sherrod Brown calling it "an insult to the American steelworkers who build our country" and Republican JD Vance opining that "a critical piece of America's defense industrial base was auctioned off to foreigners for cash." The United Steelworkers International union, which had backed a potential acquisition from Cleveland Cliffs, also vowed to "strongly urge government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States and benefits workers."
The U.S. currently ranks No. 4 behind China, India, and Japan in worldwide steel production, and the blast furnace steel plants operated by U.S. Steel are among the more costly to operate compared with more modern facilities that melt down scrap using arc furnaces. But U.S. Steel plants with blast furnaces remain integral to U.S. manufacturing, particularly automakers.
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.