Final Thoughts

Final thoughts

Written by Michael Cowden


I thought Nippon Steel’s $14.1-billion deal for U.S. Steel might become a political football in this year’s presidential election.

Now there is little doubt that it will after Trump told reporters in Washington, D.C., earlier this week that he would “absolutely” block the transaction – and that he would do so “instantaneously.”

I’m not going to handicap what might happen. At risk of stating the obvious, the next president won’t be inaugurated until Jan. 20, 2025 – so nothing instantaneous can happen until then. But it’s probably safe to say that there could be a lot of twists and turns between now and then on the matter.

The consensus at the Tampa Steel Conference seemed be that a Nippon Steel acquisition of U.S. Steel was the best outcome for the company and for US manufacturing. Why? In large part because it might be the least disruptive to operations and because it would not result in additional consolidation.

And it makes a lot of sense for Nippon Steel, which would gain access not only to a US market that it sees as having growth potential but also to a global automotive footprint. Nippon would be able to serve not only automakers in the US and in Japan but also those in Europe via U.S. Steel’s mill in Kosice, Slovakia.

But even while the conference was underway, Lourenco and Celso Goncalves made it abundantly clear that Cliffs would not exit the scene quietly – especially after getting closer to the prize than I think a lot of us realized.

I don’t agree with everything that Cliffs said on its earnings call. But the company is right that steel has surprisingly strong bipartisan support in an otherwise extremely divided US political landscape. And steel also tends to punch above its weight both in elections and in trade policy.

Some of the pro-steel rhetoric that resonated for Trump in 2016 also worked for Biden in 2020. And as I noted last month, Cliffs has appointed to its board Ron Bloom, who served in senior roles both in the USW and in the administration of former President Barack Obama.

I note the Bloom appointment again here because Obama was also a stalwart USW supporter, and his administration rolled out in 2015-16 what, at the time, were huge trade cases targeting sheet and plate imports. They resulted in in duties of more than 500% in the case of Chinese cold rolled.

Trump’s renewed talk of tariffs – a proposed 10% tariff on virtually all imports – has me thinking back to 2017-2018 and the early days of Section 232. Remember all the speculation about when and how the tariffs might be rolled out? And remember the chaos that ensued when they suddenly were in March 2018? Even more unexpected was that they were imposed against US allies like the EU, Japan, and South Korea, as well as against Canada and Mexico, with whom the US shares closely linked supply chains.

The Obama administration mostly followed the traditional AD/CVD route, which gave traders and consumers of foreign steel at least some time to adjust course. Trump didn’t. He invoked national security to introduce 25% tariffs on imported steel. And he, at times, made changes to those tariff levels via Twitter (now X).

How is it possible that US policy can change on a dime from one administration to the next or that a president can change it with a few keystrokes on a social media platform?

I recall attending a steel conference in Mexico not long after Trump was elected. Daniel Pearson – then a senior fellow at the Cato Institute (a libertarian think tank), a former ITC chairman, and a former Cargill executive – said that the president was not like a king, except in matters of international trade.

The conundrum, he said, was that US presidents had been given those king-like trade powers with the expectation they would use them to make trade deals. It wasn’t anticipated that they might also use those powers to break trade deals. That issue is as relevant in the campaign now as it was in the early days of the Trump administration.

PS – Seeing many of you at the Tampa Steel Conference earlier this week was a pleasure. Thank you to everyone who attended and to all reading this for your continued interest in and support of SMU!

Michael Cowden

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Final thoughts

I’ve had discussions with some of you lately about where and when sheet prices might bottom. Some of you say that hot-rolled (HR) coil prices won’t fall below $800 per short ton (st). Others tell me that bigger buyers aren’t interested unless they can get something that starts with a six. Obviously a lot depends on whether we're talking 50 tons or 50,000 tons. I've even gotten some guff about how the drop in US prices is happening only because we’re talking about it happening.