Final Thoughts
Final Thoughts
Written by Ethan Bernard
January 7, 2025
Some world-changing events happen in an instant. Others take many twists and turns. The outcome remains unknowable at every phase. That is, until you finally arrive at the end of the roller coaster, the safety bar lifts up, and you stagger off the ride. It appears such is the case with Nippon’s Steel Corp.’s (NSC’s) proposed $14.9-billion buy of Pittsburgh-based U.S. Steel. And the ride ain’t over yet.
Before that deal was even announced, we had the original drama of learning that USS was up for sale in the summer of 2023, that Cleveland-Cliffs made a bid and was rejected. Add to that vociferous opposition from the United Steel Workers (USW) union from the start. Even Esmark made an appearance in the action at one point. Now the next phase of the Japanese steelmaker’s USS transaction has announced itself: litigation.
Devil in the details
As SMU reported yesterday, Nippon and USS have filed lawsuits. One in the US Court of Appeals for the District of Columbia and another in the US District Court for the Western District of Pennsylvania. This follows President Biden blocking the deal. One lawsuit is against the US government, and the other against Cliffs’ Chairman, President, and CEO Lourenco Goncalves as well as USW President David McCall. Nippon/USS have provided legal documentation here. And there’s a lot of it.
In the second lawsuit, USS/Nippon contend that Cliffs’ Goncalves and USW’s McCall “engaged in unethical and unlawful conduct to prevent U. S. Steel’s pending merger with NSC.” Further, they labeled Cliffs’ tactics “thuggish,” and cited a 2022 interview with Goncalves where he says, “I want everything.”
And the litigation makes clear that USS/Nippon do not believe that the Committee on Foreign Investment in the United States (CFIUS) review process was above board.
Recall that the CFIUS review process ended in a split decision, thus sending the final decision to President Biden, who blocked the deal. The companies believe Biden had a political agenda. Regarding CFIUS, the lawsuit alleges:
Then, on Dec. 20, 2024, U.S. Steel and NSC had a telephone call with CFIUS in hopes of addressing any outstanding questions. CFIUS did not ask a single question and quickly ended the call, with its own telephone operators at times muting Plaintiffs’ representatives so they would not be heard. This sham call was symbolic of the entire sham process.
There’s a lot more alleged in the documentation if you have a few free hours, or days, depending on your reading speed.
Goncalves takes to the airwaves
In our article yesterday, we covered both USW’s McCall and Cliffs’ Goncalves responses. Both dismissed the allegations, with McCall calling them “baseless.”
Goncalves then appeared on Fox News’ “Mornings with Maria” on Tuesday with Maria Bartiromo. In the interview, he said, “My response (will) be given in court. And I have never had so much time to prepare for a lawsuit that I knew that was coming. So we are armored through the teeth and the Japanese will learn… about the judicial process in the United States.”
Regardless of the language used, “armored through the teeth” does have one very definite connotation, at least in my mind: expensive. When large corporations and international unions do battle, no matter the outcome, the lawyers are going to win.
The ‘Trump Factor’
Goncalves alluded to the incoming Trump administration, and how Trump has made his opposition to the deal known publicly.
Still, as CRU Principal Analyst Josh Spoores pointed out in a recent interview with SMU, President-elect Trump has also been courting foreign investment into the US. Will he be willing to make some kind of deal?
A Reuters article today noted that Biden’s order gives the companies 30 days to unwind the transaction. The company is still interested in successfully completing the deal. That time frame puts it under Trump 2.0.
In a press conference today, Trump spoke about renaming the Gulf of Mexico the “Gulf of America,” and continued talking about making Canada the 51st state. Meanwhile, Donald Trump Jr. was in Greenland, and the incoming administration revived talk of the US acquiring the territory, currently part of Denmark.
In short, we’re in uncharted territory, and it’s increasingly hard to tell the difference between bluster and what’s actually on the table. Could the USS/Nippon merger fit somehow into this as-yet unknown deal calculus? Greenland today, Nippon/USS merger tomorrow (post-Jan. 20, that is)?
Goncalves veered away from the case a bit when Bartiromo asked him if steel prices would be going up once Trump arrives in office. We’ve all have heard of what has been called a “Trump bump” on pricing. I think it’s more of a “Trump Factor,” an X-factor wildcard.
But without hesitation, Goncalves said they’d be on the rise. He boomed: “Yes, President Trump is coming.”
Tampa Steel Conference
If you’re wondering how to navigate the first few months of this new administration, there’s no better place to learn about it than the Tampa Steel Conference, which we host along with Port Tampa Bay.
It starts less than two weeks after Inauguration Day, which means there will be a lot to talk about. It will feature fireside chats with leading industry CEOs on topics ranging from demand and purchasing strategies to logistics and trade policies. Trump 2.0 could be a key factor in all of those discussions. Also, it’s winter… in the Florida sunshine, which is always a plus if you’re coming from a colder clime.
If you’re interested in registering, click here. Also, for those who have already registered, the conference app is now available for download here.
Ethan Bernard
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