In mid-December, the Japanese company announced it would acquire US Steel for $14.9 billion. The news was disturbing to politicians of both parties, who have often argued over the years that steel is an important source of employment and an important domestic industry.
The real shocker for me was the announced acquisition price of $14.9 billion. US Steel was the world's largest company when it was founded in 1901 by merging numerous smaller competitors. By 1960, The company remained among the top 10 US companies on the Fortune 500.. By 1991, US Steel was removed from the 30 largest companies that made up the Dow Jones Industrial Average. In 2014, U.S. Steel was removed from Standard & Poor's list of top 500 U.S. companies. In fact, U.S. Steel is no longer even the largest steel company in the United States; we're talking about Nucor. US Steel currently produces about 12% of US steel.
Acquisition of US Steel It won't be the biggest deal of 2023.. Kroger's, for example, acquired Albertsons for $24.6 billion last year in a merger of grocery store chains. Biotechnology company Amgen paid $26 billion for Horizon Therapeutics. Prologis, a company that owns and manages industrial space, paid $23 billion for Duke Realty. Broadcom, which designs and manufactures a wide variety of software infrastructure and semiconductor products, has acquired VMware, which makes software that lets you „run any app, on any device, in any cloud,“ for $61 billion. This is four times the value of US Steel.
Certainly it still exists Some U.S. professional sports teams are worth more than $7 billion, (Football) Dallas Cowboys, (Baseball) New York Yankees, (Basketball) Golden State Warriors, etc. Once mighty U.S. Steel is now worth about two professional sports franchises.
The declining importance of U.S. Steel is part of changes in the global steel industry as a whole. Regarding the global steel market and the position of U.S. steel manufacturers in that market, consider the following: Illustration by Nicolo Conte, published on the Elements website. If you look at the bottom left of the diagram, you can see that in 1967, China accounted for 3% of the global steel market, but now it accounts for 57%. The combined steel production of Japan and the United States is less than one-fifth of that of China, and both the United States and Japan lag behind India as steel producers.
Part of the increase in steel production in China and India is the dramatic expansion of their economies.of world steel association reports the main uses of steel from a global perspective as follows:
Of course, the production of buildings, transportation equipment, and machinery in China has exploded over the past 40 years or so. Therefore, the local market for Chinese steel manufacturers also soared.
But another problem is that the U.S. steel industry in general, and U.S. Steel in particular, has historically lagged far behind the cutting edge advances in steel technology.as Brian Potter points out: No Innovation, “The History of US Steel” (Construction Physics, December 29, 2023), U.S. Steel lagged far behind technological advances after World War II, including: Transition from open hearth to basic oxygen furnace. Seeking economies of scale with very large furnaces. The rise of „mini mills“ that melt scrap iron to make steel instead of processing iron ore. others.
Although the U.S. steel industry as a whole, and U.S. Steel in particular, has been forced to make significant cuts over the past few decades, the U.S. economy still produces the majority of its steel at home.by United States Geological Survey According to the 2023 Mineral Commodity Summary, 14% of U.S. finished steel consumption in 2022 was imported. The main sources of these imports were Canada (21%), Brazil (15%), and Mexico (14%).
However, the United States has a long history of blocking steel imports from other countries. For example, when President Trump decided to increase protectionism in 2018, steel was one of the first industries to gain additional tariff protection. As a result, U.S. industries that use steel, such as construction, automobiles, transportation equipment, and machinery, pay more than steel users in other countries.of According to the SteelBenchmark website, at this time, U.S. steel users pay $1,142 per ton of hot-rolled strip. For comparison, the equivalent price in Western Europe is $790. The price on the world export market is $606. The price in mainland China is $484. Therefore, any U.S. industry that depends on U.S. steel production is at a competitive disadvantage in the world market relative to other companies.
At this point in the discussion, someone usually says something to blame. „Then you just don't care about steelworkers' jobs, and you just don't care if the U.S. steel industry disappears.“ Actually, I do. However, the pattern of history over the past half century has been that the U.S. government has continued to protect the U.S. steel industry from international competition, and the U.S. steel industry has not used that protection to catch up technologically.
Looking to the future, the United States and Japan together represent only a small portion of the global steel market. Both countries' steel industries need greater scale and continuous technological improvements. Compared to these issues, the question of whether a Japanese steelmaker should be allowed to pay $14.6 billion to America's second-largest steelmaker strays from the real issue.