Introduction

In a significant development for the U.S. steel industry, Cleveland-Cliffs has indicated a potential new bid to acquire U.S. Steel, reigniting debates surrounding the future of the iconic manufacturer. This news follows President Biden's recent decision to block a $14 billion acquisition of U.S. Steel by Japan's Nippon Steel, which raised concerns about national security.

Cleveland-Cliffs' Confidence

Lourenco Goncalves, CEO of Cleveland-Cliffs, expressed confidence regarding the bid, stating that saving the United States Steel Corporation is a matter of “when,” not “if.” Despite this bold proclamation, specifics about the potential offer remain undisclosed. Goncalves previously attempted to engage U.S. Steel in 2023, but the offer was turned down in favor of Nippon’s more lucrative bid.

Potential Divestment

As Cleveland-Cliffs emerges from its previous bid, CNBC reported that the company might consider divesting U.S. Steel’s subsidiary, Big River Steel, to Nucor, another major American steel producer. However, Goncalves refrained from confirming any such partnership with Nucor during a press briefing.

Market Reaction

The potential for Cleveland-Cliffs' renewed interest has spurred investor optimism, prompting a noteworthy jump in U.S. Steel shares, which surged by as much as 10% on speculation surrounding the bid. By the end of Monday trading, shares closed approximately 6% higher, although they still face a 23% decline over the year.

Legal Challenges

Meanwhile, the proposed merger between U.S. Steel and Nippon Steel remains uncertain. Recently, both companies launched lawsuits against the U.S. government, alleging corruption in the decision that blocked their merger. They accused the Biden administration of sabotaging the review process for political motives. Additionally, U.S. Steel and Nippon have filed legal actions against Cleveland-Cliffs and representatives of the United Steelworkers union, claiming illegal collusion to derail their acquisition plans. Goncalves and union president David McCall have dismissed these claims as unfounded.

Political Environment

The Biden administration has opted to delay enforcement of its order blocking the Nippon takeover until June, allowing for judicial review. Goncalves voiced concerns during a recent conference in Butler, Pennsylvania, asserting that Cleveland-Cliffs’ plans are stalled until U.S. Steel’s management and board decide to abandon the Nippon merger.

U.S. Steel's Historical Context

Historically, U.S. Steel was once the titan of steel production, but it has recently slipped in global rankings, primarily due to its slow transition to more efficient and environmentally friendly production methods. In this competitive environment, Cleveland-Cliffs argues that Nippon Steel is the only buyer equipped to make significant investments in U.S. Steel’s operations.

Union Opposition

Complicating matters further, the United Steelworkers union, representing 11,000 employees at U.S. Steel, has strongly opposed Nippon's takeover, citing allegations of illegal trade practices and bad faith negotiations. Interestingly, the union has previously expressed a preference for Cleveland-Cliffs, given its unionized workforce.

Regulatory Scrutiny

As the situation unfolds, any new bid from Cleveland-Cliffs could face closer scrutiny from federal antitrust regulators, particularly in light of varying approaches to merger enforcement under different presidential administrations. Whether Cleveland-Cliffs can effectively navigate these hurdles remains to be seen, but the unfolding drama underscores the volatile landscape of American steel and the broader implications for the industry and its workforce.

Conclusion

Stay tuned, as the fight over U.S. Steel’s future continues to evolve!