Steel, cement and foreign ownership

Under the pretense of concerns tied to the economy, infrastructure and national security, powerful interests oppose a takeover of United States Steel Corp. (USS) by Japan’s Nippon Steel Corp. The deal is set to close in the third quarter pending USS shareholder approval, voting for which is scheduled this month.

In a statement following USS board acceptance of a Nippon Steel $55/share offer, the White House noted, “U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain domestically owned and operated.”

“Allowing one of our nation’s largest steel manufacturers to be purchased by a foreign-owned corporation leaves us vulnerable when it comes to meeting both our defense and critical infrastructure needs,” added United Steelworkers International President David McCall.

If steel production capacity is essential to national security and infrastructure, cement production is of at least near-equal standing. The same Nippon Steel-USS sentiment we hear from 1600 Pennsylvania and United Steelworkers brass could have applied more than four decades ago when foreign-owned cement companies—sensing solid, long-term investment opportunities—built a U.S. presence by acquiring iconic brands like Lehigh Portland, Kaiser Cement, Penn-Dixie and (USS-owned) Universal Atlas. Domestic investors’ scant interest in cement production paved the way for foreign operators to control more than 80 percent of U.S. clinker capacity by the early 1990s.

Did the United Steelworkers, whose locals represent hundreds if not thousands of cement plant rank & file, enlist political allies to disrupt years of merger & acquisition activity, wherein eight of the top 10 U.S. cement producers are now controlled by foreign companies? By comparison, the domestically held, publicly traded peers of USS—Cleveland-Cliffs, Commercial Metals, Nucor and Steel Dynamics—account for well over 50 percent of steel output in the U.S.

The Committee on Foreign Investment in the U.S. (CFIUS) empowers the White House to complicate or potentially block the Nippon Steel-USS tie up. After reviewing the national security implications of certain transactions, CFIUS can issue its own determination or defer to the White House. Nippon Steel checks a key box. Committee records show that the seven countries investing the most here—Japan, Canada, France, Germany, Netherlands, Switzerland and United Kingdom, allies all—account for 72 percent of the value added by foreign-owned affiliates in the United States.

In the latest revisions to the law behind the CFIUS, Congress recognizes that a) “foreign investment provides substantial economic benefits to the United States, including the promotion of economic growth, productivity, competitiveness, and job creation, thereby enhancing national security,” and b) commitment to an open investment policy “encourages other countries to reciprocate and helps open new foreign markets for United States businesses.”

Nippon Steel has pledged that no jobs will be lost as a result of the USS transaction; new capital and technological advances will support job growth and create new internal workforce opportunities. “We are progressing through the regulatory review, including CFIUS, while trusting the rule-of-law, objectivity, and due process we expect from the U.S. Government. We are determined to see this through and complete the transaction,” the company assures investors.

Setting aside the opinion of a White House with zero credibility on national security and many other matters, United Steelworkers leadership will do well to rethink its position on the sale of a key employer to a company hailing from an ally like Japan. Looking to another employer it knows well, the union might ponder whether the U.S. portland cement industry could bask in its present financial bliss without “foreign-owned corporation” commitments.

[email protected]