Senator Urges Biden to Probe Nippon Steel’s Alleged Ties to China Amid US Steel Takeover Deal

‘Nippon ownership could risk bringing U.S. Steel into more – not less – dependence on China’s non-market economy.’
Senator Urges Biden to Probe Nippon Steel’s Alleged Ties to China Amid US Steel Takeover Deal
A worker leaves U.S. Steel Edgar Thomson Steel Works in Braddock, Pa. on March 10, 2018. Drew Angerer/Getty Images
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The Chair of the Senate Banking Committee has urged President Joe Biden to investigate Nippon Steel’s alleged ties to China amid growing bipartisan opposition to the Japanese company’s proposed acquisition of U.S. Steel Corp.

In a letter dated April 1 to President Biden, Sen. Sherrod Brown (D-Ohio) raised concerns over a consultancy report highlighting that the deal might undermine U.S. economic and national security due to foreign ownership of the major American steel producer.

“Nippon’s connection to the Chinese steel ecosystem and industrial policy agenda has concerning implications regarding ties to China’s military-civil fusion strategy and [the] quest for global economic power,” Mr. Brown warned. “It is also imperative that Nippon’s relationship with and exposure to the Chinese steel industry is thoroughly examined as well.”

In December, the Pittsburgh-based steelmaker U.S. Steel agreed to a $14.9 billion buyout proposal from Japan’s Nippon Steel. The deal will allow the Japanese steel producer to wholly own the American steel maker.

The report from the consultancy group Horizon Advisory reveals that Nippon Steel has a deep connection with China’s steel sector. The company played a significant role in establishing the Chinese steel industry almost 50 years ago by supporting China’s state-owned steel company, Shanghai Baoshan Iron and Steel (Baosteel or Baowu Group). Nippon Steel contributed Japanese technology, equipment, and personnel to help build Baowu, which has since become the world’s largest steelmaker.

In addition, the report said the Japanese steel maker has operations in China with nine facilities that it partially or wholly owns. It also has established partnerships and cooperation with major Chinese steel producers.

Due to Nippon Steel’s alleged close ties and frequent interaction with China’s steel industry, the report warns that “Nippon ownership could risk bringing U.S. Steel into more – not less – dependence on China’s non-market economy.”

In the letter to President Biden, Mr. Brown said he opposed the acquisition, calling it a bad deal, and stated, “I have made clear my deep-seated opposition to the potential merger of U.S. Steel and Nippon Steel. This deal is bad for American workers and bad for our economic and national security.”

The Ohio senator also expressed concerns over Nippon Steel’s close cooperation with Baowu, citing a report of Baowu’s alleged connection to forced labor in Xinjiang, China.

“We cannot allow our U.S. industrial base to be compromised through further entanglement with one of our biggest national security threats and our largest economic competitor that we know does not follow our trade laws,” Mr. Brown warned.

Nippon Steel said in a statement that Horizon’s report was “rife with inaccuracies and misrepresentations” and that its operations in China were “very limited,” representing less than 5 percent of its global production capacity.

The Japanese steelmaker also said the entities in which it invests in China have no control over its operations or business decisions outside of China and that its Chinese partners do not have any access to information about Nippon Steel’s operations, including its R&D and engineering, outside of China.

Bipartisan Opposition

When the deal was announced in December, the White House said the potential takeover would deserve “serious scrutiny” as it might pose national security risks and supply chain concerns.
President Biden has also spoken out against the potential acquisition deal.

“It is important that we maintain strong American steel companies powered by American steelworkers. I told our steelworkers I have their backs, and I meant it,” the president said in a statement. “U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.”

In addition, former President Donald Trump said he would block the deal “instantaneously.” “We saved the steel industry,” he said. “Now, U.S. Steel is being bought by Japan. So terrible.”

At the time, Sens. Bob Casey (D-Pa.), John Fetterman (D-Pa.) and Rep. Chris Deluzio (D-Pa.) sent a letter in December 2023 to Treasury Secretary Janet Yellen, chair of the Committee on Foreign Investment in the United States, urging the committee to block the proposed acquisition.

In a post on Dec. 18 on social media platform X, Mr. Fetterman vowed to prevent the takeover from going forward as he called it “absolutely outrageous.”

“I’m gonna do everything I can to block it,” Mr. Fetterman said. “It’s absolutely outrageous that U.S. Steel has agreed to sell themselves to a foreign company. Steel is always about security—both our national security and the economic security of our steel communities.”

Union Rejects

On March 27, the United Steelworkers Union (USW) rejected a letter with “binding commitment” from Nippon Steel.

USW said the Nippon Steel letter was “a meaningless piece of paper” and “a pack of empty promises.”

“Our union sees through Nippon’s proposal and will not support the transaction in exchange for a pack of empty promises. Nor will we be deceived by so-called commitments that have baked into them ways to release Nippon from following through.” USW International President David McCall and USW Negotiating Committee Chairman Mike Millsap said in a statement.

In February, U.S. Steel representatives and USW met to discuss the union’s recent grievance filings over the deal. Nippon Steel plans to have its Houston-based holding company, Nippon Steel North America (NSNA), assume the USW’s labor, pension, retiree benefits, and other agreements, the communication states.
Beth Brelje and Reuters contributed to this report. 
Aaron Pan
Aaron Pan
Author
Aaron Pan is a reporter covering China and U.S. news. He graduated with a master's degree in finance from the State University of New York at Buffalo.
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