Nippon Steel sues the U.S. government

Nippon Steel has recently finalized its policy of filing a lawsuit against the U.S. government regarding its plan to acquire U.S. Steel, a large U.S. steel company. It will take legal action to determine whether the procedures for U.S. President Biden to issue a halt order on the acquisition plan are appropriate. Against the backdrop of the increasing presence of Chinese companies in the steel industry, it will argue for the rationality of cooperation between U.S. Steel, which is based in the growing United States, and Nippon Steel, which has cutting-edge technologies such as decarbonization

Since the acquisition was announced in December 2023, it has been at the mercy of politics due to the U.S. election and other reasons. The stage will shift to the judicial field.

On January 3, Biden issued a halt order on the acquisition plan, saying that “actions that may harm U.S. national security may be taken.” Although Nippon Steel cannot object to Biden’s judgment itself, it can sue the flaws in the decision-making procedures of the Committee on Foreign Investment in the United States (CFIUS), which is the premise of the judgment.

Nippon Steel and U.S. Steel issued a statement on January 4, saying that they “will never give up expanding their business in the United States.” They hope to achieve the acquisition plan through litigation.

Nippon Steel believes that this is Biden’s “political judgment” and “clearly violates” the due process stipulated in the U.S. Constitution and the law governing the behavior of the Committee on Foreign Investment. It believes that the problem is that no clear evidence has been provided for the national security risks that serve as the judgment criteria.

In Nippon Steel’s acquisition plan, as a countermeasure to the concerns of the Committee on Foreign Investment in the United States, it proposed that more than half of the directors should be American nationals, but “no written feedback was received at all.” Nippon Steel claims that the U.S. government’s approach is flawed and is expected to be a focus of debate in the lawsuit.

The suspension order requires Nippon Steel to end the acquisition plan within 30 days in principle. If the Committee on Foreign Investment in the United States, which reviews the acquisition plan, does not extend the acquisition deadline, it must submit a certificate of abandonment of the acquisition plan to the Committee on Foreign Investment in the United States before February 2. If the abandonment certificate is submitted, the acquisition plan will be completely stopped.

Nippon Steel will file a lawsuit against the U.S. government, and its first task is to ask the court to temporarily stop the order to abandon the acquisition before February 2.

The lawsuit will once again emphasize the rationality of Nippon Steel’s investment in the United States, aiming to make relevant parties understand the synergy of the acquisition.

In the global steel industry, China controls more than half of crude steel production. If Nippon Steel acquires U.S. Steel, it will rank third in the world in crude steel production, but it is still less than half of China Baowu Steel Group, which ranks first.

Among the manufacturing industries, the steel industry has the highest carbon dioxide emissions. In the future, not only scale but also the development of decarbonization technology will become the axis of competition. Nippon Steel is considered to have the world’s top decarbonization technology such as hydrogen steelmaking, but Chinese companies are also promoting investment in hydrogen steelmaking with the whole country’s strength.

The Japanese market continues to shrink due to population decline, and it is difficult to obtain the results of such technology development. From the perspective of the United States, the population is expected to increase before 2070, and the steel market will continue to grow, but U.S. steel companies, which have been protected by high tariffs, have no spare capacity for technology development and equipment investment. If Nippon Steel’s technology can be put into practical use in the huge U.S. market as soon as possible by acquiring U.S. Steel, it can respond to the threat from China.

Nippon Steel has also decided to reduce its production capacity in China by 70% by 2024. In the future, it will continue to attach importance to the U.S. market, which is an ally and shares various values.

Some people in the Japanese industry are also worried that this suspension order will lead to a decline in investment in the United States. The Japanese government conveyed its position to the US government as of January 4. It called for explaining the reasons for the US government’s judgment in order to dispel the concerns of the industry.

Nippon Steel also hopes to overturn Biden’s assessment of “security risks” through litigation.