The U.S. steel industry is in trouble. Joe Biden blocked Nippon Steel’s attempt to buy US Steel (X). The Japanese firm is offering $14.9 billion for the American steel firm.
Biden wants US Steel to remain American-owned. To help complete the deal, Nippon offered the steelworker union job protection. It would also keep the plants open. Unfortunately, this did not convince the union that jobs were safe.
US Steel is not in a competitive position in the long term. Japan’s industry is ahead, so the broken deal is bad news for both parties. The chances are high that as steel demand weakens, losses will mount for US steel. As a result, the company will need to achieve higher productivity. It will need to cut costs, close plants, and rely on government support.
In the iron ore sector, Cleveland-Cliffs (CLF) stock has not bottomed yet. CLF stock lost 26.36% in the last month. The deal blockage hurts this firm, too. Without consolidation, the oversupply of steel will weaken Cliffs’ acquisition of Stelco. Still, CEO Lourenco Goncalves is interested in buying US Steel, too.
CLF stock is a high-risk investment at this time. The Stelco acquisition will weigh against the firm’s balance sheet. Adding US Steel would hurt investors even more.