The merger between US Steel and Nippon Steel appears to officially be melting down.
President Biden blocked Japanese giant Nippon Steel's $14.9 billion takeover of beleaguered manufacturer US Steel earlier today, citing concerns about national security.
Ever since Biden announced his opposition to the acquisition back in March, the deal has looked increasingly unlikely—but this final nail in the coffin sent shares of US Steel plummeting 6.53% this afternoon. Overall, the stock is down over 36% in the past 12 months.
An iron-clad deal
Back in 2023, US Steel, the third-largest steel producer in the US, needed a capital lifeline. Nippon Steel, the fourth-largest steelmaker in the world, saw an opportunity to enter the American market and give the 123-year-old US company a facelift. But ever since the deal was first announced just over a year ago, it has faced scrutiny from lawmakers and fierce opposition from the United Steelworkers Union.
Nippon planned to invest roughly $3 billion in US Steel to help it close the gap with its competitors. Now, US Steel CEO Dave Burritt says that without the merger, the company may have to shutter mills.
Some rare common ground: Both President-elect Trump and President Biden opposed this deal. As geopolitical tensions rise, both parties have embraced a more protectionist foreign policy.
“A strong domestically owned and operated steel industry represents an essential national security priority and is critical for resilient supply chains,” Biden explained in a statement.
Nippon and US Steel called Biden’s block “unlawful” in a joint statement.
Time to manufacture some gains
US Steel isn’t the only member of the manufacturing industry that’s been struggling to build returns for investors. Materials was the worst performing sector of 2024.
The sector, which includes raw materials for mining, construction, and metal refining, is sensitive to macroeconomic slowdowns. The logic is straightforward: Demand for building new stuff declines when nobody can afford to build new stuff.
But some analysts argue that the sector as a whole could be a major comeback story of 2025, considering how global inflation is receding and that China could implement new stimulus to help its economy recover.
Instead of betting big on flashy AI stocks, it could be time to get back to the basic building blocks—literally.—LB
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