Nippon Steel president Eiji Hashimoto is casting his decision to buy U.S. Steel for over $14 billion in geopolitical terms. The deal is set to transform the metals industry, creating a new steelmaking giant. This new company would dominate the sector “excluding China, in the free-competition world,” the Harvard-educated Hashimoto said, according to the Wall Street Journal.
China currently dominates the steel industry. Six of the world’s top 10 steel producers are from China, with the state-owned Baowu Group leading the pack, according to data from the World Steel Association. Nippon Steel, currently ranked fourth, would rise to third place after acquiring U.S. Steel. (ArcelorMittal, formed in 2006 from the merger of European company Arcelor and Indian steelmaker Mittal Steel, is the world’s second largest producer).
Nippon Steel is paying a hefty premium for U.S. Steel. The Japanese company is offering to pay $55 a share, significantly above U.S. Steel’s closing price of $39.55 at Friday’s market close. (Shares have jumped 22% since then, following Nippon Steel’s announcement).
Despite that, Hashimoto has defended the price tag, saying the deal has “sufficient economic rationality” on Tuesday. “We want to complete a global network for a new era in the industry,” he said.
Several other companies had considered buying U.S. Steel as well. Cleveland Cliffs, another U.S.-based steelmaker, offered to buy U.S. Steel at $35 a share earlier this year. (U.S. Steel rebuffed the offer.) ArcerlorMittal and Canada’s Stelco were also considering offers for U.S. Steel.
U.S. lawmakers, however, don’t think Hashimoto’s decision to buy U.S. Steel is good for American security. U.S. Senator John Fetterman (D-Pa.) complained that it was “outrageous that [U.S. Steel] sold themselves to a foreign nation and a company” in a post on X, formerly Twitter. Fellow senator J.D. Vance (R-Ohio) also opposes the deal, alleging that “a critical piece of America’s defense industry was auctioned off to foreigners for cash.” Fetterman, Vance and Senator Sherrod Brown (D-Ohio), who also opposes the deal, all represent battleground states in next year’s U.S. elections.
The United Steelworkers union is also against the deal. The union’s president, David McCall, said in a statement that neither U.S. Steel nor Nippon Steel contacted the union over the deal, which violates an agreement that requires U.S. Steel to notify the union of any changes in control. That adds more political complexity to the deal, as President Joe Biden seeks to shore up his support from the U.S. labor movement ahead of the election.
The deal still needs to be approved by the Committee on Foreign Investment in the United States (CFIUS).
Hashimoto’s tenure at Nippon Steel shows an executive with a tough negotiating style. He spent over four decades at Nippon Steel before becoming president in April 2019. At the time, the company faced increased competition from Chinese steelmakers and low sales margins. Hashimoto successfully leaned on customers to pay higher prices, and even tried suing Toyota Motors in 2021 for patent infringement. Nippon Steel dropped its suit in November.
In 2019, the year Hashimoto became president, Nippon Steel lost $3.9 billion. Last year, the company generated $5.1 billion in profit.
This story was originally featured on Fortune.com
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