Politicians have the annoying habit of poking their self-interested noses into the normal flow of business and, by doing so, mucking things up. A case in point is the almost $15 billion acquisition of US Steel by Nippon Steel, announced last December. The deal, which was reasonable and accepted, has now become a political football and is in danger of collapse. With US elections due in November, President Joe Biden and his rival Donald Trump are both using the takeover bid to court electoral support. With scant regard for a free marketplace, Biden fired the first shot a few weeks ago by saying it was “vital” for US Steel to remain “domestically owned and operated”. Really, why? He gave no details as to how this feel-good notion might be achieved. Donald Trump followed up by declaring he would immediately block the acquisition if elected. Again, no reason, no details. Just an appeal to blind patriotism. The proposed deal has subsequently drawn criticism from lawmakers and the relevant union, the United

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Steelworkers (USW), which is keen to secure the best deal for its members. In reply, Japan’s largest steelmaker has pledged there will be no job cuts and that it will honour all agreements between the union and US Steel. Nippon Steel has even said it will move its own US headquarters to Pittsburgh where US Steel is based. But, to no avail. Senators have cited national security issues and even alleged links between Nippon Steel and China as reasons for the deal to falter. The proposal is now being scrutinised by the US’s Committee on Foreign Investment in the US. Meanwhile, Tadashi Imai, the new president of Nippon Steel, has said: “I am convinced that we’re the most useful partner to help US Steel grow in the United States.” 

Amidst this jingoistic electoral frenzy, the threat to America is not just from the far east. It´s also from the south, apparently. The background is that in 2020 the United States-Mexico-Canada Agreement (USMCA) replaced the North American Free Trade Agreement (NAFTA). It permits tariff free trade between the countries. Among other things, Mexico began supplying much-needed and cheaper steel to the US than it could provide itself. However, now in an election year, the whole thing is outrageous. Those under-cutting Mexicans must be stopped. So, an alliance of US senators is calling for the reinstatement of 25% Section 232 import duties on material imported from Mexico. In March they introduced a bill to Congress called the ‘Stop Mexico’s Steel Surge Act’. The American Iron and Steel Institute (AISI) is backing the bill. The irony is that restricting the volume of material crossing the border could ease the current downward pressure on prices: meaning higher steel prices for US consumers.

Self interest is also alive and well in China where, according to the China Iron and Steel Association (CISA), 15 of the country´s major steel bar producers have called on authorities to restrict steel bar output to prevent prices falling further. The Association said steel bar prices have seen “irrationally” sharp declines amid ongoing weakness in China’s real estate and infrastructure sectors, leading steel bar producers to face narrowing margins and losses. Prices of steel rebar on the Shanghai Futures Exchange have fallen by 14.2% since the start of this year. Steel bar demand from infrastructure construction has contracted due to spending cutbacks by indebted local governments, according to CISA. Facing weakening demand, some suppliers have already taken measures to support prices. Of the total furnace capacity in Shanxi province, almost 40% has been shut down for maintenance, CISA said.

In an economic climate where many steel-related business are struggling to survive – and many are failing to do so – the call for a greener steel industry grows louder. But at what cost? Well, according to the consensus of opinions expressed at the Global Iron Ore and Steel Forecast Conference, held in Perth in March, the extra cost of creating green steel could be anything from zero to $150 per metric tonne (m/t). Figures from Monash University in Australia show that green steel could be made in Western Australia for about AUD 850 (USD 570) m/t using a mix of wind, solar, battery storage and hydrogen. There´s much talk in the steel industry about the climatic, moral and good corporate citizen virtues of “going green”. But the cost of converting the existing steelmaking processes into their greener cousins is daunting. The fact is that while academics and well-intentioned business people talk about the need to go green, many steelmakers in China and other Asian countries are still building blast furnaces to be fed standard iron ore and coal – for use over the next 20 years.