With two bidders coming out within days, U.S. Steel — a symbol of American industrialization that for more than a century has helped build everything from the United Nations building in New York to the Superdome in New Orleans — seems to be on the cusp absorbed.
Here’s what’s happened so far, and how the acquisition of U.S. Steel could reshape the global steel industry.
bidding war
After rejecting a $7.3 billion takeover offer from rival Cleveland-Cliffs on Sunday, U.S. Steel said it was considering its next move. On Monday, industrial group Esmark Bid $7.8 billion Pittsburgh Steel Manufacturers.
Shares of US Steel surged more than 30% on Monday, with the 122-year-old steelmaker’s bid likely to be even higher.
U.S. Steel said it had other offers to consider, but did not give a timetable for if and when it would make a decision to sell itself.
a potential giant
Cleveland-Cliffs said its proposal, first presented on July 28, would create a company that would rank among the top 10 steelmakers in the world and be one of the top four outside China, which is Dominance in global steel production. Cleveland-Cliffs chief executive Lourenco Goncalves said the tie-up between the two US steelmakers would “create a lower cost, more innovative and stronger domestic supplier for our customers”.
Goncalves said he was prepared to continue negotiations with U.S. Steel despite rejecting the company’s initial offer.
Cleveland-Cliffs is North America’s largest producer of flat steel and iron. The acquisition of U.S. Steel would further reduce the number of players in the U.S. steel industry, which has undergone major consolidation in recent years, including two steelmakers at the center of development this week.
The proposed acquisition would give Cleveland-Cliffs control of about 50% of the domestic flat steel market and 100% of blast furnace production, Citi analysts wrote in a note to clients. It would also make it “close to a domestic monopoly” for auto body steel and nearly 100 percent US iron ore.
That’s sure to interest antitrust regulators, which have raised the bar for mergers in many industries under the Biden administration. Automakers and other big steel buyers are also likely to resist dwindling competition among U.S. steelmakers.
Steel price surge and consolidation
Soaring prices have driven consolidation in the steel industry for nearly a decade. Steel prices more than quadrupled at the start of the pandemic to nearly $2,000 a tonne by summer 2021 as supply chains stalled, a sign of a surge in demand for the commodity and a lack of demand.
Cleveland Cliffs bought AK Steel in 2019 before steel prices started to soar, and within a year ArcelorMittal USA 2020 $1.4 billion.us steel corp. Acquisition of Big River Steel the following year.
Prices have fallen back to around $800 a tonne, but that’s still at the top of steel prices for the past six years. The continued rebound in the economy, especially in the US, has helped keep flat steel prices rising.
american steel history
U.S. Steel has been a symbol of industrialization since its founding in 1901 by JPMorgan Chase, Andrew Carnegie and others, and dominated the world for the past 40 years before Japan and China became the preeminent steelmakers status.
The company survived the Great Depression and became an integral part of the United States in World Wars I and II, supplying data for aircraft, ships, tanks and other military equipment, in addition to steel for cars and appliances. million tons of steel.
During the energy crisis and multiple recessions of the late 1970s and early 1980s, U.S. Steel cut production and divested many other businesses. Entering the new millennium, with prices falling due to a supply glut and an influx of cheap steel imports, the company restructured in 2001, spinning off its energy business to become Marathon Oil Corp.
The 64-story U.S. Steel Tower still dominates the Pittsburgh skyline, but U.S. Steel is no longer its largest tenant. That was UPMC, a local health system whose name now sits at the top of the tower.
Global Steel Production
China and Chinese companies have come to dominate global steel production. About 54 percent of the nearly 2 billion tons of steel produced globally each year comes from China, according to the World Steel Association.
Shanghai-based state-owned steel company China Baowu Group will produce nearly 120 million tons of steel in 2021.
Together, Cleveland-Cliffs and U.S. Steel produced nearly 33 tons of steel that year, according to the world steel association. The combined entity would immediately rank among the world’s top 10 steelmakers, but remain at the lower end of that list.
Of course, this will not change the overall status of the U.S. steel industry, which currently ranks fourth after China, India and Japan.
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