U.S. Steel and Nippon Merger: Should Investors Bet on It?

Key Points

• US Steel stock is elevated as sentiment improves on the merger deal with Japan’s Nippon Steel.
• Biden’s executive order blocking the deal was postponed until June 18, 2025, as a U.S. District Court is set to rule on the case by that date.
• President Trump had opposed the deal during the election campaign but seems open to a minority investment to help upgrade the steel mills.

The steel stocks in the basic materials sector have been benefactors of President Trump’s steel and aluminum tariffs. However, U.S. Steel’s 26.5% year-to-date (YTD) performance as of Mar 28, 2025, may be caused by more than just tariff benefits, especially when peers like Nucor Co. NYSE: NUE and Steel Dynamics Inc. NASDAQ: STLD are only up 4.5% and 8.7% YTD, as of Mar 28, 2025, respectively.

The acquisition of United States Steel Co. NYSE: X by Japan’s Nippon Steel is currently in a state of flux, but it's gaining optimism. A state of flux is better than dead and terminated. At least, that's what United Steel shareholders are feeling. The merger, once thought to be dead and buried after the Biden administration blocked it and President Trump vowed not to let it happen, has been experiencing a sentiment shift. U.S. Steel stock has rebounded 60% off its 52-week low of $26.92 in September 2024.

History of the Nippon Steel Acquisition Attempt

After receiving several bids, including from peer steel maker Cleveland Cliffs Inc. NYSE: CLF, U.S. Steel finally agreed to be acquired by Nippon Steel Corporation (NSC) in late December 2023 at a 40% premium of $55 per share. The all-cash deal was valued at $14.1 billion.

NSC would also invest $2.7 billion in upgrading U.S. Steel’s mills and honor all collective bargaining agreements with the United Steel Workers Unions. Furthermore, U.S. Steel would retain its name and headquarters in Pittsburgh, Pennsylvania. The deal seemed like a win-win for shareholders, Nippon and U.S. Steel, which drastically needed to upgrade its mills to survive.

The Department of Justice asked for a period to review. The Committee on Foreign Investment in the United States (CFIUS) took time to decide and came to a deadlock. On Jan. 3, 2024, President Joe Biden officially blocked the merger via executive decision. Three days later, Nippon Steel and U.S. Steel filed lawsuits against the United States government, stating that the ruling was unconstitutional. The Biden Administration delayed enforcement of the executive order until June 18, 2025, which also is the exclusivity period for Nippon Steel.

Latest Status of the Merger Attempt

After Donald Trump won the election, NSC and U.S. Steel focused on negotiating with the Trump administration. On Feb 17, 2025, Trump suggested that NSC would drop its full acquisition and instead "invest heavily" in U.S. Steel. The move indicated Trump’s openness to flexibility and injected more optimism into the potential deal.

NSC also increased its commitment to invest in modernizing U.S. Steel's mills from $2.7 billion to upwards of $7 billion. Cleveland Cliffs, along with Nucor, stepped back up to the table and offered $30 per share, which was well below the $55 per share offered by NSC. Cleveland Cliffs would have to wait until after the exclusivity arrangement expires on June 18, 2025, to make a move.

Potential Outcomes and Reasons to Be Bullish

The Department of Justice, Biden, Cleveland Cliffs, Senators John Federman and Sherrod Brown, and even the United Steelworkers Union oppose the deal based on national security. NSC stated that a merger would better help U.S. Steel compete against China. While a total acquisition seems like too much for Trump to approve, he has shown an interest in negotiating a minority stake investment. 

The case is in the U.S. Court of Appeals in Washington D.C. Circuit Courts. It now depends on their rulings by June 18, 2025. Analysts have pointed out that the courts rarely rule against the CFUIS and Presidential decisions due to national security concerns.

If the deal is restructured, there may be compromise, but political and union opposition remains fierce. As for the outcomes, Nippon could walk if the court ruled against the deal by June 18, 2025. This would open up the potential for a merger with Cleveland Cliffs and Nucor. The Trump administration favors a revised partial investment. The last scenario would be U.S. Steel decided to go it alone.