(Bloomberg) — Shares in Nippon Steel Corp. dipped on Monday, the first day of trading since US President Joe Biden blocked the Japanese company’s planned $14.1 billion takeover of United States Steel Corp.
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Biden had already expressed his opposition to the deal, but he announced his decision formally on Friday, days after the case was referred to him by a US security review panel. In a written statement, he said the takeover would have placed a major steel producer under foreign control, creating a risk to critical supply chains.
US Steel and Nippon Steel said in a joint statement that there was no evidence of a national security threat, describing the decision as political. They intend to challenge the order, which would be a difficult path and one likely to significantly extend a months-long tussle over a US industrial giant that has raised tensions between the US and its close ally Japan.
Washington’s final verdict was not a shock, said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab. “President Biden had expressed his opposition to the deal for some time, and the market had factored in this possibility,” he said, adding President-elect Donald Trump, who takes office later this month, would “likely maintain this stance as well.”
Nippon Steel shares were trading down 1.5% at 3,136 yen at 9:58 a.m. in Tokyo, slightly underperforming the Nikkei 225 benchmark index. Shares earlier fell as much as 2.3%.
Without the tie-up, US Steel will have to find alternative sources of much-needed investment.
Similarly, Nippon Steel — which made several concessions around employment, leadership and production capacity over the last months, in an effort to assuage White House concerns — will be forced to search for another target or growth market to help reduce its dependence on the waning Japanese market and compete more effectively with China.
“Over the last decade, there has been an understanding in Tokyo that both US parties have shifted in the direction of economic nationalism, of greater protectionism. This is just the reality,” Tobias Harris, founder of Japan Foresight, said on Bloomberg TV. “You find opportunities where they exist.”
Japan’s largest steelmaker had aimed to boost crude steel production capacity by 30% with the US Steel deal.
