John Pierpont Morgan will probably remain the most powerful businessman in the history of American capitalism, despite its many spectacular figures. In 1901, already the country’s leading banker, he purchased the assets of the king of steel, Andrew Carnegie, to merge them with his own and form the American and world number one steel company, US Steel.
This giant company has long remained the symbol of the country’s industrial power, its heart beating to the rhythm of the blast furnaces of Pittsburg, a star-spangled banner of hardened steel. But the steel has rusted a lot since then and it is the flag of the Rising Sun which picks up the remains. Nippon Steel will buy US Steel for nearly $15 billion (€13.7 billion).
The sum is considerable for a company that has become a marginal player in the global steel battle between the Japanese, the Chinese and the European ArcelorMittal. A boon for US Steel shareholders. In August, its local competitor, Cleveland Cleef, a miner turned steelmaker, offered $7.3 billion. Today, Japanese offers double. An unexpected jackpot, which is not at all to the taste of trade unionists who would have preferred the American solution and fear restructuring. They appeal to national security. Not sure they will win their case.
Decarbonization challenge
Nippon Steel’s bet to overpay its prey to strengthen its American presence remains daring. In Tokyo, the company’s stock price fell sharply upon the announcement of the news. But traditional Japanese companies care little about their small shareholders. They want to see their long-term benefit. In this case, Nippon Steel, which is deploying a very ambitious international deployment strategy, is targeting customers of American automobile manufacturers, including the Japanese Nissan and Toyota.
The fact remains that this is a lot of money at a crucial moment in the world steel industry. This sector, once very fragmented, and now consolidated around a few giants, must face the challenge of decarbonization. Steel manufacturing, from iron ore and coal, is responsible for 8% of global greenhouse gas emissions. Nippon Steel is committed to reducing its net emissions to zero by 2050. This requires switching to electric steel mills and converting to hydrogen. The investments to do this are considerable and will hamper the profitability of the factories.
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