President Joe Biden’s endorsement of the “Manufacturing Renaissance Act” has ignited a competitive bidding process for United States Steel Corp, as investors vie for a stake in America’s iconic steel company. With expectations of a surge in domestic steel demand, the focus on the industry’s growth potential has intensified.
United States Steel CEO, David Burritt, remains optimistic about a transformative steel cycle fueled by the act. Cleveland-Cliffs Inc. has made a bid worth $7.25 billion, setting the stage for a flurry of developments. However, US Steel’s rejection of the offer has triggered a strategic review process. In a surprising turn of events, privately owned industrial group Esmark Inc. has entered the competition with a counter-offer.
The attractiveness of the US auto market, coupled with US Steel’s strategic shift towards more sustainable electric-arc furnaces, has increased the company’s appeal. This revival in the steel market comes after years of global oversupply and low prices, largely due to extensive Chinese exports.
The “Manufacturing Renaissance Act” has generated excitement among US industrialists as it offers subsidies to domestic manufacturers focused on green technologies, including electric-vehicle batteries. This act has the potential to drive stronger steel demand, particularly from the renewables sector. Additionally, tax credits for decarbonization goals also work in favor of steelmakers.
Tom Price, head of commodities strategy at Liberum Capital, highlights the potential for a structural shift in demand, making it an opportune time for acquisitions in the metal processing industry.
Potential buyers of US Steel are drawn to the increased demand prospects, thanks to protectionist measures aimed at safeguarding the US from excessive imports.
The steel industry has become politically significant in the US, with former President Donald Trump emphasizing the revitalization of blue-collar sectors like coal and steel. Tariffs aimed at limiting steel imports, along with a recovery in steel prices, have played a role in the industry’s resurgence.
A potential merger between US Steel and Cleveland-Cliffs could give rise to the world’s 10th-largest steelmaker, creating new opportunities for growth and development in the industry.