Cleveland-Cliffs Commends President Biden’s Reported Decision to Block Foreign Ownership of U.S. Steel by Japan’s Nippon Steel

Rhea-AI Summary

Cleveland-Cliffs Inc. (NYSE: CLF) has commended President Biden's reported decision to block the foreign takeover of U.S. Steel by Japan's Nippon Steel. CEO Lourenco Goncalves emphasized the importance of American ownership in the steel industry for national security and domestic manufacturing. He criticized U.S. Steel's threats to shut down production and fire union workers if the deal doesn't close, calling it a 'pathetic blackmail attempt'.

Goncalves highlighted the United Steelworkers union's opposition to Nippon Steel, citing its history of unfair trade practices. Cleveland-Cliffs, with support from the USW and financing from J.P. Morgan and Wells Fargo, has expressed readiness to acquire and invest in any union-represented assets that U.S. Steel might shut down, aiming to protect union jobs and local communities.

Positive

• Cleveland-Cliffs has the exclusive support of the United Steelworkers union
• The company has ample financing support from a bank group led by J.P. Morgan and Wells Fargo
• Cleveland-Cliffs is ready to acquire and invest in U.S. Steel's union-represented assets if they are shut down

Negative

• None.

Insights

Financial Analyst

The reported decision by President Biden to block Nippon Steel's acquisition of U.S. Steel is a significant development in the U.S. steel industry. This move could have far-reaching implications for the sector's competitive landscape. For Cleveland-Cliffs (NYSE: CLF), this presents a potential opportunity to strengthen its market position. The company's readiness to acquire U.S. Steel's union-represented assets could lead to increased market share and enhanced production capacity.

However, investors should consider the financial implications of such acquisitions. While Cleveland-Cliffs mentions "ample financing support," large-scale acquisitions could impact the company's debt levels and short-term profitability. The potential for synergies and long-term growth must be weighed against these factors. Overall, this development could be a catalyst for CLF's stock, but careful analysis of the financial impact of any future acquisitions is crucial.

Industry Expert

The Biden administration's reported decision reflects a growing trend of protectionism in critical industries. This move aligns with the broader national security concerns surrounding foreign ownership of strategic assets. For the U.S. steel industry, this decision could lead to a reshaping of the competitive landscape, potentially favoring domestic players like Cleveland-Cliffs.

The emphasis on American ownership and union jobs suggests a shift towards prioritizing domestic production and labor interests. This could result in increased government support for U.S. steel companies, potentially leading to favorable policies or subsidies. However, it's important to note that such protectionist measures might also lead to retaliatory actions from other countries, potentially affecting global trade dynamics in the steel industry.

Labor Relations Specialist

The strong stance of Cleveland-Cliffs in support of union jobs and its exclusive backing from the United Steelworkers union is a significant factor in this situation. This alignment with labor interests could provide Cleveland-Cliffs with a competitive advantage in terms of workforce stability and political support. The company's commitment to acquiring and investing in union-represented assets demonstrates a pro-labor strategy that could enhance its reputation and operational efficiency.

However, investors should be aware that strong union relationships can also lead to higher labor costs and potential inflexibility in workforce management. The long-term impact on profitability and competitiveness will depend on how effectively Cleveland-Cliffs balances these labor commitments with operational efficiency and market demands.

CLEVELAND--(BUSINESS WIRE)-- Cleveland-Cliffs Inc. (NYSE: CLF) (“Cliffs”) applauded the reported decision by President Biden to officially block the foreign takeover of U.S. Steel by Japan’s Nippon Steel. The Company provided the following statement from its Chairman, President and CEO, Lourenco Goncalves:

“We commend President Biden and the U.S. government for its reported decision to block foreign ownership of U.S. Steel by Japan’s Nippon Steel. The American steel industry plays a crucial role in safeguarding our national security. President Biden’s courageous move affirms our view that our industry is best served by American companies that are committed to the long-term prosperity of domestic manufacturing, supported by good paying union jobs, under American ownership.”

“After decades of unfair trade practices causing harm to American steel companies and union jobs, it is no surprise to us that the United Steelworkers union (USW) adamantly opposes any transaction involving Nippon Steel, a company with an extensive track-record of injurious trade practices. The last-minute threats by U.S. Steel to shut down integrated steelmaking production, fire union workers, and move their headquarters from Pittsburgh if their deal does not close, is just a pathetic blackmail attempt on the United States government and the Commonwealth of Pennsylvania. By taking immediate action, our government is showing that this type of shameless behavior will never be tolerated.”

“With the continued exclusive and unwavering support of the United Steelworkers union, and with ample financing support available from our bank group led by J.P. Morgan and Wells Fargo, Cleveland-Cliffs stands ready to immediately acquire and invest in any and all union-represented assets that U.S. Steel shuts down, protecting union jobs and investing in the future livelihoods and communities in which the facilities operate.”

About Cleveland-Cliffs Inc.

Cleveland-Cliffs is a leading North America-based steel producer with focus on value-added sheet products, particularly for the automotive industry. The Company is vertically integrated from the mining of iron ore, production of pellets and direct reduced iron, and processing of ferrous scrap through primary steelmaking and downstream finishing, stamping, tooling, and tubing. Headquartered in Cleveland, Ohio, Cleveland-Cliffs employs approximately 28,000 people across its operations in the United States and Canada.

Forward-Looking Statements

This release contains statements that constitute "forward-looking statements" within the meaning of the federal securities laws. All statements other than historical facts, including, without limitation, statements regarding our current expectations, estimates and projections about our industry or our businesses, are forward-looking statements. We caution investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those matters expressed in or implied by such forward-looking statements. Investors are cautioned not to place undue reliance on forward-looking statements. Among the risks and uncertainties that could cause actual results to differ from those described in forward-looking statements are the following: continued volatility of steel, iron ore and scrap metal market prices, which directly and indirectly impact the prices of the products that we sell to our customers; uncertainties associated with the highly competitive and cyclical steel industry and our reliance on the demand for steel from the automotive industry; potential weaknesses and uncertainties in global economic conditions, excess global steelmaking capacity, oversupply of iron ore, prevalence of steel imports and reduced market demand; severe financial hardship, bankruptcy, temporary or permanent shutdowns or operational challenges of one or more of our major customers, key suppliers or contractors, which, among other adverse effects, could disrupt our operations or lead to reduced demand for our products, increased difficulty collecting receivables, and customers and/or suppliers asserting force majeure or other reasons for not performing their contractual obligations to us; risks related to U.S. government actions with respect to Section 232 of the Trade Expansion Act of 1962 (as amended by the Trade Act of 1974), the United States-Mexico-Canada Agreement and/or other trade agreements, tariffs, treaties or policies, as well as the uncertainty of obtaining and maintaining effective antidumping and countervailing duty orders to counteract the harmful effects of unfairly traded imports; impacts of existing and increasing governmental regulation, including potential environmental regulations relating to climate change and carbon emissions, and related costs and liabilities, including failure to receive or maintain required operating and environmental permits, approvals, modifications or other authorizations of, or from, any governmental or regulatory authority and costs related to implementing improvements to ensure compliance with regulatory changes, including potential financial assurance requirements, and reclamation and remediation obligations; potential impacts to the environment or exposure to hazardous substances resulting from our operations; our ability to maintain adequate liquidity, our level of indebtedness and the availability of capital could limit our financial flexibility and cash flow necessary to fund working capital, planned capital expenditures, acquisitions, and other general corporate purposes or ongoing needs of our business, or to repurchase our common shares; our ability to reduce our indebtedness or return capital to shareholders within the currently expected timeframes or at all; adverse changes in credit ratings, interest rates, foreign currency rates and tax laws; the outcome of, and costs incurred in connection with, lawsuits, claims, arbitrations or governmental proceedings relating to commercial and business disputes, antitrust claims, environmental matters, government investigations, occupational or personal injury claims, property-related matters, labor and employment matters, or suits involving legacy operations and other matters; supply chain disruptions or changes in the cost, quality or availability of energy sources, including electricity, natural gas and diesel fuel, critical raw materials and supplies, including iron ore, industrial gases, graphite electrodes, scrap metal, chrome, zinc, other alloys, coke and metallurgical coal, and critical manufacturing equipment and spare parts; problems or disruptions associated with transporting products to our customers, moving manufacturing inputs or products internally among our facilities, or suppliers transporting raw materials to us; the risk that the cost or time to implement a strategic or sustaining capital project may prove to be greater than originally anticipated; our ability to consummate any public or private acquisition transactions and to realize any or all of the anticipated benefits or estimated future synergies, as well as to successfully integrate any acquired businesses into our existing businesses; uncertainties associated with natural or human-caused disasters, adverse weather conditions, unanticipated geological conditions, critical equipment failures, infectious disease outbreaks, tailings dam failures and other unexpected events; cybersecurity incidents relating to, disruptions in, or failures of, information technology systems that are managed by us or third parties that host or have access to our data or systems, including the loss, theft or corruption of sensitive or essential business or personal information and the inability to access or control systems; liabilities and costs arising in connection with any business decisions to temporarily or indefinitely idle or permanently close an operating facility or mine, which could adversely impact the carrying value of associated assets and give rise to impairment charges or closure and reclamation obligations, as well as uncertainties associated with restarting any previously idled operating facility or mine; our level of self-insurance and our ability to obtain sufficient third-party insurance to adequately cover potential adverse events and business risks; uncertainties associated with our ability to meet customers' and suppliers' decarbonization goals and reduce our greenhouse gas emissions in alignment with our own announced targets; challenges to maintaining our social license to operate with our stakeholders, including the impacts of our operations on local communities, reputational impacts of operating in a carbon-intensive industry that produces greenhouse gas emissions, and our ability to foster a consistent operational and safety track record; our actual economic mineral reserves or reductions in current mineral reserve estimates, and any title defect or loss of any lease, license, easement or other possessory interest for any mining property; our ability to maintain satisfactory labor relations with unions and employees; unanticipated or higher costs associated with pension and other post-employment benefit obligations resulting from changes in the value of plan assets or contribution increases required for unfunded obligations; uncertain availability or cost of skilled workers to fill critical operational positions and potential labor shortages caused by experienced employee attrition or otherwise, as well as our ability to attract, hire, develop and retain key personnel; the amount and timing of any repurchases of our common shares; potential significant deficiencies or material weaknesses in our internal control over financial reporting; the risk that the proposed transaction with Stelco may not be consummated; the risk that a transaction with Stelco may be less accretive than expected, or may be dilutive, to Cliffs’ earnings per share, which may negatively affect the market price of Cliffs’ common shares; the risk that adverse reactions or changes to business or regulatory relationships may result from the announcement or completion of the proposed transaction; the possibility of the occurrence of any event, change or other circumstance that could give rise to the right of one or both of Cliffs or Stelco to terminate the transaction agreement between the two companies, including, but not limited to, the companies’ inability to obtain necessary regulatory approvals; the risk of shareholder litigation relating to the proposed transaction that could be instituted against Stelco, Cliffs or their respective directors and officers; the possibility that Cliffs and Stelco will incur significant transaction and other costs in connection with the proposed transaction, which may be in excess of those anticipated by Cliffs; the risk that the financing transactions to be undertaken in connection with the proposed transaction may have a negative impact on the combined company’s credit profile, financial condition or financial flexibility; the possibility that the anticipated benefits of the proposed acquisition of Stelco are not realized to the same extent as projected and that the integration of the acquired business into our existing business, including uncertainties associated with maintaining relationships with customers, vendors and employees, is not as successful as expected; the risk that future synergies from the Stelco Acquisition may not be realized or may take longer than expected to achieve; the possibility that the business and management strategies currently in place or implemented in the future for the maintenance, expansion and growth of the combined company’s operations may not be as successful as anticipated; the risk associated with the retention and hiring of key personnel, including those of Stelco; the risk that any announcements relating to, or the completion of, the proposed transaction could have adverse effects on the market price of Cliffs' common shares; and the risk of any unforeseen liabilities and future capital expenditures related to the proposed transaction.

For additional factors affecting the business of Cliffs, refer to Part I – Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023, and other filings with the U.S. Securities and Exchange Commission.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240905162867/en/

MEDIA CONTACT:

Patricia Persico

Senior Director, Corporate Communications

(216) 694-5316



INVESTOR CONTACT:

James Kerr

Director, Investor Relations

(216) 694-7719

Source: Cleveland-Cliffs Inc.

FAQ

What is Cleveland-Cliffs' (CLF) stance on the potential U.S. Steel takeover by Nippon Steel?

Cleveland-Cliffs (CLF) strongly supports President Biden's reported decision to block the foreign takeover of U.S. Steel by Japan's Nippon Steel, emphasizing the importance of American ownership in the steel industry for national security and domestic manufacturing.

How has Cleveland-Cliffs (CLF) responded to U.S. Steel's threats of shutdowns and layoffs?

Cleveland-Cliffs (CLF) has called U.S. Steel's threats to shut down production and fire union workers a 'pathetic blackmail attempt'. CLF has stated its readiness to acquire and invest in any union-represented assets that U.S. Steel might shut down, with the aim of protecting union jobs and local communities.

What financial support does Cleveland-Cliffs (CLF) have for potential acquisitions of U.S. Steel assets?

Cleveland-Cliffs (CLF) has stated it has ample financing support available from a bank group led by J.P. Morgan and Wells Fargo, positioning the company to potentially acquire U.S. Steel assets if they become available.

How does the United Steelworkers union view Cleveland-Cliffs (CLF) compared to Nippon Steel?

According to Cleveland-Cliffs (CLF), the United Steelworkers union exclusively and unwaveringly supports CLF, while adamantly opposing any transaction involving Nippon Steel due to its history of unfair trade practices.