John C. Tumazos thinks unions and Pennsylvania politicians have gotten the U.S. Steel sale all wrong.
The Wilkinsburg-bred metals industry analyst said Nippon Steel’s $14.9 billion acquisition of the Pittsburgh-based steel icon will not trigger mass layoffs in southwestern Pennsylvania or encourage new owners to idle mills.
Instead, the new conglomerate, which might become ranked the largest privately owned steel outfit in the world, will create new jobs, spark investment and invest heavily in upgrading existing facilities — especially in places like the Mon Valley, Tumazos said.
“There will be a $1 billion capital project every year for the next 10 years if Nippon buys this,” said Tumazos, the son of an Edgar Thomson Works steelworker and a Carnegie Mellon University alumnus who has tracked metals industry trends for 44 years.
“These politicians and union guys are attacking this thing that’s going to save their bacon.”
The United Steelworkers labor union and Democratic U.S. Sens. John Fetterman and Bob Casey voiced strong opposition to the sale, which was announced Monday.
On Tuesday, the two Pennsylvania pols joined U.S. Rep. Chris Deluzio to urge U.S. Treasury Secretary Janet Yellen and a federal committee to block the proposed sale, which they called “a step backwards in our commitment to supply chain integrity and economic security.”
Casey called the sale “a bad deal for American steelworkers” late Thursday.
Nippon is based in Japan.
“Allowing a foreign company to acquire U.S. Steel would set back the progress our commonwealth and our nation have made to lead the way in manufacturing, infrastructure and clean energy investments,” he told TribLive.
Tumazos countered that by calling the knee-jerk opposition to foreign ownership of U.S. Steel, especially by a U.S. ally such as Japan, “racist and xenophobic.”
U.S. Steel leadership has said labor agreements ratified in September 2022 will remain in effect, and Nippon will maintain them. Nippon already has more than 600 United Steelworkers union employees in the U.S.
‘It shocked me’
Tumazos and others who follow the steel industry said they consider it likely that Nippon Steel will resurrect U.S. Steel’s planned $1.2 billion Mon Valley modernization, which the company abandoned in May 2021, just two years after announcing it.
The investment called for construction of a new, endless casting and rolling facility at the Edgar Thomson Works plant in Braddock and a cogeneration facility at the Clairton Coke Works, among other plans to modernize facilities and slash emissions.
“It shocked me that local officials did not issue permits for the project, which would have reduced energy usage in steelmaking … and consequently reduced CO2 emissions,” Tumazos said. “The snap judgments of the politicians today and the permitting process several years ago for Mon Valley Works were universally dysfunctional and ignorant.”
Josh Spoores echoed that Nippon Steel’s purchase would come in tandem with renewed investment — though in more muted terms.
“I do expect for them to come and invest in some production lines in the U.S.,” said Spoores, the Pittsburgh-based principal steel analyst for CRU, a business intelligence firm headquartered in London. “It’s probably an upgrade to get Japanese ownership.”
Because reaction to the sale “has become so political,” it could become “more challenging” for the deal to gain federal approval, Spoores said.
The proposal might next proceed to the federal Committee on Foreign Investment in the United States (CFIUS), Spoores said. While some sales or mergers are met with “a rubber stamp,” Spoores said the U.S. Steel sale could be more complicated.
“I don’t think (those opposing the sale) are seeing the whole picture,” he said. “I think they’re seeing the old, iconic image of U.S. Steel and not what it is today.”
‘Part of our identity’
At its peak, U.S. Steel was one of the most powerful companies in the world.
The Pittsburgh-headquartered organization became America’s first billion-dollar corporation, achieving a $1.4 billion price-tag when business titans Andrew Carnegie, J.P. Morgan and Charles Schwab formed it in 1901.
In 1910, Pittsburgh was manufacturing 60% of all of the steel in the United States. By 1943, fueled by production to support U.S. allies in World War II, U.S. Steel employed about 340,000 workers. In 1953, it reached its peak production, creating 35.8 million tons of steel.
“It is so much a part of our identity — it’s the name of our football team, after all,” said P. Chris Pistorius, a metallurgical engineer and Carnegie Mellon University professor who co-directs the Center for Iron and Steelmaking Research.
“Steel is such a part of the Pittsburgh identity that it’s hard to have a rational response to this,” he said.
Steel production plummeted in Pittsburgh in the second half of the 20th century, halving the city’s population during a 70-year run defined by companies closing down mills.
As the 1980s ended, 75% of Pittsburgh’s steel-making capacity was deemed “shuttered.” Between 1980 and 1983, the city lost an additional 95,000 manufacturing jobs.
Pittsburgh’s population dropped from 676,806 in 1950 to 302,898 this year, census data shows.
U.S. Steel also grew smaller.
By the end of 2022, U.S. Steel employed 22,470 workers and produced 22.4 million tons of steel — 13.2 million of it flat-rolled steel made in North America, company documents show.
Today, U.S. Steel boasts about 3,000 union jobs in Pennsylvania and 1,000 non-union jobs in Western Pennsylvania, spokeswoman Amanda Malkowski told TribLive.
By comparison, the state added 4,000 new clean-energy jobs in 2022 alone, growing the sector to more than one out of every three energy industry jobs in Pennsylvania, according to the policy group E2.
Changes for U.S. Steel
Pistorius called Nippon Steel’s investment in shrinking U.S. Steel’s carbon footprint and lowering its emissions “inevitable.”
Among the reasons, Pistorius cited U.S. Steel’s investment in an electrical steel line at its Big River Steel facility in Osceola, Ark. U.S. Steel has said that plant is projected to have $5.2 billion in construction impact, based on $3 billion of direct spending — the largest investment Arkansas ever has seen.
Pistorius also feels Nippon Steel and U.S. Steel share an interest in decarbonization.
In September, the latter company announced plans to partner with the National Energy Technology Laboratory to capture carbon dioxide emissions from Braddock’s Edgar Thomson Works. Installation is scheduled for early 2025.
“I don’t think a company with the stature of Nippon Steel would purchase a company with assets like U.S. Steel to just keep running it as it is,” Pistorius said.
SteelWatch, an environmental watchdog, believes that Nippon Steel needs to do more to tackle U.S. Steel’s emissions legacy.
Caroline Ashley, the group’s executive director, said the Japanese steelmaker plans to run blast furnaces, which rely on coal production, through 2050. Instead, it should be focusing on more “green” technologies, such as emissions trading, applying taxes on carbon, and calling for renewable energy sources, she said.
“It’s truly shocking that a corporation could still be thinking of operating blast furnaces in 2050,” said Ashley, who is based in London. “I don’t think anyone has been quite so brazen.”
Nippon Steel did not return requests for comment this week.
Since its founding in 1901, U.S. Steel primarily has made steel in blast furnaces by heating iron ore, coke and limestone, industry experts said. The process makes high-quality steel, but furnaces need to operate at or near capacity in order to be profitable.
Ashley also raised concerns that Nippon Steel’s expansion in emerging markets in Asia would not “be driven by the green agenda.” She characterized the company’s views on coal as “backward-looking.”
“I can’t say U.S. Steel was rapidly decarbonizing or transforming,” she said. “But there’s a risk of the situation getting a lot worse.”
Reducing carbon emissions
U.S. Steel followed Monday’s announcement by re-asserting its view that the $14.9 billion sale “is a strongly positive development for American steel, American jobs and America’s national security,” spokeswoman Amanda Malkowski said.
Malkowski specifically cited electrical steel growth and decarbonization technology.
If Nippon Steel wants to meet targets of the Paris Accord, an international climate change treaty, it must help to reduce carbon emissions from steel production by 90%, according to financial consulting and accounting company Deloitte. SteelWatch said Nippon Steel’s current target is a 50% reduction.
A Deloitte analysis shows that, by 2030 or 2035, market demand for “green” steel likely will exceed available supplies, especially in Europe.
U.S. Steel maintains the acquisition deal with Nippon Steel “will create a stronger, more competitive global company, better positioned to serve all employees and customers.”
“U.S. Steel and the country will benefit from the investment and technologies contributed to it by Nippon Steel,” she said.
Justin Vellucci is a Tribune-Review staff writer. You can contact Justin at [email protected].
