Two weeks ago, rival Cleveland-Cliffs made a $7.3 billion buyout offer that was rejected by U.S. Steel. That offer was followed by a $7.8 billion offer from the industrial group Esmark. The Pittsburgh steelmaker’s shares increased more than 30% on rumours that a transaction was close.
U.S. Steel said in a letter to shareholders on Tuesday that it had signed confidentially agreements with “numerous” third parties and was starting to provide possible bidders with material needed for their due diligence.
Our primary duty is to uphold our fiduciary obligations, the business stated in the letter. This indicates that we are concentrated on the future direction of our Company that maximises value for our stockholders.
Its stock increased by another 3% on Tuesday.
The Cleveland-Cliffs proposal, which was first presented on July 28, would establish a business that would rank among the top 10 steel producers globally and among the top four outside of China, which currently controls the majority of the world’s steel output. The CEO of Cleveland-Cliffs, Lourenco Goncalves, claimed that a merger between the two American steel producers would result in “lower-cost, more innovative, and stronger domestic suppliers for our customers.”
Goncalves has stated that he is willing to carry on the conversation with the 122-year-old U.S. Steel despite the latter’s original offer being turned down.
In this decade, the steel sector has undergone consolidation in part due to rising pricing. Steel prices more than doubled at the beginning of the pandemic and were close to $2,000 per metric tonne by the summer of 2021 as a result of supply chain blockage, which was a result of both the rapid growth in demand for products and the failure to anticipate that need.
Prior to the rise in steel prices in 2019, Cleveland Cliffs purchased AK Steel. A year later, for $1.4 billion, it acquired ArcelorMittal USA. The next year, Big River Steel was acquired by U.S. Steel.
Although prices have stabilised at about $800 per metric tonne, this still represents the highest level of steel pricing over the previous six years.
Since it was established in 1901 by J.P. Morgan, Andrew Carnegie, and others, U.S. Steel has served as a symbol of industrialization. Prior to Japan and later China overtaking the U.S. steel industry as the world’s leading steel producers in the last 40 years, the American steel industry dominated the world.