Blocked Nippon Steel Bid Praised by Groups With Climate Concerns

Environmentalists are hailing the White House’s recent order to block Nippon Steel from buying US Steel, saying a takeover by the Japanese giant would have guaranteed many more years of carbon-intensive, coal-based steelmaking.

The decision matters because steelmaking constitutes about 11% of global carbon emissions. Nippon Steel Corp. and United States Steel Corp. were the fourth and 24th biggest producers in the world in 2023, according to the World Steel Association. President Joe Biden on Jan. 3 formally blocked the $14.1 billion sale of US Steel to Nippon Steel after a US security review.

“It boils down to a lack of commitment by Nippon Steel to use the updated tech for US Steel specifically, and even in its investor report, the plan’s timeline still locks in a generation of coal-based steelmaking,” said Yong Kwon, senior policy adviser for the Sierra Club’s industrial transformation campaign.

Groups like the Natural Resources Defense Council have called on the steel industry to switch to cleaner alternatives, such as the direct-reduced iron process, ideally powered by green hydrogen.

But Nippon has made “no plans for such a transition,” Kwon said. “Instead, it made a firm commitment to extend the life of all existing blast furnaces in the US.”

In that sense, the deal’s collapse is a good sign for environmental groups. But industry watchers caution that US Steel’s uncertain future means more steelmaking could go to countries with less interest in decarbonization goals.

Blast Furnaces

In its 2024 presentation for investors, Nippon said it envisions deploying direct-reduced iron furnaces, which produce significantly fewer carbon emissions than blast furnaces, around 2040—a target Kwon said is “much, much too late.”

US Steel’s blast furnaces and coke ovens are responsible for up to 14 million tons of climate pollution, according to research group Industrious Labs.

“Whoever owns and operates US Steel facilities must invest in clean, modern iron and steel production that protects public health and good union jobs,” said Hilary Lewis, Industrious Labs’ steel director.

Nippon Steel didn’t respond to an interview request. US Steel declined to comment.

Both Nippon Steel and US Steel have pledged to decarbonize by 2050.

Nippon has said it’s moving toward carbon neutrality by producing steel in large electric arc furnaces, using hydrogen in the direct iron reduction process, and deploying hydrogen injection technology for blast furnaces.

US Steel, meanwhile, is focusing on reducing its energy consumption, relying more heavily on renewables, and investigating carbon capture technology.

Last September, US Steel unveiled its first steel product certified as sustainable under the global ResponsibleSteel standard, attesting that the steel made at its Big River facility in Osceola, Ark., is created using raw materials that meet certain criteria on sourcing and production.

Further, in anticipation of the merger, Nippon in August said it would invest at least $1 billion to increase energy efficiency and make other improvements at US Steel’s Mon Valley Works outside Pittsburgh, as well as $300 million to revamp a blast furnace at the Gary Works in Indiana.

But to Kwon, those promises aren’t good enough because they still leave the company locked into older technology. Nor do Nippon’s plans address the health impacts borne by neighboring communities linked to coal-based iron and steelmaking, the Sierra Club said in a statement.

Steps Toward Decarbonization

If the deal doesn’t go through, though, and more steelmaking goes overseas, that could end up being even worse for the environment, according to Jeremy Harrell, CEO of clean energy group ClearPath.

The US ranks among the world’s least carbon-intensive steel producers, along with Italy, Turkey, and Mexico, according to consulting firm Global Efficiency Intelligence.

On the other end of the spectrum are India, China, Vietnam, and Japan. Worryingly, China made far more steel in 2024 than any other country, with India and Japan ranking second and third, according to the World Steel Association.

“If we’re closing facilities here in the US and the global market is sourcing it from other areas, that’s probably a negative from an emissions standpoint,” Harrell said.

Meanwhile, the two companies have filed a pair of federal lawsuits alleging that Biden ignored the rule of law to favor the United Steelworkers and support his political agenda that the Committee on Foreign Investment in the United States didn’t conduct a good faith review of the proposed merger, and that rival steelmaker Cleveland-Cliffs illegally tried to block the deal.

David Burritt, US Steel’s CEO, told CNBC on Jan. 7 that he believes President-elect Donald Trump “will take a fresh look at this.” Earlier this month, Burritt said Biden’s decision was “shameful and corrupt.”