The steel industry returned to the news again, kindly provided by President Trump. The President leaves his mark in negotiations between the Japanese company Nippon Steel OTCMKTS: NPSCY and steel in the USA NYSE: XSo, what does Trump’s position for American steel reserves mean, and ultimately in this historical company for basic materials, ultimately there is still growth? Below I will provide a brief story of the recent American steel and nippon saga and consider this issue.
History lesson: Nippon hopes to buy a cult American manufacturer
In December 2023, the largest steel manufacturer in Japan, Nippon Steel, announced his US Steel purchase plan for $ 14 billion. Based on the field, the company agreed to pay $ 55. On April 12, the shareholders of the American steel approved the purchase, while 98% of the vote in support. It makes sense why they did it. On this day, US Steel shares are traded for only $ 39.50. The completion of the transaction would give shareholders an income of 39% of this current price.
Nippon Steel today
From 13:59 on East
- 52-week range
- $ 6.11
▼
$ 8.67
- Dividend yield
- 3.24%
- P/e ratio.
- 7.55
However, at the beginning of January 2025, President Joe Biden, through the Committee on Foreign Investments in the United States (CFIUS), blocked the deal, citing the problems of national security as an excuse. It was an unusual solution. This is the only time CFIUS prevented a transaction without Chinese possession or affecting the ligaments. US Steel and Nippon filed several trials against this decision. If they win these trials, the deal may pass.
The reduction before the beginning of February, when the recently open President Donald Trump has his influence on a steel deal. During the press conference with the prime minister of Japan, Trump said that Nippon would not buy steel for us. Instead, he said that this “invests significant funds” in the company. At the moment, markets are little aware of the specifics of the transaction. Nevertheless, there is some information about what Trump and the government of Japan are striving for.
New steel transaction: more questions than answers
Firstly, Trump said that no one can have majority property when contacting American steel. This is important, as without an existing share, Nippon cannot unilaterally force the company to take any specific actions. The chief secretary of Japan said that Nippon will consider the proposal of a new deal. This “is completely different from everything that he did in the past.” However, Nippon Steel officials have not yet released new comments. Last Thursday, the day before these new events, the vice -chairman of the company said that he did not plan to change the acquisition structure.
What does this mean for the Once Industry Titan, US Steel
At the moment, it seems, there are two different ways that everything can go. Firstly, Nippon and US Steel can reject the ambitions of their governments in transfer with them. In the end, the words from Trump and the Japanese government: words. Two companies have the right to continue their lawsuit against the government and fulfill the full, initial transaction.
United States Steel Today
The United States Steel
- 52-week range
- $ 26.92
▼
$ 48,13
- Dividend yield
- 0.51%
- P/e ratio.
- 26.37
- Value is valuable
- $ 39.82
I am inclined to agree with the assessment of the claim that the acquisition of American steel does not represent the risk of national security. Japan ultimately is an ally of the United States and is the third largest manufacturer in the world. China, which produces the very steel in the world, is a famous opponent of the United States. This acquisition will strengthen American steel and Nippon, which makes friendly companies more competitive with Chinese. Nevertheless, many legal scientists, according to the visible, agree that the chances of Nippon and the United States to win these trials are low. Ultimately, this means that American steel shareholders probably will not receive this location of $ 55 per share.
It seems that a much more likely option is that US Steel and Nippon will negotiate with the governments of the United States and Japan. Without knowing the details of the new potential transaction, it is difficult to say that American steel is significantly underestimated. It is traded at a direct center (p/e), from almost 20x. This is in accordance with competitors such as nucor NYSE: NueField
The shares are beneficial from the new 25% of tariffs for steel and aluminum, but it is difficult to see how they really break, until the parties are concluded in this deal. Right now, it is reasonable to wait for additional information related to this transaction, and what actions will take on steel and Nippon. The recent price of $ 39, issued by Morgan Stanley, considers the shares as fairly evaluated compared to their closing price on February 10.
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