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To make steelusUSUSUSUS USUSUSYour browser does not support the element. pliant enough to be shaped into parts for cars and planes, it must first be heated until it glows cherry red. That, incidentally, may have been the colour of David Burritt’s face when Joe Biden blocked the purchase of Steel by Nippon Steel, a Japanese firm, on January 3rd. Mr Burritt, the American steelmaker’s boss, issued an incandescent statement calling the president’s decision “shameful and corrupt” and accusing him of helping China (“Chinese Communist Party leaders in Beijing are dancing in the streets”).That the purchase was supported both by Steel’s management and many of its employees was not enough to win over Mr Biden. Nor were Nippon’s pledges to hand out $5,000 each to workers and give the American government a decade-long veto on production cuts. Selling America’s third-largest steelmaker to a rival from an allied country would hardly have posed a , as Mr Biden claimed. But the decision to block the takeover is entirely consistent with the protectionist mood in Washington that is set to intensify under Donald Trump, who also vowed to block the deal. Where does that leave Steel?The company’s first response has been to call the lawyers. On January 6th Steel and Nippon jointly announced two lawsuits. One asks the court to overturn Mr Biden’s decision on the basis it was done for “purely political reasons”, rather than for national security. It also accuses the Committee on Foreign Investment in the United States, America’s inbound-investment watchdog, of not conducting a lawful review (the committee had failed to reach a consensus on whether the deal posed a national-security threat, referring the decision to Mr Biden).The second lawsuit is aimed at Cleveland-Cliffs, a rival American steelmaker, and the United Steelworkers union, alleging that they colluded to torpedo Nippon’s bid (a claim they call “baseless”). Cleveland-Cliffs narrowly lost to Nippon in a bidding war for Steel last year.Overturning Mr Biden’s decision in court will be tough. Judges give wide latitude to the executive on matters of national security, and allegations of insufficient due process will be a hard sell, says Jonathan Gafni of Linklaters, a law firm. Steel’s prospects as a standalone company, though, look bleak, even with a $565m break-up fee from Nippon. It has long struggled to compete with imported steel and “mini-mills” that use electricity to melt scrap metal. Nippon had promised to invest billions upgrading its tired kit, and the deal offered an opportunity to learn from a far more efficient partner (the Japanese firm earns more profit per tonne of crude steel than any of its big rivals).If it fails in court, Steel may therefore seek another buyer. But finding one could be tricky. Other foreign steelmakers will probably steer clear. Even if Cleveland-Cliffs still has its heart set on a deal, it may struggle to find the cash: its balance-sheet is already stretched owing to slumping steel prices and its acquisition last year of Stelco, a Canadian steelmaker. Antitrust regulators might also have something to say about a tie-up between the two; American carmakers have complained that the combined company would produce 65-90% of the steel they use to make vehicles.Mr Burritt may now pin his hopes on America’s next president. Higher tariffs, which Mr Trump has promised, could help shield the firm (at the expense of customers). Mr Burritt has also appealed to the president-elect to save the Nippon deal. The lawsuits may buy time for Mr Trump, who fancies himself America’s dealmaker-in-chief, to eke out a few more concessions and declare victory. He will have to decide whether he wants Steel to be part of a vibrant, global firm, or carry on as a declining, all-American one.
