Trump's backing for Nippon's US Steel bid leaves key questions unanswered

TOKYO: U.S. President Donald Trump's comments supporting Nippon Steel's 5401.T $14.9 billion bid for U.S. Steel left lingering questions about the scope of the deal and its costs for the Japanese firm, leading to muted gains for its shares on Monday.

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Trump announced a US-Nippon Steel partnership, promising jobs and major investment, possibly signaling support for the acquisition.
US Steel shares jumped on the news, though uncertainty remains about the full deal and structure of the partnership.
Nippon Steel sees US expansion as vital due to stagnant domestic demand, despite concerns over the deals cost.

As part of the deal announced on Friday, Trump said in a post on Truth Social the "planned partnership" between the two companies will create at least 70,000 jobs and add $14 billion to the U.S. economy.

He added that the bulk of that investment would occur in the next 14 months and said he would hold a rally at U.S. Steel in Pittsburgh on Friday.

Trump said on Sunday that the United States will have control over U.S. Steel as part of the partnership.

It is still unclear whether "partnership" refers to the full acquisition of U.S. Steel that Nippon Steel has been pursuing. The White House did not respond to questions about the announcement on Friday.

U.S. Steel shares soared 21% on Friday to $52.01 as investors interpreted the comments from Trump, who had originally opposed the deal, to mean Nippon Steel had received his approval for its long-planned takeover, the last major hurdle for the deal. But the shares still remain below the $55 per share offered by Nippon, reflecting uncertainty about a deal.

Both U.S. Steel and Nippon Steel, though, lauded Trump's comments on Friday.

For Nippon Steel, Japan's top steelmaker, the deal is core to its global expansion strategy. It would lift production to 86 million metric tons from 63 million tons now - at a time when domestic demand is declining.

"The benefits of gaining access to the growing U.S. market are enormous," Masayuki Kubota, chief strategist at Rakuten Securities Economic Research Institute, said in a note, referring to Nippon Steel.

"Although the company is the world leader in technology, the domestic market is saturated, competition is fierce in Asia, and the company's growth strategy has turned a corner," he said, adding Nippon can expect new growth in the U.S. by leveraging its technological strength in high-grade steel.

Costs for a deal were a worry, some analysts said.

"While the news is positive for Nippon Steel's business development, the increase in spending is worrisome," said Hiroyasu Mori, the head of the investment information office at Okachi Securities.

Shares of Nippon, the world's fourth-largest steelmaker, rose as much as 7.4% to 3,081 yen in Tokyo, but then erased a chunk of the gains to be up 1.7% by mid-afternoon trade.

A merger would create the world's third-largest steel producer by volume, after China's Baowu Steel Group and Luxembourg-based ArcelorMittal, according to World Steel Association data.