Saving U.S. Steel — and America’s Steel Industry — Requires an Actual Strategy.

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As one of his last acts in office, President Biden blocked the acquisition of U.S. Steel (USS) by Japan’s Nippon Steel, citing the importance of “a strong domestically owned and operated steel industry” to create resilient supply chains. Although this decision assuaged fears that a foreign owner might offshore key U.S. steelmaking capacity and threaten both national security and jobs, it did not resolve how to save USS and its plants from further decline or bankruptcy.

Although the Biden administration’s ambitious industrial strategy was likely to increase demand for rare earth minerals and some metals, it did not include any coherent policy designed to incentivize demand for critical goods that use steel and other metals. Unfortunately President Trump’s policies thus far — especially his rejection of the prior administration’s industrial policies related to decarbonization — are likely to make the challenge only more difficult.

The USS saga reads like a history of what has gone wrong with U.S. manufacturing since the 1970s. Until then the U.S. led the world in producing steel, aluminum, copper, ferroalloys, and rare earths and was also a leader in metals such as tungsten, titanium, and zinc. As recently as 1975, USS itself was the world's largest steel producer. But today the corporation doesn’t even rank in the top 20.

Many of the challenges USS faces stem from falling behind in technological upgrades. USS produces steel mainly through blast furnace technology and has been slow to adopt electric arc furnace (EAF) technology, which utilizes scrap (recycled) steel and makes the steel-making process more productive, less carbon-intensive, and cheaper. 

The problem intensified in the 1980s and 1990s, when a new crop of mini mills designed to use EAF entered the sheet steel market, driving down U.S. Steel’s market share. Present market leader Nucor, for instance, launched its first EAF facility in 1989. During these years USS responded by cutting over 100,000 jobs, spinning off subsidiaries, and closing more than 100 facilities. Since 2000, the problem has only worsened, as the share of U.S. steel made through EAF rose from 47% of total production to 70% today.

During this time, USS shied away from investing in the new technology, instead relying on cost-cutting measures to continue to serve investors. Even as its share of the market declined, the corporation continued to offer stock buybacks and increase executive compensation. In 2022, for example, USS spent nearly $1 billion on stock buybacks and $19 million on CEO salary. The current CEO David Burritt stood to receive a $70 million payout had the merger with Nippon Steel been approved.

In 2023, U.S. Steel began to court merger partners to raise capital to retrofit existing equipment and invest in new competitive technologies. The failure of Nippon’s acquisition bid leaves USS with few good options. An alternative merger proposal with Cleveland-Cliffs, its American competitor, was endorsed by United Steelworkers. But many steel consumers, including major automotive trade groups, have opposed the merger since it would dramatically concentrate the market for steel products.

Acquisition, however, should not be the only solution to the structural problems plaguing USS—and the nation’s broader steel production crisis. This outcome is often presented as the only means of allowing U.S. corporations to gain the efficiency and economies of scale needed to compete against producers in countries such as China, whose overcapacity is driving global prices downwards.

Rather, the incoming Trump Administration should be implementing policies that incentivize more domestic steel-making capacity. U.S. consumption of steel has been declining for decades. In 1978 over 100 million tons of steel was produced but by 1982 the total had dropped to 60 million, a point from which demand never truly recovered.

United Steelworkers President David McCall recently argued as much in his call for a resurgence in U.S. shipbuilding and a section 301 investigation into China’s shipbuilding industry. Thus far, however, the Trump administration’s industrial policy seems nothing more than a very blunt instrument. The main components are blanket tariffs, deregulation, and tax cuts, which both individually and in combination have repeatedly failed to deliver any proven resurgence in manufacturing. 

It’s critical that the administration understand the importance of decarbonization efforts to industrial productivity. The administration should aim to build on, not destroy, the Inflation Reduction Act and Bipartisan Infrastructure Bill to bolster demand from automakers and even wind power developers.

This article was featured in The Corner Newsletter: January 31, 2025
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