Cleveland-Cliffs Chief Slams US Steel for 'Pathetic Blackmail Attempt' On US, Pennsylvania

Steelmaker and iron-ore miner Cleveland-Cliffs Inc. CLF said late Thursday that it is ready to buy United States Steel Corp. X assets if the Biden administration blocks a $14.9-billion deal with Nippon Steel Corp. NPSCY.

"Cleveland-Cliffs stands ready to immediately acquire and invest in any and all union-represented assets that U.S. Steel shuts down," Cleveland-Cliffs CEO Lourenco Goncalves said in a statement Thursday afternoon.

The announcement came after U.S. Steel said it would "largely pivot away" from its blast furnaces without $2.7 billion in investment in Pennsylvania and Indiana facilities that would come if Nippon is allowed to buy U.S. Steel. 

U.S. Steel added that the lack of a deal with Nippon "raises serious questions" about the company maintaining its headquarters in Pittsburgh, a major city in the presidential election battleground state of Pennsylvania.

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Goncalves added that his company has the backing of the United Steelworkers union and "ample" financial support from its bank group led by JPMorgan Chase & Co. JPM and Wells Fargo & Co. WFC.

Goncalves also applauded Biden's decision to block the deal on national security grounds and slammed U.S. Steel.

"The last-minute threats by U.S. Steel to shut down integrated steelmaking production, fire union workers, and move their headquarters from Pittsburgh if their deal does not close, is just a pathetic blackmail attempt on the United States government and the Commonwealth of Pennsylvania," Goncalves said.

U.S. Steel shares plunged more than 17% Wednesday after the deal was reportedly flagged by the Biden administration as a national security risk. They regained some of that ground Thursday but closed at $29.97, nearly 16% below the $35.60-level where they closed before the news.

Jefferies maintained a Buy rating on U.S. Steel Thursday but dropped its price target from $47 to $41.

Despite the stock pullback, U.S. Steel's credit remains stable, according to Evan Mann, senior high yield analyst with corporate bond research firm Gimme Credit.

"While this news disappointed U.S. Steel shareholders with the stock dropping by double digits yesterday, it had little impact on the company's bond yields," Mann said Thursday in a note

His firm kept its credit score for U.S. Steel at Stable.

Mann said that U.S. Steel over the medium term should benefit from a new mini-mill, new galvanized and electric steel lines and a new flat-rolled pellet facility and other upgrades. But that view is tempered by a slowing U.S. economy in the near term, he said.

Mann added that an independent U.S. Steel could consider joint-venture investment with Nippon on some of the U.S. company's assets.

Mann also noted U.S. Steel CEO David Burritt's comments on closing older, less efficient mills and likely moving its home base out of Pittsburgh if the Nippon deal were blocked.

"It is not clear to us how much of this statement was true versus trying to gain political support," Mann said.

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