Nippon Steel Confident Hefty Premium For U.S. Steel Makes Sense

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Nippon Steel Confident Hefty Premium For U.S. Steel Makes Sense
  • Nippon Steel has stepped up its overseas push
  • The US witnessed a growth market as the demand for steel in Japan declined.
  • President Hashimoto says economic rationale had underpinned the premium.

“Nippon Steel (5401.T) said on Tuesday its $14.1 billion deal to buy U.S. Steel (X.N) would help it tap into a new growth market, as concerns over the huge premium the world’s fourth largest steelmaker was paying sent its shares down as much as 6%.” – .

Reuters

Nippon Steel is on the look out to expand across the oceans in the upcoming year, as a lessening population in Japan, where is produces 3/5th of its total revenue, is lowering the outlook of demand for all the high end steel that is used in Japan for electronic goods and autos.

This acquisition will be adding 20 million metric tonne capacity of crude stell to its already 66 million tons and would make it an even bigger supplier to the auto industry in the United States, which has been ramping up the output following all the major recent deals of the carmaker with the labor unions.

“Nippon Steel aims to complete a global network … by establishing a base in the United States… where steel demand is expected to grow,” Nippon Steel’s President Eiji Hashimoto said in a press conference.

“U.S. Steel is not a competitor to us in the U.S. market or elsewhere, so we can objectively say that it is a best match,” he further added.

North America only contributed 12 percent of the total revenue that the company generated in the previous fiscal year that ended in March. The deal is a focal point that marks the acceleration of the firm in the overseas market to reduce its dependence on Japan.

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