The automotive industry could see higher prices for the steel used in gas-powered and electric vehicles, as well as in related industries like transportation and infrastructure, if a proposed takeover of United States Steel Corp. is consummated. Before that happens, though, antitrust authorities would need to sign off on a prospective acquisition.
Given the high cost of EVs relative to vehicles powered by internal combustion engines, any rise in prices will further complicate consumer acceptance of electric-powered cars and trucks. Right now, the average cost for an EV is $64,000 (before any subsidies), compared to $48,000 for a gas-powered vehicle.
Higher pricing is one reason pure electric vehicles are starting to pile up on dealer lots. Adding more costs to the equation would slow sales even further. As it stands, automotive leaders like Jim Farley, president and CEO of Ford Motor Co. in Dearborn, have revealed that they already charge more for gas-powered vehicles just to make up for sizeable losses in the government-mandated EV sector.
Inside the Numbers
$44 Billion – Combined revenue of Cleveland-Cliffs and U.S. Steel
132 Million Metric Tons – Annual steel production of global industry leader China Baowu
31 Million Metric Tons – Combined annual steel production of Cleveland-Cliffs and U.S. Steel
Sources: Cleveland-Cliffs Incs., Association for Iron and Steel Technology, World Steel Association
In August, Cleveland-Cliffs Inc. made public an offer to acquire Pittsburgh-based U.S. Steel for $35 a share, which the company rejected. It came on the heels of an offer for U.S. Steel from Esmark Inc., an industrial conglomerate in Pittsburgh. Both prospective buyers state that merging U.S. Steel into their respective operations would lower costs and provide for more innovation.
But given the U.S. steel industry is highly concentrated and sells its output at more expensive prices relative to foreign competitors, additional consolidation would give manufacturers added leverage to boost prices. The cost issue is compounded by quotas set by the U.S. government to use domestic steel for infrastructure, automobiles, and other markets in order to win contracts and realize any subsidies.
The Big Four of the U.S. steel industry is led by Nucor, followed by Cleveland-Cliffs, U.S. Steel, and Steel Dynamics, according to the World Steel Association. Cleveland-Cliffs, which produces hot- and cold-rolled steel, stainless steel, tubular components, and other metal products for the automotive, infrastructure, and manufacturing industries, would be the most likely to complete a deal for U.S. Steel.
The company’s operations include Dearborn Works (formerly Rouge Steel), and it owns Ferrous Processing & Trading Co. in Detroit, which has multiple locations in the region as well as in Florida, Ohio, Tennessee, Canada, and Mexico. Cleveland-Cliffs is the largest producer of flat-rolled steel and iron ore pellets in North America, and the end products are used to manufacture car frames, bodies, doors, and fenders, as well as food cans (both steel and tin).
Lourenco Goncalves, president, CEO, and chairman of Cleveland-Cliffs, says a merger with U.S. Steel would “create the only American member of the Top 10 steel companies in the world, joining a select group of just three other companies outside of China — one European, one Japanese, and one Korean.”
In the same vein, Goncalves states that “having Cleveland-Cliffs as a world-class, internationally competitive steel company is critical for our country to retain its economic leadership and to regain its manufacturing independence.”
But at what price to consumers, who eventually pay for any rising costs in the supply chain?
