WASHINGTON, Sept 5 (Reuters) - Nippon Steel's proposed $14.9 billion takeover of U.S. Steel would create national security risks because it could hurt the supply of steel needed for critical transportation, construction and agriculture projects, the U.S. said in a letter sent to the companies and seen by Reuters.
The letter also cited a global glut of cheap Chinese steel, and said that under Nippon, a Japanese company, U.S. Steel would be less likely to seek tariffs on foreign steel importers.
The Committee on Foreign Investment in the U.S. (CFIUS) said in its 17-page letter sent on Saturday to Nippon Steel and U.S. Steel and first reported by Reuters, that decisions by Nippon could "lead to a reduction in domestic steel production capacity."
CFIUS added: "While U.S. Steel frequently petitions for (trade) relief, Nippon Steel features prominently as a foreign respondent resisting trade relief for the U.S. domestic steel industry."
The letter provided a first glimpse of the national security grounds that the Biden administration could use as a basis for its expected move to block the merger, even as the companies and many industry experts questioned the strength of the arguments.
"By almost any measure, the issues identified by the committee are not ones that would fall into the national security bucket, but quite clearly into two others: Nationalistic trade protectionism and electoral politics," said Michael Leiter, a CFIUS lawyer in Washington, D.C. not involved in the deal.
