The Decline and Fall of U.S. Steel

After 123 years as one of America’s most iconic businesses, U.S. Steel is soon to be no more.

J.P. Morgan formed U.S. Steel in 1901 by financing a merger between the Carnegie Steel Company, the Federal Steel Company, and the National Steel Company. The merger cost was $492 million, which equates to $17.3 billion today, and Charles M. Schwab was named the new conglomerate’s first president. Schwab left the company two years later to run the Bethlehem Shipbuilding and Steel Company, which introduced the H-beam that revolutionized construction and made skyscrapers possible.

In its first year of operation, U.S. Steel accounted for 67% of all steel production in America. At one time, U.S. Steel was the world’s largest steel producer and its first billion-dollar company. In 1907, U.S. Steel purchased its largest competitor, the Tennessee Coal, Iron and Railroad Company. However, by 1911, U.S. Steel’s market share had shrunk to 50% as smaller and leaner companies like Bethlehem Steel were able to innovate more quickly.

Although Bethlehem Steel held a virtual monopoly on munitions contracts during World War I, U.S. Steel managed to secure enough government contracts during World War II to expand its ranks to 340,000 employees. Its steel production peaked in 1953 at more than 35 million tons.

Having failed to break up U.S. Steel’s monopoly in 1912, the federal government tried reining them in again in 1952, when President Harry Truman sought to take over the company’s mills during labor turmoil with its union, the United Steelworkers of America. However, the Supreme Court ruled that President Truman lacked the constitutional authority to do so. Ten years later, President John F. Kennedy was more successful in getting U.S. Steel to repeal some price increases that he felt were dangerously inflationary.

In 1982, U.S. Steel sought to expand and diversify its holdings by acquiring Marathon Oil and Texas Oil and Gas. Four years later, the company’s name was changed to USX to reflect those acquisitions, with U.S. Steel named a subsidiary. However, the name reverted back to U.S. Steel after the corporation sold off Marathon and its other non-steel assets except for Transtar, a railroad company, in 2001. By that time, U.S. Steel’s production was only 8% higher than it had been 100 years ago when the company was founded, and its domestic market share had fallen to just 8%.

In 2014, U.S. Steel suffered the ignominy of being dropped from the S&P 500 because of its declining market capitalization. The company tried rebounding by acquiring Big River Steel in 2021 and beginning construction on a new plant in Osceola, Arkansas a year later. However, those moves weren’t enough to stave off the Nippon Steel Corporation of Japan, which agreed to purchase U.S. Steel last December for $14.1 billion or $55 per share, pending regulatory approval. As part of the proposed deal, Nippon has promised to retain the U.S. Steel name and to maintain its headquarters in Pittsburgh while honoring all existing union contracts.

Two questions remain to be answered before this deal goes through. First, how did a company so dominant in its field that it was simply referred to as “The Corporation” on Wall Street decline so precipitously? In 2008, U.S. Steel was the world’s 8th largest steel producer, but by 2022 it had fallen to 24th place.

The second question is more subjective: Can America really afford to see one of its most iconic companies purchased by a foreign corporation, especially when steel production is essential to both our overall economy and our national security?

Economists far smarter than me are best suited to answer both questions, but as an American who hates seeing China (and Bill Gates) gobble up our once privately-owned farmland, the proposed sale of U.S. Steel to Nippon feels like a real punch to the gut.