Competing Bidders Offer to Purchase U.S. Steel

Fate of three Mon Valley Works facilities unclear; more than 3,000 steelworkers employed in Braddock, Clairton and West Mifflin

By Jason Togyer
The Tube City Almanac
August 14, 2023
Posted in: State & Region

U.S. Steel’s Edgar Thomson Plant was founded by Andrew Carnegie in 1873 and forms the nucleus of what is now called the Mon Valley Works. (Mark Dixon photo via Flickr, licensed under Creative Commons)

The jobs of more than 3,000 Mon Valley steelworkers are among those that hang in the balance after competing bidders emerged with offers to purchase Pittsburgh-based U.S. Steel Corp.

On Sunday evening, the publicly traded company announced that it had retained investment bankers from Barclays Capital Inc. and Goldman Sachs & Co. to evaluate “strategic alternatives” to “maximize stockholder value” that could include selling all or part of the corporation.

U.S. Steel operates the Pittsburgh area’s last integrated steelmaking facility, the Mon Valley Works, which includes a coal by-products plant in Clairton; a blast-furnace and continuous casting facility, Edgar Thomson Plant, in Braddock and North Braddock; and a rolling mill, Irvin Plant, in West Mifflin.

U.S. Steel confirmed over the weekend that a rival company, Cleveland-Cliffs Inc., a steel-making and iron-ore mining conglomerate in Ohio, had made an unsolicited $7.3 billion offer to purchase the corporation.

The Cleveland-Cliffs offer has the support of the United Steelworkers union, according to a letter the company released on its website.

The offer amounts to $35 per share.

On Monday, Sewickley-based Esmark Inc. made its own offer of $7.8 billion to purchase U.S. Steel. Esmark formerly owned Wheeling-Pittsburgh Steel Corp. until selling it to Russian-based Severstal in 2008.

Esmark said its offer is all-cash. According to U.S. Steel, the Cleveland-Cliffs offer would include 50 percent cash, and 50 percent stock in that company.

Cleveland-Cliffs is the second-largest steelmaker in the United States. U.S. Steel is ranked third.

In a letter dated Aug. 3 and released by Cleveland-Cliffs, the president of the United Steelworkers, Thomas Conway, said that the company currently represents 14,000 of the company’s rank-and-file employees, and enjoys a good labor-management partnership.

“Different from typical acquirers, Cliffs did not cut union jobs when it bought AK Steel and ArcelorMittal USA, but rather significantly increased the workforce,” Conway said. “Cliffs has also proven itself to be a collaborative partner to the USW leadership.”

The Steelworkers union “feels that Cliffs is the single steel producer in the best position to ensure that U.S.-based manufacturing remains strong in this country, with the support of the USW and its represented workforce,” Conway wrote.

“The USW will not endorse anyone other than Cliffs” for a purchase of U.S. Steel, he wrote.

U.S. Steel has invited Cleveland-Cliffs to participate in its “strategic review” but rejected the 50/50 offer.

In a letter from U.S. Steel to C. Lourenco Goncalves, the chairman, chief executive officer and president of Cleveland-Cliffs, U.S. Steel’s president said that accepting the offer would be “unreasonable” unless the Pittsburgh corporation was able to conduct a full financial review of the Ohio firm’s operations.

“Doing otherwise would be tantamount to accepting a price without knowing what it in fact represents,” David B. Burritt, U.S. Steel’s president, chief executive officer and member of the board of directors, said in the letter to Goncalves, made public Sunday night.

Although vastly smaller than the days when it employed upwards of 100,000 people in the Mon-Yough area at plants in McKeesport, Homestead and Duquesne, U.S. Steel remains a major employer and contributor to the tax base of Braddock, Clairton, North Braddock and West Mifflin, and supplies raw and semi-finished steel to other manufacturers in the Pittsburgh area.

The corporation also maintains a research facility in Homestead and a training facility in Duquesne.

In 2019, U.S. Steel announced plans to invest $1.5 billion in the Mon Valley Works, including construction of an “endless caster and roller” at Edgar Thomson that could go from raw materials to finished steel without the need for transporting and rolling steel slabs at Irvin Plant, as well as a “co-generation” facility in Clairton that would produce electricity, in part from coke gas that would otherwise be wasted.

In 2021, citing changing business conditions, U.S. Steel canceled the investment after instead purchasing Arkansas-based Big River Steel for $774 million in cash. The following year, U.S. Steel announced plans to building a new $3 billion steel factory in Arkansas.

Both moves have led local community and business leaders to speculate that the aging Mon Valley Works plants are going to be closed.

Messages left Monday by Tube City Almanac for Steelworkers union leaders in West Mifflin and Clairton were not immediately returned. A reporter who asked Steelworkers headquarters for local comment was referred to a prepared statement issued on Sunday.

In that statement, the union said its priority is “always to ensure that USW members’ rights are respected and that jobs and benefits are protected.”

“While we don’t know exactly what the future holds for U.S. Steel, we do know that the USW’s labor agreement with U.S. Steel contains strong successorship language to protect workers’ rights, and that the company is obligated to provide the union with notice before a sale can proceed,” said the statement, which was not attributed. “We look forward to hearing more from U.S. Steel about its plans so that we can continue to work toward a strong future for the company’s USW work force.”

Esmark Inc. was founded in 2003 by former U.S. Steel vice president James P. Bouchard and has investments in manufacturing, energy, technology, real estate and commodities.

In 2003, the company acquired two Chicago area-steel services companies, Electric Coating Technologies and Sun Steel, and it 2007 it acquired Wheeling-Pittsburgh Steel Corp., before selling it to Severstal for $1.3 billion.

Severstal then sold Wheeling-Pittsburgh to a holding company, which went bankrupt in 2012. Most of the Wheeling-Pittsburgh facilities have since closed or been sold to other owners, including a coal by-products plants in Monessen, Westmoreland County, which is now operated by Cleveland-Cliffs Inc.

U.S. Steel said it is taking a “measured approach to considering” the Cleveland-Cliffs and Esmark proposals, which includes seeking more information.

U.S. Steel stock, which had been trading at $22 to $23 per share for most of August, closed at $31.08 per share on Monday.

Editor’s Note: The writer of this story has a conflict of interest. He is a U.S. Steel Corp. stockholder.

Jason Togyer is volunteer executive director of Tube City Community Media Inc. and editor of Tube City Almanac.

Originally published August 14, 2023.

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