When we think about the modern economy and the world we interact with, it is easy to overlook the very things making it possible. Infrastructure exists in the background because it facilitates our lives, so we go from place to place or meet with people with our minds on those things not what got us there. Infrastructure is that basic physical structure and the systems that enable our lives – along with the power, water, information, and waste that come along with it.
But if we think of our infrastructure very little, what gets overlooked even more are the materials comprising that infrastructure. Chief of among those inputs is steel.
Steel is essentially the skeleton of our national economy. It upholds our buildings and our bridges, it’s built into the frames of our vehicles, it makes possible both railroads and trains. The supply chains, the goods themselves, and the buildings hosting the goods and services we consume – all of them are dependent on steel.
It is incumbent on both industry and policymakers to take actions that ensure longterm, sustainable access to high-quality, low-cost steel. That’s as important for the sector itself as it is for the wider economy, and failures within the industry could have both short- and longer-term cascading effects.
Of note, Pittsburg-headquartered U.S. Steel has struggled economically in recent years. The company’s significant year over year revenue decline capped off with an $80 million loss in the last quarter. The domestic steel company is currently poised to be acquired by Japanese steel producer, Nippon. This voluntary and profitable transaction would keep U.S. employees and its Pennsylvania headquarters, operating as a U.S.-based subsidiary of the Japanese company.
As a critical industry, major employer, and significant economic transaction, this mutually agreeable merger must still be sanctioned by the federal government.
If a number of notable politicians, including Senators from both parties, get their way, Janet Yellen the current Treasury Secretary and chair of the Committee on Foreign Investment in the United States (CFIUS) will block the deal from materializing. The White House has also indicated that regulatory review of the deal may be on the table.
What these political actors and others with influence or authority to weigh in on the decision must face are the economic and physical realities for infrastructure. Steel is essential, as is its quality, cost, and reliable supply. It takes a robust industry with longterm strategy to maintain those factors. The impetus for the U.S. Steel – Nippon merger in the first place indicates the current domestic steelmaker was not positioned to do so effectively.
The unquestionable criticality of steel to every facet of our modern lives demands that those in a position to expedite or scrutinize the deal internalize that fact. Delays may cause unnecessary ripples throughout the economy, signal uncertainty, and ultimately delay the shoring up of the domestic steel supply that the current deal seeks to accomplish.
With steel being incorporated into and essential to virtually every road, bridge, vehicle, and building in the nation, vital to energy production, generation, and transmission, and facilitating necessities from food to safe water, policymakers can’t take their eye off the importance of a high-quality deal that ensures great steel, at a cost-effective rate, and sustainability for the long haul.
Written by Benjamin Dierker, Executive Director
The Alliance for Innovation and Infrastructure (Aii) is an independent, national research and educational organization. An innovative think tank, Aii explores the intersection of economics, law, and public policy in the areas of climate, damage prevention, energy, infrastructure, innovation, technology, and transportation.