US Steel: Regulatory Gains and Strategic Momentum Create a High-Conviction Opportunity

The proposed acquisition of U.S. Steel (NYSE: X) by Nippon Steel has evolved into a high-stakes test of regulatory resolve and strategic necessity. Despite political headwinds, the deal’s recent progress—including 10 non-U.S. regulatory approvals, $7 billion in capital commitments, and shifting U.S. political dynamics—signals advancing deal certainty. With shares trading at $41 versus a $48 price target from Morgan Stanley, investors are being handed a rare chance to capitalize on a stock undervalued by the market’s short-term pessimism. Here’s why now is the time to act.

Non-U.S. Approvals Unlock a Strategic Backstop

The merger has already cleared 10 major regulatory hurdles outside the U.S., including the European Union, Mexico, and the U.K.. These approvals, which include critical assessments under the EU’s Foreign Subsidies Regulation, demonstrate that antitrust authorities globally view the deal as a net positive for competition and innovation. With 99% of shareholder votes backing the merger, the path to closing now hinges solely on U.S. regulators—a bottleneck that is narrowing.

Political Dynamics Favor a Compromise

While President Biden’s January 2025 executive order blocking the deal grabbed headlines, behind-the-scenes negotiations suggest a resolution is within reach. Key Biden advisors, including Treasury Secretary Janet Yellen, have privately urged the administration to reconsider its stance, citing risks to U.S.-Japan relations and the strategic benefits of Nippon’s $7 billion investment in U.S. steelmaking capacity.

Meanwhile, incoming Trump administration signals hint at pragmatism. Adviser Mike Pompeo has publicly endorsed the merger, framing it as a counter to Chinese steel dominance. With the June 18, 2025 deadline looming, both sides have incentive to compromise. A likely path: mitigation measures such as guarantees on U.S. job retention and technology sharing to satisfy national security concerns.

Strategic Value: A Lifeline for U.S. Steel

The merger’s value isn’t just financial—it’s existential. U.S. Steel, struggling with $1.43 EPS in 2024 and outdated infrastructure, needs Nippon’s capital and decarbonization expertise to compete. The combined entity would command 86 million metric tons of crude steel capacity, enabling scale to weather industry consolidation and meet demand for green steel.

Catalysts for a Breakout

1. DOJ Resolution by Q3 2025: With non-U.S. approvals secured, the Department of Justice faces pressure to finalize its review, removing a key uncertainty.
2. Trump’s Inauguration (Jan 20, 2025): A new administration could fast-track approval, leveraging Nippon’s investment to boost U.S. manufacturing.
3. Morgan Stanley’s $48 PT: The stock’s current $41 valuation leaves 17% upside, with analysts likely to raise targets as risks abate.

Risk Factors—And Why They’re Overblown

• Labor Opposition: The United Steelworkers’ (USW) objections pale against Nippon’s pledge to honor union contracts and invest in Pittsburgh-based operations.
• Competitor Sabotage: Rival Cleveland-Cliffs’ rhetoric (“Japan is evil”) lacks legal merit and risks alienating investors.
• Regulatory Delays: The extended June 18 deadline ensures the deal remains on track, with CFIUS reviews typically resolving within 45 days.

Conclusion: A Rare Value Play in a Risk-On World

U.S. Steel is a high-conviction buy at $41. The regulatory tailwinds, capital influx, and geopolitical alignment all point toward a deal completion by late 2025—not 2024 as originally hoped, but still within a 12-month window. With Morgan Stanley’s $48 PT as a near-term target and $50+ upside if the merger accelerates, this is a stock poised to reward bold investors.

Act now before the catalysts crystallize—and the market catches up.