The auto industry is objecting to the prospect of Cleveland-Cliffs buying rival U.S. Steel, which would give them a near-monopoly over integrated steelmaking in the United States and unprecedented pricing power.

The Alliance for Automotive Innovation, a trade group, is lobbying Congress against the proposed purchase that would leave Cleveland-Cliffs as the last remaining integrated steelmaker. While mini-mills have grabbed much of the market share for steel, integrated mills like those along the lakeshore in Northwest Indiana have held onto the automotive business because they make new steel that's strong and formable enough for automotive manufacturing, instead of recycling existing steel as mini-mills do.

"If permitted to proceed, this transaction could have negative implications for the auto industry and increase costs for average drivers," Alliance for Automotive Innovation President and CEO John Bozzella wrote in a letter to the U.S. Senate's Subcommittee on Competition Policy, Antitrust, and Consumer Rights.

Cleveland-Cliffs, the largest flat-rolled steel producer and largest manufacturer of iron ore pellets in the United States, made an unsolicited offer to buy U.S. Steel for nearly $7.3 billion in August. U.S. Steel, which runs the Gary Works steel mill and Midwest Plant in Portage, rejected the offer but is now reviewing strategic alternatives, which still could include a sale to its Cleveland-based rival.

Cleveland-Cliffs is already the largest supplier of steel to the automotive industry in North America, with automakers accounting for 31% of its revenue last year.

"The potential concentration in domestic steel production that will result from this proposed transaction deserves antitrust scrutiny from the subcommittee and government regulators," Bozzella wrote in the letter. "In particular, the government should examine the potential for anti-competitive pricing of materials used by steel-reliant automotive manufacturers."

Cleveland-Cliffs would end up with total or near total control of steel manufacturing if the deal were allowed, according to the Alliance for Automotive Innovation.

"In addition to owning nearly all U.S. iron ore mining and processing facilities, a combined Cleveland-Cliffs and U.S. Steel would control 100% of blast furnace production in the U.S., more than 90 percent of U.S. advance high strength steel used for automotive underbody panels, bodyside reinforcements and impact areas, 80% of body in white steel used to produce a vehicle’s structural frame, 65 percent of U.S. exposed grade steel used for automotive surface panels like doors, hoods and fenders," Bozzella wrote.

Automakers also have concerns about how consolidation in the steel industry would affect the electrical steel that's used in motors of electric vehicles, one of the fastest-growing segments in the sector that's only expected to gain more market share as more EV infrastructure comes online.

"Currently, there are two primary domestic suppliers of automotive grade e-steel in the U.S.: Cleveland-Cliffs and Big River Steel owned by U.S. Steel. In a combined company, 100% of the domestic e-steel needed for electrical motors and EV production will be concentrated in a single company," Bozzella wrote. "Based on my conversations with automakers, I can tell you there is concern about the cost of both steel and e-steel."

That sort of consolidation could drive up electric vehicle prices and slow consumer adoption of the new technology the administration has been pushing as a way to combat climate change, he argued.

"The average transaction price of a new EV remains higher than the industry average," Bozzella wrote. "Without competition in the U.S. for the production of e-steel, automakers face an increase in the cost of materials which could ultimately increase the cost of finished EVs for customers. A production concentration in a single company also exposes the broader economy to supply chain interruptions and shortages."

Bozzella called for antitrust scrutiny of the proposed merger, which would leave just one integrated steelmaker left in the United States, which once had dozens of competitors in the sector.

"Auto manufacturing in the U.S. is undergoing a massive transformation. The U.S. industrial base is retooling and automakers are localizing manufacturing through $115 billion of commitments toward automotive electrification," Bozzella wrote. "A consolidation of steel production capacity in the U.S. will further increase costs across the industry for both materials and finished vehicles, slow EV adoption by driving up costs for customers, and put domestic automakers at a competitive disadvantage relative to manufacturers using steel from other parts of the world."
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