Nippon Steel continues to insist that it wants to buy all of U.S. Steel despite its bid being rejected by two U.S. presidents and brought into doubt by a Japanese prime minister, and even though its chances for success in forcing the issue in court are low.

Analysts argue that the steelmaker’s determination is a function of a desire to implement a coherent and well-planned global strategy, and that its fight against the odds is just a simple business decision. They add that it might also have something to do with its desire to protect technology.

“The U.S. market is the last piece of the puzzle,” said Katsuhiro Sato, a professor at Waseda Business School.

Nippon Steel has set a long-term target of increasing annual crude steel production capacity to over 100 million metric tons from 66 million tons in 2023. To do that, the company needs to expand into promising foreign markets, given that the Japanese market will likely keep shrinking due to the country's declining population.

It has been laying the groundwork for its global strategy by strengthening production bases in regions where populations continue to increase. In South America, Nippon Steel has been partnering with Brazil’s Usiminas.

In India, the Japanese company is teaming up with ArcelorMittal to build two blast furnaces. Sato said India is a gateway to the African market, where steel demand is likely to increase.

In late 2023, Nippon Steel announced plans to purchase U.S. Steel in a transaction valued at $14.9 billion. The U.S. market is attractive because the population is expected to grow, while demand for high-grade steel products, a Nippon Steel strength, is robust in the country's auto industry.

“I think the management is very aware that Nippon Steel cannot become a real global company without this piece,” Sato said.

Then-U.S. President Joe Biden blocked the deal on Jan. 3, 2025, saying it was a threat to national security, and U.S. President Donald Trump indicated after his inauguration that he would not allow Nippon Steel to own a majority of the iconic American company.

Prime Minister Shigeru Ishiba has indicated that he supports a new arrangement that keeps U.S. Steel American-owned, and others in the Japanese government have indicated that the deal would be restructured.

Nippon Steel immediately sued after the Biden block, although attorneys with expertise in the area say that the case has little merit and is likely to fail. The company went silent for a time after the Trump shock about ownership. It dispatched executives to the United States, but has not provided updates on their activities there.

The Japanese press did report that Nippon Steel was intent on a full takeover of U.S. Steel, and then last week, Nippon Steel President Tadashi Imai said the company plans to continue to pursue full ownership of the steelmaker.

Analysts say that full control is important to Nippon Steel so it can safeguard its technology.

“This will involve transferring quite high levels of core know-how and technology. Thus, if Nippon Steel can only take a minority stake and U.S. Steel changes its mind later, it would be a huge problem,” Sato, a former McKinsey consultant, said. “If that occurs, U.S. Steel might become a rival after technology was just siphoned off.”

Shinichiro Ozaki, an analyst at Daiwa Securities, also said that full acquisition is ideal for Nippon Steel to focus on the business without worrying about technology leaks and slow decision-making.

"By making U.S. Steel a wholly owned subsidiary, Nippon Steel would be able to utilize all of the cutting-edge technology, so they can expect a lot of synergistic effects,” Ozaki said.

Nippon Steel has had bad experiences in the past with partnerships with foreign companies.

In 2004, it formed a joint venture with China’s Baoshan Iron & Steel to make steel products for automotive use in China. In 2021, Nippon Steel filed lawsuits against Baoshan for alleged patent infringement. Nippon Steel dissolved the joint venture last year.

“There's a risk of repeating the same experience in the U.S. market. I suspect the trauma from the past is still haunting Nippon Steel," Sato said.

While Nippon Steel is eager to pursue the original deal and will be negotiating with the U.S. government, the question is whether Trump will give a green light.

Daiwa Securities' Ozaki said although the hurdles seem high, there is still a possibility that Nippon Steel will be able to make U.S. Steel a wholly owned subsidiary if the Japanese steelmaker shows greater commitment to invest in the United States.

“If a complete takeover is still difficult even after making such an offer, the focus will then likely shift to whether it can acquire a majority stake, as a possible middle ground,” Ozaki said.

“Nippon Steel might already have some ideas of where it would like to reach an agreement, but there's no point in lowballing the position before the negotiations."

Ozaki and Sato said another potential scenario is to spin off businesses from U.S. Steel and narrow the scope of the acquisition.

U.S. Steel could carve out businesses vital for Nippon Steel’s strategy, such as a production base with a state-of-art electric arc furnace and iron ore mining rights, Ozaki said.

“Both parties can save face through this approach. Nippon Steel will get what it wants, and U.S. Steel’s main entity will remain unchanged,” Sato said.