First bond issuance after acquiring US Steel! New Nippon Steel's 90 billion yen financing is well received, but spreads reach highest level since 1998.

Nippon Steel Corporation raised 90 billion yen (approximately 560 million US dollars) through the issuance of ordinary corporate bonds. This is the company's first issuance of ordinary corporate bonds since completing the acquisition of a US steel company. Initially planning to raise about 50 billion yen, Nippon Steel increased the issuance size to 90 billion yen due to strong investor demand. According to reports, the 10-year bonds issued in multiple tranches in this offering have a coupon rate of 3.202%, the highest level for ordinary corporate bonds issued by the company in about 30 years. The spread over Japanese government bond yields for these bonds is 54 basis points, the largest since 1998. Meanwhile, the spread for the 5-year bonds is 47 basis points, while last week, Sumitomo Metal Mining's bond spread was only 27 basis points, despite having a slightly lower credit rating than Nippon Steel. Nippon Steel completed the acquisition of a US steel company for about 2 trillion yen in June 2025. This issuance of bonds in yen is an early test for investors on whether they are willing to support Japanese companies seeking growth through large overseas acquisitions. Shunsuke Oshida, head of credit research at Manulife Investment Management (Japan) Ltd., stated that Japanese companies often face a dilemma when seeking growth through overseas acquisitions, as they usually have to pay higher financing spreads as operational and financial risks increase. However, he added that such deals could present attractive investment opportunities for Japanese domestic investors. Furthermore, the reason Nippon Steel raised funds at a higher spread may be due to the high costs of upgrading the US steel Pennsylvania plant. US Steel stated on Monday that the total investment for the upgrade of its Mon Valley production facility in Pennsylvania could reach as high as 2.5 billion US dollars, more than double the minimum investment commitment Nippon Steel made when acquiring the US steel manufacturer back in August 2024, Nippon Steel promised to invest at least 1 billion US dollars into the Mon Valley project. In a statement released on Monday, US Steel announced that the modernization project's total investment is expected to be between 2 billion and 2.5 billion US dollars. The upgraded production facility will increase yield, reduce energy consumption, and expand the range of products supplied to automobile manufacturers and other industrial manufacturers. Increasing the investment scale shows that Nippon Steel is reshaping US Steel's capital expenditure plan after taking over. Nippon Steel is betting that a larger-scale modernization upgrade plan will enhance the competitiveness of one of the oldest steel manufacturing bases in the US. This investment decision also indicates that despite the increasing competition from new steel mills, Nippon Steel remains optimistic about the long-term prospects for US Steel's business in the Pittsburgh area.