Fitch Upgrades U.S. Steel to Investment Grade After Nippon Steel Acquisition

Fitch Ratings has upgraded United States Steel Corporation’s (NYSE: X) Issuer Default Rating (IDR) from 'BB' to 'BBB-' with a Stable outlook, marking a shift to investment grade. The upgrade also applies to U.S. Steel’s unsecured notes and environmental revenue bonds.

This decision follows the successful acquisition of U.S. Steel by Nippon Steel Corporation. Fitch views the merger favorably due to increased scale, improved geographic diversification, and access to advanced technologies. Nippon Steel, with a production capacity of 69 million tons annually, significantly surpasses U.S. Steel’s 25.4 million tons, offering potential for operational efficiencies and higher profitability.

Fitch assessed U.S. Steel’s Standalone Credit Profile at 'bb' but upgraded its rating using the Stronger Parent criteria, as Nippon Steel holds an investment-grade rating. The $11 billion capital infusion into U.S. Steel is seen as credit positive, provided it doesn’t strain liquidity or inflate leverage.

The company’s strategic focus on modern, efficient, and lower-cost assets supports better margins and operational resilience. A key development includes a $450 million non-grain-oriented (NGO) electrical steel line completed at Big River Steel in Q3 2023. This positions U.S. Steel as one of only two U.S. producers of NGO electrical steel, a vital material for EV and hybrid motors.

Fitch forecasts EBITDA leverage, currently at 4.1x as of March 2025, to decline to 2.5x or lower from year-end 2025 through 2027. Expected annual standalone EBITDA is projected between $1.5 billion and $2.0 billion.

Compared to peers, U.S. Steel boasts greater electric arc furnace capacity and broader product and market diversification than Cleveland-Cliffs (NYSE: CLF) and Commercial Metals Company (NYSE: CMC), enhancing its competitive position in the North American steel industry.