The Canadian government has given the U.S. owner of Stelco a deadline of five business days to present a strategy aimed at preserving jobs at the steel producer located in Hamilton, or risk facing legal repercussions.
Cleveland-Cliffs, based in Ohio, announced last week its intention to lay off up to 500 employees as it ceases certain steel production at Stelco. The federal government claims this move contravenes “binding commitments” made during the company’s acquisition in 2024.
In a correspondence directed to Stelco president Paul Simon on Monday, Industry Minister Mélanie Joly indicated that Ottawa is ready to pursue a court order to uphold the agreement under the Investment Canada Act.
“The Government of Canada is serious about adherence to commitments,” Joly stated in the letter, which was made available to CBC News on Tuesday.
“In cases where an investor fails to fulfill an obligation, the Act allows for remedies, including a court application for orders that could involve mandating compliance, divestiture, or financial penalties.
“I hope that such measures will not be required.”
The Liberal government has given the U.S. owner of Hamilton steelmaker Stelco five days to share a plan on saving jobs or face potential legal action. Last week, Ohio-based Cleveland-Cliffs announced up to 500 layoffs at Stelco, citing the U.S. trade war.
Cleveland-Cliffs purchased Stelco in a cash-and-stock transaction valued at $3.4 billion, which, as stated in a press release at the time, prioritized “national interests” and acknowledged the “significance of the workforce.”
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Joly’s letter indicates that this includes “commitments to maintain at least the same number of unionized employees and the vast majority of non-unionized workers as were employed at the time of the transaction’s announcement.”
Cleveland-Cliffs CEO Lourenco Goncalves stated that the layoffs are essential and warranted due to the ongoing Canada-U.S. trade conflict, asserting that Stelco’s capacity to export steel to the U.S. was a crucial factor in the agreement.
Joly emphasized that the company’s obligations “remain in effect even if business strategies or market conditions change.”
Prime Minister Mark Carney stated last week that Ottawa will “utilize all available powers” against Cleveland-Cliffs as it seeks to hold the Ohio-based firm accountable to the “full extent of the law.”
CBC News contacted Cleveland-Cliffs for a response on Tuesday.
What may come next?
Commitments linked to foreign acquisitions under the Investment Canada Act generally last for five years, detailing elements such as the acquiring company’s investment levels in the purchased business, the location of the acquired firm’s headquarters, and employment levels, according to Sandy Walker, co-chair of the competition and foreign investment review group at the global law firm Dentons.
“Should you fail to meet those commitments … the minister can issue a demand letter requesting an explanation for the non-compliance, allowing the company an opportunity to reply,” she explained in an interview with CBC News last week.
If the government finds the response unsatisfactory, she noted, the next action would be for the attorney general to initiate legal proceedings against the company.
Prime Minister Mark Carney says Canada will ‘use all the powers that we have’ to ensure that Stelco meets its ‘legal obligations for employment.’ The company, which is owned by U.S.-based Cleveland-Cliffs, announced plans on Monday to idle some production at its Hamilton plant, putting hundreds of workers out of a job.
“Cleveland Cliffs might argue that due to circumstances outside of its control, it could not fulfill these commitments. Such circumstances could include U.S. tariffs,” Walker remarked.
“I can’t predict what will actually occur, but these are the types of issues they will examine.”
In 2009, Industry Canada took legal action against Stelco’s former owner, U.S. Steel, concerning job security. The case was resolved out of court in 2011.
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Ron Wells, president of United Steelworkers Local 1005, expressed that his members had hoped for a different outcome under the ownership of Cleveland-Cliffs.
“They assured us, ‘Trust us, we’re nothing like U.S. Steel. We’ll demonstrate that to you,'” he shared with CBC News on Tuesday. “The trust that was built has been shattered.”
Wells voiced skepticism about Stelco reversing its decision to lay off employees, even with increasing pressure from the federal government.
Aerial (drone) images of the Stelco Hamilton Works Production facility. (Patrick Morrell/CBC)
“I believe they will proceed with the layoffs,” he stated.
“We hope the federal government takes legal action against them, and that the result is a mandate for divestiture. I don’t think having a national steel company would be detrimental.”
An internal communication from Stelco’s vice-president of sales, which was acquired by CBC News last week, indicated that the company’s intention to implement up to 500 layoffs was partly influenced by intense competition from imported steel products.
On Tuesday, Finance Minister François-Philippe Champagne remarked that a balance of imports and domestic supply is essential for a country the size of Canada.
Funding from Ontario
In the meantime, the Ontario government announced on Tuesday its commitment to invest over $200,000 in collaboration with Ottawa through the Canada-Ontario Workforce Tariff Response, aimed at safeguarding steel and manufacturing jobs in the Hamilton region.
This financial support will facilitate skill upgrades for 75 workers and job seekers, as noted by the province’s labour minister.
“Ontario is countering President Trump’s economic assaults by assisting our workers in retraining, enhancing their skills, and maintaining their competitiveness,” Trevor Jones stated in a press release.
The CEO of Cleveland-Cliffs, the American company that bought Stelco, says Cleveland-Cliffs ‘will not disappoint the people of Hamilton’ when it comes to protecting the environment in the city. Lourenco Goncalves says the company doesn’t want to generate profits at the expense of the health of the community.
Goncalves has voiced his support for Trump’s Section 232 measures, which impose tariffs of up to 50 percent on steel and aluminum imports from Canada.
He has stated his commitment to Canadian steel workers, emphasizing that “America first does not mean America only.”
Last Monday, following the announcement regarding the Stelco layoffs, Trump highlighted a $15 billion investment plan by Mesabi Metallics, a Minnesota-based steelmaker, to construct a large facility in Iowa as proof that his administration’s tariffs on imported steel are effectively achieving their goals.