Up to 500 Stelco Layoffs Put Cleveland-Cliffs on Legal Collision Course With Ottawa

Cleveland-Cliffs said Monday it will lay off up to 500 workers at Stelco's Hamilton plant and its Lake Erie Works operation in Nanticoke, Ont. — a cut that lands barely a year after Ottawa approved the U.S. steelmaker's $3.4-billion acquisition of Stelco Holdings Inc. in 2024 on legally binding job conditions, and that could now trigger legal action from the federal government.

Those conditions, imposed under the Investment Canada Act, required Cliffs to maintain for five years at least the same number of unionized employees and the vast majority of non-unionized employees. The company says the layoffs are necessary to ensure its survival during the trade war with the United States.

For the affected workers, the arithmetic is stark. Some will be offered jobs at Lake Erie Works, but Ron Wells, president of United Steelworkers Local 1005, says there are only 46 openings in Nanticoke — nowhere near enough to absorb hundreds of cut positions.

"We're hopeful that the Canadian government enforces the Investment Canada Act," Wells told The Globe and Mail. That statute stipulates that major foreign investments in Canada must benefit the domestic economy.

The office of Industry Minister Mélanie Joly did not say whether it considers Cliffs in violation of its commitments or whether it intends to sue. "Stelco and Cleveland-Cliffs have made significant commitments to Canadian steelworkers," Gabrielle Landry, deputy director of media relations in Joly's office, wrote in an e-mail. "We will use every lever possible to defend Canadian industry, protect jobs, and secure our supply chain." Cliffs did not respond to a request for comment.

Whether a lawsuit follows depends on the contract's fine print, according to Subrata Bhattacharjee, national chair of the competition and foreign investment review group at Borden Ladner Gervais LLP. "Until you actually see the agreement, you can't really say for sure," he said. He expects Joly will at minimum press the company on its promises. Cliffs will likely argue the tariff situation is beyond its control and seek renegotiation or release from the undertaking, he said, adding: "The process now includes the opportunity to renegotiate or mediate another solution, and I suspect that in the current environment, it's quite likely the government may try to seek some other type of assurance."

There is precedent — and it involves the same Canadian steelmaker. After U.S. Steel acquired Stelco in 2007 and made Investment Canada Act commitments on jobs and production, the 2008 financial crisis prompted Canadian layoffs. Ottawa sued, alleging the company reneged on its legally binding commitments. A 2011 settlement imposed a new set of commitments on U.S. Steel, including production levels and investment in Canada.

The backdrop is a Canadian steel sector throttled by the 50-per-cent tariffs U.S. President Donald Trump imposed last year. Federal and provincial governments have responded with hundreds of millions of dollars in funding, crackdowns on foreign steel dumping and mandates that publicly funded projects use Canadian steel wherever possible.

Ottawa says it offered Stelco financial support to sustain operations and maintain employment during the trade war, and the company turned it down. "For some time, our government has made clear to the company that we are ready and willing to provide financial support to sustain operations and protect jobs," Landry said. "Its decision to reject these practical proposals and continue with layoffs is extremely disappointing."

For the hundreds of Hamilton and Nanticoke workers facing displacement — and for the roughly 46 who can transfer to Nanticoke — the coming months hinge on whether Ottawa enforces the five-year employment undertaking or negotiates a new one, as it did with U.S. Steel in 2011.