Cleveland-Cliffs Rejects Ottawa's Demand to Halt Stelco Layoffs of Up to 500 Workers

The fight over Stelco's Hamilton plant is now a standoff between a U.S. steel giant and the Canadian government. Neither side is budging.

Stelco said Sept. 28 that it would indefinitely idle its cold-rolled and coated operations in Hamilton, Ont., and concentrate production at Lake Erie Works in Nanticoke. Up to 500 workers could be affected. The company said it expects to offer a significant number of them jobs at Lake Erie.

What Ottawa says Cleveland-Cliffs promised

Ohio-based Cleveland-Cliffs bought Stelco in 2024 for C$3.4 billion (about US$2.4 billion). Ottawa approved the deal under the Investment Canada Act with employment undertakings attached.

Industry Minister Mélanie Joly says those five-year commitments require "at least the same number of unionized employees and the vast majority of non-unionized employees" as when the deal was announced. She put that in an Oct. 5 letter to Stelco president Paul Simon, expressing "extreme disappointment" and giving the company five business days to present a compliance plan.

Joly also said Stelco declined to seek support through federal job-preservation programs. Prime Minister Mark Carney said there is "money on the table" from Ottawa but did not disclose the amount or terms. He said the company had "betrayed" workers.

The Investment Canada Act lets the government apply to a superior court for orders directing compliance, forcing divestiture, or imposing monetary penalties. Joly told reporters that "everything is on the table," including a forced sale of Stelco's Canadian assets. She also said she is always open to sitting down with the company.

Cleveland-Cliffs pushes back

Stelco replied in a letter dated Oct. 9, four days into the five-day window. It said it has done nothing wrong and called the government's accusations false. The seven-page letter, authored by Simon, cited foreign import pressure and a 58 per cent plunge in exports of cold-rolled and coated steel to the United States from pre-trade-war levels. It said the undertakings do not stipulate a commitment to avoid layoffs.

Goncalves went further in public. "We didn't even need the five days that she gave," he said. "Because it is so absurd that ... it's easy to counter."

His legal argument is narrow. "There is no provision in the contract that I have to keep employment at a certain level every single day of the five years," he said. He called the layoffs temporary, lasting until there is a Canada-U.S. trade deal. He also said that if Ottawa had imposed such a condition, "I would not have accepted."

Cleveland-Cliffs says the move does not shift steel production out of Canada. Output is being concentrated at Lake Erie Works, with overall tonnage unchanged.

Stelco's memo to employees said U.S. tariffs "significantly shrunk the market" for its cold-rolled and galvanized products. Demand in its traditional markets fell almost 25% in the second quarter versus the 2024 quarterly average, including a 10% decline in Canada.

The tariff problem

The awkward part for the company is Goncalves himself. He has publicly backed Trump's 50% steel tariffs, calling them "a necessary step" to protect U.S. steelmakers.

Joly argues that makes it hard for him to treat the damage as outside his control. "He's in favor of these U.S. tariffs against steel," she said. "They cannot say that this is now an act of God or force majeure."

The tariffs are real, and so is Canada's retaliation. Trump imposed up to 50% duties on Canadian steel under Section 232 roughly a year and a half ago, and Canada answered with tariffs of its own. At a White House event on a Monday, Trump announced a new US$15 billion steel plant in Iowa. He credited his tariffs with reducing foreign steel imports and attracting investment, saying companies were building plants there "because they don't want to pay tariffs."

Workers want faster answers

Union leaders and analysts say the legal route is too slow. They say court action will take too long to help the workers affected now.

Ron Wells, president of USW Local 1005, said the overriding emotion is anger. "We feel we've been betrayed by Cleveland-Cliffs," he said. "We feel like we're pawns in this trade war."

Ontario NDP leader Marit Stiles has gone further. She called on Premier Doug Ford to work with Ottawa to push Cleveland-Cliffs to give up its ownership and establish "public ownership and Canadian management." Ford has been silent on the issue in recent weeks. In late August he said, "Maybe they should find a new owner for Stelco. Maybe we should just buy them."

Cleveland-Cliffs reported second-quarter revenue of US$5.2 billion, operating cash flow of US$230 million and an adjusted net loss of US$115 million.

What comes next

Canadian government lawyers are considering their options, and no court application has been announced. Joly said Ottawa is reviewing Stelco's letter.

The disputed question is whether a contract promise to keep jobs for five years bends under tariffs and weak demand. Ottawa says it does not. Goncalves says the contract never required constant staffing levels. A superior court would have to settle that, if the two sides do not reach a deal first.

Union leaders are asking affected steelworkers to be patient while that plays out.