Stelco says it is proceeding with Ontario layoffs after Ottawa issues ultimatum

Stelco Inc. has informed Ottawa it is not in violation of its Investment Canada Act job commitments, and it is proceeding as planned with hundreds of layoffs in Canada.

Stelco, which is owned by U.S. steelmaker Cleveland-Cliffs Inc., said on Sept. 28 that it was laying off up to 500 workers in Hamilton and Nanticoke, Ont., saying it couldn’t compete in galvanized steel as a result of the trade war.

When the federal government approved Cliffs’ $3.4-billion acquisition of Stelco in 2024, it imposed legally binding conditions, including maintaining at least the same number of unionized employees in Canada for five years, as well as the vast majority of non-unionized workers.

On Monday Industry Minister Mélanie Joly issued the Cleveland-based steelmaker an ultimatum to map out a plan within five business days for complying with its employment guarantees under the Investment Canada Act or possibly face legal action.

In the company’s response letter obtained by The Globe and Mail, Stelco president and general counsel Paul Simon on Friday told Ms. Joly the steelmaker is in fact not in violation of its commitments, citing a legal technicality around the promises, and the government’s own ICA guidelines.

“Your representation that Stelco’s planned layoffs cause it to breach its undertakings is false,” Mr. Simon said. “As the undertakings do not stipulate a commitment to avoid layoffs, nor do they include a requirement that employment levels be above a certain amount on each day of the five years of the undertakings.”

He added that the spirit of ICA gives the government plenty of flexibility to allow layoffs in unforeseen circumstances.

“Throughout the history of the Investment Canada Act and its predecessor foreign investment acts, it has consistently been understood that changes in circumstances may necessitate the non-enforcement or renegotiation of undertakings,” he said. “This decades-old principle is set out in the Government of Canada’s Investment Canada Act Guidelines – Administrative Procedures: Monitoring of Investments.”

Ms. Joly’s office did not immediately respond to a request for comment.

Cliffs argues that the imposition last year of a 50-per-cent tariff on Canadian steel exports to the U.S. was an event that was out of its control.

Responding to the plan that Ms. Joly asked Cliffs to map out, Mr. Simon said that owing to its inability to profitably make galvanized steel anymore, it is proceeding with the idling of its Hamilton Works operation. Laid off workers will have the opportunity to apply for job openings at Lake Erie Works, he said. The local union has said that only 46 positions were available at Lake Erie Works.

Cliffs has said it is prepared to immediately call back laid off workers in Canada if Ottawa can reach a “Fortress North America,” trade pact with the U.S. but it has also been clear it believes the government has not done enough to reduce foreign dumping of galvanized steel in the country, which is hurting Cliffs’ ability to compete in the domestic market.

Ottawa has already aggressively cracked down on the dumping of foreign steel into Canada through the imposition of tariff-rate quotas and mandated that publicly funded projects use Canadian steel wherever possible.

“The most important step the government could take,” Mr. Simon said, “would be to impose further restrictions on imports of cold-rolled and coated steel products into Canada, limit import substitution, and eliminate remissions for steel products that Canadian producers, including Stelco, can supply.”