Stelco Deadline - Peacock Tariff Consulting

Ottawa gives Cleveland-Cliffs 15 days to reverse 500 layoffs or face court action under the Investment Canada Act, in the sharpest test yet of Canada’s foreign investment undertakings

OTTAWA, Oct. 23, 2026 – Industry Minister Mélanie Joly has given Cleveland-Cliffs Inc. 15 days to reverse plans to lay off up to 500 workers at Stelco’s Ontario operations or face legal action, escalating a dispute over foreign investment commitments into what may become the most significant enforcement proceeding ever brought under the Investment Canada Act.

Joly sent the demand in a letter to Stelco’s general counsel on Thursday, and confirmed it in a statement posted to X. The letter, according to reporting on its contents, asserts that the Cleveland-based steelmaker has repeatedly failed to demonstrate compliance with the formal undertakings it submitted when it acquired the Hamilton steelmaker for $3.4 billion in 2024.

“As we stand right now, the business is still taking steps to lay off 500 workers,” Joly said. She said the company “has repeatedly failed to demonstrate that they are compliant with their undertakings,” adding: “That is unacceptable.”

Asked how far Ottawa would go, Joly said forced divestiture is “definitely on the table” if Cleveland-Cliffs does not meet its obligations. She characterised the letter as a step in a legal process designed to put evidence on the record ahead of a possible court challenge.

Cleveland-Cliffs declined to comment when contacted by CTV News.

The case matters well beyond Hamilton. The Investment Canada Act requires that significant foreign acquisitions deliver a net benefit to Canada, and approvals are routinely conditioned on binding undertakings covering employment, capital investment and head office functions. Those undertakings have historically been enforced through negotiation rather than litigation. A contested court proceeding, and particularly any order compelling divestiture, would reset expectations for every foreign acquirer of a Canadian industrial asset.

The commitments at issue

François-Philippe Champagne, then industry minister, approved the Stelco acquisition in 2024 on conditions that included a five-year guarantee that unionised headcount would not fall and the retention of nearly all non-union positions. Those terms were central to the net benefit determination.

Joly’s letter also points to a less conventional undertaking. According to accounts of the correspondence, Cleveland-Cliffs pledged to be a strong advocate for policies that benefit both the US and Canadian steel industries. The minister’s letter argues that the company’s conduct has run directly against that commitment.

The letter cites testimony Cleveland-Cliffs Chairman and CEO Lourenco Goncalves gave to the Congressional Steel Caucus on January 14, 2026, in which he endorsed Section 232 tariffs applied to Canada and described Canada as a “steel dumping machine.” It further states that Goncalves called the increase of those tariffs to 50 per cent “absolutely necessary,” and that Cleveland-Cliffs was the first signatory on an industry memorandum sent to the US president on January 28 advocating steel levies. Goncalves has publicly claimed influence over the tariff decisions.

That sequence creates an unusual legal posture. The company’s defence of the layoffs rests on tariff-driven market conditions. Ottawa’s position is that the same company advocated for the tariffs it now cites as the cause of the job losses, and that doing so breached a specific undertaking given to secure approval of the purchase.

In October, Stelco formally requested relief from some of its commitments, citing what it described as unprecedented and escalating disruptions facing the industry, and asked to reduce employment obligations. That request appears to have triggered the current phase of the dispute.

How the layoffs unfolded

Cleveland-Cliffs announced in late September that it would shut part of its Ontario operations at the Hamilton and Lake Erie facilities, affecting up to 500 jobs, citing low steel prices, US tariffs and continued import pressure. In a September 28 letter to customers, Stelco said it would idle the cold-rolled and coated operations at Hamilton Works for an indefinite period. The Hamilton cold mill and coating lines were scheduled to go dark on October 9.

Cleveland-Cliffs shares fell as much as 9.5 per cent in New York on the announcement, the steepest intraday decline since April.

By October 5, Ron Wells, president of United Steelworkers Local 1005, said 90 members had received layoff notices, with 85 more expected by the end of the following week. Wells also said only 46 positions were open at Nanticoke for displaced Hamilton workers, undercutting the suggestion that affected employees could be absorbed elsewhere in the company’s Canadian footprint. He urged Ottawa to enforce the Investment Canada Act.

Prime Minister Mark Carney, speaking in Vancouver after the initial announcement, said: “We were very disappointed at this decision by Stelco,” and said the government would pursue the company to the full extent of the law if it breached its obligations. He also placed the blame upstream: “I would just take note that this situation is caused by the U.S. tariffs,” noting that Goncalves had applauded those tariffs.

Goncalves has rejected federal bridge financing and loan offers, arguing that government money could not have prevented the temporary layoffs. He maintains the company is meeting its contractual obligations and has described Ottawa’s response as bullying and harassment.

How the file reached this point

The sequence is worth setting out because the compressed timeline has been a political liability for the government.

Cleveland-Cliffs announced the Ontario shutdown in late September. The Hamilton cold mill and coating lines were scheduled to go dark on October 9. Joly’s office initially responded by noting the significant commitments Stelco and Cleveland-Cliffs had made to Canadian steelworkers. Ottawa then gave the company five days to produce a plan to preserve jobs. That deadline passed without resolution. Roughly a week before the current letter, Joly indicated the matter was days from being resolved, a statement Conservative MP Michael Guglielmin has since used to argue that federal timelines have shifted repeatedly.

In October, Stelco formally requested relief from some of its undertakings, citing unprecedented and escalating disruptions and asking to reduce employment commitments. That request moved the file from negotiation toward adjudication, because a request for relief is an implicit acknowledgment that the commitments as written are not being met.

The Thursday letter to Stelco’s general counsel, with its 15-day deadline, is framed by Joly as a step in a legal process designed to place evidence on the record ahead of a potential court challenge. In litigation terms it functions as a demand letter establishing notice and opportunity to cure, which is the predictable predicate for an application to the Federal Court.

The tariff arithmetic behind the dispute

Section 232 tariffs on steel and aluminum imports into the United States reach as much as 50 per cent. The effect on Canadian steel trade has been severe and rapid. Canada exported US$4.6 billion in steel to the United States last year, down from US$7 billion in 2024, a decline of roughly one third in a single year.

The structural picture is worse. Statistics Canada data show employment in iron and steel mills and ferro-alloy manufacturing in Ontario at 10,779 in July 2026, down 52.8 per cent from 22,861 in July 2002. The national figure for the same category fell to 14,245 from 28,828, a decline of 50.6 per cent. Including steel product manufacturing from purchased steel, which employed 9,510 people, national steel-related employment stood at 23,755 in July 2026.

Canada’s own countermeasures have raised costs on the other side of the ledger. The retaliatory surtax list published by the Department of Finance on August 25 and effective September 8 covers 874 tariff items and approximately $27.6 billion in US imports, with rates of 15, 25 or 50 per cent mirroring the corresponding US rate. Steel items under Chapters 72 and 73 account for 274 lines, carrying 50 per cent on most raw and fabricated products and 25 per cent on selected finished articles. Aluminum products under Chapter 76 carry 50 per cent across 29 items.

Canadian steelmakers therefore face a US market behind a 50 per cent wall and a domestic market in which input costs on US-sourced material have risen sharply. Integrated producers with assets on both sides of the border, which is precisely what Cleveland-Cliffs became when it bought Stelco, can rebalance production between jurisdictions in a way that single-country producers cannot. That asymmetry is the commercial core of the dispute.

The idling question

A technical issue at the centre of the dispute is whether temporarily idling production lines constitutes a reduction in headcount for the purposes of the undertakings given in 2024.

Stelco’s September 28 letter to customers described the shutdown of cold-rolled and coated operations at Hamilton Works as indefinite rather than permanent, and the company has consistently described the resulting job losses as temporary layoffs. That characterisation is not incidental. If an undertaking guarantees that unionised headcount will not fall over five years, a company may argue that employees on temporary layoff remain employees, that recall rights persist under the collective agreement, and that the guarantee is therefore intact.

Ottawa’s position appears to be that an indefinite idling with no stated restart date, accompanied by formal layoff notices to individual workers, is a reduction in fact whatever label is attached to it. The union’s evidence supports that reading in practical terms. Local 1005 president Ron Wells reported that 90 members received notices on October 5 with 85 more expected the following week, and that only 46 positions were available at Nanticoke for displaced Hamilton workers. Workers who cannot be redeployed and who have no return date are not, in any economically meaningful sense, still employed.

The question matters beyond Stelco. Employment undertakings in Canadian foreign investment approvals are typically expressed in headcount terms without defining whether layoffs, idlings, contracting out or attrition count against the commitment. A judicial determination on this point would supply a definition that currently exists only in negotiation practice.

Why the advocacy clause is unusual

The pledge to be a strong advocate for policies benefiting both the US and Canadian steel industries is the element of the file with the least precedent.

Undertakings covering employment, capital expenditure, research spending, head office location and Canadian director representation are standard. They are measurable, and compliance can be verified through reporting. An undertaking that commits a parent company’s public policy posture is categorically different. It asks a reviewing authority to assess the content of speech, including testimony to a foreign legislature.

Cleveland-Cliffs’ conduct, as described in Joly’s letter, makes the clause unusually testable. Goncalves’ January 14, 2026 testimony to the Congressional Steel Caucus endorsing Section 232 tariffs against Canada, his description of Canada as a steel dumping machine, his characterisation of the increase to 50 per cent as absolutely necessary, and the company’s position as first signatory on a January 28 industry memorandum to the US president advocating steel levies form a documentary record that requires no inference about intent.

The company’s defence would likely be that advocating for US trade policy in the United States is lawful activity that the undertaking cannot have been intended to foreclose, and that the clause as drafted is too vague to support enforcement. Ottawa’s answer is that the clause is what the company offered in order to obtain approval of a $3.4 billion acquisition, and that a party cannot accept the benefit of an approval and then disclaim the condition attached to it.

Political and labour reaction

The response in Canada has split along predictable lines, but with a common thread of impatience.

Ontario NDP Leader Marit Stiles said workers fear “this becoming a very long legal battle,” and argued that near-term relief for laid-off workers must form part of the federal response, questioning how affected families would be supported while litigation proceeds.

Conservative MP Michael Guglielmin, the party’s senior advisor on steel policy, criticised what he called shifting timelines, noting that Joly had said six days earlier that the matter was days from resolution. He said workers need concrete action rather than further process.

The United Steelworkers national leadership has backed Joly’s enforcement posture while pressing the government to follow through. Union leaders had earlier welcomed Carney’s commitment to hold Cleveland-Cliffs accountable and called on the prime minister to match words with action. One local president characterised the layoffs as politically motivated in nature, a reading that aligns with Ottawa’s argument that the company’s tariff advocacy and its Canadian workforce reductions are connected rather than coincidental.

Premier Doug Ford, who appeared alongside Carney on Wednesday to announce an $8.7 billion industrial support package for steel, automotive and critical minerals, offered a blunt assessment of the company’s position: “You don’t go back on your commitments.”

The timing of the two events is not accidental. The support package included a Joint Steel Action Fund worth about $5.22 billion over five years, $3.55 billion federal and $1.67 billion provincial, alongside commitments to Buy Canadian procurement and enhanced Canada Border Services Agency enforcement against dumped and subsidised steel imports. Ottawa is simultaneously offering the sector money and demonstrating that accepting foreign ownership of Canadian steel assets carries enforceable conditions.

What enforcement could look like

The Investment Canada Act gives the minister several routes when undertakings are breached. The statute contemplates applications to the Federal Court for orders requiring compliance, for penalties, and in the most serious cases for divestiture of the investment. Joly’s reference to forced divestiture being on the table is therefore grounded in the legislation, though it would be an extraordinary remedy.

Practitioners note several complications. Undertakings are typically drafted with qualifiers allowing for changes in market conditions, and a respondent facing a 50 per cent tariff wall in its principal export market has an obvious argument that conditions changed materially and unforeseeably. The counter-argument Ottawa appears to be building is that the respondent helped create those conditions, and that a company cannot invoke as force majeure a policy outcome it lobbied for.

The advocacy undertaking is the novel element. Employment and investment undertakings are measurable. A commitment to advocate for policies benefiting both countries’ steel industries is qualitative, and testing it in court would require a judge to assess whether congressional testimony endorsing tariffs against Canada breaches a pledge to support Canadian industry. A ruling either way would be instructive for how such clauses are drafted in future transactions.

Timing is the other constraint. Fifteen days from Thursday places the deadline in early November. Even an expedited court process would extend well past the point at which the Hamilton cold mill and coating lines have been idled and workers have made their own decisions about relocation or retraining.

What a divestiture order would mean

Forced divestiture has been raised by the minister as available, and it is the remedy that would carry the greatest market consequence.

A divestiture order would require Cleveland-Cliffs to sell Stelco, raising immediate questions about who would buy a Canadian integrated steelmaker operating behind a 50 per cent US tariff wall with a domestic market smaller than its capacity. Potential acquirers would include non-US international producers, Canadian institutional investors, and the governments themselves. Carney has declined to say whether public acquisition is under consideration, which is not the same as ruling it out.

The valuation problem is severe. Cleveland-Cliffs paid $3.4 billion in 2024, before the current tariff structure was in place. An asset whose principal export market is tariffed at 50 per cent is worth materially less, and a forced sale compounds the discount. A divestiture order would therefore impose a significant loss on the current owner, which is why the threat carries weight, and would also likely require either a buyer willing to accept long-term operating losses or public participation in the transaction.

Implications for businesses and investors

For foreign acquirers of Canadian assets, the immediate lesson concerns drafting and conduct. Undertakings given under the Investment Canada Act have usually been treated as a compliance formality managed through periodic reporting. A contested enforcement action signals that they are enforceable obligations whose breach carries litigation risk, and that a parent company’s public policy advocacy in its home jurisdiction may be read as part of the compliance picture.

Legal advisers should expect closer attention in future reviews to whether undertakings contain explicit market-condition carve-outs, how employment commitments are measured, whether temporary idling counts as a headcount reduction, and whether advocacy commitments are capable of objective assessment.

For Canadian steel buyers, the practical issue is supply continuity. Idling cold-rolled and coated capacity at Hamilton Works removes domestic supply of specific product grades used in automotive, appliance and construction applications. Buyers who substitute imported coated steel need to account for Canada’s own 50 per cent surtax on US-origin steel, and for the heightened CBSA enforcement posture announced Wednesday, which raises the documentation burden on alternative origins.

For exporters generally, the dispute is a reminder that Canadian countermeasures and Canadian industrial policy are now operating together. The enhanced trade remedy enforcement commitment means a greater likelihood of anti-dumping and countervailing duty investigations touching steel imports from third countries, not only from the United States. Firms importing steel into Canada should review origin documentation and be prepared for verification requests.

For workers and the communities around Hamilton and Nanticoke, the calculus is harder. A legal process measured in months does not pay a mortgage. Both opposition parties have made that point, and it is the most politically dangerous aspect of the file for a government that has staked considerable credibility on the proposition that it can hold a foreign owner to its word.

The broader question

Underlying the Stelco dispute is a question Canadian policymakers have avoided for two decades: whether foreign ownership of strategic industrial capacity is compatible with industrial resilience when the owner’s home government is applying trade measures against Canada.

A KPMG Canada survey of 275 companies found that 42 per cent of Canadian manufacturers have moved some or all production to the United States or plan to, with 29 per cent having already shifted output south and 13 per cent intending to. That migration is driven by tariff economics, not ownership structure, but foreign ownership accelerates it by placing the decision in a boardroom with assets on both sides of the line.

Carney, addressing the employment conditions attached to the 2024 purchase, has not said whether governments would consider acquiring Stelco. The question has moved from the fringe of the debate toward its centre. If the enforcement action fails, Ottawa will have demonstrated that its principal tool for conditioning foreign investment does not work under pressure. If it succeeds, it will have established that Canadian undertakings are enforceable even against a determined counterparty, and the price of acquiring Canadian industrial assets will have changed.

Either outcome will be studied closely by every party now weighing a cross-border transaction in a tariffed sector.