Canada threatens legal action against Cleveland-Cliffs over Stelco layoffs
Prime Minister Mark Carney says the government will pursue the U.S. steelmaker for allegedly violating job commitments tied to its 2024 takeover.
Explainer
Canada is threatening to sue U.S. steelmaker Cleveland-Cliffs Inc. for allegedly violating job commitments after its Stelco subsidiary announced up to 500 layoffs in Ontario.
Prime Minister Mark Carney said Tuesday the federal government intended to pursue Cleveland-Cliffs "to the fullest extent of the law."
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He pointed to employment obligations the company took on as a condition of its $3.4-billion acquisition of Stelco in 2024.
"Our thoughts are with the workers and the families who have been betrayed by the company," Carney said.
What did Cleveland-Cliffs promise when it bought Stelco?
The federal government approved the 2024 transaction only after imposing legally binding conditions on Cleveland-Cliffs.
Those included a promise to maintain for five years at least the same number of unionized employees and the vast majority of non-unionized employees.
The Investment Canada Act stipulates that major foreign investments should benefit the domestic economy.
Why is Stelco laying off workers?
Stelco plans to indefinitely idle cold-rolled and coated operations at its Hamilton plant on Oct. 9, affecting up to 500 employees.
The company said it will concentrate steel production at its Lake Erie Works facility in Nanticoke, Ont., and will offer Hamilton employees positions there.
Ron Wells, president of United Steelworkers Local 1005, said there are only 46 openings at Nanticoke.
Stelco said the layoffs were necessary due to low steel prices and a market shrunk by U.S. tariffs.
An internal memo reported that U.S. tariffs drove demand for its cold-rolled and galvanized products down by nearly 25 per cent in the second quarter against the 2024 quarterly average.
Cleveland-Cliffs CEO Lourenco Goncalves has previously called the 50 per cent U.S. steel tariffs "a necessary step" to protect American steelmakers.
"Without further measures to protect fair trade in Canada, the future competitiveness of our galvanizing lines in Hamilton is at risk," Goncalves said in July.
What legal action could Canada take?
Carney said the company has binding employment obligations and the government will "use all powers that we have."
Goncalves told Bloomberg he was prepared to fight the Canadian government in court.
"If that's what they're going to do, great," he said. "We'll resolve this in court."
Subrata Bhattacharjee, a competition lawyer, said without seeing the legal agreement it is impossible to know for certain if the company is offside.
He said the process includes an opportunity to renegotiate or mediate another solution.
"Cleveland Cliffs will likely be trying to explain how the tariff situation is out of its control," Bhattacharjee said.
The United Steelworkers union said it is also examining legal options.
"We think the federal government should go after Stelco legally," Wells said.
Has the government offered any support?
Carney acknowledged that Ottawa had put financial assistance on the table to help protect jobs, though he declined to specify the size of the offer.
"There's money on the table from the federal government," Carney said.
Gabrielle Landry, a spokesperson for Industry Minister Mélanie Joly, said financial aid had been offered to Stelco to sustain operations but was turned down.
"Its decision to reject these practical proposals and continue with layoffs is extremely disappointing," Landry said.
Canada's steel sector has been throttled by U.S. tariffs imposed last year.
The federal and provincial governments have rolled out multiple initiatives to help the industry, including providing hundreds of millions of dollars in funding and cracking down on foreign steel dumping.
Local politicians in Hamilton called the layoffs devastating.
"That, for me, is unacceptable and it's unfair to the people of Hamilton that an employer would be so willing to just lay workers off and create havoc in the community," Mayor Andrea Horwath said.
The layoffs come as the broader Canada-U.S. trade dispute has intensified.
Canada announced retaliatory tariffs matching U.S. duties dollar for dollar after trade negotiations collapsed in August.
With files from The Globe and Mail, Yahoo News and The News International