What happens next with Stelco layoffs as Ottawa threatens legal action?

Industry Minister Mélanie Joly is expected to speak Wednesday afternoon — her first public appearance since Stelco answered Ottawa’s legal threat over layoffs of up to 500 workers.

Stelco’s letter, obtained by Global News, was dated Oct. 9 in response to one sent by Joly on Oct. 5, in which she gave the company an ultimatum and five days to respond.

Joly’s letter to the company expressed “extreme disappointment” and claimed the layoffs constitute a direct breach of the company’s commitments under the Investment Canada Act.

Stelco maintained in its response that it hasn’t done anything wrong and claims the accusations from the federal government are “false.”

The Ontario-based steel manufacturer announced last month that pressure from U.S. tariffs forced it to concentrate steel production at its Lake Erie Works plant in Haldimand, and halt production at its plant in Hamilton. Although the company said some of those workers would be offered positions at the Haldimand facility, hundreds are still expected to be out of work.

U.S. President Donald Trump levied tariffs on steel products from Canada of up to 50 per cent under its Section 232 duties about a year-and-a-half ago, with other products like aluminum and autos also facing tariffs.

Here’s where things stand.

Joly claimed in her letter to Stelco on Oct. 5 that the market dynamics surrounding Trump’s tariff policies do not excuse Stelco from its commitments under the Investment Canada Act, and that the federal government would be using the “full force of the law” if those jobs are not preserved.

Joly told reporters last week that the chief executive of U.S.-based Cleveland-Cliffs, which acquired Stelco in 2024, has supported steel tariffs and therefore cannot characterize the company’s plan to lay off up to 500 workers due to tariffs and market pressures as beyond its control.

“He’s in favor of these U.S. tariffs against steel,” she said, referring to Cleveland-Cliffs CEO Lourenco Goncalves’ public support of American steel tariffs.

“They cannot say that this is now an act of God or force majeure.”

The government says Cleveland-Cliffs made a series of commitments when it acquired the Ontario steelmaker, including preserving jobs and the Stelco name, maintaining and expanding its Canadian operations, generating cost savings, broadening its customer base and supporting unionized steel jobs.

In a release from 2024, Cleveland-Cliffs announced the agreed acquisition of Stelco and said they would “maintain significant employment levels in Canada and Canadian representation on the management team.”

Business lawyer Nassira El Hadri said the government appears to have moved past asking Cleveland-Cliffs to justify the layoffs, and is also asking for a plan outlining how it will comply with all of its undertakings.

“They are not asking for an explanation,” said El Hadri, founder of Hadri Law in Toronto. “They’re saying, ‘You have to give us a plan on how you are going to comply.’”

“These undertakings are not goodwill gestures,” El Hadri said. “They are binding.”

If the company responds by simply reiterating that the layoffs are necessary because of U.S. tariffs, she said the dispute could end up in court.

According to the federal government, the binding undertakings in the agreement from 2024 include:

• To respect Stelco’s historic brand by carrying on operations under the name, “Stelco, a Cleveland-Cliffs Company”;
• To maintain Stelco’s head office in Hamilton, with responsibility for Stelco’s day-to-day operations;
• To continue to employ at least the same number of unionized employees and the vast majority of non-unionized employees as were employed when the transaction was announced;
• To honour all existing collective bargaining agreements and Stelco’s employee benefit and pension commitments;
• To make significant capital and research and development expenditures in support of Stelco’s operations; and
• To ensure Stelco’s Scope 1 and Scope 2 greenhouse gas emission intensity do not increase and continue to be at least 25 per cent below the global average for integrated steel mills.

Stelco’s letter in response to Joly from Oct. 9 was authored by Stelco’s president, Paul Simon.

According to the seven-page letter, exports of cold-rolled and coated steel to the United States have plunged 58 per cent from pre-trade-war levels as foreign imports continue to undercut Canadian-made steel.

Simon also claimed in the letter that the company was open and transparent with the federal government for several months about its struggles.

“Our early September meetings with several senior government officials, including representatives from your office, led Stelco to believe that the government understood the market realities confronting Stelco’s Hamilton Works finishing lines,” the letter said.

“Stelco submitted its annual report confirming its compliance with the employment undertakings in November 2025. That report highlighted that Stelco was facing significant challenges due to the unforeseen consequences stemming from unprecedented U.S. tariffs and Canada’s failure to advance an effective ‘Fortress North America’ trade regime.”

“Your representation that Stelco’s planned layoffs cause it to breach its undertakings is false as the undertakings do not stipulate a commitment to avoid layoffs.”

In the letter, Simon described an industry upended by U.S. tariffs, weakening demand and continued foreign steel imports.

“Stelco cannot continue to produce cold-rolled and coated steel products without incurring significant losses that are not sustainable,” Simon said in the letter. “As such, we will continue with the idling of Hamilton Works.”

Over the weekend, Joly issued a statement in a social media post acknowledging she had received the letter from Stelco, and maintained the federal government’s stance.

“The Government of Canada continues to expect Stelco to meet its legally binding commitments to employees. These commitments were agreed upon as undertakings under the Investment Canada Act and do not cease to apply because of changing business strategy or market conditions,” said Joly in the statement.

“As our legal team reviews the Stelco letter, all options are on the table.”

– more to come

– with files from Global News’ Sean Prevail and the Canadian Press