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Cleveland-Cliffs Vows Court Fight Over Stelco Layoffs
Cleveland-Cliffs CEO Lourenco Goncalves says the company is prepared to fight the Canadian government in court over layoffs at Stelco, setting up a potentially significant test of the five-year employment undertakings that Ottawa required when it approved the US$2.5 billion acquisition in 2024.
By Paul Ploumis
Published October 12, 2026
Key Points
- Layoffs: Up to 500 workers could be affected across Stelco’s Ontario operations.
- Hamilton: United Steelworkers Local 1005 expects roughly 300–350 layoffs at Hamilton Works.
- Ottawa’s position: The layoffs may violate binding five-year employment undertakings attached to Cleveland-Cliffs’ 2024 acquisition of Stelco.
- Cleveland-Cliffs’ position: The company says the layoffs are temporary and do not breach the undertakings.
- Operations: Stelco is idling cold-rolled and coated operations at Hamilton while concentrating more steel production at Lake Erie Works in Nanticoke.
- Tariffs: Cleveland-Cliffs cites 50% U.S. steel tariffs and weaker market conditions as major reasons for the production changes.
- Sale possibility: Goncalves said he would consider selling Stelco for an acceptable offer.
SEATTLE (Scrap Monster): Cleveland-Cliffs CEO Lourenco Goncalves says he is prepared to defend Stelco’s planned layoffs in court as the Canadian government considers enforcement action over employment commitments made when the U.S. steelmaker acquired Stelco in 2024.
Speaking Sunday on CBC’s Rosemary Barton Live, Goncalves disputed Ottawa’s position that laying off hundreds of Ontario workers breaches binding undertakings made under the Investment Canada Act.
Industry Minister Mélanie Joly has said Cleveland-Cliffs committed to maintaining at least the same number of unionized employees and the vast majority of non-unionized employees for five years following approval of the transaction.
Goncalves argues that the agreement does not require the company to maintain the exact employment level on every day of the five-year period and says the layoffs are intended to be temporary.
ScrapMonster Exclusive: The Real Dispute Is How a Five-Year Jobs Promise Is Measured
The existence of the employment commitment is not really in dispute. When Ottawa approved Cleveland-Cliffs’ purchase of Stelco in October 2024, the federal government publicly described the deal as subject to “binding, five-year-long undertakings.”
Those included a commitment to maintain at least the number of unionized employees in place when the transaction was announced and to retain the vast majority of non-union employees.
What is now disputed is how that commitment applies when a company temporarily idles production. Cleveland-Cliffs argues that temporary layoffs do not necessarily mean it has failed to meet a five-year employment undertaking. Ottawa says changes in market conditions do not release the company from commitments made to obtain approval for the acquisition.
The public version of the 2024 approval does not resolve that question. It states the employment obligation but does not explain in detail whether compliance is measured continuously, at specified reporting dates, on an average basis, or how temporary layoffs and transfers between Stelco operations are treated.
There is another number worth remembering. When Cleveland-Cliffs announced the acquisition in July 2024, it told investors it expected approximately US$120 million in annual cost savings with no impact to union jobs. It also said Stelco would maintain significant Canadian employment, invest at least C$60 million and seek to increase production from its Ontario facilities.
That makes the current confrontation more consequential than a normal cyclical steel layoff. If Ottawa formally alleges non-compliance, the question becomes whether temporary operating decisions made during a trade shock are compatible with a legally binding employment undertaking that helped secure approval of the acquisition.
Layoffs Are Already Underway at Hamilton Works
Stelco began issuing layoff notices in early October as it winds down cold-rolled and coated steel operations at Hamilton Works.
United Steelworkers Local 1005 President Ron Wells said the layoffs are expected to unfold over approximately three weeks.
The union expects roughly 300 to 350 workers to be affected in Hamilton, with additional job losses possible at Stelco’s Lake Erie Works in Nanticoke.
Stelco has said up to 500 employees could ultimately be affected across its Ontario operations.
Some employees may have opportunities to transfer to Lake Erie Works, although the number of available positions is not expected to absorb all affected Hamilton workers.
Hamilton Cold-Rolled and Coated Operations Are Being Idled
The layoffs are tied to Stelco’s decision to indefinitely idle its cold-rolled and coated steel operations in Hamilton.
The company is shifting more of its steel production toward Lake Erie Works in Nanticoke.
Stelco said demand for its cold-rolled and galvanized products in traditional markets was almost 25% lower in the second quarter of 2026 compared with the average quarterly level in 2024.
The company has cited the Canada-U.S. trade dispute, weak demand and continued import pressure as factors behind the decision.
U.S. Section 232 tariffs on many Canadian steel products stand at 50%, sharply reducing the economics of shipments into what has historically been Canadian producers’ largest export market.
Ottawa Says Five-Year Employment Commitment Still Applies
The federal government approved Cleveland-Cliffs’ acquisition of Stelco under the Investment Canada Act in October 2024.
The approval was contingent on a package of five-year undertakings, including commitments to:
- Maintain Stelco’s head office in Hamilton.
- Continue employing at least the same number of unionized workers as when the transaction was announced.
- Retain the vast majority of non-unionized employees.
- Honour existing collective bargaining agreements.
- Maintain employee benefit and pension commitments.
- Make significant capital and research-and-development expenditures.
- Continue operating under the Stelco name.
Joly has argued that changes in business strategy or market conditions do not automatically remove those obligations.
Ottawa demanded that the company provide a plan showing how it intends to comply with the undertakings while avoiding or reversing the job cuts.
Cleveland-Cliffs Says Layoffs Are Temporary
Cleveland-Cliffs rejects Ottawa’s characterization of the layoffs as a breach.
Goncalves said Sunday that there is no requirement, in his interpretation of the agreement, to maintain a fixed number of employees every day for the entire five-year period.
The company says workers can be recalled if Canada and the United States reach a trade arrangement that improves the economics of Canadian steel shipments.
Stelco similarly told Ottawa that its current position reflects circumstances outside its control and that the government’s characterization of the layoffs as a violation is incorrect.
The competing interpretations have not yet been resolved by a court.
What the Investment Canada Act Allows Ottawa to Do
The Investment Canada Act contains an enforcement process when the federal government believes an investor has failed to comply with a written undertaking.
The minister can issue a demand requiring the investor to remedy the alleged default, explain why there has been no breach or justify the non-compliance.
If the dispute is not resolved, Ottawa can apply to a superior court.
| Potential ICA Action | What It Could Mean |
|---|---|
| Demand for compliance | Government can require the investor to remedy or justify alleged non-compliance. |
| Court application | Ottawa can seek enforcement through a superior court if a ministerial demand is not satisfied. |
| Compliance order | A court may direct an investor to comply with written undertakings. |
| Financial penalties | The Act permits daily financial penalties for specified contraventions. |
| Divestiture | In serious cases, a court can order an investor to divest control of the Canadian business or investment. |
Those are statutory remedies available under the Act. Their availability does not mean a court would necessarily impose any particular remedy in the Stelco dispute.
Goncalves Says Stelco Could Be Sold
Asked whether Cleveland-Cliffs would consider selling Stelco, Goncalves said he would consider a sufficiently attractive offer.
That does not amount to an announced sale process, and Cleveland-Cliffs has not said it is formally marketing Stelco.
The comment nevertheless introduces another potential path if the company and Ottawa are unable to resolve the disagreement over employment and production.
Cleveland-Cliffs completed its acquisition of Stelco on November 1, 2024.
The original transaction carried an enterprise value of approximately US$2.5 billion, or C$3.4 billion.
Cleveland-Cliffs Supports the Tariffs It Says Hurt Stelco
The dispute contains an unusual commercial tension.
Stelco has cited U.S. steel tariffs as one of the principal forces damaging the economics of its Canadian cold-rolled and coated products.
Goncalves, however, remains a strong supporter of Section 232 steel tariffs, arguing they protect American steelmakers from unfairly traded imports.
Cleveland-Cliffs has publicly supported expanded Section 232 protections in the United States.
The two positions are not necessarily mutually exclusive from Cleveland-Cliffs’ perspective: tariffs may benefit its U.S. mills while simultaneously making Stelco’s Canadian exports to the U.S. less competitive.
For Stelco workers and Canadian policymakers, however, that split creates a significant question over how the company allocates production between its U.S. and Canadian operations while the tariff regime remains in place.
Confirmed, Contested and Still Unknown
| Issue | Status |
|---|---|
| Five-year employment undertaking exists | Confirmed by the Government of Canada’s 2024 approval statement. |
| Layoffs underway | Confirmed. |
| Up to 500 jobs potentially affected | Confirmed by Stelco’s announced plan. |
| Layoffs legally breach the undertaking | Contested — Ottawa says the commitments remain binding; Cleveland-Cliffs disputes that the layoffs constitute a breach. |
| Layoffs are temporary | Company position; timing of recalls has not been established. |
| Stelco formally for sale | No. Goncalves said he would consider a good offer, but no sale process has been announced. |
| Court action filed | Not announced as of October 12. |
What to Watch Next
Federal enforcement decision: The first major question is whether Ottawa proceeds from warnings and compliance demands to a formal court application.
Interpretation of the undertaking: If litigation begins, the treatment of temporary layoffs, transfers and the method used to measure employment levels could become central issues.
Worker recalls: Cleveland-Cliffs says the layoffs are temporary. Actual recall timing will determine whether that characterization develops into a short-term production adjustment or a longer-term restructuring.
Hamilton production: The future of Stelco’s cold-rolled and coated operations is now more important than the headline layoff count alone.
Canada-U.S. steel negotiations: Any change to the 50% U.S. tariff regime could materially alter the economics of Stelco’s Canadian operations.
Potential sale: Goncalves’ willingness to consider an offer is not a sale process, but any credible bidder would introduce another possible outcome for Stelco.
ScrapMonster Market Read: The most important question is no longer whether layoffs are happening — they are. The issue is whether Cleveland-Cliffs can temporarily reduce Stelco’s workforce while remaining compliant with a five-year undertaking to maintain employment. Ottawa and Cleveland-Cliffs have taken opposing positions, and the public version of the undertaking does not settle the measurement question. If the dispute reaches court, the outcome could matter well beyond Stelco because it would provide a real-world test of how employment promises attached to major foreign acquisitions are enforced when market conditions change after a transaction closes.
Sources: Innovation, Science and Economic Development Canada; Cleveland-Cliffs; Investment Canada Act; United Steelworkers; CBC News; The Canadian Press.
