Ottawa has escalated its fight with Cleveland-Cliffs, the American owner of Hamilton-based steelmaker Stelco, raising the prospect of Stelco legal action within weeks. Industry Minister Melanie Joly said on October 22 that the company is still moving ahead with plans to lay off up to 500 workers in Ontario, and she gave it 15 days to live up to the commitments it made when it bought the business or face proceedings in court. Cleveland-Cliffs, which acquired Stelco in 2024, declined to comment to CTV News.
Joly delivered the warning in a letter to Stelco’s general counsel and in a statement posted on X. She said the company has repeatedly failed to demonstrate that it is complying with the undertakings it gave the federal government, and that the letter forms part of a legal process to put evidence on the record ahead of a possible court challenge.
Why Ottawa Is Threatening Stelco Legal Action
The dispute rests on the Investment Canada Act, the federal law that governs foreign takeovers of Canadian businesses. When a foreign buyer acquires a significant Canadian company, Ottawa can approve the deal on the condition that the purchaser makes binding commitments, known as undertakings, on matters such as employment, investment and corporate conduct. According to Joly’s letter, the undertakings Cliffs provided were essential to the transaction going forward.
One of those pledges was that Cliffs would be a strong advocate for policies benefiting both the American and Canadian steel industries. Joly has said that forcing the company to sell Stelco is “definitely on the table” if it does not meet its obligations. Divestiture is the most severe remedy available and would be an extraordinary step against a major U.S. industrial company, which underscores how seriously the government views the alleged breaches.
The Layoffs at Hamilton and Lake Erie
In September, Cliffs announced it would shut down part of its Ontario operations at the Hamilton and Lake Erie facilities, the latter located in Nanticoke, affecting up to 500 jobs. The company pointed to low steel prices and U.S. tariffs as the reasons. On October 5, 90 union members received layoff notices, and a union president said another 85 were expected by the end of the following week.
Stelco also asked Ottawa in October for relief from its employment commitments, citing what it described as unprecedented and escalating disruptions across the steel industry. Notably, the company reported its strongest quarter since the takeover only days ago, even as layoffs continued at the Nanticoke mill. That contrast is likely to feature prominently in any government argument that the cuts are not driven purely by financial necessity.
Tariffs and the CEO’s Comments
The broader backdrop is the trade war over steel. The United States has used Section 232 tariffs on imported steel and aluminum, with rates reaching as high as 50 per cent. Canadian steel exports to the U.S. fell to US$4.6 billion last year from US$7 billion in 2024, a sharp drop for an industry that has long depended on the American market.
Joly’s letter takes aim at the conduct of Cliffs chief executive Lourenco Goncalves. It says he testified before the U.S. Congressional Steel Caucus on January 14, 2026, endorsing Section 232 tariffs against Canada and taking credit for blocking Stelco’s sales into the United States. The letter also says he described Canada as a “steel dumping machine” and compared it to China and Brazil, and that Cliffs was the first signatory on a January 28 industry memo to President Donald Trump advocating steel levies. Goncalves has reportedly accused Canada of bullying and harassment over its threats against the company.
Political and Union Reaction
The Steelworkers’ national director backed Joly’s approach, and a local union president called the layoffs politically motivated. Not everyone is satisfied with the government’s handling, however. Ontario NDP Leader Marit Stiles warned of a very long legal battle and urged near-term support for workers who have already lost their jobs. Conservative MP Michael Guglielmin criticised what he called shifting timelines, noting that Joly had said only six days earlier that a resolution was days away.
Those concerns highlight a practical problem. Stelco legal action could take months or years to resolve, while laid-off workers and the communities around Hamilton and Nanticoke face immediate financial pressure. You can read more about Joly’s two-week ultimatum to Stelco and the evidence the government is assembling.
What It Means for Investors and the Steel Sector
For investors, the standoff is a reminder that foreign ownership of strategic Canadian assets comes with political risk. Investment Canada Act undertakings have rarely been enforced through the courts, so a contested case would be closely watched by any foreign company considering a Canadian acquisition. A tougher enforcement posture could reassure workers and communities, but it may also make some buyers more cautious about pricing deals or accepting binding conditions.
Cleveland-Cliffs shareholders face their own uncertainty. A forced sale of Stelco would be a significant disruption, and a protracted legal fight could weigh on management attention and relations with Canadian customers. For the broader Canadian steel industry, the case lands while producers are already grappling with high U.S. tariffs, lost export volumes and pressure to find new markets. Suppliers, transport companies and local businesses that depend on the Hamilton and Lake Erie operations are also exposed to the outcome.
What Comes Next
The 15-day clock means a decision point should arrive in early November. Cliffs could reverse or pause the layoffs, negotiate a revised set of commitments with Ottawa, or let the deadline pass and prepare to defend itself in court. The government, for its part, has signalled it is building an evidentiary record and is prepared to escalate if the company does not move.
Conclusion
Joly’s ultimatum marks one of the most aggressive uses of the Investment Canada Act in recent memory and sets up a high-stakes test of how far Ottawa will go to protect jobs at foreign-owned firms. Whether the threat of Stelco legal action pushes Cleveland-Cliffs to change course, or instead triggers a long courtroom fight, the outcome will shape the future of Ontario steelmaking and the rules foreign investors face in Canada.
