Industry Minister Mélanie Joly has escalated a high-stakes confrontation with Cleveland-Cliffs, warning the Ohio-based steel giant that it faces financial penalties or the forced sale of its Canadian assets if it proceeds with plans to idle hundreds of workers at Stelco’s Ontario operations. The ultimatum marks a dramatic test of the Investment Canada Act’s enforcement teeth and signals the Liberal government’s willingness to wield statutory nuclear options to protect domestic industrial capacity.
The dispute centres on the $3.4-billion takeover of Stelco, approved by Ottawa in 2024 under a framework of legally binding undertakings. Those conditions required the new owner to maintain unionised headcount levels for a five-year term and preserve the vast majority of non-union positions. When Stelco announced on 28 September that it would lay off up to 500 employees in Hamilton and Nanticoke — blaming an uncompetitive galvanised steel market exacerbated by the trade war with Washington — Joly declared the move a breach of those commitments.
A statutory showdown
Speaking to reporters after a fireside chat at The Globe and Mail’s defence summit in the capital on Wednesday, Joly left no ambiguity about the government’s resolve. “Right now, a business decision or even a change in market conditions cannot be used to not follow the commitment,” she said. The minister confirmed her department is reviewing a formal response from Stelco, delivered by letter on Friday, but underscored that Section 40 of the Investment Canada Act places “everything on the table.”
That section empowers the federal court to impose financial penalties, compel compliance through injunctive relief, or order a forced divestiture — effectively compelling the sale of Canadian assets. It is a provision rarely invoked, and never before against a major North American steel producer. Joly’s decision to name-check it publicly constitutes a calculated escalation, designed to concentrate minds in Cleveland-Cliffs’ boardroom.
The company’s counter-narrative
Stelco’s rejoinder, signed by president and general counsel Paul Simon, leans heavily on textual interpretation. The company argues the undertakings did not explicitly prohibit layoffs, nor did they require static employment levels on every single day of the five-year window. Simon also invoked the government’s own guidelines under the act to buttress the position that the commitments have not been violated.
Cliffs chief executive Lourenço Gonçalves has added a geopolitical dimension to the defence. He has publicly offered to recall the laid-off workers immediately — provided Ottawa negotiates a “Fortress North America” trade pact with the United States. The 50-per-cent tariff Washington imposed on Canadian steel last year, Gonçalves contends, has destroyed the economics of exporting galvanised product south of the border.
Domestic safeguards deemed insufficient
Ottawa has not been idle on the trade file. In 2024, the government imposed tariff-rate quotas to curb the dumping of foreign steel into the Canadian market and mandated that publicly funded infrastructure projects prioritise domestic steel wherever feasible. Yet Gonçalves maintains these measures fall short. He argues that galvanised steel continues to flood the domestic market at dumped prices, undercutting Stelco’s cost structure and leaving the Hamilton and Nanticoke facilities exposed.
The standoff now enters a critical phase. Joly has signalled openness to a negotiated solution, but the clock is ticking on a file that has become a litmus test for the credibility of Canada’s foreign investment review regime. If the undertakings attached to the Cliffs approval can be interpreted away by corporate counsel, future investors may treat similar conditions as aspirational rather than binding.
Why it Matters
This confrontation transcends a single plant closure. It will define whether the Investment Canada Act functions as a genuine shield for Canadian workers and strategic capacity or merely a procedural hurdle cleared at signing. A government retreat would signal to every foreign acquiror that employment undertakings are negotiable after the fact; a court-ordered divestiture would establish a precedent that reverberates through every future cross-border deal in the resource and manufacturing sectors. For the 500 families in Hamilton and Nanticoke, the legal semantics are secondary — their livelihoods hang on whether Ottawa’s statutory bark matches its bite.
