Industry Minister Mélanie Joly warned that American steelmaker Cleveland-Cliffs could face severe financial penalties or forced divestment under the Investment Canada Act if it proceeds with layoffs at Stelco plants in Hamilton and Nanticoke, Ontario.
The Bottom Line
- Divestment Risk: Ottawa is reviewing legal pathways under Section 40 of the Investment Canada Act, which could lead to financial penalties or court-enforced compliance orders.
- Trade War Pressures: Stelco defends the job cuts by citing a 58 per cent plunge in cold-rolled and coated steel exports to the U.S. following a tariff imposed last year.
- Political Fallout: While the federal government weighs court filings and financial penalties, opposition leaders have called for the nationalization of the steelmaker.
Investment Canada Act Commitments Under Scrutiny
These mandated maintaining at least the same number of unionized employees in Canada for five years, alongside the vast majority of non-unionized staff. On Sept. 28, however, Stelco announced it was idling parts of Hamilton Works and moving forward with hundreds of job cuts, arguing that market conditions and U.S. tariffs make domestic production unsustainable. The company also expects layoffs to occur at its Lake Erie Works in Nanticoke, Ont.
Minister Joly told reporters in Ottawa that business decisions and shifting market conditions cannot override legally binding undertakings. According to The Globe and Mail, Joly stated that everything is on the table, including Section 40 of the Investment Canada Act, which provides mechanisms for financial penalties, court-enforced compliance orders, and forced divestitures. Joly had previously warned she would invoke the “full force of the law” to enforce the agreement, adding that Stelco has “explicitly chosen not to seek support” from federal programs intended to maintain operations and preserve jobs. Stelco management countered that government offers of financial aid did not address the root causes of the decision to idle facilities.
The Trade Conflict Driving Stelco Layoffs
Stelco president and general counsel Paul Simon outlined the company’s defense in a seven-page letter sent to Ottawa on Friday, Oct. 9, 2026. Simon argued that Stelco is not in violation of its commitments, noting that the undertakings did not guarantee zero layoffs on every single day of the five-year period. The company reported that Canadian exports of cold-rolled and coated steel to the United States fell by 226,000 tonnes in the second quarter of 2026 compared to 2024 pre-trade-war averages. Domestic demand for these products has declined by 10 per cent due to broader industrial disruptions.
Cleveland-Cliffs CEO Lourenco Goncalves has maintained that the U.S. tariff on Canadian steel renders profitable sales into the American market impossible. While Goncalves indicated he would immediately call back laid-off workers if Ottawa and Washington negotiate a “Fortress North America” trade pact, he also argued that existing domestic trade protections are inadequate against foreign steel imports that account for 45 per cent of the domestic market share. The company announced 300 to 350 layoffs at the Hamilton plant alone.
Political Opposition and Calls for Nationalization
The standoff has drawn intense political friction beyond the cabinet room. As reported by the Canadian Broadcasting Corporation (CBC), federal NDP Leader Avi Lewis and Ontario NDP Leader Marit Stiles called on the federal government and the provincial government to nationalize Stelco, pointing to recent public takeovers of steelmakers in the United Kingdom. Lewis stated that if the government is serious about saving the industry, it requires “immediate action.” Stiles urged Ontario Premier Doug Ford to push for the establishment of public ownership and Canadian management. Prime Minister Mark Carney has stated he will take appropriate action after reviewing the company’s response to the minister’s ultimatum.
Historical precedent exists for such federal interventions; Ottawa previously filed a lawsuit against U.S. Steel in 2009 following similar post-financial-crisis layoffs under prior ownership, which ultimately led to an out-of-court settlement before that foreign owner sought creditor protection. In 2018, the federal government also purchased the Trans Mountain pipeline from a private company, a move cited as an example of taking on major infrastructure.
Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute financial advice.
