Canada Gives Cleveland-Cliffs 15 Days to Address Stelco Employment Commitments
Key Facts
Canadian Industry Minister Mélanie Joly gave Cleveland-Cliffs 15 days to address what the government describes as breaches of its commitments in the Stelco acquisition, with possible recourse to the courts, according to an iPolitics report on October 22. The government says the commitments tied to the deal impose employment obligations, while the company denies violating them and says it is in compliance. The deadline does not amount to a court ruling or penalty; no order to sell assets or other final measure of that kind has been issued so far. Options the government could ask a court to impose include penalties that could extend to a forced sale of assets. The dispute centers on how employment levels are calculated and whether current layoffs conflict with the binding commitments that accompanied Cleveland-Cliffs’ acquisition of Stelco.
Cleveland-Cliffs said in a statement issued on October 26 that 175 workers in Hamilton had been temporarily laid off and that it had requested a meeting to discuss their path back to work. The figure represents the workers temporarily laid off so far, according to the company, while 500 remains the maximum number expected to be affected by the workforce reduction plan, not the number already told they would be laid off. In its current report, the company expects average employment to reach 627 full-time equivalent employees, compared with a required threshold of 603. The company cites this average to support its position that it will meet its employment commitment, while the government’s demand centers on addressing the alleged breaches and honoring the commitments. The union said, according to Global News, that only 40 jobs had been offered to affected workers at the Lake Erie facility.
Canada approved Cleveland-Cliffs’ acquisition of Stelco in October 2024, subject to meeting legally binding employment commitments for five years, according to the Associated Press. Joly says the commitments included maintaining employment levels through 2029, as well as defending Canada’s exemption from U.S. tariffs on steel, facilitating shipments, community donations and co-op training opportunities. According to Global News, the agreement set the combined annual average employment of unionized employees at a minimum of 1,766, a level equivalent to the average full-time equivalent employment during the twelve months ended June 30, 2024. It also stipulated retaining at least 90% of the prior annual average employment of non-unionized employees. The company says the commitments do not prevent layoffs or require it to reach a specified employment level on every day of the five years, a difference in the interpretation of the annual obligation that lies at the heart of the dispute.
Stelco links the workforce reduction plan to market pressures, with the company attributing the layoffs to U.S. tariffs, weak demand for Canadian steel and competition from imports, according to a Canadian Press report. The company told employees in a memo that demand in the markets it traditionally serves fell by about 25% in the second quarter compared with the average for the quarters in 2024, with a 10% decline in Canada. Company President Lourenco Goncalves also said that operating galvanized steel production at between 50% and 55% capacity is neither efficient nor profitable. The United States imposed tariffs of 50% on Canadian steel amid an escalating trade dispute between the two countries, according to the Associated Press. Prime Minister Mark Carney said the government had offered money to help preserve jobs, adding that it has legal commitments it intends to enforce to the fullest extent permitted by law.
Goncalves said he hoped to bring the laid-off workers back before Christmas if a plan to increase Canadian sales succeeds. In another statement, he linked the workers’ return to a trade deal that would allow the company to produce and sell galvanized steel again. Cleveland-Cliffs is expected to submit an update to Stelco’s compliance report after the current reporting period closes on October 31, as required by the Investment Canada Act. The company’s shares, listed under the ticker CLF, closed at $13.94 on October 28, according to EL7 data. It remains unclear whether the government will go to court after the deadline or how it will assess the next compliance report.