Canada Stelco Update

When we last checked in on the Stelco drama a week ago, Canada's Industry Minister Mélanie Joly had given Cleveland Cliffs CEO Lourenco Goncalves a deadline to "share" a plan to retain the Stelco workers for whin he'd announced layoffs. As of last Sunday,

Prime Minister Mark Carney also said last week that Ottawa will "use all powers that we have" against Cleveland-Cliffs as it pursues the Ohio-based company to the "fullest extent of the law."

Stelco Inc. said in a letter responding to Joly that the company will proceed with the layoffs and the government's characterization of the move as a breach of undertakings is "false."

So Goncalves said in almost as many words, "Go ahead and sue." Ottawa's response so far has been not to respond, and people are starting to notice, as we see in the YouTube video embedded above. A reportetr asks Jolie,

What is the government's timeline to either resolve this conflict with Stelco or to pursue legal action?

She responds, "It's a question of days," buit days later, there's still no response. The commentator goes on to characterize the situation as kabuki theatre, and I agree: Goncalves has been saying that if Canada resolves its trade dispute with t\he US, the solution to the problem is seen in the disappearance of the problem, but Carney and Joly are trying to create a distraction, putting up a brave stance to defend 500 jobs, while the dipute has already cost Canada 100,000.

Goncalves's legal position is twofold. First,

"There is no provision in the contract that I have to keep employment at a certain level every single day of the five years," Goncalves said on Sunday. "If that was an imposition of the Canadian government, I would not have accepted."

Goncalves reiterated Stelco's position that the layoffs are a temporary measure until Canada and the U.S. reach a trade agreement, and that the jobs will be restored.

Second,

The U.S. owner of Stelco says the Canada–U.S. trade war changed the conditions behind its employment commitments in Hamilton, Ont.

Goncalves said the ability to sell freely to American buyers was an "underlying condition" of the terms Cleveland-Cliffs accepted when it bought Stelco in 2024.

"I would not have acquired the Stelco if I knew that Canada and the United States would become what they became – enemies in trade," he said.

He made a similar case to Global News: "There's no market in Canada for the amount of galvanized steel we produce in Canada. We need to export… to the United States."

What neither Carney nor Joly seems to have gamed through in this dispute is that legal action against Stelco or Cleveland Cliffs will tie the case up in the courts for years -- the full force of the law may prevail, but it will be long after the hoped-for quick victory that Carney and Joly need. The historical outcome of such legal action isn't encouraging:

Here's what we know from the last time the federal government took the U.S. steelmaker to court.

In 2007, Pennsylvania-based U.S. Steel announced a deal to acquire Stelco, then a publicly traded company, for about $1 billion US, and the company was renamed U.S. Steel Canada.

Major foreign investments must benefit the domestic economy, per the Investment Canada Act. So, foreign buyers must give legally binding written commitments — called undertakings — to the federal industry minister to prove the deal provides a "net benefit to Canada."

At the time, U.S. Steel agreed to several such undertakings, including a three-year commitment to maintain Canadian employment levels, and increase steel production in Canada by at least 10 per cent.

However, when the 2008 financial crisis sapped global demand, U.S. Steel closed most of Stelco's Canadian operations and laid off over 1,500 employees.

. . . According to a summary of court filings compiled by a lawyer at Toronto-based Torys LLP, Stelco argued the undertakings only required compliance at the end of their three-year term, not before.

Stelco also said that per Industry Canada guidelines, its investors should not be held accountable for factors beyond their control, like the unfolding financial crisis.

. . . The attorney general of Canada formally withdrew the lawsuit in late 2011, ending in an out-of-court-settlement before the court could make a judgment.

In other words, the case languished in the legal system for three years, when the government withdrew the suit in favor of a settlment that was less than they wanted. But then that incarnation of Stelco went bankrupt anyhow. Carney's problem is that he needs to see quick results from his "elbows out" strategy, but he's put himself in the position with Stelco-Cleveland Cliffs that he starts out a loser with no way to fix the situation. It sounds like even Canadian media is beginning to wake up to this.