Ottawa Threatens to Force a Stelco Sale. Cleveland-Cliffs’ CEO Says He Would Sell for a Good Offer.
Industry Minister Melanie Joly told the Canadian Club of Toronto on Friday, October 16 that Stelco’s owner Cleveland-Cliffs “must keep the jobs in Canada or face the prospect of having to sell their Canadian assets,” per CP24. Divestment of control is the heaviest order a court can make under the Investment Canada Act. It is also the one remedy Cliffs’ chief executive has already answered with a price.
The layoffs came first. Stelco said on September 28 it would indefinitely idle the cold rolled and coated operations at Hamilton Works, affecting up to 500 people, with United Steelworkers Local 1005 putting the number of steelworkers laid off at about 350, per SteelOrbis. On October 5 Joly gave the company five business days to produce a compliance plan. Cliffs replied on the deadline, rejecting the premise. Joly said on October 14 that “everything is on the table,” per CP24. Two days later she named the sale.
What Ottawa says was promised
Minister Champagne, then Minister of Innovation, Science and Industry, approved the takeover on October 30, 2024, and the ISED ministerial statement describes “a significant package of binding, five-year-long undertakings to support Cleveland-Cliffs’ net benefit case.” Six of them, each five years long. The one in dispute reads: “To continue to employ at least the same number of unionized employees and the vast majority of non-unionized employees as were employed when the transaction was announced.” The transaction was announced July 15, 2024. Another commits Cliffs to “Maintain Stelco’s head office in Hamilton, with responsibility for Stelco’s day-to-day operations.” The other four cover the Stelco name, existing collective agreements and pension commitments, capital and research spending, and a cap on greenhouse gas emission intensity.
The argument turns on the word “employ.” Cliffs’ October 9 reply, reported by Global News, says: “Your representation that Stelco’s planned layoffs cause it to breach its undertakings is false as the undertakings do not stipulate a commitment to avoid layoffs.” Lourenco Goncalves made the same point on CBC’s Rosemary Barton Live: “There is no provision in the contract that I have to keep employment at a certain level every single day of the five years. If that was an imposition of the Canadian government, I would not have accepted.”
That reading is not invented. When U.S. Steel bought Stelco Inc. in 2007, its employment undertaking was drafted with a headcount and an averaging convention, and the text is set out in the reasons of Prothonotary Milczynski in Canada (Attorney General) v. United States Steel Corporation, 2010 FC 1142, at paragraph 3: “Over the Term, the Investor will maintain an average aggregate employment level at the Canadian business of not less than 3,105 employees on a full time equivalent basis if the bar mill continues to be operated, or 2,790 employees on a full time basis if the bar mill is sold or closed.” An average aggregate level, measured across a term. That is the structure Goncalves claims for his own undertaking, and it is how the last employment undertaking at this mill was written. What ISED published is a six-bullet summary that says nothing either way about a number or an averaging convention. The operative text decides this and the summary cannot. The two sides also read the layoffs themselves differently: HR Reporter, on October 13, paraphrased a union president, Ron Wells, as noting that the company calls the cuts indefinite while the union treats them as temporary under the collective agreement.
Section 36 makes information gathered under the Act privileged, but subsection 36(4) carves out, among other things, two that matter here: “information contained in any written undertaking given to Her Majesty in right of Canada” on a net benefit investment, and at 36(4)(e)(iii) “any demand sent by the Minister under section 39” outside the national security stream. So the document that would settle this argument is one the Act does not stop the government from releasing. That removes the Act’s own privilege rather than compelling disclosure, and other statutes can still apply.
What the Act allows, and the order it allows it in
Step one is a demand under section 39, and it is not a formality. Where the Minister believes a non-Canadian “has failed to comply with a written undertaking given to Her Majesty in right of Canada” on a net benefit investment, the Investment Canada Act lets the Minister demand that the company “cease the contravention, to remedy the default, to show cause why there is no contravention of the Act or regulations or, in the case of undertakings, to justify any non-compliance therewith.” Subsection 39(3) sets the form: a demand “shall indicate the nature of the proceedings that may be taken under this Act” against the recipient if it fails to comply.
Note that final branch. The statute contemplates a company answering by justifying why it did not comply, and Cliffs’ commercial case is an attempt to use that door. Goncalves, in comments reported by Global News: “There’s no market in Canada for the amount of galvanized steel we produce in Canada.” Whether that is true is the factual question under the legal one, and the most recent read on domestic demand cuts both ways: our look at Canada’s August manufacturing sales found the series high came on price rather than volume. Section 39.1 is the off-ramp, letting the Minister “after the investment has been implemented, accept a new undertaking from the non-Canadian.”
Step two is court, and the sequence is fixed. Under s.40(1) an application on behalf of the Minister may be made to a superior court only where a company “fails to comply with a demand under section 39.” No demand, no application. On the public record there is a letter dated October 5 with a five business day deadline.
What a court may then order is broad. Section 40(2) lets it make any order the circumstances require, and the list runs from divestment of control on terms the court considers just and reasonable, through compliance with the undertaking and disposition of the acquired assets at paragraph 40(2)(f), to “a penalty not exceeding ten thousand dollars for each day the non-Canadian is in contravention.” Section 41 attaches to the disposition order rather than to divestment of control: where 40(2)(f) assets are owned by a non-Canadian outside Canada that misses the court’s deadline, the court may vest them in a trustee who may “do all such things and execute all such documents as are necessary to give effect to the order of the court.” And subsection 40(4) carries no figure at all: anyone who “fails or refuses to comply with an order made by a superior court under subsection (2) or (2.1) that is directed to them may be cited and punished by the court that made the order, as for other contempts of that court.”
What the penalty is worth, and what divestment is worth
The $10,000 is a ceiling a court sets within, not a tariff. At the ceiling a full year is $3.65 million. Cliffs reported revenue of $5,226 million for the three months ended June 30, 2026 in its Q2 Form 10-Q, which is $57.4 million a day. The maximum daily penalty is 0.017% of one day’s sales at that rate, and a full year at the maximum is about 90 minutes of them. The quarter itself was a loss: $134 million at the group, and $145 million attributable to Cliffs shareholders, the larger figure because $11 million of net income in the period was attributable to noncontrolling interests. The loss is real. The penalty is not what caused it.
That is a statement about the penalty the Act names, not about Cliffs’ exposure. Once a compliance order exists, subsection 40(4) puts the company in front of a contempt power with no stated maximum. And the section 40(2) remedies are not a closed list: at paragraph 14 of 2010 FC 1142, Prothonotary Milczynski called the section 40 power “broad,” and said the court “may make any order or orders as, in its opinion, the circumstances require and is not limited by the options set out in subsections 40(a) through (g) of the Act.” That is an observation in reasons for order on a motion to amend rather than a ruling after a merits hearing, and the same paragraph describes the Crown’s position as “perhaps ambitious.” The proposition does not depend on it: subsection 40(2) lets the court “make any order” the circumstances require, and qualifies its own list with the words “without limiting the generality of the foregoing.” The named penalty is immaterial to a company this size. Divestment, contempt and an open-ended remedial power are not.
Divestment is the other story. Cliffs’ FY2025 Form 10-K puts the total purchase consideration for Stelco at US$3,208 million on page 72: $2,450 million of cash, $343 million of share exchange, struck on a Cliffs share price of US$13.27 at the November 1, 2024 closing date, and $415 million of debt repaid at closing. Strip the debt and the equity portion was US$2,793 million. Beside a market capitalisation of US$6.91 billion at Friday’s close, per StockAnalysis, those November 2024 prices are 46% and 40% of Cliffs’ current market capitalisation. The stock closed at US$12.12 on October 16, 8.7% lower on a share price comparison rather than a total return. How the price was allocated is what a forced sale would test: net identifiable assets acquired of $2,406 million, holding $1,025 million of intangible assets and $1,282 million of property, plant and equipment, with $802 million of goodwill on top. So $1,827 million of the $3,208 million, 57% of it, bought customer relationships and expected synergies rather than hard assets.
How much of Cliffs is at stake is answerable from the same filing. Its geographic note reports revenues “based on product destination,” which is not the same as revenue produced in Canada: on that basis Canada was $2,071 million of $18,610 million in FY2025, or 11.1%, against 5.6% in FY2024 and 4.8% in FY2023. Net property, plant and equipment by location is location-based, and there Canada was $1,307 million of $9,481 million in FY2025, or 13.8%, after $1,319 million in FY2024 and $78 million in FY2023. That step from $78 million to $1.3 billion is the Stelco acquisition arriving on the balance sheet. Canada is roughly a seventh of Cliffs’ net fixed assets and roughly a ninth of its revenue by destination. Material, and not existential, which is what makes the answer Goncalves gave on CBC, asked whether he would consider selling Stelco, a sentence a chief executive can afford to say: “For a good offer, yes.”
What happened when Ottawa took these sections to court
U.S. Steel bought Stelco Inc. in 2007 with undertakings on production and employment, and in July 2009 the Government filed an application in Federal Court, file T-1162-09, seeking an order requiring compliance. Where that put the court is recorded at paragraph 14: “It is the first application brought by the AG of Canada under sections 39 and 40 of the Investment Canada Act, and the power of the Court under section 40 of the Act has never been exercised.” That was written on November 15, 2010, in reasons for order on a motion the Attorney General had filed that October to amend its notice of application.
U.S. Steel attacked the machinery itself, arguing that sections 39 and 40 breached procedural fairness rights and that the Canadian Bill of Rights, a quasi-constitutional statute rather than part of the Constitution, gave it recourse against inconsistent federal legislation. That challenge failed in the Federal Court (2010 FC 642, June 14, 2010) and again in the Federal Court of Appeal (2011 FCA 176, May 25, 2011), and the Supreme Court of Canada dismissed the application for leave with costs on November 24, 2011. Leave being refused, it never heard the case and decided nothing on the merits.
The more useful lesson is about time. At paragraph 4 of the same reasons the prothonotary recorded that “at the time the application was commenced, only fifteen months remained in the Term,” and that the challenge, “which the AG of Canada agreed was a ‘stand alone’ or ‘freestanding’ challenge and should be decided first as a preliminary matter, sealed the fate that this application could only be heard after the expiry of the Term. That motion was filed in October, 2009, heard in January, 2010 and dismissed on June 14, 2010.” The enforcement application outlived the obligations it was brought to enforce.
Measured end to end, that case ran about twenty-nine months, from an application filed in July 2009 to the settlement of December 12, 2011. Run the same span forward from the October 5 letter and it reaches into 2029, which is also when five-year undertakings dating from 2024 expire, on any start date in that year. Cliffs has a longer runway than fifteen months by some margin, and on that arithmetic the runway and the precedent’s duration are roughly the same length. That is arithmetic on how long the last one took. It is not a prediction about this one, which has not begun.
A demand was issued in that case, and the fight was over how far it reached. At paragraph 8 the prothonotary recorded U.S. Steel’s position that the Crown’s proposed amendments “require a new Demand to be issued under section 39 of the Investment Canada Act, as the first (and only) Demand was, according to U.S. Steel, solely in respect of the first year of the Term.” That is a party’s position as the court set it down, not a holding. Paragraph 9 is the answer to it, and it goes two ways at once. On the motion record, the original demand and the original notice of application “clearly refer to the entire Term and seek remedial action or an order covering the entire Term to ensure the Production and Employment Undertakings are satisfied in their entirety.” But whether the demand “was premature, valid only for year one of the Term and whether a fresh Demand for years two and three are required are already matters in issue under the application as originally drafted,” and they were “matters that should be left to the judge hearing the application.” Scope went Ottawa’s way on the record in front of her. Validity was left for a hearing the settlement removed.
The same paragraph holds the sentence that reads most directly onto this week. “It also appears from this motion that the parties may not share a common understanding of what the Production and Employment Undertakings mean and what actually was required of U.S. Steel over the Term to satisfy them.” That was written in 2010, about this mill, about an employment undertaking. The argument now running over what “employ” obliges Cliffs to do is the same disagreement in a new document, and the last time a court was asked to resolve it, it said the question belonged to a merits hearing.
The same argument went up to the Court of Appeal, which in 2011 FCA 277 found at paragraph 7 that the appellant was “essentially reasserting its interpretation of the Act, an interpretation that both the Prothonotary and the Federal Court found worthy of full debate.” It dismissed the appeal from the bench on October 6, 2011 without anyone deciding the point. Which is why the form of the October 5 letter matters.
Then, on December 12, 2011, the Government settled. Industry Minister Paradis announced new and enhanced undertakings covering continued steel production in Canada, operation of both the Lake Erie and Hamilton plants through 2015, further capital investment and community funding in Hamilton and Nanticoke. No penalty was imposed, and the outcome was a renegotiated undertaking, which is the section 39.1 route. None of that forecasts this case. It is what the machinery produced the one time it was used.
What is being idled, and what the filings show in Ontario
What Stelco said it would idle is the cold rolled and coated operations at Hamilton Works, which is narrower than Hamilton Works, and the 10-K’s own tables show why the distinction carries weight. In the raw material table, Hamilton and Lake Erie each carry 0.7 million net tons of coke capacity, two of five cokemaking facilities the filing gives “an aggregate annual rated capacity of 4.0 million net tons.” On that line Hamilton is a cokemaking site on the same scale as Lake Erie. In the raw steel processing and finishing table, Ontario configured capacity sits at Lake Erie, 2.5 million net tons. So what has been idled is a set of finishing lines at a site the same filing also lists among the company’s five coke plants.
Joly said that “Stelco’s Hamilton plant produces steel essential to our advanced manufacturing industrial base,” and the filing’s configuration is worth reading beside that rather than against it. Coated steel feeds vehicle production, and that customer base is in a labour fight of its own this weekend as Unifor’s strike vote at Stellantis opens. Our piece on the Stellantis strike vote and Canadian auto exposure sizes the listed side of that supply chain through Magna, Linamar and Martinrea.
What Cliffs’ own filings say
The FY2025 Form 10-K, filed February 9, 2026, carries a risk factor headed “We continue to face ongoing risks arising out of the Stelco Acquisition.” Its fourth bullet, on page 21, reads: “our ability to satisfy our operational, employment, environmental, charitable or other undertakings made to the Canadian government.” The words “Investment Canada” appear zero times in that 10-K and zero times in the Q2 2026 10-Q, and Cliffs’ most recent Form 8-K is dated July 24, 2026. None of that is a failing: an Item 8.01 current report is discretionary, and a 10-Q does not restate risk factors unless they materially change. It is simply what an investor can and cannot read today, and the Q3 report on Monday, October 19, before the US open, is the first periodic filing to land since any of this became public. A reader who would rather check that undertakings bullet than take our word for it will find it on EDGAR rather than SEDAR+, because Cliffs is a US filer, and our guide to how to research a stock covers where company filings live and which form carries what.
The sharpest document in this dispute, though, is the one the company filed itself on July 23, 2026. The Q2 10-Q sets out management’s own account of the Canadian market, and it is forward-looking. It opens: “The Canadian steel industry is also an important market for us.” It then describes global overcapacity and unfair trade practices “resulting in the dumping of steel in Canada at below market value,” which “contributed to weakened results for our Canadian operations in 2025,” before turning to the remedy: Canada imposed tariff-rate quotas in the second half of 2025, and in the second quarter of 2026 the Department of Finance announced “the extension of the tariff-rate quota regime through June 2027.” Then the expectation. “We expect these tariff-rate quotas to help support a healthier Canadian steel industry and allow Stelco to generate improved margins throughout 2026 and beyond.” The paragraph closes on two more sentences: “During the first half of 2026, the Canadian steel industry experienced lower than historical import levels, indicating an improving Canadian steel market,” and “We believe it is crucial for Canada to strengthen measures in place to protect its domestic steel industry in order to preserve the Canadian economy and national security.”
That is not a passage about 2025 results. “Throughout 2026 and beyond” is the period now in dispute, and the paragraph asks Ottawa for more protection of the Canadian industry, not less. Sixty-seven days after that filing, on September 28, Stelco said it would indefinitely idle the cold rolled and coated operations at Hamilton Works. In October, Goncalves said there is no market in Canada for the amount of galvanized steel the company produces in Canada. Both accounts are the company’s and both are on the record. A producer can expect better margins at Stelco overall and still find one product oversupplied, so the two are not flatly irreconcilable. What narrows the gap is which lines went down: the coated and cold rolled operations, which make the product he says has no market, at the business whose margins the filing expected to improve.
This is where the filings stop being background and become evidence. The justification branch of section 39(1) lets a company answer a demand by justifying non-compliance, and Cliffs’ answer is commercial: the Canadian market cannot absorb what Hamilton makes. Anyone weighing that justification, at the Minister’s desk or later in a courtroom, will have to reckon with the account Cliffs filed in July, a document of the company’s own making.
The listed Canadian comparable, and two different instruments
Stelco is private now, inside a NYSE-listed parent, so the listed Canadian way into this sector is Algoma Steel Group, Canadian-headquartered and listed on both the TSX and Nasdaq. It closed at C$5.71 on Friday, down 1.55%, with a market capitalisation of C$602.32 million, per StockAnalysis, and it reports on October 28. At the Bank of Canada’s USD/CAD rate for the same day, 1.4154, that is about US$425 million, so Cliffs is about 16 times its market capitalisation.
The treatment has differed. On September 29, 2025, Finance Canada announced a term sheet for $400 million to Algoma through the Large Enterprise Tariff Loan facility, with Ontario adding $100 million on matching terms, to help it “continue operations” and “limit disruption to its workforce.” One is lending and one is a penalty, so the two are not comparable in economic value. But a $500 million support package went to the Canadian-headquartered producer, and what Stelco’s US parent is facing is a threatened court application.
Both producers sell into the same tariff-rate quota regime, the one Cliffs’ own July filing said it expected to improve Stelco’s margins throughout 2026 and beyond. Ottawa met one of them with a $400 million loan facility, and Ontario added $100 million on matching terms. Ottawa is meeting the other with the heaviest remedy in the Investment Canada Act. Algoma puts its own numbers for the quarter on the table on October 28, the same day as the Bank of Canada’s rate decision.
What to watch in Monday’s filing
The quarter ended September 30, two days after the idling announcement and five days before Joly’s letter, so the escalation sits outside the period the numbers cover and inside whatever the company chooses to say about events after it. Three things in the filing are checkable against what is already public. Whether the undertakings bullet in the Stelco Acquisition risk factor still reads as it does on page 21 of the February 10-K. Whether the Canadian market commentary still reads as it did in July, with the expectation of improved Stelco margins throughout 2026 and beyond intact. And whether anything is put on the record, in the document or on the call, about a demand under section 39.
Market data as of the October 16, 2026 close, from StockAnalysis. Company financials are from Cleveland-Cliffs’ FY2025 Form 10-K and Q2 2026 Form 10-Q, and court passages from the Federal Court, Federal Court of Appeal and Supreme Court of Canada records, as cited.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. The text of the Investment Canada Act, including sections 36, 39, 39.1, 40 and 41, is quoted from the Justice Laws consolidation current to September 30, 2026 and last amended on September 3, 2024. The undertakings and their wording come from the Minister of Innovation, Science and Industry’s own statement on the Investment Canada Act review of the acquisition, dated October 30, 2024, which publishes them as a six-point summary rather than as the operative text. The 2009 to 2011 litigation history is taken from the courts’ own records: Federal Court file T-1162-09, the Federal Court of Appeal’s reasons in 2011 FCA 277, and the Supreme Court of Canada docket 34389, which records leave to appeal dismissed with costs on November 24, 2011. The 2011 settlement is described from Industry Canada’s news release of December 12, 2011. Every Cleveland-Cliffs financial figure is from the company’s own filings with the US Securities and Exchange Commission, the Form 10-K for the year ended December 31, 2025 filed February 9, 2026 and the Form 10-Q for the quarter ended June 30, 2026 filed July 23, 2026, with the filing and page named at each figure. The counts of how many times a phrase appears in those filings are our own, run over the full text of each document. Share prices and market capitalisations are from StockAnalysis and are closing values for October 16, 2026, and the Canadian dollar conversion uses the Bank of Canada’s USD/CAD rate for the same day. Percentages comparing one of these figures to another are our arithmetic on the figures as reported. The November 2024 purchase consideration is a historical transaction price set beside an October 2026 market capitalisation, and the share price comparison between the November 1, 2024 closing date and October 16, 2026 is a price comparison and not a total return. The September 28 announcement date, the five business day deadline and the Local 1005 estimate of 350 steelworkers are reported by SteelOrbis; the quotations from Cleveland-Cliffs’ October 9 reply and from its chief executive are reported by Global News and by CBC, whose Rosemary Barton Live carried the interview; the Minister’s remarks of October 14 and October 16 are reported by CP24.
