Industry Minister Mélanie Joly sent a demand letter to Ohio-based Cleveland-Cliffs on Thursday alleging the company is violating binding commitments it made to Canada when it acquired Stelco in 2024, and warning that legal action — including a potential court-ordered divestiture — could follow if the company does not comply.

The letter, obtained by Radio-Canada and reported by CBC News, says the federal government may apply to a superior court under Section 40 of the Investment Canada Act if Cleveland-Cliffs fails to meet the demand. Joly said the government would seek monetary penalties and potentially direct the company to sell its Canadian assets.

"Let me be clear: no act of God or change in market conditions can relieve Cleveland-Cliffs of the commitments it made to Canada. Those commitments are not optional," Joly said, in a statement posted to X on Thursday.

Cleveland-Cliffs said late last month it plans to lay off as many as 500 workers as it idles certain steel production at Stelco. The federal government has said the company's 2024 purchase of Stelco included promises to employ at least the same number of unionized workers and the vast majority of non-unionized employees as there were when the deal was announced, with those obligations running through 2029.

Those undertakings were approved by then-Industry Minister François-Philippe Champagne under the Investment Canada Act. In an Oct. 30, 2024 news release, Champagne said the approval was contingent on binding five-year commitments, including maintaining Stelco's head office in Hamilton and honouring all collective bargaining agreements and pension commitments.

Stelco's president and general counsel, Paul Simon, pushed back in a letter to Joly earlier this month. "Your representation that Stelco's planned layoffs cause it to breach its undertakings is false," Simon wrote, according to CBC News.

Cleveland-Cliffs chief executive Lourenco Goncalves said Monday that "third quarter was Stelco's strongest ... since we acquired the company two years ago" and that "the Canadian hot-rolled market has improved substantially."

Conservative MP Ned Kuruc, who represents Hamilton East-Stoney Creek, called on the government to take the matter to court. "The Liberals are saying they have an ironclad contract, Minister Joly said today not even an act of God can release them from that commitment. OK, I accept that. Let's go to court," Kuruc said, according to CBC News.

Joly said Thursday she remains open to talks. "I remain prepared to sit down with Cleveland-Cliffs to find a solution. But our bottom line is clear: protect Canadian jobs, defend our steel industry and ensure that commitments made to Canada are respected," she said in her statement.

The federal government sued Stelco's previous owner, U.S. Steel, in 2009 over job protection commitments; that case settled out of court in 2011.

No formal news release from Innovation, Science and Economic Development Canada accompanying the demand letter had been posted to canada.ca as of Thursday.

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