Stelco, the Canadian subsidiary of Cleveland-Cliffs Inc., has written to Prime Minister Mark Carney's government stating it will move ahead with layoffs affecting hundreds of workers, potentially triggering a legal battle, while Ottawa made clear on Saturday it will not back down.

According to the letter, Stelco told Canadian Industry Minister Melanie Joly that the planned layoffs near Toronto do not violate the company's 2024 commitment to maintain its unionized workforce. The letter characterizes tariffs and the U.S.-Canada trade war as events beyond the company's control.

The letter, dated October 9, was authored by Stelco President and General Counsel Paul Simon, who wrote: "External factors have dealt a tremendous blow, and if Stelco continues producing cold-rolled and coated steel products, it will suffer unsustainable losses. We will proceed with shutting down the Hamilton facility."

Melanie Joly's office confirmed it had received Stelco's letter and stated that Ottawa will not compromise. Her spokesperson, Mathis Denis, said the Canadian government "still requires Stelco to honor its legally binding commitments to workers" and does not accept the company's justification for proceeding with layoffs.

Denis stated: "These commitments are obligations made under the Investment Canada Act and do not become void due to changes in business strategy or market conditions."

This week, the minister threatened legal action against Cleveland-Cliffs, and Carney described the layoffs at the Hamilton and Nanticoke facilities as a "betrayal" of workers.

When Cleveland-Cliffs acquired Stelco, it committed to maintaining the subsidiary's employment levels and explicitly guaranteed at least the same number of unionized positions. The company said this week that the trade war between the U.S. and Canada, including a 50% tariff on steel, constitutes a change in circumstances.

The letter states that Stelco will continue operating the Lake Erie facility as well as another site in Hamilton, and will maintain staffing levels at its local headquarters.

Simon wrote: "No one could have anticipated the subsequent U.S. tariffs, let alone their impact and the chaos they have caused." He said the tariffs constitute a change in circumstances that "may render the relevant obligations unenforceable or subject to renegotiation."