Hamilton’s storied steel manufacturer Stelco is being purchased in a $3.8-billion deal by one of the largest steel producers in the U.S.
As part of the proposed deal, U.S. industry titan Cleveland-Cliffs Inc. has promised to maintain Stelco’s name, Hamilton headquarters and unionized Canadian workforce.
The local union for Hamilton steelworkers sounded wary about the plan Monday, however.
Ron Wells, president of United Steelworkers Local 1005, noted the job guarantees are “promises we have heard before” from the last American steel giant to buy the company, U.S. Steel in 2007 — which thereafter laid off hundreds of workers, cut production and permanently shuttered the Hamilton location’s remaining blast furnace.
The steelmaker’s current owner and turnaround specialist, Alan Kestenbaum, bought the company out of creditor protection in 2016, resurrected the Stelco name and returned it to profitability.
In a note to employees circulated by email, Kestenbaum called the incoming owner “labour-friendly.” The international United Steelworkers body also gave the deal a thumbs up.
“I want to be hopeful, but given our past experiences we are concerned about it,” said Wells, who heads United Steelworkers Local 1005 and represents 600-plus workers at Stelco’s Hamilton coke plant and steel-finishing plant. “If there is a downturn in the business, are they going to keep us going? Or do they idle (Canadian plants) first?
“For us these are serious questions … Hopefully in the end it is good news, but there remains the possibility it could be bad.”
Stelco announced early Monday in a release that Cleveland-Cliffs Inc. has entered into an agreement to buy the Hamilton-based steel company for $70 per share, or about $3.8 billion in cash and stocks.
The deal is still subject to a shareholders vote in the fall — as well as a federal review under foreign takeover rules.
Cleveland-Cliffs describes itself as the largest producer of flat-rolled steel in North America. It is routinely a top-five producer of steel by tonnage in the U.S.
In a call with investors Monday, CEO Lourenco Goncalves said he expects the deal to eventually save $120 million a year — but not by shrinking the workforce. He conceded some leadership changes are inevitable, but added the company will retain a “Canadian management team.”
“I want to say loud and clear, we know what you have gone through under previous ownership (by U.S. Steel) … We are not going to disappoint you,” he said in a message directed at Stelco’s nearly 2,200 workers in Hamilton and at Nanticoke. “We have committed to no layoffs.”
No one from Stelco was available to answer questions from The Spectator on Monday.
But in his message to workers, Kestenbaum said Cleveland-Cliffs has agreed to “several critical undertakings that will protect our employees and our communities,” including agreements:
- to keep the Stelco name, its Hamilton headquarters and continue plans to invest $60 million in Canadian facilities over the next three years;
- to maintain research relationships with McMaster University and the federal CanmetMATERIALS lab;
- to remain ownership partners with Hamilton Tiger-Cats and Hamilton Forge FC;
- to increase “overall charitable support” by $2 million a year.
By email, Mayor Andrea Horwath called the legacy of Stelco and its workers in the city “immense,” adding she is pleased to hear company will “maintain local Hamilton headquarters, operations and partnerships.”
Steel industry expert Peter Warrian said the proposed sale is just the latest significant — and potentially politically controversial — “consolidation” move in the North American industry. For example, American politicians have threatened to block the proposed sale of U.S. Steel Corp. to Japan’s Nippon Steel.
Warrian noted the sale of Canada’s largest steelmaker will trigger a foreign investment review by the Canadian government that “will likely have political overtones.”
He noted the sale to U.S. Steel in 2007 resulted in court action against the steelmaker for allegedly reneging on jobs and production promises. The mess infuriated workers, local politician and union leaders. “They haven’t forgotten that,” Warrian said.
In his conference call, Goncalves expressed optimism that the Canadian government would approve the sale, adding the company has a “legal strategy to get this thing done and done fast.”
Stelco was formed in Hamilton in 1910 — but the name briefly disappeared when the company was purchased by U.S. Steel for about $1.1 billion.
Bedrock Industries, headed by Kestenbaum, rescued the restructuring company out of creditor protection in 2017 for about $500 million and resurrected the Stelco name.
Since then, Stelco has sold most of its sprawling historical steelmaking site on the bayfront to developer Slate Asset Management, but with an agreement to lease back its remaining operational facilities.
It’s not yet clear if the new owner wants to continue making coke on the Hamilton bayfront in the long-term. Lease agreements obtained by The Spectator in 2022 suggested Stelco expected to demolish the polluting coke plant by 2029 at the latest.
