A bankruptcy court judge has approved a transition plan that will sever U.S. Steel Canada from its U.S. parent and has allowed the company to suspend health-care benefits for tens of thousands of retirees.

In a brief decision on Friday, Justice Herman Wilton-Siegal endorsed a plan for U.S. Steel Canada to form its own company to manage its Canadian assets. He also endorsed its request to suspend health-care benefits to 20,000 pensioners, and to allow a reprieve on paying property taxes.

The details will be known on Tuesday. But Gary Howe, president of United Steelworkers (USW) Local 1005, said his union is disappointed. It will meet with drug benefit providers and look at other options to cover the gap for pensioners, particularly those under 65 not covered the province's Trillium drug plan.

In the meantime, he said, "the real story is that 20,600 people will be without benefits that they've earned."

But the decision has greater implications for U.S. Steel Canada (USSC), which runs plants in Hamilton and Nanticoke. The company has been in bankruptcy protection under the Companies Creditors Arrangement Act (CCAA) since last September.

What happens to a stand-alone U.S. Steel Canada, and whether it can continue to operate, is still very uncertain.

Other options included putting the company in "hot standby" mode in the hope that conditions change, or declaring it bankrupt, said Marvin Ryder, a McMaster University professor.

Both Ryder and steel industry analyst Chuck Bradford told CBC Hamilton on Friday that selling the Hamilton operation in its current state is unlikely. It's more likely that it will be sold in pieces. The Nanticoke, with its pricey rolling mill, is a better candidate for sale, Ryder said. It may even be sold to U.S. Steel once it's separated from the Canadian company, or the corporation will get it as part of a "debt swap." All of these details are unknown.

But "in terms of buying and operating (in Hamilton), I don't mean to be the bearer of bad news, but it's not likely," Ryder said.

Howe said the steelmaker is locked into paying pension contributions at least until the end of the year. But he's not sure what will happen after that.

There's also no time period specified yet for how long the company will go without paying health-care benefits or property taxes. U.S. Steel Canada pays about $6 million in property taxes per year in Hamilton. The company employs about 2,200 people.

Mayor Fred Eisenberger of Hamilton said once the city hears more details, it will decide whether to appeal the decision. City taxes for the rest of the year amount to about $1.5 million.