Schnitzer Steel Industries, Inc. reported net income of $28 million on revenues of $604 million for the fiscal 2007 second quarter, and net income of $50 million for the six months ended February 28, 2007.

Second Quarter Results—The $28 million net income ($0.93 per diluted share) compares to net income of $21 million ($0.68 per diluted share) during the second quarter of fiscal 2006. Revenues of $604 million were 50% higher than revenues reported during the same period in 2006.

Year-to-Date results—Net income of $50 million ($1.60 per diluted share) compares to net income of $63 million ($2.03 per diluted share) for the comparable period in 2006. Included in fiscal year-to-date 2006 net income for the comparable period was a $34 million (after tax) first-quarter gain related to disposition of the Hugo Neu joint venture assets. Net income in 2006 was also reduced by an $11 million first-quarter charge related to a reserve taken for the estimated settlement of the SEC and Department of Justice investigations into the company’s past payment practices in Asia. Excluding the gain from the disposition of joint venture assets and the charge for the investigation reserve, fiscal year-to-date 2006 net income for the comparable period would have been $40 million ($1.30 per diluted share).

Comments—“We continue to be pleased with our strong operating and financial results,” said John Carter, President and CEO. “Net income in the second quarter improved by approximately 33% from both the prior quarter and last year as we continued to focus on increasing our asset utilization to take advantage of the strong markets in which we operate.”

“Our Metals Recycling Business substantially increased sales volumes and margins — the worldwide markets for scrap metal remain very positive, and our ability to ship directly to international markets from export facilities on both coasts remains a long-term competitive advantage. Our Auto Parts Business showed solid quarter over quarter and year over year improvement in financial results. Our Steel Manufacturing Business also posted good financial results despite the effects of normal seasonal slowdowns in the construction industry on the West Coast. We were encouraged by a pick-up in activity toward the end of the quarter, and the demand for steel in our markets appears to be high,” said Carter.

“Our overall operating performance was strong during the quarter,” said Chief Operating Officer Tamara Lundgren. “In the Metals Recycling Business, we saw good operational results from the two new mega-shredders installed during the first quarter, which helped increase our production and sales volumes. We look forward to the installation of similar equipment at our Portland facility this spring. In the Auto Parts Business, contributions from increased core and scrap sales offset some of the normal seasonal decline in admissions and parts sales. In the Steel Manufacturing Business, sales activity increased as customers reacted to announced price increases and we were able to offset some of the higher scrap price pressure on our margins by shifting production toward higher margin products.”

Steel Manufacturing Business—Revenues for the Steel Manufacturing Business were slightly higher than the first quarter of 2007 and 10% higher than the second quarter of 2006. Sales volumes, which were 4% higher on a quarter-over-quarter basis, more than offset a 2% decline in average net sales prices. While the steel industry experienced normal seasonal softness during the winter months, sales volumes accelerated during the latter part of the quarter as customer activity increased in anticipation of future price increases. On a year-over-year basis, both sales volumes and sales prices increased.

Operating income declined on both a year-over-year and quarter-over-quarter basis, primarily due to a narrowing of the spread between the net sales price/ton and the cost/ton of acquiring scrap metal for use in the company’s electric arc furnace. The Steel Manufacturing Business acquires 100% of its scrap at market prices through Schnitzer’s Metals Recycling Business.

Steel Manufacturing Outlook—The company expects demand for steel products to rise in the fiscal third quarter as West Coast construction activity increases. Based on recently announced price increases and current market conditions, the company believes average net prices during the quarter will be approximately 10% higher than the average prices obtained during the recently completed second quarter.

The company scheduled a six-week shutdown of one of its rolling mills beginning in early March for the installation of a new reheat furnace. In anticipation of the shutdown, the company built inventory during the second quarter to support the expected strong market demand. As a result, sales volumes during the third quarter are expected to approximate the volumes during the recently completed second quarter, while being lower than the 190,000 tons sold during the third quarter of 2006.

Rising scrap costs, lower volumes and one-time costs associated with the shutdown of the rolling mill during the installation of the new reheat furnace are expected to result in lower margins than those reported during the third quarter of 2006. Compared to the second quarter of this year, the company expects scrap costs to approximate the increase in net selling prices, although it notes that the potential exists for margin expansion if scrap price increases were to slow. Any benefit from these lower than anticipated raw material costs would be partially offset by the one-time costs noted above.

Schnitzer Steel Industries is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 32 operating facilities located in 11 states throughout the country, including six export facilities located on both the East and West Coasts and in Hawaii. The company’s vertically integrated operating platform also includes both auto parts and steel manufacturing businesses. With an annual production capacity of over 750,000 tons, the company’s steel manufacturing business—Cascade Steel Rolling Mills—produces finished steel products, including rebar, wire rod and other specialty products. The company commenced its 101st year of operations in 2007.