Stelco Inc.’s court-appointed Monitor has filed its Eighteenth Report regarding the company's Court-supervised restructuring. The Report outlines production and shipping data for Stelco’s segments as well as information on cash flow and forecasts; pension plan and OPEB information. The Report also includes an update on Stelco’s capital raising process, including the sale of Plateco, and an update on the claims procedure. In addition, the Report notes Stelco’s intention to request an extension of the stay period.

Production and shipping — In its report, the Monitor provides a summary of semi-finished steel production and product shipments by each segment of Stelco’s operation. Stelco estimates that its integrated steel business (Hamilton and Lake Erie facilities) produced 4,473,000 net tons of semi-finished steel during 2004. This compares to the 4,286,000 net tons produced during 2003. Shipments from the integrated steel business are estimated at 3,975,000 net tons, which compares to the 4,158,000 net tons shipped during 2003.

Cash Flow Results and Forecasts — The Report indicates that Stelco has entered into contracts for in excess of 50% of its expected shipments in 2005. As a result of improved market conditions, the pricing on these contracts is on average 30% higher than on comparable contracts during 2004. The Monitor indicates that this should help Stelco to improve its cash flow from operations over the coming months. The Monitor also reports the company's belief that it will be able to generate net cash flow and improve its liquidity during 2005 based on continued strength in the market and higher prices generated through its contract business for. The appendices to the Report contain the cash flow forecasts prepared for the company covering the period January 29, 2005 to April 29, 2005.

Other Financial Information — The Report states that Stelco will not be in a position to issue audited financial statements in the near future because of uncertainties surrounding the restructuring process. However, the Monitor notes that Stelco has indicated that it may be in a position to pre-announce certain preliminary unaudited operating results for the fourth quarter of 2004 before the end of this month. At that time, the Monitor notes, Stelco may also provide an indication of the financial forecast for 2005. In the meantime, and to address stakeholder requests, the appendices to the Report provide certain business, financial and pension information prepared by the company with the Monitor's assistance regarding Stelco's integrated steel business. Information in these appendices dealing with 2004 has been estimated by Stelco based on actual results for the first three quarters and projected results for the fourth quarter of the year. Selected information for 2005 was assembled from the company's business plan and projections for 2005.

Information contained in Appendix K to the Report includes:

• Total steel shipments for the integrated steel business are forecast to be 4,130,000 net tons in 2005.
• The number of employees in integrated steel and corporate operations is forecast to be 5,258 by the end of 2005, compared to 5,499 in early January 2005 and 6,236 in 2003.
• The company's proposed essential capital expenditures (including the previously announced Lake Erie Hot Strip Mill Phase 2 upgrade, new Pickle Line in Hamilton and several co-generation projects) are budgeted at $425 million and are expected to provide net benefits (pre tax) to the company of $91 million in 2007 and $138 million in 2008 once the full benefits of the program are realized.
• Stelco Inc.'s non-capital losses available as of January 1, 2005 to apply against future taxable income are estimated to be no federal non-capital losses available, and $523 million Provincial (Ontario) non-capital losses available.

Pension Plan and OPEB Information — The Report and its Appendix L provide preliminary estimates of the future cash funding and the solvency deficiencies of Stelco’s four main pension plans plus other post-employment benefit plans (OPEBs) for the integrated steel operations. The materials in and appended to the Report also contain GAAP accounting expenses in these matters. These estimates are contained in a Preliminary Actuarial Update prepared as at the end of 2004 by Mercer Human Resource Consulting Limited. Final actuarial valuation reports will be prepared in the coming months. Elements of Mercer's preliminary report include:

• Cash funding of Stelco's four main pension plans and related OPEBs has been or is forecast to be as illustrated in the adjacent table.
• The solvency deficiency of the four main pension plans as at December 31, 2004 is estimated to be $1.279 billion compared to $1.059 billion as at the end of 2003.
• The going concern deficiency of the four plans as at December 31, 2004 is estimated to be $409 million compared to $234 million as at the end of 2003.

The Report also summarizes previously announced developments in the company's Court-approved capital raising and asset sale process. Interested parties are conducting due diligence under Phase 2 of the process. The date for the filing of binding offers for the core business and non-core subsidiaries is February 14, 2005.

The Claims Procedure — The Monitor's Report provides a summary of the number of claims filed by the Claims Bar Date of January 31, 2005 and the total amount of those claims. A total of 1,330 claims were filed, 924 of which relate to Stelco (parent company) with the balance related to those subsidiaries included in the Court-supervised restructuring process. The value of all claims filed totals $3.654 billion. The Report notes that this total simply includes the value of claims received; it does not yet reflect the review process that may result in the disallowance or revision of those claims. Claims will be reviewed in accordance with the Claims Procedure Order; however, the Monitor and the company expect that the value of the claims allowed will be significantly lower than the amount of the claims filed. The Monitor notes that a large dollar volume of the claims filed relates to contingent liabilities for which Stelco would be liable in the event that the company failed to meet its obligations under certain agreements.

Updating previous information in this matter, the Report notes that an agreement of purchase and sale and related agreements surrounding the sale of Plateco are expected to be executed within the next week.

The Report also notes that Stelco will seek an extension of the Stay Period, which will otherwise expire on February 11, 2005, to April 29, 2005. The Monitor recommends that the request be granted on the basis that an extension is necessary for Stelco to continue negotiations with its stakeholders, complete the capital raising and asset sale process, complete the claims procedure and to develop a plan of arrangement or compromise.

Full text of the Monitor’s Eighteenth Report can be accessed through links available on the Court Monitor’s website or Stelco’s website.

Stelco Inc. is a large, diversified steel producer involved in major segments of the steel industry through its integrated steel business, mini-mills, and manufactured products businesses.