March 8, 2007 — Stelco Inc. reported a loss before income taxes of $145 million for the fourth quarter of 2006, which compares to a net loss of $103 million for the fourth quarter of 2005.

During the fourth quarter, Stelco closed its production facilities for a period of time to enable the company to complete several strategic capital projects, including:

• The reline and upgrade of the Hamilton blast furnace to increase throughput and extend the interval for the next furnace reline to 2018.
• The phase-two expansion of the Lake Erie hot strip mill, which is expected to increase throughput by 20% over previous levels.

These upgrades combined with lower demand to reduce production for the quarter to 611,000 tons, a 33% decline compared to the previous quarter. Now that these two major projects are complete, Stelco says it does not anticipate any further significant mill outages in 2007.

Fourth quarter results were also negatively impacted by lower demand in the automotive and steel service center sectors, which led to lower spot prices for steel and lower shipments during the quarter. In addition, Stelco experienced higher input costs during the fourth quarter.

Nine Month Results—For the nine-month period since the company exited from CCAA, Stelco reported a loss before income taxes of $187 million on net sales of $1.83 billion. These results include $110 million in unusual items relating to fresh-start accounting and the operational restructuring. Shipments were 2,562,000 tons over the same nine-month period.

Since exiting from CCAA on March 31, 2006, Stelco has made significant progress in its operational restructuring program, which comprises four key components:

• Workforce reduction from 4,954 on March 31, 2006 to 4,051 in January 2007 through voluntary programs and attrition. Based on this reduction in the number of employees, labor costs are estimated to be $65 million lower on an annualized basis.
• Reduction of production and administrative costs through workflow improvement and a decentralized approach to managing the business. Compensation incentives were implemented or modified across the organization.
• Optimization of capital expenditures by increasing the return-on-investment threshold and enhancing project management of major capital projects.
• Reduction of working capital requirements through better management of semi-finished and finished inventories, lower sales levels and improved processes for the management and collection of accounts receivable.

Management Comments—"Our goals upon exiting CCAA were to quickly implement change in the culture and direction of Stelco,” stated Rodney Mott, President and CEO. “I am pleased with the progress we have made, and compliment our employees for their willingness to accept the ongoing changes. We have more work to do to optimize our performance but the biggest hurdles are behind us, and our long-term competitive position is substantially improved. We have a positive outlook for 2007 and have positioned our operations to respond quickly to increased demand for steel in first quarter.”

Outlook—Stelco says its shipments and semi-finished steel production have improved significantly during the first two months of 2007 as compared to the respective monthly averages for the fourth quarter. For January and February, average monthly shipments were 293,000 tons and average monthly semi-finished steel production was 354,000 tons, which compares to fourth quarter monthly averages of 225,000 tons and 204,000 tons respectively. Spot prices have continued to improve in January and February compared to the end of the fourth quarter, and further increases are anticipated.

Stelco, one of Canada's largest steel companies, is focused on its two Ontario-based integrated steel businesses located in Hamilton and in Nanticoke. These operations produce high quality value-added hot rolled, cold rolled, coated sheet and bar products.