Competitive Conditions in the Business:

Integrated Mills Versus Mini-Mills — There are generally two types of primary steel producers that are differentiated by the process used to make raw steel. Steel manufacturing by an integrated mill involves the production of liquid iron by combining iron ore and coke with lime and oxygen in a blast furnace. The molten iron is sent to a basic oxygen furnace where scrap is added and oxygen is injected to make steel. In contrast, we are a mini-mill producer and our steel-making facilities in Regina, Montpelier, Mobile and Koppel use electric arc furnaces to directly melt scrap or scrap substitutes into liquid steel. As a group, mini-mills have historically been characterized by lower costs of production and lower man-hours per ton than integrated mills. This is due, in part, to lower capital costs and lower operating costs. However, as a result of steel industry consolidation globally, and in North America, and the emergence from bankruptcy of previously inefficient and high cost steel-making assets, the cost differential between mini-mills and some integrated mills has begun to narrow. During periods of historically high scrap costs, where iron ore costs have not increased at the same rate, such as those experienced in 2005 through 2006, the historical cost differentials between integrated and mini-mill steel-making are further reduced as scrap is a secondary input for integrated mills and a primary input for mini-mills. Our product lines must compete against both domestic and offshore supply. The domestic industry has gone through a period of consolidation. The volume of imported steel varies depending on the level of government control, demand and pricing in other parts of the world relative to North America, and the strength of the U.S. and Canadian dollars against other foreign currencies. Generally, foreign steel products must be offered at discounts great enough to warrant the additional risks of earlier purchase commitment, longer delivery lead times, and in some cases, the uncertainty of quality.

Plate and Coil — Our hot rolled steel products compete with many North American integrated and mini-mill coil and plate producers and imports. Our major competitors in discrete plate products are Nucor Corporation, the Mittal Steel group of companies, Oregon Steel Mills Inc., and Algoma Steel Inc. A large proportion of our coil production is further processed into cut-to-length plate and pipe, while the balance competes against wide coil producers such as Algoma Steel Inc., Mittal Steel and Nucor Steel Inc., and to a more limited extent with many North American mills making coil less than 72 inches wide.

In December 2006, under the sunset review provisions of the World Trade Organization, the U.S. International Trade Commission (ITC) revoked anti-dumping orders against imports of plate products from 11 countries (Belgium, Brazil, Finland, Germany, Mexico, Poland, Romania, Spain, Sweden, U.K. and Taiwan) that had been in place since 1993. Earlier the U.S. Department of Commerce had ruled that the countries involved would resume unfair trading practices if the findings were lifted, however, in its decision the ITC determined that a resumption of dumping did not pose a threat to U.S. producers. With the exception of Taiwan (1979) these orders had been in place since 1993.

In August 2006, the Canadian International Trade Tribunal (CITT) determined that a revocation of anti-dumping orders against hot rolled steel imports into Canada from Brazil, China, India, Taiwan, South Africa and Ukraine would result in a resumption of injurious dumping and continued the findings for five years. At the same time, the Tribunal revoked findings against Yugoslavia, Bulgaria and Serbia/Montenegro.

Tubular Products — Our tubular products in sizes less than or equal to 16 inches in diameter compete with several North American producers and imports. Our major domestic competitors for energy tubular products are Tenaris, United States Steel Corporation and Lone Star Steel Company. Our tubular products in excess of 16 inches in diameter compete with the products of Berg Steel Pipe Corporation, Oregon Steel Mills Inc., Stupp Corporation, American Cast Iron Pipe Company and United States Steel Corporation. Other than us, United States Steel Corporation, Jindal and Oregon Steel Mills Inc. are the other large diameter pipe fabricators that have the capability to produce their own coil or plate for input to their pipe making process.

Since 1995, the U.S. government has been imposing duties on imports of various OCTG products from Argentina, Italy, Japan, Korea and Mexico in response to anti-dumping and countervailing duty cases filed by several U.S. companies. These duties are subject to sunset reviews that began in June 2006. We expect that the International Trade Commission (ITC) will make final rulings on these cases by the second quarter of 2007. We cannot predict the outcome of these rulings or any other future actions regarding other import duties or other trade restrictions on imports of OCTG and line pipe products. We expect to continue to experience high levels of competition from imports of OCTG.

In June 2006, in a similar sunset review process, the ITC continued for a period of five years the anti-dumping findings against standard pipe imports from Turkey, Thailand, India, Brazil, South Korea, Mexico and Taiwan.