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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 20-F

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 29, 2003

Commission file number: #000-29506

NOVAMERICAN STEEL INC.(Exact name of Registrant as specified in its charter)

Canada(Jurisdiction of incorporation or organization)

2175 Hymus Blvd., Dorval, Québec H9P 1J8, Canada(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:



Securities registered or to be registered pursuant to Section 12(g) of the Act:

Common Shares, without nominal or par value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:



Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of November 29, 2003:

| |  | 9,700,000 |  | Common Shares   
| |  | --------- |  | ----------------
| |  | -0-       |  | Preferred Shares

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

|Yes                                                                                         |  | ý | No      |  | o |  | 
|------------------------------------------------------------------------------------------- |  | - | ------- |  | - |  | 
|Indicate by check mark which financial statement item the registrant has elected to follow.
|Item 17                                                                                     |  | o | Item 18 |  | ý |  | 

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TABLE OF CONTENTS

|Item     |                                          | Caption                                                                      |    | Page
|-------- | ---------------------------------------- | ---------------------------------------------------------------------------- | -- | ----
|         |                                          |                                                                              |    |     
|         | Statement on Forward-Looking Information |                                                                              | 3 
|Part I  
|1        |                                          | Identity of Directors, Senior Management and Advisers                        |    | 3   
|2        |                                          | Offer Statistics and Expected Timetable                                      |    | 3   
|3        |                                          | Key Information                                                              |    | 3   
|4        |                                          | Information on the Company                                                   |    | 8   
|5        |                                          | Operating and Financial Review and Prospects                                 |    | 17  
|6        |                                          | Directors, Senior Management and Employees                                   |    | 25  
|7        |                                          | Major Shareholders and Related Party Transactions                            |    | 29  
|8        |                                          | Financial Information                                                        |    | 30  
|9        |                                          | The Offer and Listing                                                        |    | 31  
|10       |                                          | Additional Information                                                       |    | 32  
|11       |                                          | Quantitative and Qualitative Disclosures About Market Risk                   |    | 33  
|12       |                                          | Description of Securities Other Than Equity Securities                       |    | 40  
|Part II 
|13       |                                          | Defaults, Dividend Arrearages and Delinquencies                              |    | 40  
|14       |                                          | Material Modifications to the Rights of Security Holders and Use of Proceeds |    | 40  
|15       |                                          | Controls and Procedures                                                      |    | 40  
|16       |                                          | Reserved                                                                     |    | 40  
|16A      |                                          | Audit Committee Financial Expert                                             |    | 40  
|16B      |                                          | Code of Ethics                                                               |    | 40  
|16C      |                                          | Principal Accounting Fees and Services                                       |    | 41  
|16D      |                                          | Exemptions from the Listing Standards for Audit Committees                   |    | 41  
|Part III
|17       |                                          | Financial Statements                                                         |    | 41  
|18       |                                          | Financial Statements                                                         |    | 42  
|19       |                                          | Exhibits                                                                     |    | 69  
|         | Signatures                               |                                                                              | 70

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STATEMENT ON FORWARD-LOOKING INFORMATION

Except for the statements of historical fact contained herein, the information under the headings "Item 4 Information on the Company", "Item 5 Operating and
Financial Review and Prospects", "Item 11 Quantitative and Qualitative Disclosures about Market Risk" and elsewhere in this Form 20-F Annual Report constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this document, the words "anticipate," "expect," "believe," "estimate," "project" and similar
expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions, including those identified in the section captioned "Key
InformationRisk Factors". Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those
anticipated, expected, believed, estimated or projected. The Company undertakes no obligation to publicly release, furnish or file the result of any revision to the forward-looking statements herein
that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

PART I

ITEM 1 IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2 OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3 KEY INFORMATION

Selected Financial Data

The selected financial data presented below, other than references to tons sold and processed, have been derived from the Consolidated Financial Statements of
Novamerican Steel Inc. and Subsidiaries ("Novamerican" or the "Company") for the five years ended November 29, 2003 which were audited by Raymond Chabot Grant Thornton, Chartered
Accountants, General Partnership. The selected financial data presented below should be read in conjunction with, and are qualified in their entirety by, "Operating and Financial Review and
Prospects," the Consolidated Financial Statements and other financial information included elsewhere in this document. All financial data presented is expressed in U.S. dollars.

|                                                 |  | Years Ended (a) |          
|------------------------------------------------ |  | --------------- | ---------
|
|
|Statement of Operations Data:                    |  |                 |          
|Net sales                                        |  | $               | 426,692  
|Cost of sales                                    |  |                 | 331,544  
|                                                 |  |                 |          
|Gross margin                                     |  |                 | 95,148   
|Operating expenses                               |  |                 | 66,522   
|                                                 |  |                 |          
|Operating income                                 |  |                 | 28,626   
|Interest expense                                 |  |                 | 5,181    
|                                                 |  |                 |          
|                                                 |  |                 | 23,445   
|Share in income of joint ventures                |  |                 | 759      
|                                                 |  |                 |          
|                                                 |  |                 | 24,204   
|Unrealized loss on foreign exchange contracts    |  |                 | 82       
|                                                 |  |                 |          
|Income before income taxes and minority interest |  |                 | 24,122   
|Income taxes                                     |  |                 | 9,401    
|                                                 |  |                 |          
|Income before minority interest                  |  |                 | 14,721   
|Minority interest                                |  |                 | 390      
|                                                 |  |                 |          
|Net income                                       |  | $               | 14,331   
|                                                 |  |                 |          
|Basic and diluted income per share (b)           |  | $               | 1.48     
|                                                 |  |                 |          
|Operating income per share                       |  | $               | 2.95     
|                                                 |  |                 |          
|Weighted average Common Shares outstanding       |  |                 | 9,700,000
|                                                 |  |                 |          
|                                                 |  |                 |          

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|                                                 |                 | Nov. 27,
1999 |           | Nov. 25,
2000 |   | Nov. 24,
2001 |         | Nov. 30,
2002 |           | Nov. 29,
2003 |  
|------------------------------------------------ | --------------- | ------------- | --------- | ------------- | - | ------------- | ------- | ------------- | --------- | ------------- | -
|Other Data:                                      |                 |               |           |               |   |               |         |               |           |               |  
|EBITDA (c)                                       |                 | $             | 33,229    |               | $ | 32,731        |         | $             | 24,391    |               | $
|Capital expenditures                             |                 | $             | 8,289     |               | $ | 24,128        |         | $             | 9,279     |               | $
|Depreciation and amortization                    |                 | $             | 4,316     |               | $ | 5,272         |         | $             | 6,019     |               | $
|Gross margin                                     |                 |               | 22.3      | %             |   | 21.5          | %       |               | 22.8      | %             |  
|Operating margin                                 |                 |               | 6.7       | %             |   | 5.6           | %       |               | 4.4       | %             |  
|Income before income taxes and minority interest |                 |               | 5.7       | %             |   | 4.4           | %       |               | 2.9       | %             |  
|Tons sold and processed (unaudited):             |                 |               |           |               |   |               |         |               |           |               |  
|                                                 | Direct sales    |               |           | 761,000       |   |               | 795,000 |               |           | 773,000       |  
|                                                 | Toll processing |               |           | 350,000       |   |               | 599,000 |               |           | 667,000       |  
|                                                 |                 |               |           |               |   |               |         |               |           |               |  
|                                                 |                 |               | 1,111,000 |               |   | 1,394,000     |         |               | 1,440,000 |               |  
|                                                 |                 |               |           |               |   |               |         |               |           |               |  
|
|
|Balance Sheet Data:                              |                 |               |           |               |   |               |         |               |           |               |  
|Current assets                                   |                 | $             | 146,549   |               | $ | 153,568       |         | $             | 140,548   |               | $
|Current liabilities                              |                 |               | 74,937    |               |   | 113,677       |         |               | 64,494    |               |  
|Working capital                                  |                 |               | 71,612    |               |   | 39,891        |         |               | 76,054    |               |  
|Total assets                                     |                 |               | 214,290   |               |   | 242,077       |         |               | 236,962   |               |  
|Total debt                                       |                 |               | 52,129    |               |   | 82,545        |         |               | 74,684    |               |  
|Net assets                                       |                 |               | 82,412    |               |   | 93,288        |         |               | 99,668    |               |  
|Share capital                                    |                 |               | 28,404    |               |   | 28,404        |         |               | 28,404    |               |  

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Risk Factors

The following issues, among others, may have a material effect on the Company's financial performance.

Cost of Raw Materials; Impact of Changing Steel Prices.The principal raw material used by the Company is
flat-rolled carbon steel which the Company typically purchases from steel producers. The steel industry as a whole is cyclical and at times pricing and availability can be volatile due to
numerous factors beyond the Company's control, including general, regional and international economic conditions, production levels, competition, import duties and tariffs and currency exchange rates.
This volatility could adversely affect the Company's business, results of operations and financial condition.

Steel
service centers generally maintain substantial inventories of steel to accommodate the short lead times and just-in-time delivery requirements of their
customers. Accordingly, the Company purchases steel in an effort to maintain its inventory at levels that it believes to be appropriate to satisfy the anticipated needs of its customers based upon
historic buying practices, contracts with customers and market conditions. The Company's commitments for steel purchases are generally at prevailing market prices in effect at the time the Company
places its orders. The Company has no long-term, fixed-price steel purchase contracts. See "Operating and Financial Review and ProspectsTabular Disclosure of Contractual
Obligations." When raw material prices increase, including as a result of surcharges, competitive conditions will influence how much of the steel price increase can be passed on to the Company's
customers. When raw material prices decline and the Company uses existing steel inventory, customer demands for lower prices could result in lower sale prices and lower margins. Changing steel prices
therefore could adversely affect the Company's business, results of operations and financial condition.

Cyclicality of Demand.Certain of the Company's products are sold to industries that experience significant fluctuations in
demand based on economic conditions or other factors beyond the control of the Company. The Company's diversified customer base, geographic base and growth strategy serve to reduce such cyclicality;
however, there can be no assurance that the Company will be able to increase or maintain its level of sales or prices in periods of economic stagnation or downturn.

Sales
of the Company's products for use in the automotive industry accounted for approximately 21.7% of the Company's net sales in fiscal 2003 and approximately 20.3% of net sales in
fiscal 2002. This increase is attributable to the consolidation of Nova Tube Indiana, LLC (formerly, BethNova Tube,
LLC). See "Information on the CompanyHistory and Development of the Company." Such sales include sales directly to the automobile manufacturers and to their component and parts suppliers
as well as to manufacturers supplying the automotive "after market" components and parts. The automobile industry experiences fluctuation in demand based on numerous factors such as general economic
conditions and consumer confidence. The automobile industry is also subject, from time to time, to labor problems, which may result in reduced demand for the Company's products during work stoppages.

Risks Associated with Expansion.Historically, the Company has grown internally by increasing sales to existing customers,
aggressively pursuing new customers and, in response to customer demand, acquiring and upgrading processing equipment and services in order to expand the range of value-added services it can offer. In
addition, growth has occurred through external expansion by the acquisition of other steel service centers and related businesses. Although the Company intends to continue actively pursuing its growth
strategy in the future, there can be no assurance that the anticipated growth will occur. In addition, although the Company generally has purchased equipment only in response to identified customer
demand, the expansion of an existing facility or construction of a new facility could have an adverse effect on the Company's results of operations due to the impact of the start-up costs
and the potential for underutilization in the start-up phase of a facility. Acquisitions could result in unforeseen difficulties in integrating the acquired businesses with the Company's
existing business and could divert a disproportionate amount of management time and attention. Moreover, the incurrence of additional

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indebtedness
to pay for expansion costs or acquisition costs could adversely affect the Company's liquidity and financial stability and the issuance of Common Shares to effect acquisitions could
result in dilution to the Company's shareholders. Although the Company frequently evaluates potential acquisitions, the Company currently has no understandings, agreements or commitments to make any
acquisitions. There can be no assurance that any new facility or operation of any future acquisitions, if completed, would be profitable. See "Information on the CompanyHistory and
Development of the Company."

Exchange Rate Fluctuations.Although the Company's financial results are reported in U.S. dollars, a substantial portion of
its revenues are received in, and its expenses are incurred in, Canadian dollars. In determining its results of operations, the Company converts the sales made by Canadian subsidiaries into the United
States, which are denominated in U.S. dollars, into Canadian dollars based upon the average monthly exchange rate at the time of sale.

Exchange
rate fluctuations are beyond the control of the Company and although the Company partially hedges its currency exposure, there can be no assurance that changes in the rate of
exchange between the Canadian dollar and the U.S. dollar will not adversely affect the Company's business, financial condition, results of operations and cash flow. See "Quantitative and Qualitative
Disclosures About Market Risk."

Environmental Matters.The nature of the Company's business may expose it to environmental liability claims, even if such
claims are without merit. American Steel and Aluminum Corporation ("American Steel"), one of the Company's subsidiaries, was named as one of nineteen defendants in an action brought in
October 2001 by two private parties under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") to recover costs incurred and to be incurred in connection with a
waste disposal facility in Cumberland, RI, which has been categorized as a Superfund site by federal authorities. The complaint was subsequently amended twice to add 38 new defendants and further such
amendments may be sought. The plaintiffs claim that the Company is liable based upon alleged shipments to the site by American Steel, prior to its 1996 acquisition. The plaintiffs have identified over
100 potentially responsible parties ("PRPs") and the Environmental Protection Agency ("EPA") has issued claim notice letters to 63 parties, some of which are defendants in the lawsuit. The Company
received, on or about April 25, 2003, an EPA claim letter. The plaintiffs seek recovery of approximately $0.6 million for investigative expenses, together with a declaration of liability
for all future response costs at the site. Future investigative costs are estimated at $3.0 million. It is not currently possible to estimate future remediation costs. The defendants have
formed a PRP committee (in which the Company is participating) to monitor the site investigation. The Company believes it has meritorious defenses against the claims raised in the action, and intends
to defend its position vigorously should the litigation proceed. However, the Company cannot provide assurances that it will prevail should the litigation proceed, and any significant loss could have
a material adverse effect on the financial results of the Company.

The
Company's processing centers and manufacturing facilities are subject to many federal, state, provincial and local laws and regulations in the United States and Canada relating to
the protection of the environment. The Company has made, and will continue to make, expenditures to remain in compliance with such laws and regulations. The Company believes that its facilities are in
material compliance with these laws and regulations and does not believe that continued compliance with such laws and regulations will have an adverse effect on its results of operations or financial
condition. In addition, the Company cannot predict the environmental laws or regulations that may be enacted in the future or how existing or future laws and regulations will be administered or
interpreted. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of the regulatory agencies or stricter interpretations of existing laws and regulations,
may require additional expenditures by the Company which could vary substantially from those currently anticipated.

Certain
of the facilities occupied by the Company have been in operation for many years and, over such time, the Company and prior owners or operators of such properties may have
generated and

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disposed
of wastes which are or may be considered hazardous. Accordingly, it is possible that additional environmental liabilities may arise in the future as a result of any such waste generation and
disposal.

Dependence on Key Individuals.The success of the Company's business is dependent upon the management and leadership of D.
Bryan Jones, the Company's President and Chief Executive Officer, and certain other members of the Company's senior management team. The loss of any of these individuals or an inability to attract,
retain and maintain additional personnel could adversely affect the Company. There can be no assurance that the Company will be able to retain its existing senior
management personnel or to attract additional qualified personnel. See "Directors, Senior Management and Employees."

Liquidity.Although the Company's Common Shares are registered under the Securities Exchange Act of 1934 and trade on the
Nasdaq National Market (the "Nasdaq"), currently, there is limited volume of trading. Accordingly, investors may not be able to rapidly divest a portion of their shares or liquidate their investment
should they desire to do so.

Competition.The principal markets served by the Company are highly competitive. The Company competes on a regional basis
with steel service centers and, to a certain degree, primary steel producers and intermediate steel processors. The Company has different competitors for each of its products and within each region.
Certain of these competitors have financial and operating resources in excess of those of the Company. Although the Company has been able to successfully compete in the past, no assurance can be given
that it will be able to continue to do so. Increased competition could have an adverse effect on the Company's net sales and profitability in the future. See "Information on the
CompanyCompetition."

Control by Existing Shareholders.Approximately 81.7% of the outstanding Common Shares are owned by certain officers and
directors of the Company. See "Directors, Senior Management and EmployeesShare Ownership." Accordingly, they will collectively retain the power to elect the entire Board of Directors of
the Company and determine the outcome of any other matters submitted to the Company's shareholders for approval.

Labor Contracts; Risk of Work Stoppage.Certain of the employees at ten of the Company's 23 facilities are organized by the
United Steelworkers, the Teamsters, the Sheet Metal Workers and independent employees associations, representing in the aggregate approximately 297 of its 1,103 employees. The Company's labor
contracts expire on staggered dates. During the next twelve months, two labor contracts with the Teamsters covering 46 employees at the Company's Albany and Harrisburg facilities and the labor
contract with an independent employee association at the Company's Norwood facility covering 19 employees will expire. While management does not expect that work stoppages will arise in connection
with the renewal of labor agreements expiring in the foreseeable future, no assurance can be given that work stoppages will not occur. Widespread work stoppages could have an adverse effect on the
Company's business, financial condition and results of operations if they were to last for a significant period of time. See "Directors, Senior Management and EmployeesEmployees."

Financial Leverage.The Company's indebtedness may increase as it continues to borrow under existing or future credit
arrangements in order to finance construction and expansion activities, future acquisitions and for general corporate purposes, which would increase the associated risks. These risks include:
sensitivity to adverse economic conditions; inability to fund future working capital, acquisitions, capital expenditures and other general corporate requirements; limits on its flexibility in planning
for, or reacting to, changes in its business and the steel industry; limits on future borrowings under its existing or future credit arrangements, which could affect its ability to pay its
indebtedness or to fund its other liquidity needs; inability to generate sufficient funds to cover required interest payments; and
restrictions on its ability to refinance its indebtedness on commercially reasonable terms. See "Operating and Financial Review and ProspectsLiquidity and Capital Resources."

Restrictive Loan Covenants May Limit the Company's Ability to Pursue its Acquisition Strategy.Certain of the Company's
credit facilities contain covenants restricting or limiting its ability to, among other things:

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incur
additional indebtedness; pay dividends or make other restricted payments; make asset dispositions; permit liens; and make capital expenditures and other investments. These restrictions may
adversely affect its ability to pursue its acquisition and other growth strategies. See "Operating and Financial Review and ProspectsLiquidity and Capital Resources."

Lack of Dividends.The Company does not anticipate paying cash dividends on its Common Shares for the foreseeable future. The
Company, at present, intends to retain any future earnings to finance operations and expansion.

Holding Company Structure; Reliance on Distributions from Subsidiaries.The Company has no direct business operations other
than its ownership of the capital stock of its subsidiaries. As a holding company, the Company is dependent on dividends, interest payments, management fees or other intercompany transfers of funds
from its subsidiaries to enable it to pay dividends and to meet its direct obligations. The Company's subsidiaries' credit facilities allow the payment to the Company of dividends and interest under
certain conditions. See "Operating and Financial Review and ProspectsLiquidity and Capital Resources."

ITEM 4 INFORMATION ON THE COMPANY

History and Development of the Company

Novamerican Steel Inc. was incorporated on April 4, 1997 under the Canada Business Corporations Act. The Company's registered office, principal
place of business and principal executive offices are located at 2175 Hymus Blvd., Dorval, Québec, Canada H9P 1J8. The Company's telephone number at the principal executive
offices is (514) 335-6682.

Following
the incorporation of the Company in 1997, a reorganization of the various operations wholly-owned or controlled by D. Bryan Jones or Scott B. Jones, the son of D. Bryan Jones,
brought the operations under one holding company. Novamerican is the holding company for two main operating groups: (i) the Canadian affiliates, consisting of Nova Steel Ltd., Metco
Steel Inc., Nova Tube Inc., Cresswell Roll Forming Inc., Argo Steel Ltd., Nova Tube Ontario Inc., Nova Steel Processing Centre Ltd. and Delta Tube and
Company, Limited, (collectively, the "Canadian Affiliates" or "Nova"); and (ii) the U.S. affiliates, consisting of Integrated Steel Industries, Inc. ("ISI"), a U.S. holding company,
American Steel, Nova Tube and Steel, Inc. and Nova Tube Indiana, LLC (formerly, BethNova Tube, LLC), (collectively, the "U.S. Affiliates" or "ISI"). See "Organizational Structure".

Nova
Steel Ltd. was established as a processor of hot-rolled carbon steel in 1979 by D. Bryan Jones, President and Chief Executive Officer of the Company. In 1983,
Nova Steel Ltd. acquired and installed its first tube mill in Montréal. In 1987, this operation became Nova Steel Ltd.'s (60%) contribution to a joint venture, Delta Tube
and Company, Limited, for the toll rolling of tubing, with Ispat Sidbec Inc. (40%). In 1985, the majority of the shares of Cresswell Roll Forming Inc., a roll forming, stamping and
manufacturing business in Québec, were acquired. In 1989, Argo Steel Ltd., a processor of hot-rolled, cold-rolled and galvanized steel products was
established in Montréal with a 50.9% interest at the time. This expansion was followed in October 1991 with the establishment of Metco Steel Inc. This company is a
processor of carbon steel plate and plate coil and operates in a Montréal location, formerly occupied by Candiv Steel, a company whose equipment and inventories were purchased by Nova
Steel Ltd. in February 1991.

In
July 1991, Nova Tube Inc. acquired a tube mill operation in Baie d'Urfé, Québec and, in May 1996, Nova Tube Ontario Inc.
("NTO") was established with the installation of a tube mill in Mississauga, Ontario specifically designed to meet the needs of high pressure hydroforming for the automotive industry.

American
Steel, which was founded in 1962 and acquired by the Company in August 1996, operates in nine locations in the Northeastern and Mid-Atlantic United States.
American Steel is a distributor of steel,

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aluminum
and stainless steel products including hot and cold-rolled carbon steel, aluminum, stainless steel, alloy and coated products in sheet, coil, bar, shapes, tubular and plate forms.

On
November 7, 1997, the Company completed its initial public offering of 2,200,000 Common Shares of its capital stock in the United States and the Company's Common Shares were
listed on the Nasdaq and currently trade under the symbol of "TONS". As of February 25, 2004, the Company had 9,700,000 Common Shares outstanding.

In
December 1998, the Company, through its then 50.9% owned subsidiary, Argo Steel Ltd., acquired the assets of a steel slitting operation and established a processing
center in Brampton, Ontario where it installed a .134" X 75" blanking line.

During
1998, the Company built a processing facility in Stoney Creek, Ontario, Nova Steel Processing Centre Ltd. ("NSPC"), and installed a 400,000 ton per year pickling line
together with a new 200,000 ton per year slitting line. Both the pickling line and the slitting line were commissioned and went into full production during the first quarter of 1999. A second slitting
line installed in 2000 has been in full production since 2001.

During
2000, Novamerican Tube Holdings, Inc., a wholly-owned subsidiary of ISI, formed a joint venture with Bethlehem Steel Corporation ("Bethlehem"), BethNova Tube, LLC
("BethNova"), to produce steel tubing for use in hydroforming of automobile and truck components. This state-of-the-art tube manufacturing facility in
Jeffersonville, IN was completed in 2001, began ramping up production in the fourth quarter of 2001 and continues to increase its operating levels. The bulk of the tube production at the new facility
is dedicated to Dana Corporation, a major automotive parts supplier, which has built a new hydroforming plant near Elizabethtown, KY. On October 15, 2001, Bethlehem filed for protection under
Chapter 11 of the United States Bankruptcy Code and on February 6, 2003, sold substantially all of its assets, including its interest in the joint venture, to International Steel
Group, Inc. ("ISG"). In June 2003, the Company purchased ISG's 50% interest in the BethNova joint venture for $4.1 million and renamed the now wholly-owned subsidiary Nova Tube
Indiana, LLC ("NTI"). See "Financial StatementsNote 3".

In
November 2000, the Company built a new tubing facility, operated by Nova Tube and Steel, Inc. ("NTS"), in Morrisville, PA. The structural tube mill, began production in
November 2000 and is capable of producing hollow structural sections ("HSS") up to 6" × 6" × 3/8". The heavy gauge slitter and
cut-to-length line were completed in November 2001 and were in full production throughout 2002.

In
2002, the Company, through a subsidiary, acquired all of the minority interest in Argo Steel Ltd. The acquisition was financed by internal sources of funds. See "Financial
StatementsNote 3".

During
2002, the Company began construction of a 158,000 square foot operating facility in LaSalle, Québec. The Company intends to combine in this facility certain
existing operations as well as upgrade its processing equipment. The anticipated cost of this project, which has been expanded to include additional equipment, is approximately $14.1 million of
which $11.0 million has been incurred through February 25, 2004. This project is being financed by a combination of new debt of $5.6 million for the land and building and internal
sources of funds.

During
2002, the premises leased by NTO in Mississauga, Ontario were expanded by 40,000 square feet. This enabled the Company to install additional equipment costing approximately
$0.4 million which
was financed by internal sources of funds. The Company plans to make further equipment upgrades at this facility which will also be financed by internal sources of funds.

Acquisition and Expansion Strategy.The Company's overall objective is to increase profits by strategically acquiring other
steel service centers and related businesses, acquiring and upgrading processing equipment and services in response to customer demand, expanding into new domestic and international markets,
increasing sales to existing customers and aggressively pursuing new customers. The Company's acquisition strategy is to pursue opportunities which, among other things, are located in areas
geographically contiguous to regions currently served, provide value-added processing capability, expand

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its
range of services and customer base and possess strong local management. In addition, the Company continually reviews opportunities to internally expand its capabilities in such contiguous areas
in order to better serve the needs of its customers and develop new markets for processed steel and tubing. Although the Company regularly evaluates acquisition opportunities, the Company currently
has no understandings, agreements or commitments in such regard.

Business Overview

Novamerican processes and distributes carbon steel, stainless steel and aluminum products and operates as an intermediary between primary metal producers and
manufacturers. In addition to flat-rolled processing, including pickling, slitting, blanking, cutting-to-length and roll forming to customer specifications, the
Company produces steel tubing used for a variety of markets such as the structural and automotive markets (including tubing used expressly for hydroforming) and also manufactures steel components for
heavy equipment.

Novamerican's
revenues are derived from sales in the United States and Canada, with approximately 48.8% of the Company's 2003 sales made to customers in the United States and the balance
of approximately 51.2% to customers in Canada. The United States and Canadian markets are viewed by management as generally homogeneous with respect to business environment, levels of risk and
profitability. The Company has its headquarters in Dorval, Québec and presently operates in twelve locations in Canada and in eleven locations in the United States.

The
Company's business strategy is focused on achieving profitable growth and higher margins through investment in value-added manufacturing and processing equipment and selective
acquisitions. The Company's acquisition strategy is to pursue opportunities, which among other things, are located in areas geographically contiguous to regions currently served, provide value-added
processing capability, expand its range of services and customer base and possess strong local management. The Company believes that its steel service center and processing operations will continue to
grow as a result of four
principal industry trends: (i) customer demand for higher quality products and services, (ii) outsourcing of manufacturing processes by North American manufacturers, (iii) the
consolidation of industry participants and (iv) the shift by major customers to fewer and larger suppliers.

Products and Services

The Company processes and distributes carbon steel, stainless steel and aluminum products and operates as an intermediary between primary metal producers and the
manufacturers that require processed metal, often on a just-in-time delivery basis. In addition to flat-rolled processing and roll forming to customer
specifications, Novamerican, through its subsidiaries, produces steel tubing used for a variety of markets such as structural and automotive markets (including tubing used expressly for hydroforming)
and also manufactures steel components for heavy equipment. Novamerican is the holding company for two main operating groups: Nova in Canada and ISI in the United States.

Nova,
which was founded in 1979, operates in twelve locations in Central Canada and two in the United States. Nova is a flat-rolled service center and manufacturer of tubing
and certain specialized end-products, focusing on value-added processing to meet specific customer needs. Nova provides service to a broad base of approximately 1,500 customers in Canada
and the United States, which include manufacturers of automobiles and automotive parts, construction equipment, agricultural equipment, resellers and general steel fabricators. Nova's
flat-rolled processing capabilities include pickling, slitting, leveling and cutting-to-length, blanking, edging, shearing, burning and roll forming.

American
Steel, which was founded in 1962 and acquired in mid-1996, operates in nine locations in the Northeastern and Mid-Atlantic United States. American Steel
is a distributor of steel, aluminum and stainless steel products, including hot and cold-rolled carbon steel, aluminum, stainless steel, alloy and coated products in sheet, coil, bar,
shapes, tubular and plate forms. In fiscal 2003, Nova supplied 1.5% of American Steel's products at market rates, and is capable of supplying American Steel with approximately

10

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one-half
of its product line. American Steel provides local service on a just-in-time basis to a broad base of approximately 5,500 U.S. customers, which include
industrial manufacturers, resellers and fabricators in the automobile, automotive supply, appliance, electrical, heavy equipment, agricultural machinery and office equipment manufacturing industries.
American Steel's processing capabilities include bar sawing, burning, shearing, leveling and cutting-to-length, blanking and slitting.

At
its processing operations, the Company maintains a substantial inventory of coil, plate coil and plate generally purchased from primary producers. The Company's inventory of carbon
and stainless steel
and aluminum is purchased in the form of a continuous sheet, typically from 36 to 96 inches wide, between .015 and .750 inches thick and rolled into 10 to 30 ton coils. Because of the width, size and
weight of these coils and the equipment required to move and process them into smaller sizes, such coils do not meet the requirements of many customers without further processing by the Company.

The
Company's tubing operations presently consist of six mills of which four are located in Canada and two are located in the United States. The majority of the Company's tube production
is HSS structural tubing. However, two of the Company's tube mills were constructed specifically to meet the needs of high pressure hydroforming for the automotive industry. Hydroforming is an
innovative technology used in the manufacture of certain automotive parts which involves the application of water at high pressure to form and shape steel tubes and reduces the cost and the weight of
a steel component. One of these tube mills is located at the NTO facility in Mississauga, Ontario. The other mill is located at the NTI (formerly, BethNova) facility in Jeffersonville, IN. See
"History and Development of the Company."

The
Company's services include pickling and the traditional service center processes of slitting, leveling and cutting-to-length and shearing as well as higher
value-added processes of tubing, roll forming, blanking and plate burning to process steel to specified lengths, widths and shapes pursuant to specific customer orders. Pickling is an
in-line process for cleaning hot-rolled steel coils of rust, scale and dirt. Slitting involves cutting steel to specified widths along the length of the coil. Leveling is a
process used to flatten any shape deficiencies in the steel coil. Cutting-to-length involves cutting steel along the width of the coil. Shearing is the process of cutting sheet
steel. Tubing is the process in which flat-rolled coils are formed into a circular, oval, square or rectangular shape. Roll forming is the process in which flat-rolled coils
can be pre-punched, in-line welded and formed into sophisticated shapes for specific purposes. Blanking cuts steel into specific shapes with close tolerances. Plate burning is
the process of cutting steel, typically in excess of one inch thick, into specific shapes and sizes.

Suppliers

The Company purchases flat-rolled steel for processing from a number of North American and international primary steel producers. The Company
concentrates on developing relationships with high-quality North American integrated steel mills and mini-mills, as well as international primary steel producers, and on
becoming a valued customer of such producers. The Company is a major customer of flat-rolled coil for many of its principal suppliers, but is not dependent on any one supplier. The Company
purchases from steel producers in quantities that are efficient for such producers. This enables the Company to maintain a continued source of supply at what it believes to be competitive prices. The
Company believes the accessibility and proximity of its facilities to major steel producers will continue to be an important factor in maintaining relationships with them.

The
steel industry as a whole is cyclical, and at times pricing and availability can be volatile due to numerous factors beyond the Company's control, including general, regional and
international
economic conditions, production levels, competition, import duties and tariffs and currency exchange rates.

Customers and Distribution

Each of the Company's distribution operations maintains its own sales and marketing staff. The Company's combined sales force consists of 124 salaried inside and
outside sales representatives of which 25 are commissioned representatives. The Company's sales efforts are focused primarily on direct

11

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customer
contact. The Company believes that its commitment to quality, service and just-in-time delivery has enhanced its ability to build and maintain strong customer
relationships, while expanding its geographic growth through the continued training and addition of sales personnel.

In
fiscal 2003, the Company processed steel for sale to approximately 7,000 customers. The Company's diversified customer and geographic base serves to reduce its exposure to
fluctuations in business and economic cycles in particular industries and regions. In fiscal 2003, the Company's top twenty customers accounted for less than 27.1% of total net sales and no single
customer accounted for more than 3.4% of total net sales. Major customers include automotive parts manufacturers and stampers, other steel service centers, general fabricators and manufacturers of
transportation equipment, material handling equipment, electrical components, appliances, storage tanks, ship building material, construction and heavy equipment and agricultural equipment. Sales to
automobile manufacturers and their suppliers combined with sales to manufacturers supplying the automotive "after market" components and parts accounted for approximately 21.7% of total net sales and
sales to other steel service centers accounted for approximately 16.9% of total net sales. See also "Products and Services".

Most
of the Company's customers are located in the Northeastern and Mid-Atlantic United States and in Central Canada. Most customers are located within a 250-mile
radius of one of the Company's facilities, allowing the Company to operate an efficient delivery system capable of handling a high volume of short lead-time orders. The Company transports
most of its products directly to customers via its own fleet of trucks, through independent trucking firms and through a logistics company owned by a director of the Company. See "Major Shareholders
and Related Party TransactionsRelated Party Transactions".

The
following table sets forth the net sales of Nova and the U.S. Affiliates for the past three fiscal years:

|                |  | Nov. 29,
2003 |         | Nov. 30,
2002 |   | Nov. 24,
2001 |  
|--------------- |  | ------------- | ------- | ------------- | - | ------------- | -
|
|Nova            |  | $             | 289,830 |               | $ | 262,160       |  
|U.S. Affiliates |  |               | 227,994 |               |   | 213,419       |  
|Eliminations    |  |               | (10,757 | )             |   | (10,078       | )
|                |  |               |         |               |   |               |  
|                |  | $             | 507,067 |               | $ | 465,501       |  
|                |  |               |         |               |   |               |  

Due
to the impact of seasons and climate in the regions predominantly served by the Company, demand for certain of the Company's products may fluctuate during the winter
months.

Competition

The Company competes with other regional and national steel service centers, single location service centers and, to a certain degree, primary steel producers and
intermediate steel processors on a regional basis. The Company has different competitors for each of its products and within each geographic region. The Company competes on the basis of price, product
selection and availability, customer service, quality and geographic proximity. Certain of the Company's competitors have financial and operating resources in excess of those of the Company.

12

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Environmental

The Company's facilities are subject to comprehensive and frequently changing federal, state, provincial and local laws and regulations in the United States and
Canada relating to the protection of the environment, including those related to air emissions, wastewater discharges, treatment, storage and disposal of hazardous substances and other materials and
wastes, occupational health and safety, and in general, the emissions of pollutants into the environment.

The
Company believes that it is in material compliance with all applicable environmental laws and regulations. The Company does not anticipate any material expenditures to meet
environmental requirements and does not believe that continued compliance with such laws and regulations will have a material adverse effect on its operations or financial condition. The Company has,
however, been named as a defendant in an action brought by two private parties under CERCLA with respect to a Superfund site. See "Key InformationRisk FactorsEnvironmental
Matters."

Organizational Structure

The following chart illustrates the organization of the Company's subsidiaries and the country of organization:

GRAPHIC

13

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Property, Plants and Equipment

American Steel, founded in 1962, was acquired by the Company in mid-1996. American Steel is a processor and distributor of carbon and stainless steel
and aluminum products. The following chart describes each of American Steel's nine locations and their operations:

|Location                      |  |       |  |                                           |  |       |  | Description of Operations                                                                                                                                                                   |  | Title
|----------------------------- |  | ----- |  | ----------------------------------------- |  | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|                             
|American Steel/Albany, NY     |  | 
   |  | 40,000 sq. ft
Shearing                    |  |      |  | Pipe and tubing, hot-rolled products and galvanized sheet                                                                                                                                   |  | Owned
|                              |  |      |  | Bar sawing                                |  | 
   |  | Stainless steel and aluminum
Tubing                                                                                                                                                         |  |      
|                             
|American Steel/Ashland, VA    |  | 

 |  | 45,000 sq. ft
Shearing
Bar sawing         |  | 

 |  | Stainless steel and aluminum
All carbon steel products
Tubing                                                                                                                               |  | Owned
|                             
|American Steel/Auburn, MA     |  | 

 |  | 105,000 sq. ft
Slitting line
Leveling and |  |      |  | Leading supplier of cold-rolled, high carbon, strip steel in the Northeastern United States                                                                                                 |  | Owned
|                              |  |       |  | cut-to-length line                        |  |      |  | Processing of cold-rolled, galvanized,                                                                                                                                                      |  |      
|                              |  |      |  | Blanking line                             |  |       |  | aluminum and stainless coils to supply sheets for the entire Company                                                                                                                        |  |      
|                              |  |       |  |                                           |  |      |  | Processing of coated sheets, intermediate tempered sheets and bright finished materials                                                                                                     |  |      
|                             
|American Steel/Cumberland, RI |  | 
   |  | 49,000 sq. ft
Shearing                    |  |      |  | Hot-rolled products, cold-rolled bars, specialty plate burning                                                                                                                              |  | Owned
|                              |  | 
   |  | Bar sawing
Burning                        |  | 
   |  | Tubing
Stainless steel and aluminum                                                                                                                                                         |  |      
|                             
|American Steel/Harrisburg, PA |  | 
   |  | 104,000 sq. ft
Shearing                   |  |      |  | Full line of products, particularly stainless steel and aluminum sheet                                                                                                                      |  | Owned
|                              |  |      |  | Bar sawing                                |  |      |  | Tubing                                                                                                                                                                                      |  |      
|                             
|American Steel/Hartford, CT   |  | 

 |  | 36,000 sq. ft
Shearing
Bar sawing         |  |      |  | Cold finished carbon steel bars, cold-rolled, coated, aluminum and stainless steel sheet                                                                                                    |  | Owned
|                              |  |       |  |                                           |  |      |  | Tubing                                                                                                                                                                                      |  |      
|                             
|American Steel/Norwood, MA    |  | 

 |  | 55,000 sq. ft
Shearing
Bar sawing         |  |      |  | Aluminum, stainless steel, cold-rolled, hot-rolled and coated sheet                                                                                                                         |  | Owned
|                              |  |       |  |                                           |  |      |  | Tubing and cold finished carbon steel bars                                                                                                                                                  |  |      
|                             
|American Steel/Portland, ME   |  | 

 |  | 59,000 sq. ft
Shearing
Bar sawing         |  |      |  | Full line of products, including high
strength, hot-rolled plates for the shipbuilding industry and stainless steel bar grating for corrosive pulp and paper and food processing industries |  | Owned
|                              |  |       |  |                                           |  |      |  | Tubing                                                                                                                                                                                      |  |      
|                             
|American Steel/Syracuse, NY   |  | 

 |  | 53,000 sq. ft
Shearing
Bar sawing         |  | 

 |  | Primarily hot-rolled products
Stainless steel and aluminum
Tubing                                                                                                                           |  | Owned
|                             

14

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In
addition to the American Steel locations, the Company also has two tubing facilities in the United States.

|Subsidiary/Location                                                        |  |     |  |                                                   |  |   |  | Description of Operations                                                                  |  | Title
|-------------------------------------------------------------------------- |  | --- |  | ------------------------------------------------- |  | - |  | ------------------------------------------------------------------------------------------ |  | -----
|                                                                          
|Nova Tube and Steel, Inc./                                                 |  | 
 |  | 163,300 sq. ft
HSS tube mill up to                |  |  |  | Hot-rolled HSS tubing up to 6" square                                                      |  | Owned
|Morrisville, PA                                                            |  |     |  | 6" × 6" × 3/8"                                    |  |  |  | Hot-rolled sheet and plate coil                                                            |  |      
|                                                                           |  |    |  | Heavy gauge slitter                               |  |   |  |                                                                                            |  |      
|                                                                           |  |    |  | Heavy gauge cut-to-length line                    |  |   |  |                                                                                            |  |      
|                                                                          
|Nova Tube Indiana, LLC/Jeffersonville, IN (formerly BethNova
Tube, LLC)(a) |  | 
 |  | 108,000 sq. ft
Mechanical tube mill up to 7" O.D. |  |  |  | High quality mechanical tubing targeting hydroformed automobile and truck frame components |  | Owned
|                                                                          

Nova, founded in 1979, has grown from a single slitting line operation to become a leading steel service center and tube mill operation serving
the central Canadian market. These facilities constitute a broad, equipment-based steel service center operation which provides manufacturing and value-added processing to meet specific customer
needs. The following chart describes each of Nova's twelve locations and their operations:

|Subsidiary/Location                                     |  |       |  |                                                                        |  |   |  | Description of Operations                                                                                                                                                       |  | Title                   
|------------------------------------------------------- |  | ----- |  | ---------------------------------------------------------------------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------
|                                                       
|Nova Steel Ltd./Dorval, Québec                          |  | 
   |  | 75,500 sq. ft
Three slitting lines                                     |  |  |  | Hot-rolled, hot-rolled pickled and oiled and cold-rolled products and                                                                                                           |  | Leased to
May 31, 2004  
|                                                        |  |      |  | Cut-to-length line                                                     |  |   |  | tubing                                                                                                                                                                          |  |                         
|                                                        |  |      |  | Multiple blanking line                                                 |  |   |  |                                                                                                                                                                                 |  |                         
|                                                        |  |      |  | Three flat bar edging lines                                            |  |   |  |                                                                                                                                                                                 |  |                         
|                                                       
|Nova Steel Ltd./Cambridge, Ontario                      |  | 
   |  | 49,100 sq. ft
Two slitting lines                                       |  |  |  | Hot-rolled, hot-rolled pickled and oiled, cold-rolled and coated sheets,                                                                                                        |  | Leased to
Nov. 30, 2004 
|                                                        |  |      |  | Cut-to-length line                                                     |  |   |  | plates and slit coils                                                                                                                                                           |  |                         
|                                                        |  |      |  | Shearing                                                               |  |   |  |                                                                                                                                                                                 |  |                         
|                                                       
|Delta Tube & Co., Ltd./LaSalle, Québec (60% owned)      |  | 
   |  | 100,000 sq. ft
HSS tube mill, up to
5" × 5" × 1/4"                     |  |  |  | Toll rolling of HSS tubing for Nova and pipe for Ispat Sidbec Inc.                                                                                                              |  | Owned                   
|                                                       
|Nova Tube Inc./Baie d'Urfé, Québec                      |  | 

 |  | 47,100 sq. ft
Hot-rolled tube mill
Cold-rolled tube mill up to 3" O.D. |  |  |  | Toll rolling of tubing for Nova for the automotive and furniture industries, other manufacturers and the structural market                                                      |  | Leased to
May 31, 2008  
|                                                       
|Nova Tube Ontario Inc./Mississauga, Ontario             |  | 
   |  | 90,000 sq. ft
Cold-rolled tube mill up to 4" O.D.                      |  |  |  | Toll rolling of high quality mechanical tubing for Nova for the hydroforming process in the automotive industry and
for other automotive and general manufacturing applications |  | Leased to
April 30, 2007
|                                                       
|Nova Steel Processing Centre Ltd./Stoney Creek, Ontario |  | 

 |  | 171,000 sq. ft
Pickling line
Two slitting lines                        |  |  |  | Pickling and slitting of coils on a toll
rolling basis                                                                                                                          |  | Owned                   
|                                                       

15

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|                                              
|----------------------------------------------
|Argo Steel Ltd./Lachine, Québec               
|                                              
|                                              
|Argo Steel Ltd./Brampton, Ontario             
|                                              
|                                              
|Metco Steel Inc./Lachine, Québec              
|                                              
|                                              
|Cresswell Roll Forming Inc./                  
|Granby, Québec                                
|                                              
|                                              
|                                              
|                                              
|Cresswell Roll Forming Inc./St. Hubert, Québec
|                                              
|Cresswell Roll Forming Inc./                  
|Shawinigan, Québec                            
|                                              

Several of Nova's facilities are leased under agreements that expire within the coming year. The Company plans to exercise its existing renewal options to extend most of
these leases. See "Information on the CompanyHistory and Development of the Company."

Substantially
all the assets of certain of the Company's subsidiaries are subject to blanket liens for the benefit of certain lenders. See "Operating and Financial Review and
ProspectsLiquidity and Capital Resources."

All
of the above facilities are fully utilized.

During
2002, the Company began construction of a 158,000 sq. ft facility in LaSalle, Québec. See "Information on the CompanyHistory and Development of the
Company."

In
2003, the Company owned two aircrafts. One of the aircrafts was traded in for a new one at a net cost of $6.6 million. Furthermore, the Company disposed of its other aircraft
in December 2003 for $2.4 million.

16

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ITEM 5 OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion should be read in conjunction with the Company's Consolidated Financial Statements and the notes thereto included
in Item 18 of this document.

Overview

All amounts are expressed in U.S. dollars.

Nova's
operations historically have been conducted by entities owned and operated under common management philosophies of the family of D. Bryan Jones. Novamerican was incorporated on
April 4, 1997 as part of a reorganization in order to consolidate the operations of American Steel and Nova under one holding company.

The
Consolidated Financial Statements include the accounts and transactions of the U.S. Affiliates and the Canadian Affiliates at historical cost, except that all material intercompany
balances and transactions have been eliminated. All references to fiscal years of the Company and its subsidiaries and affiliates in Operating and Financial Review and Prospects are to fiscal years
ended on the last Saturday of November. The fiscal years ended November 29, 2003, November 24, 2001 and November 25, 2000 include 52 weeks of operations, whereas the fiscal
year ended November 30, 2002 includes 53 weeks of operations.

Novamerican,
through its subsidiaries, sells a broad range of products, many of which have different gross margins. Products that have more value-added processing, as well as
manufactured products, generally have a greater gross margin. Toll processing, whereby the Company processes steel owned by its customers, generally results in lower selling prices per ton but higher
gross margin percentages than the Company's historical direct sales. Accordingly, the Company's overall gross margin is affected by product mix and the amount of processing performed, as well as
volatility in selling prices and material purchase costs. Net sales include direct sales and toll processing revenues. Cost of goods sold for direct sales includes raw material, freight and labor
costs.

The
Company sells products in Canada and the United States. All sales and payments are made in either Canadian dollars or U.S. dollars. Because the Company conducts its operations
generally on the basis of short-term orders, backlog is not a meaningful indicator of future performance. The Company's results of operations are affected by numerous external factors,
such as general economic and political conditions, competition and steel pricing and availability.

The
Company concentrates on internal growth and on improving the efficiency of its operations through increases in capacity, productivity and efficiency. The Company also has expanded
through selective acquisitions, including the 1996 purchase of American Steel, and through strategic capital investments, such as NTO, NSPC, NTS, the installation of the Company's fifth tube mill in
Morrisville, PA and NTI (formerly, BethNova), the Company's sixth tube mill, established to supply tubing for use in hydroforming of automobile and truck components. The Company has been profitable in
each year since commencing of operations in 1979, except for a loss of less than $200,000 in 1990. The Company's total tons sold and processed grew from 1998 to 2003 at a compound annual rate of 8.3%.

17

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Selected Results of Operations

The following table sets forth for each of the periods presented certain statement of operations data expressed as a percentage of net sales.

|                                  |  | Years Ended |  
|--------------------------------- |  | ----------- | -
|
|Net sales                         |  | 100.0       | %
|Cost of sales                     |  | 77.2        |  
|                                  |  |             |  
|Gross margin                      |  | 22.8        |  
|Operating expenses                |  | 18.4        |  
|                                  |  |             |  
|Operating income                  |  | 4.4         |  
|Interest expense                  |  | 1.5         |  
|                                  |  |             |  
|                                  |  | 2.9         |  
|Share in income of joint ventures |  | 0.0         |  
|                                  |  |             |  
|Income before income taxes        |  | 2.9         |  
|Income taxes                      |  | 1.0         |  
|                                  |  |             |  
|Net income                        |  | 1.9         |  
|                                  |  |             |  

Fiscal Year Ended 2003 Compared to Fiscal Year Ended 2002

Tons sold and processed increased by 3.8% to 1,664,000 tons in 2003 from 1,604,000 tons in 2002. Tons sold and processed in 2003 include 870,000 tons from direct
sales and 794,000 tons from toll processing, compared with 867,000 tons from direct sales and 737,000 tons from toll processing in 2002.

Net
sales increased by approximately $41.6 million, or 8.9%, to $507.1 million, compared with $465.5 million in 2002. The increase was partly attributable to higher
processing volumes but also due to prices which, after moving downward through the first half of the year, trended up through the second half.

Gross
margin, as a percentage of net sales, decreased to 21.0% in 2003 from 24.5% in 2002. The decrease was attributable to weak market conditions prevailing in the first half of 2003
caused by excess inventories throughout the industry.

Operating
expenses, as a percentage of net sales, decreased to 16.5% of sales from 17.1% in 2002. The decrease in percentage was mainly attributable to the higher net sales. In absolute
dollars, operating expenses increased by $3.5 million. This increase was due mainly to increased operating levels in certain facilities and the consolidation of an operation which was formerly
accounted for on an equity basis.

Interest
expense remained unchanged at $5.1 million. This was a result of the overall borrowings remaining at the same level as 2002.

Income
before income taxes decreased by $11.8 million, or 39.1%, to $18.4 million in 2003 from $30.2 million in 2002. This decrease was due mainly to lower gross
margins.

Income
taxes in 2003 were $5.3 million and represented 28.8% of income before taxes, compared to $10.1 million representing 33.4% of income before income taxes in 2002.

Fiscal Year Ended 2002 Compared to Fiscal Year Ended 2001

Tons sold and processed increased by 11.4% to 1,604,000 tons in 2002 from 1,440,000 tons in 2001. Tons sold and processed in 2002 include 867,000 tons from direct
sales and 737,000 tons from toll processing, compared with 773,000 tons from direct sales and 667,000 tons from toll processing in 2001.

18

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Net
sales increased by approximately $48.5 million, or 11.6%, to $465.5 million, compared with $417.0 million in 2001. The increase was mainly attributable to higher
selling prices and higher volumes.

Gross
margin, as a percentage of net sales, increased to 24.5% in 2002 from 22.8% in 2001. The increase was attributable to the rapid increase in selling prices during 2002, to the
increase in the number of tons processed and to the management of inventories.

Operating
expenses, as a percentage of net sales, decreased to 17.1% of sales from 18.4% in 2001. The decrease in percentage was mainly attributable to the higher selling prices. In
absolute dollars, operating expenses increased by $3.0 million. This increase was due mainly to increased operating levels.

Interest
expense decreased by approximately $1.4 million, or 21.6%, to $5.1 million, compared to $6.5 million in 2001. This decrease was mainly due to the lower
level of bank indebtedness.

Income
before income taxes and minority interest increased by $18.3 million, or 153.8%, to $30.2 million in 2002 from $11.9 million in 2001. This increase was due
mainly to higher selling prices and higher gross margins.

Income
taxes in 2002 were $10.1 million and represented 33.4% of income before taxes and minority interest, compared to $3.9 million representing 32.8% of income before
income taxes and minority interest in 2001.

Fiscal Year Ended 2001 Compared to Fiscal Year Ended 2000

Tons sold and processed increased by 3.3% to 1,440,000 tons in 2001 from 1,394,000 tons in 2000. Tons sold and processed in 2001 include 773,000 tons from direct
sales and 667,000 tons from toll processing, compared with 795,000 tons from direct sales and 599,000 tons from toll processing in 2000.

Net
sales decreased by approximately $61.5 million, or 12.9%, to $417.0 million, compared with $478.5 million in 2000. The decrease was mainly attributable to lower
selling prices and to general market conditions.

Gross
margin, as a percentage of net sales, increased to 22.8% in 2001 from 21.5% in 2000.

Operating
expenses, as a percentage of net sales, increased to 18.4% from 15.9% in 2000. The increase was a result of higher plant expenses, particularly in the new start up facilities.

Interest
expense increased by approximately $0.1 million, or 1.6%, to $6.5 million, compared to $6.4 million in 2000. This increase was mainly due to the higher
level of long-term debt.

Income
before income taxes and minority interest decreased by $9.3 million, or 43.9%, to $11.9 million in 2001 from $21.2 million in 2000. Income taxes in 2001 were
$3.9 million and represented 32.8% of income before taxes and minority interest, compared to $8.0 million representing 37.8% of income before income taxes and minority interest in 2000.

Liquidity and Capital Resources

The Company's principal capital requirement is to fund its growth, including strategic acquisitions, the purchase and upgrading of processing equipment, the
construction and upgrading of related facilities and additional working capital. Historically, the Company has used cash generated from operations and revolving credit borrowings under its credit
facilities to finance its working capital requirements and has financed acquisitions and capital additions from the proceeds of long-term indebtedness under the credit facilities.

Net
cash from operating activities for fiscal 2001, 2002 and 2003 was $28.2 million, $13.2 million and $19.1 million, respectively. These variations are attributable
mainly to fluctuations in the Company's overall inventory levels which reflected the existing market conditions.

19

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Net
cash used for investing activities for fiscal 2001, 2002 and 2003 was $14.6 million, $16.5 million and $17.0 million, respectively. During 2003, cash used for
investing activities consisted primarily of $25.1 million of capital expenditures. From fiscal 2001 to date, the Company has made significant investments in the facilities at Jeffersonville, IN
and LaSalle, Québec as well as in equipment at St. Hubert, Québec and Stoney Creek, Ontario. In addition, the Company disposed of an aircraft and purchased a new one. See
"Property, Plants and Equipment."

Net
cash from (used for) financing activities for fiscal 2001, 2002 and 2003 was ($7.2) million, $0.3 million and $0.1 million, respectively. These differences are mainly
due to fluctuations in working capital items.

The
Company believes that funds available under its credit facilities together with the funds from operations will be sufficient to provide the Company with the liquidity necessary to
fund its anticipated working capital requirements and capital expenditure requirements over the next 24 months. Capital requirements are subject to change as business conditions warrant and
opportunities arise. In connection with its internal and external expansion strategies, the Company may from time to time seek additional funds to finance the development of new facilities and major
improvements and additions to processing equipment to respond to customers' demands. The Company plans to refinance its U.S. revolving credit and term loan agreements when they become due in 2006. The
Company expects to generate enough cash to repay all its other long-term debt.

At
November 29, 2003, the Company's revolving credit facilities consisted of the following:



There
are no cross collateralizations among the various Canadian credit facilities or between the Canadian credit facilities and the U.S. credit facility.

At
November 29, 2003, the Company's long-term debt consisted of the following:



20

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A
matched fund term loan amounting to $1.3 million in 2002, secured by a moveable hypothec (or lien) on the aircraft of a Canadian subsidiary, that bore interest at 7.4%, was
repaid during the year.

A
loan amounting to $0.6 million in 2002, secured by machinery and equipment of a Canadian subsidiary, that bore interest at 5%, was repaid during the year.

A
promissory note amounting to $4.0 million in 2002, secured by a first priority security interest in the aircraft, of a U.S. subsidiary, that bore interest at LIBOR plus a
premium of 2%, was repaid during the year.

The
credit facilities contain various restrictive covenants which require minimum net worth levels, maintenance of certain financial ratios and limitations on dividends and capital
expenditures. The credit

21

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facilities
allow the payment to the Company of dividends and interest from its subsidiaries under certain conditions.

The
parent guarantees and all other direct obligations rank on apari passubasis.

As
at November 29, 2003, the Company had $50,000 outstanding under letters of credit.

At
November 29, 2003, advances by an employee to the Company amounted to $3.5 million, bearing interest at prime, currently 4.5%, plus a premium of 0.5%, without repayment
terms.

On
December 29, 2003, a U.S. subsidiary of the Company obtained a $6.5 million loan from a U.S. bank to finance the acquisition of an aircraft. See "Property, Plants and
Equipment."

On
February 20, 2004, a Canadian subsidiary of the Company obtained a $5.6 million loan from a Canadian bank to finance the new facility in LaSalle, Québec.
See "Information on the CompanyHistory and Development of the Company."

Off-balance Sheet Arrangements

There were no off-balance sheet arrangements as of and for the year ended November 29, 2003 that had or are reasonably likely to have a
material current or future effect on the Company's financial condition, revenues or expenses, liquidity, capital expenditures or capital resources.

Tabular Disclosure of Contractual Obligations

A summary of the payments due under the Company's debt and other contractual obligations as at November 29, 2003 is as follows:

|                     |  | Payments due by period
|-------------------- |  | ----------------------
|
|
|Long-term debt       |  | $                     
|Operating leases     |  |                       
|Purchase obligations |  |                       
|                     |  |                       
|                     |  | $                     
|                     |  |                       

Purchase
obligations include payments due under legally binding agreements with suppliers, such as firm, non-cancelable purchase orders for the supply of steel. Virtually all
of the Company's purchase orders may be cancelled without penalty upon giving sufficient notice. The
amounts included in the above table reflect the Company's estimate of steel on order, in production and unshipped and for which the Company believes it would have an obligation to pay. In the normal
course of business, the Company purchases approximately $408.0 million annually of steel, of which the Company estimates no more than approximately $20.0 million was outstanding at
November 29, 2003 in the form of firm purchase orders.

Effects of Inflation

Inflation generally affects the Company by increasing the cost of personnel, processing equipment, purchased steel and borrowings under the Company's credit
facilities and other indebtedness. The Company does not believe that inflation has had a material effect on its operating income over the last three fiscal years. However, it has had and could have a
material effect on the Company's financing costs based on inflation's impact on amounts borrowed, the prime rate and LIBOR.

22

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Hedging

The Company formally documents all relationships between hedging instruments and the hedged items, as well as its risk-management objectives and
strategies for undertaking various hedge transactions. The Company formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows of the hedged items.

When
it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively
when (a) it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item; (b) the derivative expires or is sold, terminated or
exercised; or (c) management determines that designation of the derivative as a hedge instrument is no longer appropriate. In these situations where hedge accounting is discontinued, the
derivative will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current-period earnings. All gains or losses that were accumulated in other
comprehensive loss will be recognized immediately in earnings upon the discontinuance of hedge accounting.

The
Company minimizes the credit (or repayment) risk in derivative instruments by entering into transactions with reputable financial institutions and it does not hold derivative
instruments for trading purposes.

At
November 29, 2003, November 30, 2002 and November 24, 2001, a U.S. subsidiary of the Company had an interest rate swap agreement to manage its exposure to
interest rate risk as required under the terms of the term loan agreement. See "Liquidity and Capital Resources." This swap possesses a term equal to the term of the debt, with a fixed pay rate and a
receive rate indexed to rates paid on the debt. This derivative was entered into concurrently with the issuance of the debt being hedged, at which date, it was designated as a cash flow hedge and its
fair value was recognized on the balance sheet. Changes in the fair value of this derivative are reported as a separate component of shareholders' equity in accumulated other comprehensive loss.

The
Company, from time to time, utilizes forward contracts to hedge its exposure to Canadian dollar exchange rate fluctuations in connection with future sales and purchases denominated
in U.S. dollars. Forward contracts are entered into with reputable financial institutions and the Company does not enter or hold foreign exchange forward contracts for trading purposes. There were no
forward foreign exchange contracts outstanding at year end.

Current and Pending Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation ("FIN") 46, "Consolidation of Variable Interest Entities: an
interpretation of ARB No. 51." Variable interest entities are required to be consolidated by their primary beneficiary. The primary beneficiary is the party that absorbs a majority of the
entity's expected losses, receives a majority of its expected returns, or both. The FASB issued staff positions in July, October and December 2003 to give further implementation guidance. There
are no material variable interest entities which will be required to be consolidated under the provisions of FIN 46.

Changes in Accounting Policies

Effective December 1, 2002, the Company adopted Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets",
which prescribes accounting for all purchased goodwill and intangible assets and states that acquired goodwill and intangible assets with indefinite lives are not amortized, but are tested for
impairment annually, while other intangible assets with finite lives should be amortized over their useful economic life. Accordingly, goodwill is no longer amortized but its

23

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carrying
value is tested for impairment annually. There were no impairment losses resulting from the transitional testing.

In
2003, the Company adopted the disclosure requirements of the SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosure: an amendment of FASB
Statement No. 123." SFAS No. 148 revises disclosures for all stock compensation plans making them more prominent by requiring that companies include in their Summary of Significant
Accounting Principles or its equivalent (1) the method of accounting for employee stock compensation, (2) if the fair value based method has been adopted for stock-based employee
compensation, a description of the method of reporting the change in accounting principle for all financial statements in which the period of adoption is presented and, (3) if the intrinsic
value method is used for any period presented, a tabular presentation of net income, basic and diluted earnings per share (if applicable), and stock-based employee compensation cost (net of tax
effects), as reported; and stock-based employee compensation cost (net of tax effects), pro forma net income, and pro forma basic and diluted earnings per share, under the fair value method of SFAS
No. 123. The adoption of SFAS No. 148 did not have a material impact on the Company's Consolidated Financial Statements.

In
2003, the Company adopted FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others: an interpretation of
FASB Statements No. 5, 57 and 107 and 34." FIN 45 requires guarantors to recognize a liability at the inception of the guarantee and record it at its fair value. Required disclosures for
guarantees include the nature of the guarantee, the maximum potential undiscounted amount of future payments the guarantor could be required to make under the guarantee and the current carrying amount
of the liability, if any, for the guarantor's obligations under the guarantee. Guarantees contemplated by the disclosure requirements of FIN 45 include product warranties, provisions in a business
combination to pay contingent consideration and guarantees issued between related parties. The adoption of FIN 45 did not have a material impact on the Company's Consolidated Financial Statements.

In
2003, the Company adopted Statement of Position ("SOP") No. 01-6, "Accounting by Certain Entities (Including Entities with Trade Receivables) That Lend to or
Finance the Activities of Others", of the AICPA's Accounting Standards Executive Committee (AcSEC). SOP No. 01-6 requires commercial entities that finance their customers' purchases
of goods and services using trade receivables to disclose their accounting policy for receivables and the related valuation allowance, including the policy for charging off uncollectible receivables
and determining past due or delinquent status. The adoption of SOP No. 01-6 did not have a material impact on the Company's Consolidated Financial Statements.

Application of Critical Accounting Policies

The preparation of the Company's Consolidated Financial Statements requires management to make estimates and assumptions that affect the amounts reported in the
financial statements. The estimates and assumptions are based on management's historical experience and past Company performance. Actual results could differ from these estimates under different
assumptions or conditions. On an ongoing basis, the Company monitors and evaluates its estimates and assumptions. The following critical accounting policies reflect what management believes require
its most difficult, subjective or complex judgments:

Goodwill.Following the adoption of SFAS No. 142 during the year ended November 29, 2003, goodwill is no longer
amortized but its carrying value must be tested for impairment. For the purpose of testing goodwill impairment, the Company and an independent appraiser performed a valuation analysis of the reporting
unit as of the beginning of the year (initial impairment test) and again as of September 1, 2003 (annual impairment test). Each of the valuation reports indicated that the fair value of the
reporting unit exceeds its carrying value, including goodwill. Therefore no impairment loss had to be recognized in the November 29, 2003 Consolidated Financial Statements.

24

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Allowance for doubtful accounts.The Company maintains an allowance for doubtful accounts for estimated losses resulting from
the inability of customers to make required payments. If the financial condition of customers were to deteriorate, resulting in an impairment of their ability to make payments, increases to the
allowance may be required.

Inventories.The Company maintains a reserve for slow-moving and unmarketable inventory to reflect the difference
between the cost of inventory and the estimated market value based on an evaluation of slow-moving products and current replacement costs. If actual market conditions are less favorable
than those anticipated by management, increases to the reserve may be required.

Income taxes.Deferred income taxes include the benefit of losses carried forward when it is reasonably likely that future
profits will result. Should the opportunity to realize the benefit of these losses expire, such amounts would result in additional deferred income tax expense.

Derivatives.The Company has designated an interest rate swap agreement to manage its exposure to interest rate risk as a
cash flow hedge. Changes in fair value are reported as a separate component of shareholders' equity in accumulated other comprehensive loss. The Company formally assesses, both at the hedge's
inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. Should this hedge cease to be
highly effective, any changes in fair value will be recognized in current period earnings. See "Financial StatementsNote 14 Financial Instruments and Hedging Activities."

Trend Information

The steel service center industry is a regional business servicing many different industrial sectors. Currently, this market is positively affected by the general
economic growth in the United States and also by certain global influences on steel pricing, the duration and overall impact of which is difficult to assess.

ITEM 6 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

Directors and Senior Management

The following table sets forth certain information regarding the Company's directors and senior management:

|Name                             |  | Age |  | Positions(s) Held                                                     
|-------------------------------- |  | --- |  | ----------------------------------------------------------------------
|D. Bryan Jones(a)(b)             |  | 63  |  | Chairman of the Board, President, Chief Executive Officer and Director
|Christopher H. Pickwoad(b)       |  | 64  |  | Executive Vice President, Chief Financial Officer and Director        
|Robert D. Taberner               |  | 52  |  | Vice President and General ManagerNova Steel, Ontario                
|Stephen D. Shaw                  |  | 56  |  | President and Chief Operating OfficerAmerican Steel                  
|Scott B. Jones                   |  | 39  |  | Vice President, Secretary and Director                                
|Roger Daigneault                 |  | 47  |  | Vice PresidentCorporate Purchasing                                   
|Peter V. Balboni                 |  | 57  |  | Vice President, Finance and TreasurerAmerican Steel                  
|Michael L. Richards(c)           |  | 64  |  | Director                                                              
|John LeBoutillier, C.M.(a)(b)(c) |  | 59  |  | Director                                                              
|Alexander Adam(a)(c)             |  | 59  |  | Director                                                              

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25

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D. Bryan Jones has over 42 years of experience in the selling, marketing and production of flat-rolled products. In 1967, he and a partner formed St. Laurent Steel,
which was later sold to a major North American steel service center. After a number of years as Vice President and General Manager of St. Laurent Steel, he left in 1979 and incorporated Nova
Steel Ltd. He has served as President and Chief Executive Officer and as a director of Nova since its founding. He has been Chairman of the Board, President, Chief Executive Officer and a
director of the Company since April 4, 1997.

Christopher
H. Pickwoad has 23 years of experience in the steel industry and has been employed by Nova since 1982. Prior to 1982, he was a partner of a firm of chartered
accountants. Mr. Pickwoad has been Executive Vice President, Chief Financial Officer and a director of the Company since April 4, 1997.

Robert
D. Taberner has 24 years of sales and marketing experience in the Ontario flat-rolled market. He has served as the Vice President and General Manager of the
Ontario facilities since 1992.

Stephen
D. Shaw has 35 years experience in the steel industry, the last 21 years of which were in steel distribution in Canada and the United States prior to joining Nova
in August 1997.

Scott
B. Jones has sixteen years of experience in the steel industry and has been employed by Nova since 1991. He has been a Vice President, Secretary and a director of the Company since
April 4, 1997. He is the son of D. Bryan Jones.

Roger
Daigneault has been employed by Nova since 1984. He was employed by Ispat Sidbec Inc. for eight years in sales and production prior to joining Nova.

Peter
V. Balboni joined American Steel in 1975 and has served as its Vice President, Finance and Treasurer since 1980.

Michael
L. Richards has been a director of the Company since September 24, 1997. Mr. Richards is a senior partner in the law firm of Stikeman Elliott LLP, Canadian counsel
to the Company.

John
LeBoutillier, C.M., has been a director of the Company since September 24, 1997. Mr. LeBoutillier has been the Chairman of the Board and President of
Mazarin Inc. since January 2004. He was formerly, from February 2001 to December 2003, Chairman of the Board of Intellium Technologies Inc., from March 2000
to February 2001, a company director, from November 1996 to March 2000, President and Chief Executive Officer of Iron Ore Company of Canada and prior to November 1996,
President and Chief Executive Officer of Ispat Sidbec Inc., the major steel supplier with which the Company owns Delta Tube and Company, Limited.

Alexander
Adam has been a director of the Company since April 1, 2003. Mr. Adam was formerly, from June 1996 to August 2002, the President and Chief Executive
Officer of Algoma Steel Inc. He previously held executive positions at Toyota Motor Manufacturing Canada Ltd. and Stelco Inc.

Compensation

During the fiscal year ended November 29, 2003, the aggregate compensation paid by the Company to the directors and named senior managers as a group for
services rendered by them to the Company in their capacities as officers totaled $4,671,568. Payments made by the Company to the directors for their services as directors amounted to $71,725. An
executive officer of the Company receives, as a bonus, a certain percentage of pre-tax earnings of the operations that he manages, which percentage is determined by negotiations between
such officer and the Company. This bonus is included in the aggregate compensation disclosed in this paragraph.

Board Practices

Directors of the Company are elected in rotation, such that at the first meeting of the shareholders for the election of directors, one-third of the
number of directors to be elected were elected to hold office until

26

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the
first annual meeting of shareholders held after that meeting, one-third of the number of directors to be elected were elected to hold office until the second annual meeting of the
shareholders held after that meeting and the balance of the number of directors to be elected were elected to hold office until the third annual meeting of shareholders held after that meeting. At
each annual meeting thereafter, directors shall be elected to fill the positions of those directors whose term of office has expired and each director so elected shall hold office until the third
annual meeting after his election. A director whose term of office has expired may, if qualified, be re-elected.

The
Board of Directors currently consists of six members. The term of office of Christopher H. Pickwoad and Michael L. Richards will expire at the Meeting which will be held on
April 1, 2004. The term of office of Scott B. Jones and Alexander Adam will expire at the first annual meeting of shareholders held after the Meeting or until their successors are elected or
appointed. The term of office of D. Bryan Jones and John LeBoutillier will expire at the second annual meeting of shareholders held after the Meeting or until their successors are elected or
appointed.

The
Company does not have any service contracts with any directors providing for benefits upon termination of employment or term of office.

Board Committees

To date the Board of Directors has established three committees: (i) a Compensation Committee to make recommendations concerning salaries, incentive
compensation and stock option grants for employees, directors and consultants of the Company; (ii) an Audit Committee to review the annual and quarterly results, communications with
shareholders, the scope of the audit and other services provided by the Company's independent auditors and to recommend to the board the selection and remuneration of the auditors, and (iii) a
Nominating Committee to advise and make recommendations to the Board of Directors concerning the selection of candidates as nominees for directors. The Audit Committee operates in accordance with the
terms of a charter that complies with the Nasdaq's listing standards.

Employees

Currently, at its 23 facilities, the Company has approximately 1,103 employees, of whom approximately 26.9% working at ten of the Company's facilities are
organized by the United Steelworkers, the Teamsters, the Sheet Metal Workers and independent employees associations. During the next twelve months, the labor contracts with the Teamsters covering 46
employees at the Company's Albany and Harrisburg facilities and the labor contract with an independent employee association covering 19 employees at the Norwood facility will expire. Management
believes relations with its employees are good, which is supported by historically low rates of employee turnover. The Company has not experienced a work stoppage by any of its unions or employee
associations in over twenty years.

Nova's
approximately 703 employees are categorized as follows: production and warehouse employees (79%), sales personnel (7%), truck drivers (3%) and administrative employees (12%). The
U.S. Affiliates' approximately 400 employees are categorized as follows: production and warehouse employees (50%), sales personnel (19%), truck drivers (14%) and administrative employees (17%).

Share Ownership

The following table sets forth certain information with respect to the ownership of the Common Shares as of February 25, 2004 by (i) each director
and senior manager of the Company and (ii) all directors and senior managers as a group. Unless otherwise indicated, the persons named below have the

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sole
voting and investment power with respect to the number of Common Shares set forth opposite their names.

|Names of Beneficial Owners                   |  | Number of Common Shares
Beneficially Owned |     | Ownership Percentage |     
|-------------------------------------------- |  | ------------------------------------------ | --- | -------------------- | ----
|D. Bryan Jones                               |  | 6,263,290                                  | (a) | 64.57                | %   
|Christopher H. Pickwoad                      |  | 159,913                                    |     | 1.65                 | %   
|Robert D. Taberner                           |  | 300,000                                    | (b) | 3.00                 | %(b)
|Stephen D. Shaw                              |  | 300,000                                    | (b) | 3.00                 | %(b)
|Scott B. Jones                               |  | 1,485,251                                  | (c) | 15.31                | %   
|Roger Daigneault                             |  | 150,000                                    | (b) | 1.52                 | %(b)
|Michael L. Richards                          |  | 7,300                                      |     | *                    |     
|John LeBoutillier, C.M.                      |  | 10,300                                     |     | *                    |     
|Alexander Adam                               |  | 1,000                                      |     | *                    |     
|All directors and senior managers as a group |  | 8,677,054                                  | (d) | 83.03                | %(d)

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Share Option Plan

The following is a summary of the principal features of Novamerican Steel Inc. 1997 Share Option Plan (the "Share Option Plan").

The
Share Option Plan provides for the grant of incentive stock options ("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code"),
nonqualified stock
options ("NSOs") and other rights (collectively "Awards"). The Company has reserved 1,500,000 Common Shares for issuance under the Share Option Plan. Administration of the Share Option Plan has been
assigned to the Compensation Committee, a committee consisting of two or more directors of the Company, a majority of whom are disinterested. The Compensation Committee has, subject to the terms of
the Share Option Plan, the authority to grant Awards under the Share Option Plan, to construe and interpret the Share Option Plan and to make all other determinations and take any and all actions
necessary or advisable for the administration of the Share Option Plan.

The
Company's key employees, executive officers, directors and other individuals who render services of special importance to the management, operation and development of the Company or
a subsidiary thereof are eligible to receive Awards under the Share Option Plan, but only employees of the Company and its subsidiaries are eligible to receive ISOs. Options will be exercisable during
the period specified by the Compensation Committee in each option agreement and will generally be exercisable in installments pursuant to a vesting schedule that is determined by the Compensation
Committee. Notwithstanding the provisions of any option agreement, options may, in the discretion of the Compensation Committee, become immediately exercisable in the event of a "change of control"
(as defined in the Share Option Plan) of the Company and in the event of certain mergers and reorganizations of the Company. No option will remain exercisable later than ten years after the date of
grant (or five years from the date of grant in the case of ISOs granted to holders of more than 10% of the Common Shares).

28

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The
exercise price for ISOs granted under the Share Option Plan may be no less than the fair market value of the Common Shares on the date of grant (or 110% in the case of ISOs granted
to employees owning more than 10% of the Common Shares). The exercise price for NSOs and all other Awards granted under the Share Option Plan is set at the discretion of the Compensation Committee.

The
Compensation Committee may grant Stock Appreciation Rights ("SARs") to Share Option Plan participants as to such number of Common Shares and on such terms and conditions as it may
determine. SARs may be granted separately or in connection with ISOs or NSOs. Upon exercise of a SAR, the holder is entitled to receive payment equal to the excess of the fair market value on the date
of exercise of the number of Common Shares for which the SAR is exercised, over the exercise price for such Common Shares under a related option, or if there is no related option, over an amount per
Common Share stated in the written agreement setting forth the terms and conditions of the SAR.

On
September 24, 1997, options to purchase 750,000 Common Shares were granted to three executive officers of the Company at an exercise price of $14.00 per share. All of these
options have since vested but none of them have been exercised. They will expire on September 24, 2007. Such options represent the only Awards granted and currently outstanding under the Share
Option Plan.

ITEM 7 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

Major Shareholders

The following table sets forth certain information with respect to the ownership of the Common Shares as of February 25, 2004 by each person or entity
known by the Company to beneficially own more than 5% of the Common Shares. Unless otherwise indicated, the persons named below have the sole voting and investment power with respect to the number of
Common Shares set forth opposite their names. None of these persons has different voting rights from any other holders of Common Shares.

|Names of Beneficial Owners             |  | Number of Common Shares
Beneficially Owned |  | Ownership Percentage |  
|-------------------------------------- |  | ------------------------------------------ |  | -------------------- | -
|D. Bryan Jones                         |  | 6,263,290(a)                               |  | 64.57                | %
|Scott B. Jones                         |  | 1,485,251(b)                               |  | 15.31                | %
|Fidelity Management & Research Company |  | 979,200(c)                                 |  | 10.09                | %

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The Company believes that more than 80% of the Common Shares are held in Canada and less than 20% of the Common Shares are held in the United
States. The Company estimates it has eighteen record holders in Canada.

No
arrangements are known to the Company at this time, the result of which may at a subsequent date result in a change in control of the Company.

Related Party Transactions

A Canadian corporation owned by Scott B. Jones, a director and officer of the Company and the son of D. Bryan Jones, the Chairman and Chief Executive Officer of
the Company, owns five facilities located in Québec and Ontario comprising a total of 281,700 square feet and leases them to the Company on a triple-net basis at an
aggregate annual rent of approximately $1,025,000. Another Canadian corporation 50% indirectly owned by Scott B. Jones and 50% indirectly owned by Peter J. Ouimet, an officer of Argo
Steel Ltd., a Canadian subsidiary of the Company, owns a facility located in Ontario comprising a total of

29

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43,300
square feet and leases it to the Company on a triple-net basis at an aggregate annual rent of approximately $159,000. Another Canadian corporation 50% indirectly owned by Scott B.
Jones and 50% owned by a party unrelated to the Company owns a facility located in Québec comprising a total of 118,300 square feet and leases it to the Company on a
triple-net basis at an aggregate annual rent of approximately $333,000. All the facility leases expire at varying dates between May 31, 2004 and December 31, 2011, and are
all subject to one or two five-year renewal options.

A
Canadian corporation owned by Scott B. Jones owns thirteen trailers which it leases to the Company at an annual aggregate rent of $188,000. This corporation also provided
transportation arrangements for an amount totalling $5,286,000 to the Company during 2003.

At
November 29, 2003, unsecured loans by D. Bryan Jones to the Company amounted to $2,412,000. See "Operating and Financial Review and ProspectsLiquidity and Capital
Resources."

At
November 29, 2003, unsecured advances by an employee to the Company amounted to $3,494,000.

Michael
L. Richards has been a director of the Company since September 24, 1997. Mr. Richards is a senior partner in the law firm of Stikeman Elliott LLP, Canadian counsel
to the Company.

The
Company has adopted a policy that all transactions with any director or officer of the Company, any person or entity that beneficially owns or exercises control or direction over
shares carrying more than 5% of the voting rights attached to all shares of the Company, or any of their affiliates, shall be (i) subject to approval by a majority of the independent members of
the Board of Directors of the Company, (ii) on terms no less favorable to the Company than could be obtained from unaffiliated parties, and (iii) reasonably expected to benefit the
Company. The terms of the above described leases and service agreements have been unanimously approved by the independent members of the Board of Directors of the Company in accordance with such
policy. In the case of service agreements, such approval is subject to certain terms and conditions, which management reasonably believes are being met.

ITEM 8 FINANCIAL INFORMATION

Consolidated Financial Statements and Other Financial Information

See Item 18 for the Financial Statements.

The
Company is a party to various claims and legal actions that it believes are ordinary in nature and incidental to the operation of its business or are covered by insurance. In the
opinion of management, the outcome of such claims and proceedings will not have a material adverse effect upon the Company's business, operations or financial condition. See also "Key
InformationRisk FactorsEnvironmental Matters."

The
Company does not anticipate paying cash dividends on the Common Shares for the foreseeable future. The Company, at present, intends to retain any future earnings to finance
operations and expansion.

During
2003, the Company's export sales amounted to $24.5 million, or 4.8%, of net sales. See "Financial StatementsNote 19."

No
significant changes have occurred since the date of the Company's Financial Statements through the date of this document.

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ITEM 9 THE OFFER AND THE LISTING

Offer and Listing Details

The following table sets forth the annual high and low sale price information for trading of the Common Shares on the Nasdaq under the symbol TONS for the last
five fiscal years.

Period

High

Low1999

13.75

8.002000

10.75

5.632001

6.00

4.232002

10.02

2.052003

10.19

5.49


The
following table sets forth the quarterly high and low sale price information for trading of the Common Shares on the Nasdaq under the symbol TONS for the past two fiscal years.

Period

High

LowFirst Quarter 2002

7.74

2.05Second Quarter 2002

9.35

5.86Third Quarter 2002

10.02

5.70Fourth Quarter 2002

6.63

4.70First Quarter 2003

10.19

5.49Second Quarter 2003

9.85

6.95Third Quarter 2003

8.32

6.65Fourth Quarter 2003

9.00

7.02


The
following table sets forth the monthly high and low sale price information for trading of the Common Shares on the Nasdaq under the symbol TONS for the past six months.

Period

High

LowAugust 2003

8.00

6.65September 2003

8.99

7.02October 2003

8.99

7.60November 2003

9.00

8.41December 2003

15.97

8.52January 2004

18.00

11.91


Markets

The Company's Common Shares currently trade on the Nasdaq where they were initially traded on October 31, 1997, in connection with the Company's initial
public offering. The Common Shares are not traded on any other exchanges. Prior to October 31, 1997, there was no public market for such shares.

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ITEM 10 ADDITIONAL INFORMATION

Certificate and Articles of Incorporation

The Company has been incorporated under, and is subject to the provisions of, the Canada Business Corporations Act (the "CBCA"). The Company's Articles of
Incorporation (the "Articles") does not restrict the type of business that the Company may carry on.

Common Shares.Holders of Common Shares are entitled to one vote for each share held on all matters submitted to a vote of
shareholders, except matters submitted to a vote of another class or series of shares. Holders of Common Shares do not have cumulative voting rights. Holders of Common Shares are entitled to receive
such dividends, if any, as may be declared by the Board of Directors out of funds legally available therefore. Upon the liquidation, dissolution or winding-up of the Company, the holders
of Common Shares are entitled to receive the assets of the Company. Holders of Common Shares have no preemptive, subscription, redemption or conversion rights. The rights of the holders of Common
Shares are subject to the rights of the holders of any Preferred Shares which may, in the future, be issued. The outstanding Common Shares are fully paid and non-assessable.

Preferred Shares.The Board of Directors is authorized to issue Preferred Shares, in one or more series, and to fix the
rights, privileges, restrictions, conditions and limitations, and the number of shares constituting any series or the designations of such series, without further vote or action by the shareholders.
Because the terms of the Preferred Shares may be fixed by the Board of Directors without shareholder action, the Preferred Shares could, subject to regulatory policies, be issued quickly with terms
calculated to defeat an attempted takeover of the Company or to make the removal of management more difficult. Under certain circumstances, this could have the effect of decreasing market value of the
Common Shares. Preferred Shares rank senior to the Common Shares as to the distribution of assets in the event of a liquidation, dissolution or winding-up of the Company. The Company has
no present plans to issue any Preferred Shares.

Changes to the Rights of Shareholders.The Company may amend, by special resolution, its articles of incorporation to change
the rights attached to its Common Shares. A special resolution is a resolution passed by not less than two-thirds of the votes cast by shareholders who voted in respect of that resolution
or signed by all the shareholders entitled to vote on that resolution.

Shareholders' Meetings.The annual meeting of the shareholders shall be convened at such day in each year and at such time as
the Board of Directors may by resolution determine. Other meetings of the shareholders may be convened by order of the chairman of the board, the president or a vice-president who is a
director or by the Board of Directors, to be held at such time and place as may be specified in such order. Shareholders holding between them not less than 5% of the outstanding shares may requisition
a special meeting of shareholders.

Quorum of Shareholders.One person present and holding or representing by proxy at least one issued voting share of the
Company shall be a quorum of any meeting of shareholders for the choice of a chairman of the meeting and for the adjournment of the meeting; for all other purposes, a quorum for any meeting (unless a
different number of shareholders and/or a different number of shares are required to be represented by the CBCA or by the Articles or By-laws of the Company) shall be persons present being
not less than two in number and holding or representing by proxy at least 20% of the shares entitled to vote at such meeting. If a quorum is present at the opening of a meeting of the shareholders,
the shareholders present may proceed with business of the meeting, notwithstanding that a quorum is not present throughout the meeting. Where the Company has only one shareholder or only one holder of
any class or series of shares, the shareholder present in person or by proxy constitutes a meeting.

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The
Company has received an exemption from Nasdaq's Quorum requirement of Rule 4350(f) "Qualitative Listing Requirements for Nasdaq National Market and Nasdaq Small Cap Market
Issuers Except for Limited Partnerships."

Voting Rights of Non-resident Shareholders.Neither Canadian law nor the Company's organizational documents
restrict or prohibit the right of non-resident or foreign shareholders to hold or exercise voting rights of its Common Shares. See "Exchange Controls."

Change in Control.The Company's Articles could make more difficult the acquisition of the Company by means of a tender
offer, a proxy contest or otherwise and the removal of incumbent officers and directors. Specifically, the Company has a staggered board of directors. See "Directors, Senior Management and
EmployeesBoard Practices." These provisions could discourage certain types of coercive takeover practices and inadequate takeover bids and may encourage persons seeking to acquire control
of the Company to negotiate first with the Company.

Number of Directors; Residency Requirements; Vacancies; Removal.The Articles provide that there shall be a minimum of three
directors and a maximum of fifteen directors and that the Board of Directors shall be elected and shall retire in rotation. The exact number of directors is fixed by the Board of Directors, subject to
the requirement of the CBCA that the Company have a minimum of three directors, at least two of whom are not officers or employees of the Company or its affiliates. The CBCA provides that one quarter
of the directors of a corporation must be "resident Canadians", defined to include Canadian citizens and permanent residents ordinarily resident in Canada.

The
CBCA provides that a vacancy on the Board of Directors may be filled by a quorum of directors, except for a vacancy resulting from an increase in the number or minimum number of
directors or from a failure to elect the number or minimum number of directors required by the Articles.

The
directors of a CBCA corporation may be removed from office by a resolution passed by a majority of votes cast at a special meeting of the shareholders, subject to any applicable
class or cumulative voting rights.

Limitations on Liability of Officers and Directors.The CBCA provides that a corporation may indemnify, and the Company's
By-laws (the "By-laws") provide that the Company shall indemnify, in each case except in respect of an action by or on behalf of the Company or a body corporate of which the
Company is or was a shareholder or creditor to procure a judgment in its favor, an officer or a director of the Company, a former officer or director of the Company or a person who acts or acted at
the Company's request as a director or officer of a body corporate of which the Company is or was shareholder or creditor, and his heirs and legal representatives, against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a
party by reason of his being or having been a director or officer of the Company or such body corporate, if he acted honestly and in good faith with a view to the best interests of the Company, and,
in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful.

Amendment of Certain Provisions of the Articles; Fundamental Changes.In accordance with the provisions of the CBCA, an
amendment to the Articles of the Company (except in limited circumstances) and the merger, consolidation or dissolution of the Company (each such event, a "fundamental change") will require the
approval of not less than two-thirds of the votes cast by the shareholders voting in person or by proxy at a special meeting of the shareholders of the Company. See "Quorum of
Shareholders."

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Material Contracts

During 2003, the Company purchased ISG's 50% interest in the BethNova joint venture for $4.1 million. See "Information on the CompanyHistory
and Development of the Company."

Exchange Controls

There are currently no laws, decrees, regulations or other legislation in Canada that restricts the export or import of capital or that affects the remittance of
dividends, interest or other payments to non-resident holders of the Company's securities other than withholding tax requirements. There is no limitation imposed by Canadian law or by the
Articles or other constituent
documents of the Company on the right of a non-resident of Canada to hold or vote Common Shares of the Company, other than as provided in the Investment Canada Act (the "Investment Act"),
as amended by the North American Free Trade Agreement ("NAFTA") Implementation Act (Canada) and the World Trade Organization ("WTO") Agreement Implementation Act.

The
Investment Act requires notification and, in certain cases, advance review and approval by the Government of Canada of the acquisition by a "Non-Canadian" of "control of
a Canadian business", all as defined in the Investment Act. Generally, the threshold for review will be higher in monetary terms for a member of the WTO or NAFTA.

Taxation

Purchasers of the Common Shares should consult their own tax advisers with respect to their particular circumstances and with respect to the effects of state,
local or foreign (including Canadian) tax laws to which they may be subject.

Canadian Federal Income Tax Consequences

The following summarizes the material Canadian federal income tax consequences relevant to an investment in the Common Shares listed on the Nasdaq by individuals
and corporations who are residents of the United States and are not residents of Canada for the purposes of the Convention between Canada and the United States of America with Respect to Taxes on
Income and on Capital, as amended (the "Convention"), who hold their Common Shares as capital property and deal at arm's length with the Company for the purposes of the Income Tax Act (Canada) (the
"Canadian Tax Act") and who do not use or hold and are not deemed to use or hold such Common Shares in connection with a business carried on through a permanent establishment or a fixed base in Canada
(collectively, "U.S. Residents"). Common Shares will generally be considered to be capital property to a U.S. Resident unless they are held as inventory in the course of carrying on a business or were
acquired in a transaction considered to be an adventure in the nature of trade. This summary is based upon the current provisions of the Canadian Tax Act, the regulations thereunder and the provisions
of the Convention as in effect on the date hereof. Other than specific proposals to amend the Canadian Tax Act and regulations thereunder publicly announced by the Minister of Finance of Canada, prior
to the date hereof, this summary does not take into account or anticipate any changes in law, whether by legislative or judicial action, nor does it take into account tax laws of any province or
territory of Canada or of any jurisdiction outside Canada.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular U.S. Resident.
Accordingly, U.S. Residents should consult with their own tax advisors for advice with respect to their own particular circumstances.

A U.S. Resident will not be subject to tax in Canada on any capital gain realized on a disposition of Common Shares, provided that the Common Shares do not
constitute "taxable Canadian property" of the U.S. Resident at the time of the disposition for purposes of the Canadian Tax Act. So long as the Common Shares are listed on the Nasdaq, Common Shares
will not generally constitute taxable Canadian property

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of
a U.S. Resident unless, at any time during the five-year period immediately preceding the disposition, the U.S. Resident, persons with whom the U.S. Resident did not deal at arm's
length, or any combination thereof, owned, had an interest in or the right to acquire, 25% or more of the issued shares of any series or class of the capital stock of the Company. If the Common Shares
are considered taxable Canadian property to a U.S. Resident, the Convention will generally exempt that U.S. Resident from tax under the Canadian Tax Act in respect of a disposition of Common Shares
provided the value of the shares issued by the Company is not derived principally from real property situated in Canada. A U.S. Resident who disposes of a Common Share that is taxable Canadian
property will be subject to Revenue Canada holdback, notification and certification obligations unless the Common Shares are listed on the Nasdaq at the time of the disposition.

Dividends
paid or credited on the Common Shares, or deemed to be paid or credited, to a U.S. Resident in respect of the Common Shares will generally be subject to Canadian withholding
tax on the gross amount of the dividends. Currently, under the Convention, the rate of Canadian withholding tax which would apply on dividends paid by the Company to a U.S. Resident is (i) 5%
with respect to dividends paid if the beneficial owner of the dividends is a company which owns at least 10% of the voting stock of the Company and (ii) 15% in all other cases.

U.S. Federal Income Tax Considerations

General.The following summarizes the material U.S. Federal income tax consequences to U.S. Holders of owning and disposing
of Common Shares. The U.S. Federal income tax discussion is based on (i) provisions of the Internal Revenue Code of 1986, as amended (the "Code") and U.S. Treasury Regulations thereunder,
existing, temporary and proposed on the date hereof, and (ii) provisions of the Convention as in effect on the date hereof. A "U.S. Holder" is a beneficial owner of the Common Shares who or
which is, for U.S. Federal income tax purposes, (i) a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or who
meets the substantial presence residency test under the U.S. Federal income tax laws; (ii) a corporation, partnership or other entity treated as a corporation or partnership for U.S. Federal
income tax purposes, that is created or organized in or under the laws of the United States, any of the fifty states or the District of Columbia, unless otherwise provided by Treasury regulations;
(iii) an estate the income of which is subject to U.S. Federal income taxation regardless of its source; or (iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust,
or electing trusts in existence on August 20, 1996 to the extent provided in Treasury regulations. Notwithstanding the foregoing definition, a holder's status as a U.S. holder might be
overridden under the provisions of an applicable tax treaty. Conversely, a "Non-U.S. Holder" is a beneficial owner of the Common Shares who or which is not a U.S. Holder. This summary is
subject to any changes to U.S. law or practice occurring after the date hereof, possibly with retroactive effect, including any change in applicable tax treaty provisions, or different
interpretations. Furthermore, this discussion is limited to holders of Common Shares who hold such Common Shares as a capital asset within the meaning of Section 1221 of the Code.

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This discussion is intended only as a descriptive summary of the material U.S. Federal income tax consequences to certain shareholders, and does not purport to be
a complete analysis or listing of all potential tax consequences of the ownership or disposition of Common Shares. This summary is not an exhaustive discussion of all possible tax considerations. In
particular, it does not discuss estate and gift taxes, taxes imposed on the Company, and the consequences for U.S. Holders subject to special tax rules, including U.S. expatriates, certain
Non-U.S. Holders, dealers in securities, partnerships, insurance companies, regulated investment companies, tax-exempt organizations, banking and financial institutions,
persons subject to the alternative minimum tax, persons whose functional currency is not the U.S. dollar, persons holding Common Shares as part of a hedging, conversion or straddle transaction,
persons who directly or indirectly or through certain related persons own more than 10% of the capital or voting power of the Company and persons carrying on a trade or business in Canada through a
permanent establishment or fixed base for the purpose of which the Common Shares have been acquired or held. Because of these limitations, prospective purchasers of Common Shares should consult their
own tax advisors regarding all the tax consequences particular to them of their ownership and disposition of Common Shares.

Taxation of Dividends.For U.S. Federal income tax purposes, the gross amount of a distribution by the Company to U.S.
Holders (including any amounts of Canadian tax withheld) will be treated as dividend income to the extent paid out of the Company's current or accumulated earnings and profits (as determined for U.S.
Federal income tax purposes). Dividends paid by the Company generally will be treated as foreign source dividend income and will not be eligible for the dividends received deduction generally
available for United States corporations under the Code. Preferential tax rates will generally apply to dividends to non-corporate U.S. Holders paid out of the Company's current or accumulated
earnings and profits. If a dividend is paid in Canadian dollars or other property, the amount includible in income will be the U.S. dollar value of the Canadian dollars or the fair market value of the
other property distributed, as determined on the date of receipt by the U.S. Holder or by a nominee, custodian or other agent of such U.S. Holder. A U.S. Holder will have a tax basis in such Canadian
dollars or other property for U.S. Federal income tax purposes equal to their U.S. dollar value on the date of receipt. Any subsequent gain or loss in respect of such Canadian dollars arising from
exchange rate fluctuations will be ordinary income or loss. If a U.S. Holder has the option to receive a distribution either in cash or in the form of Common Shares, and such U.S. Holder chooses to
receive Common Shares (a "Share Distribution"), such U.S. Holder will be treated for purposes of the preceding sentences as having received a distribution to the extent of the fair market value of
these Common Shares. To the extent that an amount received by a U.S. Holder exceeds the U.S. Holder's allocable share of the Company's current and accumulated earning and profits, such excess will be
treated first as a non-taxable return of capital to the extent of the U.S. Holder's basis in the Common Shares (thereby reducing the U.S. Holder's basis in the Common Shares), and
thereafter any remaining distribution in excess of basis would constitute a taxable gain from the deemed sale or exchange of the U.S. Holder's Common Shares. See "Tax on Sale" below. Subject to the
limitations set forth in the Code, U.S. Holders may elect to claim a foreign tax credit against their U.S. Federal income tax liability for Canadian tax withheld from dividends received in respect of
the Common Shares. For the purposes of the limitations on use of foreign tax credits, dividends received from the Company generally will be characterized as passive income, or, in the case of certain
U.S. Holders, financial services income and therefore any U.S. tax imposed on these dividends cannot be offset by
excess foreign tax credits that a U.S. Holder may have from foreign source income not qualifying as passive income or financial services income, respectively. The rules relating to the determination
of the foreign tax credit are complex and U.S. Holders should consult their tax advisors to determine whether and to what extent a credit would be available. U.S. Holders that do not elect to claim a
foreign tax credit may instead claim a deduction for Canadian tax withheld.

Tax on Sale.For U.S. Federal income tax purposes, a U.S. Holder generally will recognize gain or loss on any sale, exchange
or other disposition of Common Shares (unless a specific nonrecognition provision applies). Such gain or loss will be measured by the difference between the amount of cash (and the fair market value
of any other property) received and the U.S. Holder's tax basis in the Common

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Shares.
A U.S. Holder's tax basis in the Common Shares will generally equal the amount paid by such U.S. Holder for the Common Shares (or, in case of Common Shares acquired by way of a Share
Distribution, the amount included in income at the time of the Share Distribution). The gain or loss arising from a sale or exchange of Common Shares will be a long-term capital gain or
loss if the U.S. Holder's holding period for such Common Shares exceeds one year. In general, the gain from a sale or exchange of Common Shares by a U.S. Holder will be treated as United States source
income. However, should any Canadian tax be imposed on the sale or other disposition of the Common Shares by a U.S. Holder and the U.S. Holder is eligible for the benefits of the Convention, an
election may be available under the Code pursuant to which a U.S. Holder would, for purposes of computing the foreign tax credit limitation, be entitled to treat the gains as foreign source income.
Alternatively, the U.S. Holder may claim a deduction for the amount of Canadian tax withheld.

Passive Foreign Investment Company, Foreign Personal Holding Company or Controlled Foreign Corporation.A "passive foreign
investment company" ("PFIC"), as to any U.S. person, is defined as any foreign corporation at least 75% of whose consolidated gross income for the taxable year is passive income, or at least 50% of
the value of whose consolidated assets is attributable to assets that produce or are held for the production of passive income at any time during such person's holding period for shares of such
corporation. For this purpose, passive income generally includes dividends, interest, royalties, rents, annuities and the excess of gains over losses from the disposition of assets which produce those
types of income. The Company currently believes that it and its subsidiaries are not PFICs and intends to conduct its affairs so as to avoid the classification of the Company and its subsidiaries as
PFICs with respect to U.S. persons holding Common Shares. However, if ever applied to the Company and its subsidiaries, the PFIC rules could produce significant adverse tax consequences for a U.S.
Holder, including taxation of disposition gains as ordinary income and the imposition of an interest charge on U.S. Federal income taxes deemed to have been deferred. The Company believes that neither
it nor any of its subsidiaries is a "foreign personal holding company" (a "FPHC") or a "controlled foreign corporation" (a "CFC"). The Company currently believes that neither it nor any of its
subsidiaries is a FPHC because it believes that no group of five or fewer United States citizens or residents owns, directly or indirectly, more than 50% of the voting stock (taking into account the
effect of applicable constructive ownership rules) of any such entity. In addition, the Company believes that less than 60% of its gross income will be FPHC income. FPHC income in this context is
similar but not identical to passive income under the PFIC rules. If the Company or any subsidiary were to become a FPHC in the future (for example by reason of certain constructive ownership rules or
a change in the ownership of its stock) then, in general, each U.S. Holder holding Common Shares on the last day of
the Company's taxable year would be treated as receiving a dividend in an amount equal to each such U.S. Holder's share of the Company's or subsidiary's undistributed FPHC income for such taxable
year. The Company currently believes that neither it nor any of its subsidiaries is a CFC. A corporation is a CFC if more than 50% of the shares of the corporation, by vote or value, are owned,
directly or indirectly (including shares owned through attribution), by "10% CFC Shareholders" (United States persons directly or indirectly owning at least 10% of the total combined voting power of
all shares of the corporation). The Company currently believes that neither it nor any of its subsidiaries is a CFC because U.S. citizens and residents, in the aggregate, do not own more than 50% of
the Company's Common Shares (taking into account the effect of applicable constructive ownership rules). In general, each 10% CFC Shareholder in a CFC on the last day of the CFC's taxable year is
required to include in its gross income for such taxable year its pro rata share of the CFC's earnings and profits for that year attributable to certain types of income or investments. Income
recognized by a 10% CFC Shareholder under the CFC rules would not also be recognized as undistributed FPHC income. Effective for the portion of a holder's holding period that begins after
December 31, 1997, in the case of a corporation that is both a CFC and a PFIC, 10% CFC Shareholders will be treated as shareholders of a CFC and not as shareholders of a PFIC during the time
that such persons are 10% CFC Shareholders.

Information Reporting and Backup Withholding Requirements with Respect to U.S. Holders.The Company does not currently pay
dividends. If it did, and if it used a paying agent (such as a bank) in the

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United
States, the paying agent would be required to report the dividends to U.S. Holders not otherwise exempt from reporting requirements. Certain U.S. Holders may be subject to backup withholding at
a 30% rate on dividends received on Common Shares. This withholding generally applies only if such U.S. Holder (i) fails to furnish a correct taxpayer identification number ("TIN") to the U.S.
financial institution or any other person responsible for the payment of dividends on the Common Share, (ii) furnishes an incorrect TIN, (iii) is notified by the U.S. Internal Revenue
Service ("IRS") of the U.S. Holder's failure to properly report payments of interest and dividends and the IRS has notified the Company to begin withholding tax from the U.S. Holder's dividends, or
(iv) fails, under certain circumstances, to provide a certified statement, signed under penalties of perjury, that the TIN provided is correct and that the U.S. Holder is not subject to backup
withholding rules.

Amounts
withheld under the backup withholding rules do not constitute a separate U.S. Federal income tax. Rather, any amounts withheld under the backup withholding rules will be refunded
or allowed as a credit against the U.S. Holder's U.S. Federal income tax liability, if any, provided the required information or appropriate claim for refund is filed with the IRS.

United States State and Local Taxes.In addition to U.S. Federal income taxes, U.S. Holders may be subject to United States
state and local taxes with respect to their Common Shares. U.S. Holders should consult their own tax advisors regarding such matters.

U.S. Federal Income Tax Consequences to Non-U.S. Holders.The following discussion summarizes the U.S. Federal
income tax consequences of owning and disposing of Common Shares by a holder of Common Shares that is a Non-U.S. Holder, is not engaged in the conduct of a trade or business in the United
States and is not present in the United States for 183 days or more during the taxable year.

Distributions to Non-U.S. Holders.Under the provisions of the Convention, a Non-U.S. Holder would
generally not be subject to U.S. income tax with respect to distributions by the Company.

Tax on Sale by Non-U.S. Holders.A Non-U.S. Holder generally will not be subject to U.S. Federal
income or withholding tax in respect of gain recognized on the disposition of shares.

Information Reporting and Backup Withholding Requirements with Respect to Non-U.S. Holders.Currently, U.S.
information reporting requirements and backup withholding will not apply to dividends on the Common Shares paid to Non-U.S. Holders at an address outside the United States if the
Non-U.S Holder files required information with the payor or qualifies for certain other exemptions. As a general matter, information reporting and backup withholding requirements will not
apply to a payment of the proceeds of a sale of the Common Shares effected outside the United States by a foreign office of a foreign broker. However, information reporting requirements (but not
backup withholding) will apply to a payment of the proceeds of a sale effected outside the United States through a "U.S. Broker," unless the broker has documentary evidence in its records that the
stockholder is not a United States person and has no actual knowledge that such evidence is false, or the Non-U.S. Holder otherwise establishes an exemption. For purposes of the preceding
sentence, a U.S. Broker is a broker that (i) is a United States person, (ii) is a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a
trade or business in the United States, (iii) is a CFC, or (iv) is a foreign partnership if it is carrying on a United States trade or business or if more than 50% of the profits or
capital interests in the partnership are owned by United States persons. Payment by a broker of the proceeds of a sale of the Common Shares effected inside the United States is subject to both backup
withholding and information reporting requirements unless the Non-U.S. Holder certifies under penalties of perjury that he or she is not a United States person and provides his or her name
and address or the Non-U.S. Holder otherwise establishes an exemption. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be
allowed as a refund or a credit against such Non-U.S. Holder's U.S. Federal income tax, provided that the required information or appropriate claim for refund is furnished to the IRS.

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THE FOREGOING DISCUSSION IS ONLY A SUMMARY OF THE PRINCIPAL U.S. FEDERAL INCOME TAX CONSEQUENCES AND CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP,
SALE OR OTHER DISPOSITION OF THE COMMON SHARES BY U.S.
HOLDERS. ACCORDINGLY, INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES AND CANADIAN FEDERAL INCOME TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR
OTHER DISPOSITION OF THE COMMON SHARES INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAX JURISDICTION.

Documents on Display

Any documents referred to in this Annual Report may be inspected at the corporate office of the Company, 2175 Hymus Boulevard, Dorval, Québec,
H9P 1J8, upon appointment during normal business hours.

ITEM 11 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to market risk from changes in interest and foreign exchange rates and, from time to time and only upon approval by senior officers, enters
into financial contracts in the ordinary course of business to hedge these exposures. The Company does not use financial instruments for trading or speculative purposes.

Interest Rate Risk.The Company's exposure to interest rate risk is as follows. (All tabular amounts are in thousands of U.S.
dollars).

|                  |  |               |  | November 29, 2003 |       
|----------------- |  | ------------- |  | ----------------- | ------
|
|Bank indebtedness |  | Floating rate |  | $                 | 18,863
|                  |  |               |  |                   |       
|Long-term debt    |  | Floating rate |  | $                 | 23,456
|                  |  | Fixed rate    |  |                   | 34,206
|                  |  |               |  |                   |       
|                  |  |               |  | $                 | 57,662
|                  |  |               |  |                   |       

|                             |  | November 29, 2003
|---------------------------- |  | -----------------
|
|Fair value of long-term debt |  | $                
|                             |  |                  

A
33 basis point movement in the Canadian prime rate, the Canadian bankers' acceptance rate, the U.S. base rate or LIBOR would result in an approximate $0.1 million, annualized
for the period ended November 29, 2003, increase or decrease in interest expense and cash flows. The modeling technique used was to apply to the Company's debt the difference between the actual
interest rates at November 29, 2003 and the what-if interest rates.

A
variable to fixed interest rate swap agreement is used by a U.S. wholly-owned subsidiary of the Company to hedge its exposure to interest rate risk related to the term credit agreement
and is accounted for on the accrual basis. Amounts to be paid or received under the interest rate swap agreement are recognized as interest expense or income in the period in which they accrue. See
"Operating and Financial Review and ProspectsHedging."

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Exchange Rate Risk.The Company, from time to time, utilizes forward exchange contracts to hedge its exposure to exchange
rate fluctuations in connection with future sales and purchases by certain of its Canadian subsidiaries, denominated in U.S. dollars. Forward exchange contracts are entered into with
reputable financial institutions. At November 29, 2003, November 30, 2002 and November 24, 2001 the Company had no forward foreign currency exchange contracts outstanding.

The
Company estimates that a fourteen-cent movement in the value of the Canadian dollar would affect net sales by approximately $28.8 million annually, based on 2003
Canadian dollar net sales, without giving effect to any hedging instruments. The modeling technique used was to determine the difference between the conversion of net sales in Canadian dollars for the
period ended November 29, 2003 using the average exchange rate for the year and the what-if exchange rate. In 2003, the average exchange rate was $1.4216 Canadian. As at
February 25, 2004, the exchange rate was $1.3370.

Commodity Price Risk.The Company does not use derivative commodity instruments to hedge its exposure to the impact of price
fluctuations on its principal raw material. See "Key InformationRisk Factors Cost of Raw Materials; Impact of Changing Steel Prices."

ITEM 12 DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

PART II

ITEM 13 DEFAULTS, DIVIDENDS ARREARAGES AND DELINQUENCIES

None.

ITEM 14 MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

None.

ITEM 15 CONTROLS AND PROCEDURES

The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on their evaluation as of the end of the period covered by this report,
that the Company's disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that
information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms. There were no changes in the Company's internal control over financial reporting during the year ended November 29, 2003
that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

ITEM 16 [RESERVED]

ITEM 16A AUDIT COMMITTEE FINANCIAL EXPERT

The Company has determined that it has at least one audit committee financial expert serving on its audit committee. The Audit Committee financial expert of the
Company is John LeBoutillier, the Chairman of the Audit Committee.

ITEM 16B CODE OF ETHICS

The Company has recently adopted a Code of Business Conduct and Ethics applicable to all directors, officers and employees, to which there were no amendments or
waivers. The Company will send a copy of

40

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the
Code of Business Conduct and Ethics without charge to any person who sends a written request therefor to Christopher H. Pickwoad, 2175 Hymus Blvd., Dorval, Québec, H9P 1J8.

ITEM 16C PRINCIPAL ACCOUNTING FEES AND SERVICES

The following table sets forth the accounting fees and services for the past two fiscal years:

Nov. 29, 2003

Nov. 30, 2002(In thousands of U.S. dollars)Audit Fees

$
377

$
329Audit-Related Fees


9


8Tax Fees


123


97$
509

$
434


"Audit-Related
Fees" include fees for the quarterly review of the Company's Consolidated Financial Statements. "Tax Fees" include tax compliance services and tax advisory and planning
services. Management presents regular updates to the Audit Committee of the services rendered by the auditors.

The
Audit Committee reviews the overall scope and specific plans for the audits of the external auditors of the Company and its subsidiaries.

The
auditors, the Audit Committee and management maintain regular and open communication in relation to the audits of the Company's Consolidated Financial Statements. There were no
disagreements between the auditors, the Audit Committee and management on matters affecting the audit of the Company's Consolidated Financial Statements.

ITEM 16D EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.

Not applicable.

PART III

ITEM 17 FINANCIAL STATEMENTS

See Item 18 for the Financial Statements.

41

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ITEM 18 FINANCIAL STATEMENTS

[nc_cad,157]Raymond Chabot Grant Thornton Logo[nc_cad,179]

Independent Auditors' Report

To
the Board of Directors and Shareholders of
Novamerican Steel Inc.

We
have audited the accompanying consolidated balance sheets of Novamerican Steel Inc. and Subsidiaries as of November 29, 2003 and November 30, 2002 and the related
consolidated statements of operations and comprehensive income, shareholders' equity and cash flows for each of the years in the three-year period ended November 29, 2003. These
financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Novamerican Steel Inc. and Subsidiaries
as of November 29, 2003 and November 30, 2002 and the results of their operations and their cash flows for each of the years in the three-year period ended
November 29, 2003 in conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 2 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standard No. 142,Goodwill
and Other Intangible Assets("SFAS 142") on December 1, 2002.

RAYMOND CHABOT GRANT THORNTON

Chartered
Accountants
General Partnership

Montréal,
Canada
December 19, 2003

42

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Novamerican Steel Inc. and Subsidiaries        Consolidated Statements of Operations and Comprehensive Income        (In thousands of U.S. dollars, except per share data)

|                                                                                                  |                            | Years ended |       
|------------------------------------------------------------------------------------------------- | -------------------------- | ----------- | ------
|
|
|Net sales                                                                                         |                            | 507,067     |       
|Cost of sales                                                                                     |                            | 400,825     |       
|                                                                                                  |                            |             |       
|Gross margin                                                                                      |                            | 106,242     |       
|                                                                                                  |                            |             |       
|Operating expenses                                                                                |                            |             |       
|                                                                                                  | Plant                      |             | 34,000
|                                                                                                  | Delivery                   |             | 17,394
|                                                                                                  | Selling                    |             | 11,410
|                                                                                                  | Administrative and general |             | 20,424
|                                                                                                  |                            |             |       
|                                                                                                  |                            | 83,228      |       
|                                                                                                  |                            |             |       
|Operating income                                                                                  |                            | 23,014      |       
|                                                                                                  |                            |             |       
|Interest expense                                                                                  |                            | 5,144       |       
|Share in income of joint ventures                                                                 |                            | (545        | )     
|                                                                                                  |                            |             |       
|                                                                                                  |                            | 4,599       |       
|                                                                                                  |                            |             |       
|Income before income taxes                                                                        |                            | 18,415      |       
|Income taxes (Note 4)                                                                             |                            | 5,333       |       
|                                                                                                  |                            |             |       
|Net income                                                                                        |                            | 13,082      |       
|                                                                                                  |                            |             |       
|Basic and diluted income per share                                                                |                            | 1.35        |       
|                                                                                                  |                            |             |       
|Comprehensive income                                                                              |                            |             |       
|Net income                                                                                        |                            | 13,082      |       
|Changes in cumulative translation adjustment                                                      |                            | 12,477      |       
|Changes in fair value of interest rate swaps, net of deferred income taxes of $188 ($490 in 2002) |                            | 289         |       
|                                                                                                  |                            |             |       
|                                                                                                  |                            | 25,848      |       
|                                                                                                  |                            |             |       

The
accompanying notes are an integral part of the consolidated financial statements.

43

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Novamerican Steel Inc. and Subsidiaries        Consolidated Statements of Shareholders' Equity        (In thousands of U.S. dollars, except share data)

|                             |                                                                                    | Common shares |  |        |  | Accumulated
other
comprehensive
income (loss) |        |        |       
|---------------------------- | ---------------------------------------------------------------------------------- | ------------- |  | ------ |  | --------------------------------------------- | ------ | ------ | ------
|
|
|
|Balance at November 25, 2000 |                                                                                    | 9,700,000     |  | 28,404 |  | 70,657                                        |        | (5,773 | )     
|                             | Net income                                                                         |               |  |        |  |                                               | 8,014  |        |       
|                             | Changes in cumulative translation adjustment                                       |               |  |        |  |                                               |        |        | (973  
|                             | Changes in fair value of interest rate swaps, net of deferred income taxes of $540 |               |  |        |  |                                               |        |        | (661  
|                             |                                                                                    |               |  |        |  |                                               |        |        |       
|Balance at November 24, 2001 |                                                                                    | 9,700,000     |  | 28,404 |  | 78,671                                        |        | (7,407 | )     
|                             | Net income                                                                         |               |  |        |  |                                               | 20,118 |        |       
|                             | Changes in cumulative translation adjustment                                       |               |  |        |  |                                               |        |        | 679   
|                             | Changes in fair value of interest rate swaps, net of deferred income taxes of $490 |               |  |        |  |                                               |        |        | (598  
|                             |                                                                                    |               |  |        |  |                                               |        |        |       
|Balance at November 30, 2002 |                                                                                    | 9,700,000     |  | 28,404 |  | 98,789                                        |        | (7,326 | )     
|                             | Net income                                                                         |               |  |        |  |                                               | 13,082 |        |       
|                             | Changes in cumulative translation adjustment                                       |               |  |        |  |                                               |        |        | 12,477
|                             | Changes in fair value of interest rate swaps, net of deferred income taxes of $188 |               |  |        |  |                                               |        |        | 289   
|                             |                                                                                    |               |  |        |  |                                               |        |        |       
|Balance at November 29, 2003 |                                                                                    | 9,700,000     |  | 28,404 |  | 111,871                                       |        | 5,440  |       
|                             |                                                                                    |               |  |        |  |                                               |        |        |       

The
accompanying notes are an integral part of the consolidated financial statements.

44

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Novamerican Steel Inc. and Subsidiaries        Consolidated Statements of Cash Flows        (In thousands of U.S. dollars)

|                                                                          |                                                          | Years ended |       
|------------------------------------------------------------------------- | -------------------------------------------------------- | ----------- | ------
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES                                      |                                                          |             |       
|Net income                                                                |                                                          | 13,082      |       
|Adjustments to reconcile net income to net cash from operating activities |                                                          |             |       
|                                                                          | Depreciation and amortization                            |             | 6,962 
|                                                                          | Share in income of joint ventures                        |             | (545  
|                                                                          | Deferred income taxes                                    |             | 2,208 
|                                                                          | Loss (gain) on disposal of property, plant and equipment |             | 351   
|Changes in working capital items                                          |                                                          |             |       
|                                                                          | Accounts receivable                                      |             | (5,895
|                                                                          | Income taxes receivable                                  |             | (595  
|                                                                          | Inventories                                              |             | 3,276 
|                                                                          | Prepaid expenses and other                               |             | (479  
|                                                                          | Accounts payable and accrued liabilities                 |             | 3,922 
|                                                                          | Income taxes payable                                     |             | (3,221
|                                                                          |                                                          |             |       
|Net cash from operating activities                                        |                                                          | 19,066      |       
|                                                                          |                                                          |             |       
|CASH FLOWS FROM INVESTING ACTIVITIES                                      |                                                          |             |       
|Acquisition of remaining interest in joint venture                        |                                                          | (4,100      | )     
|Acquisition of minority interest                                          |                                                          | (2,278      | )     
|Investment in a joint venture                                             |                                                          | 8,640       |       
|Distribution from a joint venture                                         |                                                          |             |       
|Additions to property, plant and equipment                                |                                                          | (25,140     | )     
|Proceeds from disposal of property, plant and equipment                   |                                                          | 6,068       |       
|Other assets                                                              |                                                          | (181        | )     
|                                                                          |                                                          |             |       
|Net cash used for investing activities                                    |                                                          | (16,991     | )     
|                                                                          |                                                          |             |       
|CASH FLOWS FROM FINANCING ACTIVITIES                                      |                                                          |             |       
|Net increase (decrease) in bank indebtedness                              |                                                          | 13,323      |       
|Advances due to an employee                                               |                                                          | 1,122       |       
|Proceeds from long-term debt                                              |                                                          | 1,872       |       
|Repayment of long-term debt                                               |                                                          | (16,134     | )     
|                                                                          |                                                          |             |       
|Net cash from (used for) financing activities                             |                                                          | 183         |       
|                                                                          |                                                          |             |       
|Effect of exchange rate changes on cash and cash equivalents              |                                                          | 1,417       |       
|                                                                          |                                                          |             |       
|Net increase (decrease) in cash and cash equivalents                      |                                                          | 3,675       |       
|Cash and cash equivalents, beginning of year                              |                                                          | 7,590       |       
|                                                                          |                                                          |             |       
|Cash and cash equivalents, end of year                                    |                                                          | 11,265      |       
|                                                                          |                                                          |             |       
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                          |                                                          |             |       
|Interest paid                                                             |                                                          | 4,821       |       
|                                                                          |                                                          |             |       
|Income taxes paid                                                         |                                                          | 7,335       |       
|                                                                          |                                                          |             |       

The accompanying notes are an integral part of the consolidated financial statements.

45

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Novamerican Steel Inc. and Subsidiaries        Consolidated Balance Sheets        (In thousands of U.S. dollars)

|                                              |                                                   | November 29,
2003 |        | November 30,
2002 |       
|--------------------------------------------- | ------------------------------------------------- | ----------------- | ------ | ----------------- | ------
|
|ASSETS                                        |                                                   |                   |        |                   |       
|Current assets                                |                                                   |                   |        |                   |       
|                                              | Cash and cash equivalents                         |                   | 11,265 |                   | 7,590 
|                                              | Accounts receivable (Note 5)                      |                   | 81,991 |                   | 67,580
|                                              | Income taxes receivable                           |                   | 595    |                   |      
|                                              | Inventories (Note 6)                              |                   | 92,876 |                   | 87,672
|                                              | Prepaid expenses and other                        |                   | 1,326  |                   | 784   
|                                              | Deferred income taxes (Note 4)                    |                   | 1,656  |                   | 1,149 
|                                              |                                                   |                   |        |                   |       
|                                              |                                                   | 189,709           |        | 164,775           |       
|Investment in joint ventures                  |                                                   | 3,356             |        | 11,451            |       
|Property, plant and equipment (Note 7)        |                                                   | 105,510           |        | 81,290            |       
|Goodwill                                      |                                                   | 12,629            |        | 12,420            |       
|Other assets                                  |                                                   | 1,452             |        | 1,769             |       
|                                              |                                                   |                   |        |                   |       
|                                              |                                                   | 312,656           |        | 271,705           |       
|                                              |                                                   |                   |        |                   |       
|LIABILITIES                                   |                                                   |                   |        |                   |       
|Current liabilities                           |                                                   |                   |        |                   |       
|                                              | Current portion of long-term debt                 |                   | 7,109  |                   | 7,472 
|                                              | Bank indebtedness (Note 8)                        |                   | 18,863 |                   | 3,534 
|                                              | Accounts payable and accrued liabilities (Note 9) |                   | 75,631 |                   | 63,254
|                                              | Income taxes payable                              |                   |       |                   | 3,710 
|                                              |                                                   |                   |        |                   |       
|                                              |                                                   | 101,603           |        | 77,970            |       
|Long-term debt (Note 10)                      |                                                   | 50,553            |        | 62,067            |       
|Fair value of interest rate swaps (Note 14)   |                                                   | 1,812             |        | 2,289             |       
|Deferred income taxes (Note 4)                |                                                   | 12,973            |        | 9,512             |       
|                                              |                                                   |                   |        |                   |       
|                                              |                                                   | 166,941           |        | 151,838           |       
|                                              |                                                   |                   |        |                   |       
|SHAREHOLDERS' EQUITY                          |                                                   |                   |        |                   |       
|Share capital (Note 11)                       |                                                   | 28,404            |        | 28,404            |       
|Retained earnings                             |                                                   | 111,871           |        | 98,789            |       
|Accumulated other comprehensive income (loss) |                                                   | 5,440             |        | (7,326            | )     
|                                              |                                                   |                   |        |                   |       
|                                              |                                                   | 145,715           |        | 119,867           |       
|                                              |                                                   |                   |        |                   |       
|                                              |                                                   | 312,656           |        | 271,705           |       
|                                              |                                                   |                   |        |                   |       

The
accompanying notes are an integral part of the consolidated financial statements.

46

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Novamerican Steel Inc. and Subsidiaries        Notes to Consolidated Financial Statements        (In U.S. dollars; tabular amounts in thousands of U.S. dollars, except per share data)

1GOVERNING STATUTES AND NATURE OF OPERATIONS

Novamerican Steel Inc. (Novamerican) was incorporated under the Canada Business Corporations Act. The Company processes and distributes, through its 24
locations in the Northeastern, Mid-Atlantic and Mid-Western United States and the Canadian provinces of Québec and Ontario, carbon steel, stainless steel and
aluminum products, including carbon steel tubular products, and operates as an intermediary between primary metal producers and manufacturers that require processed metal.

2ACCOUNTING POLICIES

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
and the reporting currency is the United States of America dollar (U.S. dollar).

A
summary of significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows.

Basis of consolidation

The consolidated financial statements include the accounts of Novamerican and all its wholly-owned subsidiaries (collectively, the Company). All significant
intercompany accounts and transactions have been eliminated. The Company's interests in joint ventures are accounted for by the equity method. Accordingly, the Company's share in income of the joint
ventures is included in consolidated net income.

Fiscal year

The fiscal year-end of the Company is the last Saturday of November. The fiscal years ending November 29, 2003 and November 24, 2001
include 52 weeks of operations, whereas the fiscal year ending November 30, 2002 includes 53 weeks of operations.

Translation of foreign currencies

Transactions concluded in foreign currencies by the Company are translated into their respective functional currency as follows: monetary assets and liabilities
are translated at the exchange rate in effect at year-end; revenues and expenses are translated at the average exchange rate for the year. Exchange gains and losses arising from
transactions denominated in foreign currencies are included in income. Gains amounted to $446,000 in 2003, $1,250,000 in 2002 and $847,000 in 2001.

The
financial statements of the Company's Canadian subsidiaries are translated from their functional currency, the Canadian dollar, into the reporting currency, the U.S. dollar as
follows: assets and liabilities are translated at the exchange rate in effect at year-end; revenues and expenses are translated at the average exchange rate for the year. All cumulative
translation gains or losses are included in accumulated other comprehensive loss in the consolidated balance sheets.

Accounting estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of

47

---

the
financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis management reviews its estimates, including those relating to the allowance
for doubtful accounts, reserve for slow moving and unmarketable inventories and income taxes based on currently available information. Actual results could differ from those estimates.

Revenue recognition

Revenue from product sales is recognized when there is persuasive evidence of an arrangement, the amount is fixed or determinable, delivery of the product to the
customer has occurred, there are no uncertainties surrounding product acceptance and collection of the amount is considered probable. Title to the product generally passes upon shipment of the
product. Sales returns and allowances are treated as reductions to sales and are provided for based on historical experience and current estimates.

Cash and cash equivalents

Cash and cash equivalents include cash in banks and term deposits which are short-term, highly liquid investments with original maturities of three
months or less.

Accounts receivable

Credit is extended based on evaluation of a customer's financial condition and, generally, collateral is not required. Accounts receivable are stated at amounts
due from customers based on agreed upon payment terms net of an allowance for doubtful accounts. Accounts outstanding longer than the agreed upon payment terms are considered past due. The Company
determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the customer's current ability to pay its obligation to the Company,
and the condition of the general economy and the industry as a whole. The Company writes off accounts receivable when they are determined to be uncollectible, and any payments subsequently received on
such receivables are credited to the allowance for doubtful accounts.

Inventories

Inventories are stated at the lower of cost or market and include the cost of purchased steel and freight. Cost is determined using the specific identification
method or the average cost method.

Property, plant and equipment

Property, plant and equipment are stated at cost.

48

---

Depreciation
is calculated using the straight-line method over the following estimated useful lives:

Buildings and building improvements

10 to 40 yearsMachinery and equipment

5 to 20 yearsFurniture and fixtures

5 to 15 yearsTransportation equipment

3 to 7 yearsComputer equipment

3 to 5 yearsLeasehold improvements

4 to 10 yearsAircraft

15 years


Depreciation
expense was approximately $6,440,000, $5,410,000 and $5,076,000 for the years ended November 29, 2003, November 30, 2002 and November 24, 2001,
respectively. No depreciation was recorded on assets under construction.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of the net assets acquired. During the year the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 142,Goodwill and Other Intangible Assets.As a result, Goodwill is no longer amortized. However, the carrying
value is tested for impairment annually. Should this review indicate that goodwill will not be recoverable, the Company's carrying value of goodwill will be reduced by the estimated impairment. In
accordance with SFAS No. 142, the Company performed the transitional and annual impairment tests of goodwill during the year. No impairment charge resulted from these tests. Goodwill arising
from acquisitions completed before July 1, 2001 was amortized using the straight-line method over 40 years until November 30, 2002.

Other assets

Other assets are recorded at cost and are composed primarily of expenses incurred in issuing long-term debt which are deferred and amortized using the
straight-line method over the term of the related debt. Amortization expense was approximately $522,000, $500,000 and $625,000 for the years ended November 29, 2003,
November 30, 2002 and November 24, 2001, respectively.

Income taxes

The provision for income taxes is computed on the pretax income of the consolidated subsidiaries located within each taxing country based on the current tax law.
Deferred income taxes are provided, based upon currently enacted tax rates, for temporary differences in the recognition of assets and liabilities on the financial statements and for income tax
purposes.

The
Company does not provide for income taxes on undistributed income of foreign subsidiaries as such income is intended to be permanently reinvested in those operations.

Stock-based compensation

The Company has established a stock-based compensation plan, described in Note 12. The Company does not recognize compensation expense when share options
are granted to plan participants. Any consideration paid by plan participants on the exercise of share options is credited to share capital.

49

---

The
Company has elected to measure compensation cost related to granting of Awards using the intrinsic value based method of accounting. In this instance however, under SFAS
No. 148,Accounting for Stock-Based CompensationTransition and Disclosure: an amendment of FASB statement No. 123,the
Company is required to disclose net income, basic and diluted income per share and stock-based employee compensation cost (net of income tax effect), as reported; and stock-based employee compensation
cost (net of income tax effect), pro forma net income and pro forma basic and diluted income per share, under the fair value method of SFAS No. 123. A tabular presentation of the required
information follows:

|                                   |                                                                   | Years ended
|---------------------------------- | ----------------------------------------------------------------- | -----------
|
|
|Net income                         |                                                                   |            
|                                   | Reported                                                          |            
|                                   | Stock-based employee compensation cost (net of income tax effect) |            
|                                   |                                                                   |            
|                                   | Pro forma                                                         |            
|                                   |                                                                   |            
|Basic and diluted income per share |                                                                   |            
|                                   | Reported                                                          |            
|                                   | Stock-based employee compensation cost (net of income tax effect) |            
|                                   |                                                                   |            
|                                   | Pro forma                                                         |            
|                                   |                                                                   |            

Earnings per share

Basic income per share is based upon the weighted average number of common shares outstanding during the respective years. Weighted average common shares
outstanding were 9,700,000 for the years ended November 29, 2003, November 30, 2002 and November 24, 2001, respectively. Stock options were not included in the computation of
diluted income per share because they are antidilutive.

Comprehensive income

Components of comprehensive income include net income, changes in cumulative translation adjustment and changes in fair value of interest rate swaps net of
deferred income taxes.

Current and pending accounting changes

Current

Effective December 1, 2002, the Company adopted SFAS No. 142,Goodwill and Other Intangible Assets,
which prescribes accounting for all purchased goodwill and intangible assets and states that acquired goodwill and intangible assets with indefinite lives are not amortized, but are tested for
impairment annually, while other intangible assets with finite lives should be amortized over their useful

50

---

economic
life. Accordingly, goodwill is no longer amortized but its carrying value is tested for impairment annually. There were no impairment losses resulting from the transitional testing.

The
information presented below reflects adjustments to information reported for the years ended November 30, 2002 and November 24, 2001 as if SFAS No. 142 had been
applied in these years. The adjustments include the effects of not amortizing goodwill.

|                                   |                       | Years ended
|---------------------------------- | --------------------- | -----------
|
|
|Net income                         |                       |            
|                                   | Reported              |            
|                                   | Goodwill amortization |            
|                                   |                       |            
|                                   | Adjusted              |            
|                                   |                       |            
|Basic and diluted income per share |                       |            
|                                   | Reported              |            
|                                   | Goodwill amortization |            
|                                   |                       |            
|                                   | Adjusted              |            
|                                   |                       |            

During
the year the Company adopted disclosure requirement only of the SFAS No. 148,Accounting for Stock-Based CompensationTransition and
Disclosure: an amendment of FASB Statement No. 123. Namely, SFAS No. 148 revises disclosures for all stock compensation plans making them more prominent by
requiring that companies include in their Summary of Significant Accounting Principles or its equivalent (1) the method of accounting for employee stock compensation, (2) if the fair
value based method has been adopted for stock-based employee compensation, a description of the method of reporting the change in accounting principle for all financial statements in which the period
of adoption is presented and, (3) if the intrinsic value method is used for any period presented, a tabular presentation of net income, basic and diluted earnings per share (if applicable), and
stock-based employee compensation cost (net of tax effects), as reported; and stock-based employee compensation cost (net of tax effects), pro forma net income, and pro forma basic and diluted
earnings per share, under the fair value method of SFAS No. 123. The adoption of SFAS No. 148 did not have a material impact on the consolidated financial statements.

During
the year, the Company adopted FASB Interpretation ("FIN") 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others: an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34.FIN 45 requires
guarantors to recognize a liability at the inception of the guarantee and record it at its fair value. Required disclosures for guarantees include the nature of the guarantee, the maximum potential
undiscounted amount of future payments the guarantor could be required to make under the guarantee and the current carrying amount of the liability, if any, for the guarantor's obligations under the
guarantee. Guarantees contemplated by the disclosure requirements of FIN 45 include product warranties, provisions in a business combination to pay contingent consideration and guarantees issued
between related parties. The adoption of FIN 45 did not have a material impact on the consolidated financial statements.

51

---

Also
during the year, the Company adopted Statement of Position ("SOP") No. 01-6,Accounting by Certain Entities (Including Entities with Trade
Receivables) That Lend to or Finance the Activities of Others,of the AICPA's Accounting Standards Executive Committee (AcSEC). SOP No. 01-6 requires
commercial entities that finance their customers' purchases of goods and services using trade receivables to disclose their accounting policy for receivables and the related valuation allowance,
including the policy for charging off uncollectible receivables and determining past due or delinquent status. The adoption of SOP No. 01-6 did not have a material impact on the
consolidated financial statements.

Pending

In January 2003, the FASB issued FIN 46,Consolidation of Variable Interest Entities: an interpretation of ARB
No. 51. Variable interest entities are required to be consolidated by their primary beneficiary. The primary beneficiary is the party that absorbs a majority of the
entity's expected losses, receives a majority of its expected returns, or both. The FASB issued staff positions in July, October and December 2003 to give further implementation guidance. There
are no material variable interest entities which will be required to be consolidated under the provisions of FIN 46.

3BUSINESS ACQUISITIONS

Acquisition of remaining interest in joint venture

Effective June 30, 2003, the Company acquired the remaining 50% interest in Nova Tube Indiana, LLC (formerly BethNova Tube, LLC, "BethNova"), a tubing
facility in Jeffersonville, Indiana, for $4,100,000 paid in cash. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the purchase price has been allocated
to the assets and liabilities based on their estimated fair values at the date of acquisition. The excess of the amounts assigned to assets acquired and liabilities assumed over the cost of the
purchase reduced the current value of property, plant and equipment by $4,540,000. The results of BethNova have been included in the Company's consolidated results from the date of acquisition.
Previously, the Company accounted for its interest in BethNova, then a joint venture, using the equity method.

Pro
forma combined unaudited results as if this combination occurred as of the beginning of each of the following periods are as follows. The pro forma adjustment is solely related to
the reduction of depreciation expenses to reflect the excess of the amounts assigned to assets acquired and liabilities assumed over the cost of the purchase mentioned above.

|                                   |  | Years ended
|---------------------------------- |  | -----------
|
|
|Net sales                          |  | 514,654    
|Net income                         |  | 13,278     
|Basic and diluted income per share |  | 1.37       

52

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Acquisition of minority interest

In 2002, the Company acquired the minority interest in one of its Canadian subsidiaries, Argo Steel Ltd. ("Argo"). Such minority interest was held by
certain employees of the Company. The acquisition was accounted for using the purchase method of accounting and as a result goodwill was recorded. The terms of the acquisition also provide for
additional consideration to be paid if Argo's earnings exceed certain targeted levels through the year 2004 which would result in additional goodwill. Management's best estimate of such additional
consideration amounts to $177,000.

4INCOME TAXES

The following summarizes the Company's income taxes on the earnings of its Canadian and U.S. operations.

Income
before income taxes by local jurisdiction:

|              |  | Years ended
|------------- |  | -----------
|
|
|Canada        |  | 14,401     
|United States |  | 4,014      
|              |  |            
|              |  | 18,415     
|              |  |            

The
income tax provision is composed of the following:

|         |               | Years ended
|-------- | ------------- | -----------
|
|
|Current  |               |            
|         | Canada        |            
|         | United States |            
|         |               |            
|         |               | 3,125      
|         |               |            
|Deferred |               |            
|         | Canada        |            
|         | United States |            
|         |               |            
|         |               | 2,208      
|         |               |            
|         |               | 5,333      
|         |               |            

53

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The components of the Company's net deferred income tax liability are as follows:

|                                                  |                                 | November 29,
2003                |   | November 30,
2002 |  
|------------------------------------------------- | ------------------------------- | -------------------------------- | - | ----------------- | -
|
|Asset (liability)                                 |                                 |                                  |   |                   |  
|                                                  | Current deferred income taxes   |                                  |   |                   |  
|                                                  |                                 | Investment in joint ventures     |   | (117              | )
|                                                  |                                 | Inventories                      |   | 782               |  
|                                                  |                                 | Accounts receivable              |   | 557               |  
|                                                  |                                 | Other items                      |   | 434               |  
|                                                  |                                 |                                  |   |                   |  
|                                                  |                                 | 1,656                            |   | 1,149             |  
|                                                  |                                 |                                  |   |                   |  
|                                                  | Long-term deferred income taxes |                                  |   |                   |  
|                                                  |                                 | Property, plant and equipment    |   | (14,370           | )
|                                                  |                                 | Investment in joint ventures     |   | (222              | )
|                                                  |                                 | Intangibles                      |   | (35               | )
|                                                  |                                 | Fair value of interest rate swap |   | 842               |  
|                                                  |                                 | Other items                      |   | 812               |  
|                                                  |                                 |                                  |   |                   |  
|                                                  |                                 | (12,973                          | ) | (9,512            | )
|                                                  |                                 |                                  |   |                   |  
|Total current and long-term deferred income taxes |                                 | (11,317                          | ) | (8,363            | )
|                                                  |                                 |                                  |   |                   |  

The
reconciliation between the Canadian statutory income tax rate and the Company's effective income tax rate is as follows:

|                                                               |  | Years ended |  
|-------------------------------------------------------------- |  | ----------- | -
|
|
|Canadian statutory income tax rate                             |  | 39.1        |  
|United States statutory income tax rate difference             |  |            |  
|Canadian incentive for manufacturing and processing activities |  | (4.9        | )
|Reduction in income tax rate                                   |  |            |  
|Other items                                                    |  | (5.1        | )
|                                                               |  |             |  
|Effective income tax rate                                      |  | 29.1        |  
|                                                               |  |             |  

5ACCOUNTS RECEIVABLE

Accounts receivables consist of the following:

|                                |  | November 29,
2003 |  | November 30,
2002
|------------------------------- |  | ----------------- |  | -----------------
|
|Trade accounts                  |  | 81,958            |  | 68,422           
|Allowance for doubtful accounts |  | 1,950             |  | 1,656            
|                                |  |                   |  |                  
|                                |  | 80,008            |  | 66,766           
|Other                           |  | 1,983             |  | 814              
|                                |  |                   |  |                  
|                                |  | 81,991            |  | 67,580           
|                                |  |                   |  |                  

54

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Changes
in the Company's allowance for doubtful accounts are as follows:

|                             |                      | November 29,
2003 |       | November 30,
2002 |      
|---------------------------- | -------------------- | ----------------- | ----- | ----------------- | -----
|
|Balance at beginning of year |                      | 1,656             |       | 1,267             |      
|                             | Bad debt expense     |                   | 1,619 |                   | 1,529
|                             | Accounts written off |                   | (668  | )                 | (756 
|                             | Recoveries           |                   | (657  | )                 | (384 
|                             |                      |                   |       |                   |      
|Balance at end of year       |                      | 1,950             |       | 1,656             |      
|                             |                      |                   |       |                   |      

6INVENTORIES

|               |  | November 29,
2003 |  | November 30,
2002
|-------------- |  | ----------------- |  | -----------------
|
|Raw materials  |  | 54,085            |  | 49,607           
|Finished goods |  | 38,791            |  | 38,065           
|               |  |                   |  |                  
|               |  | 92,876            |  | 87,672           
|               |  |                   |  |                  

7PROPERTY, PLANT AND EQUIPMENT

|                                    |  | November 29,
2003 |  | November 30,
2002
|----------------------------------- |  | ----------------- |  | -----------------
|
|Land                                |  | 6,837             |  | 5,874            
|Buildings and building improvements |  | 36,151            |  | 31,827           
|Machinery and equipment             |  | 69,962            |  | 56,232           
|Furniture and fixtures              |  | 688               |  | 557              
|Transportation equipment            |  | 1,965             |  | 1,825            
|Computer equipment                  |  | 3,353             |  | 2,896            
|Leasehold improvements              |  | 1,614             |  | 789              
|Aircraft                            |  | 15,363            |  | 8,663            
|Assets under construction           |  | 11,608            |  | 3,488            
|                                    |  |                   |  |                  
|                                    |  | 147,541           |  | 112,151          
|Accumulated depreciation            |  | 42,031            |  | 30,861           
|                                    |  |                   |  |                  
|                                    |  | 105,510           |  | 81,290           
|                                    |  |                   |  |                  

8BANK INDEBTEDNESS

The bank indebtedness of the Company's Canadian subsidiaries consists of various demand revolving credit facilities available by either prime rate loans or
bankers' acceptances, bearing interest at prime, currently 4.5% (4.5% in 2002), or bankers' acceptance rates, respectively, plus a premium varying from 0% to 0.5%, and are secured by inventories,
movable hypothecs covering the universality of present and future book debts and a negative pledge on certain assets of the Canadian subsidiaries. There are no cross collateralizations among the
various facilities. These facilities are renegotiated on an annual basis.

55

---

The
Company's Canadian subsidiaries have approximately $37,385,000 in 2003 and $30,981,000 in 2002 (CA$48,500,000 in both years) of revolving credit facilities from two Canadian
financial institutions, of which approximately $18,470,000 (CA$23,961,000) was available at November 29, 2003 and $27,159,000 (CA$42,515,000) was available at November 30, 2002. In
addition, a Canadian subsidiary has a revolving demand credit facility of $578,000 in 2003 and $479,000 in 2002 (CA$750,000 in both years), bearing interest at prime, currently 4.5% (4.5% in 2002),
plus a rate varying from 0% to 0.75%, of which $578,000 was available at November 29, 2003 and $479,000 was available at November 30, 2002 (CA$750,000 in both years).

As
at November 29, 2003, the bank had issued guarantees and letters of credit to the Company's Canadian subsidiaries amounting to $50,000 (CA$65,000) and $288,000 (CA$450,000) as
at November 30, 2002.

9ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

|                                                                                                                                            |  | November 29,
2003 |  | November 30,
2002
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- |  | -----------------
|
|Trade accounts                                                                                                                              |  | 69,560            |  | 59,937           
|Trade accounts to a company controlled by a shareholder                                                                                     |  | 872               |  | 442              
|Trade accounts to a joint venture                                                                                                           |  | 1,705             |  | 909              
|Advances due to an employee (CA$4,532,595, CA$3,077,106 in 2002), bearing interest at prime plus a premium of 0.5%, without repayment terms |  | 3,494             |  | 1,966            
|                                                                                                                                            |  |                   |  |                  
|                                                                                                                                            |  | 75,631            |  | 63,254           
|                                                                                                                                            |  |                   |  |                  

10LONG-TERM DEBT

|                                        |                                       | Maturity |           | November 29,
2003 |       | November 30,
2002
|--------------------------------------- | ------------------------------------- | -------- | --------- | ----------------- | ----- | -----------------
|
|Revolving line of credit(a)             |                                       | 2006     |           |                  |       | 3,107            
|Loans(b)                                |                                       |          |           |                   |       |                  
|                                        | (CA$1,960,967; CA$5,423,594 in 2002)  |          | 2005-2012 |                   | 1,512 |                  
|Term credit facility(c)                 |                                       |          |           |                   |       |                  
|                                        | (CA$9,839,290; CA$15,441,028 in 2002) |          | 2006      |                   | 7,584 |                  
|Term loan(d)                            |                                       | 2006     |           | 46,154            |       | 48,804           
|Promissory note(e)                      |                                       | 2007     |           |                  |       | 4,000            
|Loans from a shareholder(f)             |                                       |          |           |                   |       |                  
|                                        | (CA$3,129,210; CA$468,629 in 2002)    |          |           |                   | 2,412 |                  
|                                        |                                       |          |           |                   |       |                  
|                                        |                                       |          |           | 57,662            |       | 69,539           
|Less: current portion of long-term debt |                                       |          |           | 7,109             |       | 7,472            
|                                        |                                       |          |           |                   |       |                  
|                                        |                                       |          |           | 50,553            |       | 62,067           
|                                        |                                       |          |           |                   |       |                  

56

---







57

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Aggregate
maturities of long-term debt are as follows:

$2004

7,1092005

4,9502006

42,3692007

1542008

154Thereafter

2,926


11SHARE CAPITAL

Preferred shares

The Company is authorized to issue an unlimited number of preferred shares, issuable in one or more series, the Board of Directors being authorized to fix the
rights, dividend rates, conversion rights, voting rights, terms of redemption (including sinking fund provisions), redemption price or prices, and the number of shares constituting any series or the
designation of such series, without further vote or action by the shareholders. No preferred shares were outstanding as at the dates of, and for the period covered by, the financial statements.

Common shares

The Company is authorized to issue an unlimited number of common shares, entitled to one vote per share.

58

---

Shareholders' protection rights plan

The Company has a shareholders' protection rights plan. Under the plan, each common share issued or outstanding has associated with it one right to purchase one
common share at a predetermined exercise price in certain circumstances relating to changes in the ownership of the common stock of the Company.

12SHARE OPTION PLAN

On September 24, 1997, Novamerican's Board of Directors adopted the Novamerican Steel Inc. 1997 Share Option Plan which provides for the grant of
incentive stock options (ISOs) as defined in Section 422 of the U.S. Internal Revenue Code of 1986, as amended, non-qualified stock options (NSOs) and Other Rights (collectively,
Awards) to key employees and directors of the
Company. Options will be exercisable in instalments pursuant to a vesting schedule during the period specified in each option agreement. No option will remain exercisable later than ten years after
the date of grant (or five years from the date of grant in the case of ISOs granted to holders of more than 10% of the common shares). The exercise price for ISOs granted under the Share Option Plan
may be no less than the fair market value of the common shares at the date of grant (or 110% in the case of ISOs granted to employees owning more than 10% of the common shares). The exercise price for
NSOs and all other Awards will be at the discretion of the Compensation Committee. Stock Appreciation Rights (SARs) may be granted to Share Option Plan participants separately or in connection with
ISOs and NSOs. Upon exercise of a SAR, the holder is entitled to receive payment equal to the excess of the fair market value, on the date of exercise, of the number of common shares for which the SAR
is exercised, over the exercise price for such common shares under a related option, or if there is no related option, over an amount per common share stated in the written agreement setting forth the
terms and conditions of the SAR. The Company has reserved 1,500,000 common shares for issuance under the Share Option Plan.

59

---



On
September 24, 1997, ISOs were granted to three executive officers of the Company to purchase 750,000 common shares at an exercise price equivalent to the initial public
offering price of $14.00 per common share. One-fifth of the ISOs could be exercised at each anniversary date of the grant except for 300,000 ISOs of which 40% could be exercised after the
second anniversary date only and 20% at each anniversary date thereafter. The Company has not issued any SARs as of November 29, 2003.

A
summary of stock option activity and related information for 2002 and 2003 follows:

|                              |  | Shares  |  | Weighted
average
exercise
price
|----------------------------- |  | ------- |  | -------------------------------
|
|OutstandingNovember 24, 2001 |  | 750,000 |  | 14.00                          
|Granted                       |  |         |  |                                
|Exercised                     |  |         |  |                                
|Forfeited                     |  |         |  |                                
|                              |  |         |  |                                
|OutstandingNovember 30, 2002 |  | 750,000 |  | 14.00                          
|Granted                       |  |         |  |                                
|Exercised                     |  |         |  |                                
|Forfeited                     |  |         |  |                                
|                              |  |         |  |                                
|OutstandingNovember 29, 2003 |  | 750,000 |  | 14.00                          
|                              |  |         |  |                                

|                           |  | Shares  |  | Weighted average
exercise price
|-------------------------- |  | ------- |  | -------------------------------
|
|Exercisable at end of year |  |         |  |                                
|2001                       |  | 600,000 |  | 14.00                          
|2002                       |  | 750,000 |  | 14.00                          
|2003                       |  | 750,000 |  | 14.00                          

60

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13RELATED PARTY TRANSACTIONS

The following transactions with related parties were concluded in the normal course of business and were measured at their respective exchange values, which are
the amounts established and agreed to by the related parties:

|                                                                     |  | Years ended
|-------------------------------------------------------------------- |  | -----------
|
|
|Processing revenue from a joint venture                              |  | 111        
|Sales to a joint venture                                             |  | 249        
|Management fees from a joint venture                                 |  | 42         
|Processing charges paid to a joint venture                           |  | 2,355      
|Purchases from a joint venture                                       |  | 50         
|Rental charges paid to companies controlled by a shareholder         |  | 1,372      
|Rental charges paid to companies jointly controlled by a shareholder |  | 333        
|Freight charges paid to a company controlled by a shareholder        |  | 5,283      
|Interest paid to a shareholder                                       |  | 81         
|Interest paid to an employee                                         |  | 186        
|Purchase of property, plant and equipment from a joint venture       |  |           

14FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

Fair value of financial instruments

Fair value of financial instruments has been estimated using data which management considered the best available methodology deemed suitable for the pertinent
category of financial instruments. The estimation methodologies are as follows:

61

---

Fair
value of financial instruments:

|                                       |  | November 29, 2003 |  | November 30, 2002
|-------------------------------------- |  | ----------------- |  | -----------------
|
|
|Long-term debt                         |  | 55,250            |  | 55,370           
|Long-term debt without repayment terms |  | 2,412             |  | 2,412            
|Interest rate swap                     |  | 1,812             |  | 1,812            

The
fair value of the long-term debt is determined without considering any additional repayments based on excess cash flow that may be required due to the difficulty of
estimating any additional repayments.

The
fair value of the interest rate swap represents the amount that would have been required to settle the contract as of November 29, 2003 had the contract been terminated. The
notional amount of the swap is $30,000,000 to be reduced to $20,000,000 in 2005 with an original term of five years expiring April 16, 2006. The Company intends to use the swap as a hedge of
the related debt interest rate until it matures.



A U.S. subsidiary of the Company uses an interest rate swap agreement to hedge its exposure to interest rate risk as required under the terms of the term loan
agreement described in note 10(d). This swap possesses a term equal to the term of the debt, with a fixed pay rate and a receive rate indexed to rates paid on the debt. This derivative was
entered into concurrently with the issuance of the debt being hedged, at which date, it was designated as a cash flow hedge. The Company formally documents all relations between the hedging
instruments and the hedged items, as well as its risk-management objectives and strategies for undertaking various hedge transactions. The Company formally assesses, both at the hedge's
inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of the hedged items. In a cash flow hedge that
is highly effective, the derivative is recognized on the balance sheet at its fair value with the offsetting amount recognized in accumulated other comprehensive income (loss).

The
Company discontinues hedge accounting prospectively when (a) it is determined that the derivative is no longer effective in offsetting changes in the cash flows of a hedged
item; (b) the derivative expires or is sold, terminated or exercised; or (c) management determines that designation of the derivative as a hedge instrument is no longer appropriate. In
these situations where hedge accounting is discontinued, the derivative will be carried at its fair value on the balance sheet, with changes in its fair value recognized in current-period income. All
gains or losses that were accumulated in other comprehensive income (loss) will be recognized immediately in income upon the discontinuance of hedge accounting.

The
Company minimizes the credit (or repayment) risk in derivative instruments by entering into transactions with reputable financial institutions and it does not hold derivative
instruments for trading purposes.

62

---



The Company does not have a concentration of available sources of supply, labor, service or other rights that, if suddenly eliminated, could severely impact its
operations.

The
Company's customer base is widely diversified and is involved in various industries. Therefore, the Company believes that no material concentrations of credit risk exist. To reduce
credit risk, the Company performs evaluations of its customers' creditworthiness and accordingly does not generally require collateral.



In the normal course of its business, the Company is exposed to market risk or price fluctuations related to the purchase, production or sale of steel products.
The Company's market risk strategy has generally been to obtain competitive prices for its products and services and allow operating results to reflect market price movements dictated by supply and
demand.

15JOINT VENTURES

The Company holds a 60% equity interest and a 50% voting interest in Delta Tube and Company, Limited, a joint venture that processes carbon steel into tubing.

Effective
June 30, 2003, the Company purchased the remaining 50% equity and voting interest in Nova Tube Indiana, LLC (formerly BethNova Tube, LLC, "Beth Nova"), a joint venture
it had with International Steel Group, Inc. The joint venture then became a wholly-owned subsidiary of the Company and its accounts were consolidated with the accounts of the Company from the
time of its acquisition. Accordingly, the following combined condensed financial information include the results of Beth Nova for the seven-month period ended June 30, 2003 only.

63

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Combined
condensed financial information of the joint ventures is summarized below:

|           |                         | Twelve-month periods ended |       
|---------- | ----------------------- | -------------------------- | ------
|
|
|Operations |                         |                            |       
|           | Net sales               |                            | 10,957
|           | Operating income (loss) |                            | 959   

|              |                          |                                           |  | November 29,
2003 |  | November 30,
2002 |  
|------------- | ------------------------ | ----------------------------------------- |  | ----------------- |  | ----------------- | -
|
|Balance sheet |                          |                                           |  |                   |  |                   |  
|              | Assets                   |                                           |  |                   |  |                   |  
|              |                          | Current assets                            |  |                   |  | 2,678             |  
|              |                          | Long-term receivable                      |  |                   |  | 7                 |  
|              |                          | Property, plant and equipment             |  |                   |  | 2,664             |  
|              |                          | Goodwill, net of accumulated amortization |  |                   |  |                  |  
|              |                          |                                           |  |                   |  |                   |  
|              |                          |                                           |  | 5,349             |  | 21,489            |  
|              |                          |                                           |  |                   |  |                   |  
|              | Liabilities              |                                           |  |                   |  |                   |  
|              |                          | Current liabilities                       |  |                   |  | 306               |  
|              |                          | Advances from partners                    |  |                   |  |                  |  
|              | Joint venture investment |                                           |  |                   |  |                   |  
|              |                          | Capital contributions                     |  |                   |  | 5,008             |  
|              |                          | Undistributed earnings                    |  |                   |  | 382               |  
|              |                          | Accumulated other comprehensive loss      |  |                   |  | (347              | )
|              |                          |                                           |  |                   |  |                   |  
|              |                          |                                           |  | 5,349             |  | 21,489            |  
|              |                          |                                           |  |                   |  |                   |  

16CONTINGENCIES

The Company is contingently liable under claims issued in the normal course of business and with respect to claims and litigation that arise from time to time. In
the opinion of management, any uninsured liability which may arise from such contingencies would not have a material adverse effect on the consolidated financial statements.

64

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17COMMITMENTS

The Company has entered into operating leases for certain facilities and equipment which expire at various dates until 2012. The following schedule outlines the
future minimum rental payments under these leases as at November 29, 2003:

|                             |  | $     
|---------------------------- |  | ------
|2004                         |  | 3,379 
|2005                         |  | 2,202 
|2006                         |  | 1,903 
|2007                         |  | 1,249 
|2008                         |  | 757   
|Thereafter                   |  | 1,124 
|                             |  |       
|Total minimum lease payments |  | 10,614
|                             |  |       

Rental
expense under the operating leases amounted to approximately $4,007,000, $3,721,000 and $3,926,000 for the years ended November 29, 2003, November 30, 2002 and
November 24, 2001, respectively.

18RETIREMENT PLAN

A U.S. subsidiary makes available to substantially all of its employees a 401(k) plan. The plan allows employees to contribute a portion of their pretax income in
accordance with specified guidelines. A percentage of such contribution, up to a certain limit, is matched by the employer. Investments are in various mutual funds at the discretion of the employees
and the plan is administered by an independent third party. Costs incurred under the 401(k) plan amounted to approximately $472,000, $463,000 and $436,000 for the years ended November 29, 2003,
November 30, 2002 and November 24, 2001, respectively.

65

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19FINANCIAL INFORMATION BY GEOGRAPHIC AREA

The Company has established that it has one single reportable segment and that it does not need to provide additional information relating to segmented
information in the financial statements.

|     |                               | United States |         | Canada  |         | Total  
|---- | ----------------------------- | ------------- | ------- | ------- | ------- | -------
|
|2003 |                               |               |         |         |         |        
|     | Net sales (a)                 |               |         |         |         |        
|     |                               | Domestic      |         | 224,236 |         | 258,348
|     |                               | Export        |         | 1,028   |         | 23,455 
|     |                               |               |         |         |         |        
|     | Total                         |               | 225,264 |         | 281,803 |        
|     |                               |               |         |         |         |        
|     | Operating income              |               | 7,818   |         | 15,196  |        
|     |                               |               |         |         |         |        
|     | Depreciation and amortization |               | 3,226   |         | 3,736   |        
|     |                               |               |         |         |         |        
|     | Long-lived assets             |               | 70,752  |         | 47,387  |        
|     |                               |               |         |         |         |        
|2002 |                               |               |         |         |         |        
|     | Net sales (a)                 |               |         |         |         |        
|     |                               | Domestic      |         | 210,733 |         | 228,622
|     |                               | Export        |         | 842     |         | 25,304 
|     |                               |               |         |         |         |        
|     | Total                         |               | 211,575 |         | 253,926 |        
|     |                               |               |         |         |         |        
|     | Operating income              |               | 12,170  |         | 22,382  |        
|     |                               |               |         |         |         |        
|     | Depreciation and amortization |               | 2,947   |         | 3,281   |        
|     |                               |               |         |         |         |        
|     | Long-lived assets             |               | 57,805  |         | 35,905  |        
|     |                               |               |         |         |         |        
|2001 |                               |               |         |         |         |        
|     | Net sales (a)                 |               |         |         |         |        
|     |                               | Domestic      |         | 205,667 |         | 190,257
|     |                               | Export        |         | 254     |         | 20,851 
|     |                               |               |         |         |         |        
|     | Total                         |               | 205,921 |         | 211,108 |        
|     |                               |               |         |         |         |        
|     | Operating income              |               | 7,578   |         | 10,720  |        
|     |                               |               |         |         |         |        
|     | Depreciation and amortization |               | 2,771   |         | 3,248   |        
|     |                               |               |         |         |         |        
|     | Long-lived assets             |               | 53,222  |         | 31,519  |        
|     |                               |               |         |         |         |        

---

66

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[nc_cad,157]Raymond Chabot Grant Thornton Logo[nc_cad,179]

Auditors' Report on Schedule II

To
the Directors of
Novamerican Steel Inc.

In
connection with our audit of the Consolidated Financial Statements of Novamerican Steel Inc. and Subsidiaries referred to in our report dated December 19, 2003 which is
included in the Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the year ended November 29, 2003 on Form 20-F, we have also
audited Schedule II for each of the years in the three-year period ended November 29, 2003. In our opinion this schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related Consolidated Financial Statements taken as a whole.

GRAPHIC

Chartered
Accountants
General Partnership

Montréal,
Canada
December 19, 2003

67

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Schedule II

NOVAMERICAN STEEL INC. AND SUBSIDIARIES    VALUATION AND QUALIFYING ACCOUNTS    (in thousands of U.S. dollars)

|Description                     |                              | Balance at
beginning of
year |       | Additions
charged to
expenses |       | Deductions |       | Balance at
end of
year
|------------------------------- | ---------------------------- | ---------------------------- | ----- | ----------------------------- | ----- | ---------- | ----- | ----------------------
|
|Allowance for doubtful accounts |                              |                              |       |                               |       |            |       |                       
|                                | Year ended November 29, 2003 |                              | 1,656 |                               | 1,619 |            | 1,325 |                       
|                                | Year ended November 30, 2002 |                              | 1,267 |                               | 1,529 |            | 1,140 |                       
|                                | Year ended November 24, 2001 |                              | 1,250 |                               | 1,189 |            | 1,172 |                       

68

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ITEM 19 EXHIBITS

The following table sets forth the exhibits filed as part of this annual report.

|1.1(a) |  | Articles of incorporation.                                                                                                                                           
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.2(a) |  | By-laws.                                                                                                                                                             
|2.1(a) |  | Specimen of Certificate representing Common Shares.                                                                                                                  
|4.1(b) |  | 1997 Share Option Plan.                                                                                                                                              
|4.2(c) |  | Formation and Operating Agreement, dated February 2, 2000, of BethNova Tube, LLC.                                                                                    
|4.3(d) |  | Acquisition by 156499 Canada Inc. of the Minority Interest in Argo Steel Ltd.                                                                                        
|4.4(e) |  | $40,000,000 Revolving Credit Facility dated April 6, 2001.                                                                                                           
|4.5(f) |  | $53,000,000 Term Loan Facility dated April 6, 2001.                                                                                                                  
|4.6    |  | Purchase Agreement dated June 30, 2003 between Novamerican Tube Holdings, Inc., as Purchaser and ISG Venture Inc., as Vendor.                                        
|8.1    |  | Subsidiaries of the Company.                                                                                                                                         
|11.1   |  | Code of Business Conduct and Ethics.                                                                                                                                 
|12.1   |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                  
|12.2   |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                  
|13.1   |  | Certification of Chief Executive Officer Pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|13.2   |  | Certification of Chief Financial Officer Pursuant to Title 18, United States Code, Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|14.1   |  | Consent of Raymond Chabot Grant Thornton.                                                                                                                            

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SIGNATURES

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this annual report its behalf.

|                         |  |     | NOVAMERICAN STEEL INC.(Registrant)                                                                    
|------------------------ |  | --- | ------------------------------------------------------------------------------------------------------
|Dated: February 25, 2004 |  | By: | /s/Christopher H. PickwoadChristopher H. Pickwoad Executive Vice President and
Chief Financial Officer

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