SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998      COMMISSION FILE NUMBER 1-9887

                            OREGON STEEL MILLS, INC.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                      94-0506370
      (STATE OR OTHER JURISDICTION OF         (IRS EMPLOYER IDENTIFICATION NO.)
       INCORPORATION OR ORGANIZATION)

        1000 BROADWAY BUILDING
              SUITE 2200
          1000 S.W. BROADWAY
           PORTLAND, OREGON                                   97205
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)                     (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (503) 223-9228

           SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

                                              Name of each exchange on
         Title of each class                     which registered
         -------------------                  ---------------------------
Common Stock, $.01 par value per share          New York Stock Exchange
  11% First Mortgage Notes due 2003             New York Stock Exchange

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      None

      Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ X]

      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  X       No
                                                  -----       ------

      State the aggregate market value of the voting stock held by nonaffiliates
of the registrant.

              BASED ON LAST SALE, JANUARY 29, 1999:   $309,321,648

      Indicate the number of shares outstanding of each of the registrant's
classes of stock as of January 31, 1999:

     COMMON STOCK, $.01 PAR VALUE                         25,776,804
     ----------------------------                -----------------------------
          (TITLE OF CLASS)                      (NUMBER OF SHARES OUTSTANDING)

                      DOCUMENTS INCORPORATED BY REFERENCE:

      Proxy statement for the Registrant's Annual Meeting of Stockholders to be
held April 29, 1999 is incorporated by reference into Part III of this report.


<PAGE>

                            OREGON STEEL MILLS, INC.
                                TABLE OF CONTENTS
                                                                            PAGE
                                     PART I
   ITEM
   1.             BUSINESS................................................... 1
                        General.............................................. 1
                        Products............................................. 3
                        Raw Materials and Semifinished Slabs ................ 5
                        Marketing and Customers.............................. 6
                        Competition and Other Market Factors................. 7
                        Environmental Matters................................ 9
                        Labor Dispute....................................... 10
                        Employees............................................11

   2.             PROPERTIES.................................................11

   3.             LEGAL PROCEEDINGS..........................................12

   4.             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........12
                        Executive Officers of the Registrant................ 13

                                     PART II

   5.             MARKET FOR REGISTRANT'S COMMON STOCK AND
                        RELATED STOCKHOLDER MATTERS..........................14

   6.             SELECTED FINANCIAL DATA................................... 14

   7.             MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                        FINANCIAL CONDITION AND RESULTS OF OPERATIONS........15

   7A.            QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
                        MARKET RISK......................................... 22

   8.             FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................23

   9.              CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                         ON ACCOUNTING AND FINANCIAL DISCLOSURE..............39

                                    PART III

   10 and 11.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
                        AND EXECUTIVE COMPENSATION...........................40

   12.            SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                        AND MANAGEMENT.......................................40

   13.            CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............40

                                     PART IV

   14.            EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
                        REPORTS ON FORM 8-K................................. 41

<PAGE>




                                     PART I

ITEM 1.  BUSINESS

GENERAL

     Oregon Steel Mills, Inc. ("Company" or "Registrant") was founded in 
1926 by William G. Gilmore and was incorporated in California in 1928.  The 
Company reincorporated in Delaware in 1974.  The Company changed its name in
December 1987 from Gilmore Steel Corporation to Oregon Steel Mills, Inc.

     During 1998, the Company operated two steel minimills and four finishing
facilities in the western United States and Canada. The Company manufactures and
markets one of the broadest lines of specialty and commodity steel products of
any domestic minimill company. The Company emphasizes the cost efficient
production of higher margin specialty steel products targeted at a diverse
customer base located primarily west of the Mississippi River, western Canada
and the Pacific Rim. The Company's manufacturing flexibility allows it to manage
actively its product mix in response to changes in customer demand and
individual product cycles. In 1993, the Company organized into two business
units known as the Oregon Steel Division and the CF&I Steel Division. In January
1998 the CF&I Steel Division was renamed the Rocky Mountain Steel Mills ("RMSM")
Division.

     The Oregon Steel Division is centered on the Company's steel plate minimill
in Portland, Oregon ("Portland Mill"), which supplies steel for the Company's
steel plate and large diameter pipe finishing facilities. The Oregon Steel
Division's steel pipe mill in Napa, California ("Napa Pipe Mill") is a large
diameter steel pipe mill and fabrication facility. The Oregon Steel Division
also produces large diameter pipe and electric resistance welded ("ERW") pipe at
its 60 percent owned pipe mill in Camrose, Alberta, Canada ("Camrose Pipe
Mill").

     The RMSM Division consists of steelmaking and finishing facilities of CF&I
Steel, L.P. ("CF&I") (dba Rocky Mountain Steel Mills) located in Pueblo,
Colorado ("Pueblo Mill"). The Company owns 87 percent of New CF&I, Inc. ("New
CF&I") which owns a 95.2 percent general partnership interest in CF&I. In
addition, the Company owns 4.3 percent of the remaining limited partnership
interest in CF&I. The Pueblo Mill is a steel minimill which produces long-length
and standard steel rails, seamless tubular products ("seamless pipe"), wire rod
and bar products.

     In total, the Company produces eight steel products which include most
standard grades of steel plate, a wide range of higher margin specialty steel
plate, coiled plate, large diameter steel pipe, ERW pipe, long-length and
standard rails, seamless pipe, wire rod and bar products. The steel industry,
including the steel products manufactured by the Company, has been highly
cyclical and is generally characterized by overcapacity, both domestically and
internationally.

       On June 19, 1996, the Company completed public offerings of an additional
6,000,000 shares of common stock at $12.75 per share and $235 million principal
amount of 11% First Mortgage Notes ("Notes") due 2003. On July 9, 1996, the
Company issued an additional 271,857 shares of common stock at $12.75 per share
pursuant to an underwriter's over-allotment option. The proceeds from these
offerings were $302.3 million, net of expenses and underwriting discounts. The
Notes are guaranteed by New CF&I and CF&I ("Guarantors"). The Notes and
guarantees are secured by a lien on substantially all the property, plant and
equipment and certain other assets of the Company and the Guarantors. The
proceeds from the common stock and debt offerings were used to repay in full
borrowing under the Company's bank credit agreement. The remaining proceeds were
used for capital expenditures and general corporate purposes.


OREGON STEEL DIVISION

       The Portland Mill is the only hot-rolled steel plate minimill in the
eleven western states and one of only two steel plate production facilities
operating in that region. The Portland Mill produces slab thicknesses of 6", 7"
and 8" and finished steel plate in widths up to 138".

       During 1997 the Company completed the construction and start-up of a
Steckel Combination Mill ("Combination Mill") at its Portland Mill. The project
included installation of a new reheat furnace, a 4-high rolling mill with
coiling furnaces, a vertical edger, a down coiler, on-line accelerated cooling,
hot leveling and shearing equipment, extended roll lines, and a fully automated
hydraulic

                                      -1-

<PAGE>


gauge control system. The annual rolling capacity of the Combination
Mill, depending on product mix, is up to 1.2 million tons.

       The Combination Mill gives the Company the ability to produce wider steel
plate than any similar mill in the world, increase its manufacturing flexibility
and, as production increases, supply substantially all the Company's plate
requirements for large diameter line pipe as well as coiled plate for
applications such as the smaller diameter ERW pipe manufactured at the Camrose
Pipe Mill. The Combination Mill produces discrete steel plate in widths from 48"
to 138" and in thicknesses from 3/16" to 8". Coiled plate can be produced in
widths of 48" to 120", and in thicknesses that range from 0.09" to .75". With
the Combination Mill, the Company is in a position to produce all grades of
discrete steel plate and coiled plate for all of the Company's commodity and
specialty markets, including heat treated applications.

     The Napa Pipe Mill produces large diameter steel pipe of a quality suitable
for use in high pressure oil and gas transmission pipelines. The Napa Pipe Mill
can produce pipe with an outside diameter ranging from 16" to 42", with wall
thicknesses of up to 1-1/16" and in lengths of up to 80 feet, and can process
two different sizes of pipe simultaneously in its two finishing sections.
Depending on product mix, the Napa Pipe Mill has an annual capacity in excess of
400,000 tons of pipe. The Portland Mill can supply substantially all of the Napa
Pipe Mill's requirements for specialty steel plate which is fabricated into
steel pipe. Depending on market conditions and other factors, the Napa Pipe Mill
may also buy plate from others.

     The Company acquired a 60 percent interest in the Camrose Pipe Mill in June
1992 from Stelco, Inc. ("Stelco"), a large Canadian steel producer. The Camrose
Pipe Mill has two pipe manufacturing mills. One is a large diameter pipe mill
similar to the Napa Pipe Mill, and the other is an ERW pipe mill which produces
steel pipe used by the oil and gas industry for drilling and distribution. The
large diameter pipe mill produces pipe in lengths of up to 80 feet with a
diameter ranging from 20" to 42" with maximum wall thickness limited to about 70
percent of the thickness of the pipe produced by the Napa Pipe Mill. Depending
upon the product mix, the annual capacity for large diameter pipe is up to
184,000 tons. The ERW mill produces pipe in sizes ranging from 4.5" to 16" in
diameter and has an annual nominal capacity of up to 141,000 tons, depending
upon product mix.

RMSM DIVISION

       On March 3, 1993, New CF&I, a then wholly-owned subsidiary of the
Company, acquired a 95.2 percent interest in a newly formed limited partnership,
CF&I. The remaining 4.8 percent interest was owned by the Pension Benefit
Guaranty Corporation ("PBGC"). CF&I then purchased substantially all of the
steelmaking, fabricating, metals and railroad business assets of CF&I Steel
Corporation. The Pueblo Mill has melting capacity of approximately 1.2 million
tons and a finished ton capacity of approximately 1.2 million tons. In August of
1994, New CF&I sold a 10 percent equity interest in New CF&I to subsidiaries of
Nippon Steel Corporation ("Nippon"). In connection with that sale, Nippon agreed
to license to the Company a proprietary technology for producing deep
head-hardened ("DHH") rail products as well as to provide certain production
equipment to produce DHH rail. In November 1995, the Company sold a 3 percent
equity interest in New CF&I to two companies of the Nissho Iwai Group ("Nissho
Iwai"), a large Japanese trading company. In 1997, the Company purchased the 4.8
percent interest in CF&I owned by the PBGC. In 1998, the Company sold a 0.5
percent interest to a subsidiary of Nippon.

       As part of its strategy in acquiring the Pueblo Mill, the Company
anticipated making significant capital additions. Shortly after its acquisition
in 1993, the Company began a series of major capital improvements at the Pueblo
Mill designed to increase yields, improve productivity and quality and expand
the Company's ability to offer specialty rail, rod and bar products. The primary
components of the capital improvements at the Pueblo Mill are outlined below.

       STEELMAKING. The Company installed a ladle refining furnace and a vacuum
degassing facility and upgraded both continuous casters. During 1995, the
Company eliminated ingot casting and replaced it with more efficient continuous
casting methods which allow the Company to cast directly into blooms. As a
result, the Company estimates that it has expanded the steelmaking capacity at
the Pueblo Mill to approximately 1.2 million tons of hot metal annually from
approximately 900,000 tons of hot metal annually at the time of the acquisition.


                                      -2-

<PAGE>

       ROD AND BAR MILL. At the time of its acquisition, the rod and bar mills
at the Pueblo Mill were relatively old and located in separate facilities which
resulted in significant costs as the Company shifted production between them in
response to market conditions. In the third quarter of 1995, the Company
commenced operation of a new combination rod and bar mill with a new reheat
furnace and a high speed rod train, capable of producing commodity and specialty
grades of rod and bar products. Depending on product mix, the new combined
facility has a capacity of up to 600,000 tons per year. These improvements
enable the Company to produce a wider range of high margin specialty products,
such as high-carbon rod, merchant bar and other specialty bar products, and
larger rod coil sizes, which the Company believes are preferred by many of its
customers.

       RAIL MANUFACTURING. At the time of the Company's acquisition of the
Pueblo Mill, rails were produced by ingot casting using energy-intensive
processes with significant yield losses as the ingots were reheated, reduced to
blooms and then rolled into rails. Continuous casting has increased rail yields
and decreased rail manufacturing costs. In 1996 the Company enhanced its
railmaking capacity through the addition of equipment capable of producing
in-line DHH rail. Rail produced using this technology is considered by many rail
customers to be more durable and higher quality rail than that produced with
existing techniques. As a result of these improvements, the Company believes it
is able to provide a functionally superior, higher margin product.

PRODUCTS

OVERVIEW

       The Company manufactures and markets one of the broadest lines of
specialty and commodity steel products of any domestic minimill company. Through
acquisitions and capital improvements, the Company has expanded its range of
finished products from discrete plate and large diameter welded pipe in 1991 to
eight products currently by adding ERW pipe, rail, rod, bar, seamless pipe and
coiled plate. It has also expanded its primary selling region from the western
United States to national and international markets.

       The following chart identifies the Company's principal products and the
primary markets for those products.
<TABLE>
<CAPTION>


                         PRODUCTS                             MARKETS
                         --------                             -------
<S>                      <C>                                  <C>   

OREGON STEEL DIVISION    Commodity and specialty steel plate  Service centers
                                                              Railcar and barge manufacturers
                                                              Heavy equipment manufacturers
                                                              Construction

                         Large diameter steel pipe            Oil and gas transmission pipelines

                         Coiled plate                         Welded pipe products
                                                              Service centers

                         Electric resistance welded pipe      Oil and natural gas line pipe

RMSM DIVISION            Rail                                 Rail transportation

                         Wire rod                             Durable goods
                                                              Capital equipment
                         Bar products                         Construction
                                                              Durable goods
                                                              Capital equipment
                         Seamless pipe                        Oil and gas producers
                                                              Gas transmission
</TABLE>
                                      -3-
<PAGE>

       The following table sets forth for the periods indicated the tonnage
shipped and the Company's total shipments by product class.

                                                         TONS SHIPPED
                                          --------------------------------------
                  PRODUCT                    1998            1997          1996
                  -------                 ---------        -------       -------

Oregon Steel Division:
    Commodity Steel Plate                   177,400         56,800       131,700
    Specialty Steel Plate                   163,900        135,600       147,900
    Plate in Coiled Form                     11,400              -             -
    Large Diameter Steel Pipe               400,000        216,600       249,300
    ERW Pipe                                 56,100        134,600        75,400
    Semifinished                                  -         23,400         3,300
                                          ---------      ---------     ---------
        Total Oregon Steel Division         808,800        567,000       607,600
                                          ---------      ---------     ---------

RMSM Division:
    Rail                                    401,400        350,200       287,700
    Rod, Bar and Wire*                      354,500        409,200       392,600
    Seamless Pipe                            68,900        120,200       151,200
    Semifinished                             36,900         28,000        61,700
                                          ---------      ---------     ---------
        Total RMSM Division                 861,700        907,600       893,200
                                          ---------      ---------     ---------
        Total Company                     1,670,500      1,474,600     1,500,800
                                          =========      =========     =========

*The Company sold its wire products production facility in June, 1997.

OREGON STEEL DIVISION

       COMMODITY STEEL PLATE. The Company's commodity steel plate is produced at
the Portland Mill. Historically, commodity steel plate consists of hot-rolled
carbon plate, in cut lengths, varying in widths from 48" to 102". The majority
of commodity steel plate is commonly produced and consumed in standard widths
and lengths, such as 96" x 240". The completion of the Combination Mill allows
for the production of discrete plate widths up to 138" and plate coils up to
120" wide. Plate coils are the feed-stock for the manufacture of ERW pipe,
welded tubing, spiral welded pipe, and for conversion into cut-to-length plate.
Commodity steel plate is used in a variety of applications such as the
manufacture of storage tanks, machinery parts, ships and barges, and general
load bearing structures.

       SPECIALTY STEEL PLATE. The Company's specialty grade steel plate is
produced at the Portland Mill on the Combination Mill in discrete plate widths
up to 138" and coiled plate up to 120". Specialty steel plate consists of
hot-rolled carbon, high-strength-low-alloy, alloy, and heat treated steel plate.
Specialty steel plate has superior strength and performance characteristics and
is typically made to order for customers seeking specific properties, such as
improved formability, hardness or abrasion resistance, impact resistance or
toughness, higher strength and ability to be more easily machined and welded.
These improved properties are achieved by chemically refining the steel by
either adding or removing specific elements, and by accurate temperature control
while hot rolling or heat treating the plate. Specialty steel plate is used to
manufacture railroad cars, mobile equipment, bridges and buildings, pressure
vessels and machinery components.

       In 1994 the Company completed expansion of the heat treated plate
production capacity at its Portland Mill by approximately 50 percent to 90,000
tons annually. The heat treating process of quenching and tempering improves the
strength, toughness, and hardness of the steel. Quenched and tempered steel is
used extensively in the mining industry, the manufacture of heavy transportation
equipment, construction and logging equipment, and armored vehicles for the
military. In early 1994, the Company installed a hot leveler at the heat treat
facility which flattens the steel plate following heat treatment and ensures
that the steel plate will retain its desired shape after cooling. These
additions enable the Company to manufacture a superior hardened plate product.

       LARGE DIAMETER STEEL PIPE. The Company manufactures large diameter,
double submerged arc-welded ("DSAW") steel pipe at its Napa and Camrose Pipe
Mills. Large diameter pipe is manufactured to demanding specifications and is
produced in sizes ranging from 16" to 42" in outside diameter with wall
thickness of up to 1 1/16" and in lengths of up to 80 feet. At the Napa Pipe
Mill the

                                      -4-
<PAGE>

Company also offers customers several options, which include internal linings, 
external coatings, double end pipe joining and full body ultrasonic inspection.
This process allows inspection of the ends, long seam welds and the entire pipe
body for steelmaking or pipemaking defects and records the results for a
permanent record. The Company's large diameter pipe is used primarily in
pressurized underground or underwater oil and gas transmission pipelines where
quality is critical.

       The Company's ability to produce high-quality large diameter pipe was
enhanced by the installation of the vacuum degassing facility at the Portland
Mill in 1993. The vacuum degassing process reduces the hydrogen content of the
final product, which increases its resistance to hydrogen-induced cracking. The
vacuum degassing facility enables the Company to produce some of the highest
quality steel plate and line pipe steels and has been key to the Company's
ability to produce large diameter steel pipe for the international pipe market.

       ELECTRIC RESISTANCE WELDED PIPE. The Company produces smaller diameter
ERW pipe at the Camrose Pipe Mill. ERW pipe is produced in sizes ranging from
approximately 4 1/2" to 16" outside diameter. The pipe is manufactured using
coiled steel formed on a high frequency electric resistance weld mill. The
principal customers for this product are oil and gas companies that use it for
gathering lines to supply product to feed larger pipeline systems.

RMSM DIVISION

       RAIL. The Company produces conventional, premium and head-hardened rail
at its Pueblo Mill. The Pueblo Mill is the sole manufacturer of rail west of the
Mississippi River and one of only two rail manufacturers in the United States.
Rails are manufactured in the five most popular rail weights (115 lb/yard
through 136 lb/yard), in 39 and 80-foot lengths. The primary customers for the
Pueblo Mill's rail are the major western railroads. Rail is also sold directly
to rail contractors, transit districts and short-line railroads.

       As part of its capital improvement program at the Pueblo Mill, the
Company improved its rail manufacturing facilities to include the production of
in-line head-hardened rail. The installation of the in-line head-hardening
process was completed in the third quarter of 1996. In-line head-hardened rail
is produced through a proprietary finishing technology. The Company has licensed
the technology (known as deep head-hardened or DHH technology) from Nippon in
connection with Nippon's investment in New CF&I. In 1998 the Company produced
approximately 124,000 tons of head-hardened product using the DHH technology.
The in-line DHH technology allows the Company to produce head-hardened product
up to the capacity of the rail facility. Rail produced using the improved
in-line technology is considered by many rail customers to be more durable and
of higher quality than rail produced with existing off-line techniques. During
1998 the Pueblo Mill completed a rail dock expansion project which increased
rail mill annual shipping capacity from 450,000 tons to over 500,000 tons.

       ROD AND BAR PRODUCTS. The Company's rod and bar mill located at the
Pueblo Mill is able to produce coils of up to 6,000 pounds. The improved steel
quality and finishing capabilities allow the Company to manufacture rods up to
1" in diameter, and to manufacture a variety of high-carbon rod products such as
those used for spring wire, wire rope, tire bead and tire cord. The Company
produces several sizes of coiled rebar in the most popular grades for the
reinforcement of concrete products.

       SEAMLESS PIPE. Seamless pipe produced at the Pueblo Mill consists of
seamless casing, coupling stock and standard and line pipe. Seamless pipe casing
is used as a structural retainer for the walls of oil or gas wells. Standard and
line pipe are used to transport liquids and gasses both above and underground.
The Company's seamless pipe mill is equipped to produce the most widely used
sizes of seamless pipe (7" outside diameter through 10-3/4" outside diameter) in
all standard lengths. The Company's production capability includes both carbon
and high quality, high strength (heat treated) tubular products. The Company
also sells semifinished seamless pipe (known as "green tubes") for processing
and finishing by others.


RAW MATERIALS AND SEMIFINISHED SLABS

        The Company's principal raw material for the Portland and Pueblo Mills
is ferrous scrap metal derived from, among other sources, junked automobiles,
railroad cars and railroad track materials and demolition scrap from obsolete
structures, containers and machines. In addition, hot-

                                      -5-
<PAGE>

briquetted iron ("HBI") and pig iron (together "alternate metallics") can 
substitute for a limited portion of the scrap used in minimill steel production,
although the sources and availability of alternate metallics are substantially
more limited than those of scrap. The purchase prices for scrap and alternate
metallics are subject to market forces largely beyond the control of the 
Company including demand by domestic and foreign steel producers, freight costs,
speculation by scrap brokers and other conditions. The cost of scrap and
alternate metallics to the Company can vary significantly, and the Company's 
product prices often cannot be adjusted, especially in the short-term, to 
recover the costs of increases in scrap and alternate metallics prices.

       The long-term demand for steel scrap and its importance to the domestic
steel industry may be expected to increase as steel makers continue to expand
scrap-based electric arc furnace capacity. For the foreseeable future, however,
the Company believes that supplies of steel scrap will continue to be available
in sufficient quantities at competitive prices. In addition, a number of
technologies exist for the processing of iron ore into forms which may be
substituted for steel scrap in electric arc furnace-based steelmaking. Such
forms include direct-reduced iron, iron carbide, and HBI. While such forms may
not be cost competitive with steel scrap at present, a sustained increase in the
price of steel scrap could result in increased implementation of these
alternative technologies.

       To reduce the effects of scrap price volatility and improve access to
high-quality raw materials, the Company is seeking to decrease its dependence on
steel scrap as an input for the production process by utilizing alternate
metallics. The Company has successfully integrated alternate metallics into the
production process as a low residual scrap substitute. The Company typically
purchases alternate metallics on a contract basis (whereas scrap is typically
purchased on the spot market), which limits the effects of price fluctuations
experienced in the scrap market. To date, the Company has purchased
substantially all of the HBI it has used from a single source, but it has no
long-term contracts for material amounts of HBI, and there is no assurance that
it will be able to obtain significant quantities of HBI in the future. Pig iron
is purchased from a variety of international producers.

       As the production of finished plate from the Combination Mill increased
during 1998, the Company's plate finishing has equaled and exceeded the steel
manufacturing of the Portland Mill. Accordingly, in 1998 the Company began 
purchasing significant quantities of semifinished steel slab from various
international suppliers. This is expected to continue and increase at least
through 1999, depending on production levels and market conditions. Such
purchases are typically made at spot prices, and are dependent upon slab
availability. Although current international sources of slabs are plentiful and
prices are favorable, the slab market and pricing has varied substantially in
recent years with steel industry market conditions worldwide. There is expected
to be continued volatility in the future, and there is no assurance of slab
availability at reasonable prices. Over the long-term, the Company expects to
adjust steelmaking production levels and its purchases of slabs in response to
market conditions.

MARKETING AND CUSTOMERS

       Steel products are sold by the Company principally through its own sales
organizations, which have sales offices at various locations in the United
States and Canada and, as appropriate, through foreign sales agents. In addition
to selling to customers who consume steel products directly, the Company also
sells to steel service centers, distributors, processors and converters.

       The sales force is organized both geographically and by product line. 
The Company has separate sales people for plate, coiled plate, DSAW and ERW
pipe, and for seamless pipe, rod, bar, and rail products. Most of the Company's
sales are initiated by contacts between sales representatives and customers.
Accordingly, the Company does not incur substantial advertising or other
promotional expenses for the sale of its products. In 1998 the Company did
not derive more than 10 percent of its sales from any single customer. Except
for contracts entered into from time to time to supply rail and large diameter
DSAW pipe to significant projects, see Part II "Management's Discussion and
Analysis of Financial Conditions and Results of Operation", the Company does
not have any significant ongoing contracts with customers and orders placed with
the Company generally are cancelable by the customer prior to production.

       The Company does not have a general policy permitting return of
purchased steel products except for product defects. The Company does not
routinely offer extended payment terms to its customers.

                                      -6-
<PAGE>


       Except for rail products, the business is generally not subject to
significant seasonal trends. The Company does not have material contracts with
the United States government and does not have any major supply contracts
subject to renegotiation.

OREGON STEEL DIVISION

       Most of the customers for the Company's commodity steel plate are located
in the western United States, primarily in the Pacific Northwest. The Company's
commodity steel plate is typically sold to steel service centers, fabricators
and equipment manufacturers. Service centers typically resell to other users
with or without additional processing such as cutting to a specific shape.
Frequent end uses of commodity grade steel plate include the manufacture of rail
cars, storage tanks, machinery parts, bridges, barges and ships.

       Customers for specialty steel are located throughout the United States,
but the Company is most competitive west of the Mississippi River, where
transportation costs are less of a factor. Typical customers include steel
service centers and equipment manufacturers. Typical uses include pressure
vessels, construction and mining equipment, machine parts and military armor.

        Large diameter steel pipe is marketed on a global basis, and sales
generally consist of a small number of large orders from natural gas pipeline
companies, public utilities and oil and gas producing companies. In 1993 the
Company began to market large diameter pipe internationally. The Company
believes that the quality of its pipe enables it to compete effectively in
international as well as domestic markets. Domestically, the Company has
historically been most competitive in the steel pipe market west of the
Mississippi River. The Camrose Pipe Mill is most competitive in western Canada.
Sales of large diameter pipe generally involve the Company responding to
requests to submit bids.

        The principal customers for ERW pipe produced at the Camrose Pipe Mill
are in the provinces of Alberta and British Columbia, where most of Canada's
natural gas and oil reserves are located. The Company believes its proximity to
these gas fields gives the Company a competitive advantage. Demand for ERW pipe
produced at the Camrose Pipe Mill is largely dependent on the level of
exploration and drilling activity in the gas fields of western Canada.

RMSM DIVISION

       The primary customers for the Pueblo Mill's rail are the major western
railroads. Rail is also sold directly to rail distributors, transit districts
and short-line railroads. The Company believes its proximity to western rail
markets benefits the Company's marketing efforts.

       Seamless pipe is sold primarily through distributors to a large number of
oil exploration and production companies. Sales of standard and line pipe are
made both through distributors and directly to oil and gas transmission and
production companies. The market for the Company's seamless pipe is primarily
domestic and is focused in the western and southwestern United States. The
demand for this product is determined in large part by the number and drilling
depths of the oil and gas drilling rigs working in the United States.

       The Company sells its bar products (primarily reinforcing bar) to
fabricators and distributors. The majority of these customers are located within
the western U.S.

       The Company's wire rod products are sold primarily to wire drawers
ranging in location from the Midwest to the West Coast. The demand for wire rod
is dependent upon a wide variety of markets, including agricultural,
construction, capital equipment and the durable goods segments. The Company
entered the high carbon rod market during 1995 as a direct result of the
investment in the new rolling facility; and over the long term expects to
increase its participation in the higher margin, high-carbon rod market.

COMPETITION AND OTHER MARKET FACTORS

       The steel industry is cyclical in nature, and high levels of steel
imports, worldwide production overcapacity and other factors have adversely
affected the domestic steel industry in recent years. The Company also is
subject to industry trends and conditions, such as the presence or absence of
sustained economic growth and construction activity, currency exchange rates and
other factors. The Company is particularly sensitive to trends in the oil and
gas, gas transmission, construction, capital equipment, rail transportation and
durable goods segments, because these industries are significant markets for the
Company's products. 

                                      -7-
<PAGE>


       Competition within the steel industry is intense. The Company competes
primarily on the basis of product quality, price and responsiveness to customer
needs. Many of the Company's competitors are larger and have substantially
greater capital resources, more modern technology and lower labor and raw
material costs than the Company.  Moreover, U.S. steel producers have 
historically faced significant competition from foreign producers. The highly
competitive nature of the industry, combined with excess production capacity in
some products, are exerting downward pressure on prices for certain of the
Company's products.


OREGON STEEL DIVISION

       The principal domestic competitor in the commodity steel plate market is
Geneva Steel, which is the only integrated steel producer west of the
Mississippi River. Geneva Steel has made significant investments to increase its
capacity with specific focus on the commodity plate market throughout the entire
United States. Other North American competitors include IPSCO, which is
currently operating a steckel mill in Saskatchewan, and has recently completed
construction and is operating a green field steckel mill in Iowa; Bethlehem
Steel in Indiana; and to a limited degree several other U.S. producers. In 1998,
Bethlehem Steel acquired Lukens Steel and formed Bethlehem Lukens Plate.
Bethlehem Lukens Plate is the now largest plate producer in North America, with
five plate mills located in Indiana, Pennsylvania, and Maryland. Principal
competitors in the market for specialty steel plate include, Bethlehem Lukens
Plate, U.S. Steel Corporation, and Algoma Steel Inc.

       The domestic commodity steel plate market continued to suffer from 
unprecedented  import tonnage levels combined with severe downward  price 
pressure from foreign countries such as; Korea, Japan, Brazil, Canada, 
Russia, former Soviet countries, and others.  1998 marked a record year for
commodity steel plate imports, with imported tonnage representing a substantial
percentage of apparent domestic consumption.  Foreign competition also exists 
for specialty grades with imports from Sweden, European Economic Community,
Brazil, Canada, Australia, and former Soviet countries.  At the end of 1997 the
U.S. International Trade Commission (USITC), under petition from two U.S.
commodity plate producers, determined that the U.S. plate Industry was 
"threatened with material injury by reason of imports from China, Russia, South
Africa, and/or Ukraine of cut-to-length carbon steel plate found by the U.S.
Department of Commerce to be sold in the United States at less than fair market
value."  In addition to this decision, suspension agreements have been signed 
allowing the named countries to export certain maximum amounts of cut-to-length
plate to the United States at minimum prices.  Despite the USITC decision on
carbon cut-to-length plate, significant imports continue to flow through into 
the United States, both in commodity and specialty plate products, and continue
to have an impact on the Company's participation in the western plate market.  
In October 1998 the USITC, under a petition filed by a dozen domestic steel 
producers, commenced an anti-dumping investigation covering certain hot rolled 
steel flat products including coiled plate.

       The Company believes that competition in the market for large diameter
steel pipe is based primarily on quality, price and responsiveness to customer
needs. Principal domestic competitors in the large diameter steel pipe market at
this time are Berg Steel Pipe Corporation, located in Florida, Bethlehem Steel
Corporation, located in Pennsylvania and SAW Pipe, located in Texas. 
International competitors consist primarily of Japanese and European pipe
producers. The principal Canadian competitor is IPSCO, located in Saskatchewan.
Demand for the Company's pipe in recent years is primarily a function of new
construction of oil and gas transportation pipelines and to a lesser extent
maintenance and replacement of existing pipelines. Construction of new pipelines
domestically depends to some degree on the level of oil and gas exploration and
drilling activity.

       The competition in the market for ERW pipe is based on price, product
quality and responsiveness to customers. The need for this product has a direct
correlation to the drilling rig count in the United States and Canada. Principal
competitors in the ERW product in western Canada are IPSCO located in
Saskatchewan and Prudential Steel Ltd. located in Alberta.

RMSM DIVISION

       The majority of current rail requirements in the United States are
replacement rails for existing rail lines. However, some new lines are being
constructed in heavy traffic areas of the United States. Imports have been a
significant factor in the domestic premium rail market in recent years. The
Company's capital expenditure program at the Pueblo Mill provided the rail
production

                                      -8-
<PAGE>

facilities with continuous cast steel capability and in-line head-hardening 
rail capabilities necessary to compete with other producers.  Pennsylvania Steel
Technologies located in Pennsylvania is the only other domestic rail producer.

       The Company's primary competitors in seamless pipe include a number of
domestic and foreign manufacturers. The Company has the flexibility to produce
relatively small volumes of specified products on short notice in response to
customer requirements. Principal domestic competitors include U.S. Steel
Corporation, Lone Star Steel and North Star Steel.

       The competition in bar products include a group of minimills that have a
geographical location close to the intermountain market. The Company's market
for wire rod encompasses the western United States. Domestic rod competitors
include GS Technologies, North Star Steel, Cascade Steel Rolling Mills, Keystone
Steel and Wire and Northwestern Steel & Wire.

ENVIRONMENTAL MATTERS

       The Company is subject to federal, state and local environmental laws and
regulations concerning, among other things, wastewater, air emissions, toxic use
reduction and hazardous materials disposal. The Portland and Pueblo Mills are
classified in the same manner as other similar steel mills in the industry as
generating hazardous waste materials because the melting operation produces dust
that contains heavy metals ("EAF" dust). This dust, which constitutes the
largest waste stream generated at these facilities, must be managed in
accordance with applicable laws and regulations.

       PORTLAND MILL. Certain refractory solid waste materials from the
steelmaking process in prior years have been collected on-site at the Portland
Mill. The Company is currently evaluating various alternatives for reusing this
material but so far has not identified a method that is commercially viable. The
ultimate success of these alternatives is not known. Other disposal means are
available, although typically at an increased cost, including both on-site and
off-site land fills. The eventual financial impact is not determinable at this
time, but such reuse or disposal is not expected to have a significant effect on
the consolidated financial condition of the Company. The Company has entered the
second phase of a compliance schedule with the State of Oregon to address
fugitive emissions from the steelmaking process. Selection among corrective
designs, engineering and construction is expected to be completed by 2001. The
financial impact of this improvement will not be known until remedial
alternatives are selected and initial engineering is completed.

     PUEBLO MILL. In connection with the 1993 acquisition of CF&I, the Company
accrued a liability of $36.7 million for environmental remediation at Pueblo,
Colorado steel mill. The Company believed $36.7 million was the best estimate
from a range of $23.1 to $43.6 million. The Company estimate of this liability
was based on two separate remediation investigations conducted by independent
environmental engineering consultants. The accrual includes costs for the
Resource Conservation and Recovery Act facility investigation, a corrective
measures study, remedial action, and operation and maintenance associated with
the proposed remedial actions. In October 1995, CF&I and the Colorado Department
of Public Health and Environment finalized a postclosure permit for historic
hazardous waste units at the Pueblo Mill. As part of the postclosure permit
requirements, CF&I must conduct a corrective action program for the 82 solid
waste management units at the facility and continue to address projects on a
prioritized corrective action schedule which is substantially reflective of a
straight-line rate of expenditure over 30 years. As of December 31, 1998, 11
solid waste management units have closed with no further action needed. The
State of Colorado stated that the schedule for corrective action could be
accelerated if new data indicated a greater threat to the environment than is
currently known to exist. At December 31, 1998, the accrued liability was $33.3
million, of which $30.9 million was classified as noncurrent in the consolidated
balance sheet.

       The Clean Air Act Amendments of 1990 imposed responsibilities on many
industrial sources of air emissions, including plants owned by the Company. The
Company cannot determine the exact financial impact of the new law because
Congress is continuing to modify it. The impact will depend on a number of
site-specific factors, including the quality of the air in the geographical area
in which a plant is located, rules to be adopted by each state to implement the
law and future EPA rules specifying the content of state implementation plans.
The Company anticipates that it will be required to make additional
expenditures, and will be required to pay higher fees to governmental agencies,
as a 

                                      -9-
<PAGE>

result of the law and future laws regulating air emissions. In addition,
the monitoring and reporting requirements of the law have subjected and will
subject all air emissions to increased regulatory scrutiny. The Company
submitted applications for permits under Title V of the Clean Air Act for the
Portland and Pueblo Mills in 1995. The Company has budgeted capital expenditures
to comply with Title V requirements in the amount of $1.5 million over a
three-year period beginning in 1999.

       The Company's future expenditures for installation of and improvements to
environmental control facilities, remediation of environmental conditions
existing at its properties and other similar matters are difficult to predict
accurately. Environmental legislation and regulations and related administrative
policies have changed rapidly in recent years. It is likely that the Company
will be subject to increasingly stringent environmental standards in the future
(including those under the Clean Air Act Amendments of 1990, the Clean Water Act
Amendments of 1990 stormwater permit program and toxic use reduction programs)
and will be required to make additional expenditures, which could be
significant, relating to environmental matters on an ongoing basis. Furthermore,
although the Company has established certain reserves for environmental
remediation as described above, there is no assurance regarding the cost of
remedial measures that might eventually be required by environmental authorities
or that additional environmental hazards, requiring further remedial
expenditures, might not be asserted by such authorities or private parties.
Accordingly, the costs of remedial measures may exceed the amounts reserved.
There is no assurance that expenditures or proceedings of the nature described
above, or other expenditures or liabilities resulting from hazardous substances
located on the Company's property or used or generated in the conduct of its
business, or resulting from circumstances, actions, proceedings or claims
relating to environmental matters, will not have a material adverse effect on
the consolidated financial condition of the Company.


LABOR DISPUTE

       The labor contract at the RMSM Division expired on September 30, 1997.
After a brief contract extension intended to help facilitate a possible
agreement, on October 3, 1997 the United Steel Workers of America ("Union"),
initiated a strike at the RMSM for approximately 1,000 bargaining unit
employees. The parties failed to reach final agreement on a new labor contract
due to differences on economic issues. As a result of contingency planning, the
Company was able to avoid complete suspension of operations at the Pueblo Mill
by utilizing a combination of permanent replacement workers, striking employees
who returned to work and salaried employees.

       On December 30, 1997 the Union called off the strike and made an
unconditional offer to return to work. At the time of this offer, only a few
vacancies existed at the Pueblo Mill. As of the end of December 1998, 90 former
striking employees had returned to work as a result of their unconditional
offer. Approximately 720 former striking workers remain unreinstated
("Unreinstated Employees").

       On February 27, 1998 the Regional Director of the National Labor
Relations Board ("NLRB") Denver office issued a complaint against RMSM, alleging
violations of several provisions of the National Labor Relations Act. The
Company not only denies the allegations, but rather believes that both the facts
and the law fully support its contention that the strike was economic in nature
and that it was not obligated to displace the properly hired permanent
replacement employees. On August 17, 1998, a hearing on these allegations
commenced before an Administrative Law Judge. Testimony and other evidence was
presented on various hearing dates in the latter part of 1998 and early 1999.
The hearing concluded on February 25, 1999. The Administrative Law Judge will
render a decision which is automatically appealable by either party to the NLRB
in Washington, D.C.  Ultimate determination of the issue may well require action
by an appropriate United States Court of Appeals. In the event there is an 
adverse determination of these issues, Unreinstated Employees could be entitled
to back pay from the date of the Union's unconditional offer to return to work
through the date of the adverse determination ("Backpay Liability"). The number
of Unreinstated Employees entitled to back pay would probably be limited to the
number of replacement workers, currently approximately 470 workers. However, 
the Union might assert that all Unreinstated Employees could be entitled to back
pay. Back pay is generally measured by the quarterly earnings of those working
less interim wages earned elsewhere by the Unreinstated Employees. In addition,
each Unreinstated Employee has a duty to take reasonable steps to mitigate the
Backpay Liability by seeking employment elsewhere that has comparable demands
and compensation. It is not 

                                      -10-
<PAGE>

presently possible to estimate the extent to which interim earnings and failure
to mitigate the Backpay Liability would affect the cost of an adverse 
determination.

     In addition, during the strike by the union, certain bargaining unit
employees of the Colorado & Wyoming Railway Company ("C&W"), a wholly-owned
subsidiary of New CF&I which provides rail service to the Pueblo mill, refused
to report to work for an extended period of time. The bargaining unit employees
of C&W were not on strike. C&W considered these employees to have quit their
employment and accordingly, C&W declined to return those individuals to work.
The unions representing these individuals have filed lawsuits or claims against
C&W claiming its members had refused to cross the picket line because they were
honoring the picket line of another organization or because of safety concerns
stemming from those picket lines. The Company believes it has substantial
defenses against these claims. However, it is possible that one or more of them
will proceed to arbitration before the National Railroad Adjustment Board or
otherwise. The outcome of such proceedings is inherently uncertain, and it is
not possible to estimate any potential settlement amount which would result from
an adverse legal or arbitration decision.

EMPLOYEES

       As of December 31, 1998, the Company had 2,426 full-time employees. A
union does not represent the Company's employees at the Portland Mill, Napa Pipe
Mill and corporate headquarters. At the Pueblo Mill, 757 employees work under
collective bargaining agreements with several unions, including the United
Steelworkers of America. The Company and the Union were unable to agree on terms
for a new labor agreement. See "Business-Labor Dispute." At the Camrose Pipe
Mill, one hundred sixty-eight employees are members of the Canadian Autoworkers
Union. The current contract expires on January 31, 2000.

       The domestic employees of the Oregon Steel Division participate in the
Employee Stock Ownership Plan ("ESOP"). As of December 31, 1998 the ESOP owned
approximately 7 percent of the Company's outstanding common stock. Common stock
is contributed to the ESOP as decided annually by the Board of Directors. The
Company also has a profit participation plan for its domestic employees of both
the Oregon Steel Division and the RMSM Division and the non-bargaining unit
employees of Camrose which permits eligible employees to share in the pretax
profits of their division.

ITEM 2.  PROPERTIES

OREGON STEEL DIVISION

       The Portland Mill is located on approximately 143 acres owned by the
Company in the Rivergate Industrial Park in Portland, Oregon, near the
confluence of the Columbia and Willamette rivers. The operating facilities
principally consist of an electric arc furnace, ladle metallurgy station, vacuum
degasser, slab casting equipment and the Combination Mill. The Company's 24,500
square-foot office building and its steel mill facilities occupy approximately
86 acres of the site. The remaining 57 acres consist of two waterfront sites.
The Company's heat treating facilities are located near its principal facilities
on a 5-acre site owned by the Company.

       The Company owns approximately 152 acres in Napa, California. The
Company's large diameter pipe mill occupies approximately 92 of these acres. The
Company also owns a steel fabricating facility located adjacent to the pipe mill
on this site. The fabricating facility is not currently used by the Company and
consists of approximately 325,000 square feet of industrial buildings containing
equipment for the production and assembly of large steel products or components
and is periodically leased on a short-term basis.

       Camrose Pipe Mill is located on approximately 67 acres in Camrose,
Alberta, Canada. The large diameter pipe mill occupies approximately 4 acres and
the ERW pipe mill occupies approximately 3 acres of the site. In addition, there
is a 3,600 square foot office building on the site. The sales staff is located
in Calgary, Alberta in leased space. The Camrose Pipe Mill is owned by Camrose
Pipe Company ("Camrose") which is 60% owned by the Company. The assets of
Camrose, including all property, plant and equipment are collateral for the
Camrose $15 million (Canadian dollars) revolving credit facility (see Note 7 to
the Consolidated Financial Statements).

                                      -11-
<PAGE>


RMSM DIVISION

       The Pueblo Mill is located in Pueblo, Colorado on approximately 570
acres. The operating facilities principally consist of two electric arc furnaces
for production of all raw steel, a ladle refining furnace and vacuum degassing
system, two 6-strand continuous round casters for producing semifinished steel,
and three finishing mills for conversion of semifinished steel to a finished
steel product. These finishing mills consist of a rail mill, seamless tube mill,
and a rod and bar mill.

       At December 31, 1998, the Company had the following nominal capacities,
which are affected by product mix:

                                                PRODUCTION       PRODUCTION
                                                 CAPACITY           1998
                                                  (TONS)           (TONS)
                                                ----------       ----------
Portland Mill:         Melting                    840,000          602,000
                       Finishing                1,200,000          630,500
Napa Pipe Mill:        Steel pipe                 400,000          296,800
Camrose Pipe Mill:     Steel pipe                 325,000          186,900
Pueblo Mill:           Melting                  1,200,000          858,600
                       Finishing mills          1,200,000          838,400


       The Notes and guarantees are secured by a lien on substantially all of
the property, plant and equipment of the Company and the Guarantors, exclusive
of Camrose. (See Note 7 to the Consolidated Financial Statements.)



ITEM 3.  LEGAL PROCEEDINGS


       See Part I, "Business - Labor Dispute", for the status of the labor
dispute at RMSM.

       The Company is party to various claims, disputes, legal actions and other
proceedings involving contracts, employment and various other matters. In the
opinion of management, the outcome of these matters should not have a material
adverse effect on the consolidated financial condition of the Company.

       The Company maintains insurance against various risks, including certain
types of product liability. The Company does not maintain insurance against
liability arising out of waste disposal, other environmental matters or
earthquake damage because of the high cost of such insurance. There is no
assurance that insurance currently carried by the Company, including products
liability insurance, will be available in the future at reasonable rates or at
all.



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

       No matters were voted upon during the fourth quarter of 1998.



                                      -12-
<PAGE>




                      EXECUTIVE OFFICERS OF THE REGISTRANT

       Officers are elected by the Board of Directors of the Company to serve
for a period ending with the next succeeding annual meeting of the Board of
Directors held immediately after the annual meeting of stockholders.

       The name of each executive officer of the Company, age as of February 1,
1999 and position(s) and office(s) and all other positions and offices held by
each executive officer are as follows:

                                                                 ASSUMED
                                                                 PRESENT
                                                                 EXECUTIVE
NAME                    AGE     POSITIONS                        POSITION
----                    ---     ---------                        ----------

Thomas B. Boklund       59      Chairman of the                  July 1985
                                Board of Directors and
                                Chief Executive Officer

Joe E. Corvin           54      President and                    December 1996
                                Chief Operating Officer

L. Ray Adams            48      Vice President of Finance        March 1991
                                and Chief Financial Officer

Christopher D. Cassard  45      Corporate Controller             February 1996

Richard J. Kasten       54      Vice President of                February 1992
                                International Sales

LaNelle F. Lee          61      Vice President of                April 1996
                                Administration and Secretary


Steven M. Rowan         53      Vice President of                February 1992
                                Materials and Transportation

Jeff S. Stewart         37      Treasurer                        February 1996


       Each of the executive officers named above has been employed by the
Company in an executive or managerial role for at least five years.

                                      -13-
<PAGE>


                                     PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON STOCK AND
             RELATED STOCKHOLDER MATTERS

      The Company's common stock is traded on the New York Stock Exchange. At
December 31, 1998, the number of common stockholders of record was 753.
Information on quarterly dividends and common stock prices is shown on page 23
and incorporated herein by reference.

      The indenture under which the Company's 11% First Mortgage Notes due 2003
were issued contains restrictions on the payment of common stock dividends. (See
Note 7 to the Consolidated Financial Statements and "Liquidity and Capital
Resource" under Item 7.) At December 31, 1998, $10.3 million was available for
the payment of common stock dividends under these restrictions.

ITEM 6.      SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>

                                                                         YEAR ENDED DECEMBER 31,
                                             -------------------------------------------------------------------------------
                                                1998             1997             1996              1995               1994
                                             ----------       ----------       ----------        ----------         --------- 
                                                         (IN THOUSANDS, EXCEPT PER SHARE, TON AND PER TON AMOUNTS)
<S>                                          <C>              <C>              <C>               <C>               <C> 
INCOME STATEMENT DATA:
Sales                                        $  892,583       $  768,558       $  772,815        $  710,971        $  838,268
Cost of sales                                   781,789          681,398          670,819           638,413           761,335
Settlement of litigation                         (7,037)               -                -                 -                 -
                                                                                                          -                 -
Gain on sale of assets                           (4,746)          (2,228)               -                 -                 -
Provision for rolling mill closures                   -                -                -                              22,134
                                                                                                          -
Selling, general and administrative
     expenses                                    56,189           51,749           44,857            43,121            50,052
Profit participation and ESOP
     contribution                                 2,890            7,157            7,844             5,418             3,074
                                             ----------       ----------       ----------        ----------        ----------
     Operating income                            63,498           30,482           49,295            24,019             1,673
Other expense, net                              (38,969)          (5,967)         (12,937)           (8,685)           (1,579)
Minority interests                               (4,213)          (5,898)          (1,204)              862            (3,373)
Income tax benefit (expense)                     (8,387)          (6,662)         (11,407)           (3,762)            2,941
                                             ----------       ----------       ----------        ----------        ----------
     Net income (loss)                       $   11,929       $   11,955       $   23,747        $   12,434        $     (338)
                                             ==========       ==========       ==========        ==========        ==========
COMMON STOCK INFORMATION:
Basic and diluted net income
  (loss) per share                                 $.45             $.45            $1.02              $.62            $(.02)
Cash dividends declared per share                  $.56             $.56             $.56              $.56             $.56
Weighted average common shares and
  common equivalents outstanding                 26,368           26,292           23,333            20,016            19,973
BALANCE SHEET DATA (AT DECEMBER 31):
Working capital                              $   40,249       $  115,322       $  120,996        $  115,453        $  141,480
Total assets                                    993,970          986,620          913,355           805,266           665,733
Current liabilities                             252,516          147,496          114,729           121,327           117,986
Long-term debt                                  270,440          367,473          330,993           312,679           187,935
Total stockholders' equity                      345,117          349,007          353,041           266,790           263,477
OTHER DATA:
Depreciation and amortization                $   42,909       $   28,642       $   29,025        $   24,964        $   22,012
Capital expenditures                         $   25,993       $   81,670       $  156,538        $  176,885        $  128,237
Total tonnage sold:
    Oregon Steel Division                       808,800          567,000          607,600           763,500           920,700
    RMSM Division                               861,700          907,600          893,200           640,200           765,600
                                             ----------       ----------       ----------        ----------        ----------
Total tonnage sold                            1,670,500        1,474,600        1,500,800         1,403,700         1,686,300
                                             ==========       ==========       ==========        ==========        =========
Operating margin (1)                               6.6%             3.7%             6.4%              3.4%              2.8%
Operating income per ton sold (1)                   $35              $19              $33               $17               $14
</TABLE>

------------------
(1) Excluding provision for rolling mill closures in 1994 and gain on sale of
    assets in 1997 and 1998.

                                      -14-
<PAGE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
         FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following information contains forward-looking statements which are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to risks and
uncertainties and actual results could differ materially from those projected.
Such risks and uncertainties include, but are not limited to, general business
and economic conditions; competitive products and pricing, as well as
fluctuations in demand; potential equipment malfunction, work stoppages, and
plant construction and repair delays.

      The following table sets forth for the periods indicated the percentages
of sales represented by selected income statement items and information
regarding selected balance sheet data:

                                                       YEAR ENDED DECEMBER 31,
                                                  ----------------------------
                                                    1998      1997       1996
                                                  -------   -------    -------
INCOME STATEMENT DATA:
   Sales                                           100.0%    100.0%     100.0%
   Cost of Sales                                    87.6      88.7       86.8
   Settlement of litigation                          (.8)        -          -
   Gain on sale of assets                            (.5)      (.3)         -
   Selling, general and administrative expenses      6.3       6.7        5.8
   ESOP and profit participation contribution         .3        .9        1.0
                                                  ------    ------     ------
        Operating income                             7.1       4.0        6.4
   Interest and dividend income                        -         -         .1
   Interest expense                                 (4.3)     (1.3)      (1.6)
   Other net                                         (.1)       .5          -
   Loss on termination of interest rate swap
      Agreements                                       -         -        (.2)
   Minority interests                                (.5)      (.8)       (.1)
                                                  ------    ------     ------

        Pretax income                                2.2       2.4        4.6
   Income tax expense                                (.9)      (.8)      (1.5)
                                                  ------    ------     ------
        Net income                                   1.3%      1.6%       3.1%
                                                  ======    ======     ======

BALANCE SHEET DATA (AT DECEMBER 31):
   Current ratio                                   1.2:1     1.8:1      2.1:1
   Total debt as a percent of capitalization        51.8%     51.8%      48.9%
   Net book value per share                       $13.39    $13.58     $13.74


                                      -15-
<PAGE>



   The following table sets forth by division, for the periods indicated,
tonnage sold, revenues and average selling price per ton:

                                                     YEAR ENDED DECEMBER 31,
                                          -------------------------------------
                                              1998        1997          1996
                                          ----------  ----------     ----------
TOTAL TONNAGE SOLD:
     Oregon Steel Division:
        Plate                                352,700     192,400        279,600
        Welded Pipe                          456,100     351,200        324,700
        Semifinished                               -      23,400          3,300
                                          ----------  ----------     ----------
                                                                                
           Total Oregon Steel Division       808,800     567,000        607,600
                                          ----------  ----------     ---------- 

     RMSM Division:
         Rail                                401,400     350,200        287,700
         Rod, Bar and Wire                   354,500     409,200        392,600
         Seamless Pipe                        68,900     120,200        151,200
         Semifinished                         36,900      28,000         61,700
                                          ----------  ----------     ---------- 
           Total RMSM Division               861,700     907,600        893,200
                                          ----------  ----------     ---------- 

           Total Company                   1,670,500   1,474,600      1,500,800
                                          ==========  ==========     ========== 

REVENUES (IN THOUSANDS):
     Oregon Steel Division                $  536,947  $  366,263     $  379,119
     RMSM Division                           355,636     402,295(1)     393,696
                                          ----------  ----------     ---------- 
Total                                     $  892,583  $  768,558(1)  $  772,815
                                          ==========  ==========     ==========
AVERAGE SELLING PRICE PER TON:
     Oregon Steel Division                      $664        $646           $624
     RMSM Division                              $413        $440(2)        $441
           Company Average                      $534        $520(2)        $515

-------------------
(1)  Includes insurance proceeds of approximately $2.5 million as reimbursement
     of lost profits resulting from lost production during the third and fourth
     quarters of 1996 related to the failure of one of the power transformers
     servicing RMSM.

(2) Excludes insurance proceeds referred to in Note (1) above.

     The Company's long range strategic plan emphasizes providing stability for
its operations through expanding its product offerings to minimize the impact of
individual product cycles on the Company's overall performance and by entering
into long-term strategic alliances. In pursuing these goals, the Company has
sought alternatives to its reliance in 1991 and 1992 on the domestic market for
large diameter pipe, the demand for which has declined significantly from levels
experienced in those years.

     In an effort to decrease the Company's reliance on the domestic large
diameter pipe market and provide additional end use for its steel plate, the
Company acquired a 60 percent interest in the Camrose Pipe Mill in June 1992
from Stelco, a large Canadian steel producer, which owns the remaining 40
percent interest in the Camrose Pipe Mill. In 1996, 1997 and 1998, Camrose
shipped 114,300, 188,600, and 233,800 tons, respectively, of steel pipe and
generated revenues of $78.5 million, $132.6 million, and $183.3 million,
respectively. During those years Stelco was a major supplier of steel plate and
coil for the Camrose Pipe Mill.

     To expand the Company's steel product lines and enter new geographic areas,
CF&I purchased the Pueblo Mill and related assets in March 1993. In 1996, 1997
and 1998 the Pueblo Mill shipped 893,200, 907,600 and 861,700 tons,
respectively, and generated revenues of $393.7 million, $402.3 million and
$355.6 million, respectively. In August 1994 New CF&I sold a 10 percent equity
interest in New CF&I to a subsidiary of Nippon. In connection with that sale,
Nippon agreed to license to the Company its proprietary technology for producing
DHH rail under a separate equipment supply agreement. In November 1995 the
Company sold a 3 percent equity interest in New CF&I to two companies of Nissho
Iwai, a large Japanese trading company.

     The labor contract at the RMSM Division expired on September 30, 1997.
After a brief contract extension intended to help facilitate a possible
contract, on October 3, 1997 the Union initiated a strike at the RMSM Division.
See Part I "Business Labor Dispute." The RMSM Division began to ramp its
operations back up in mid-October 1997 with management and replacement workers.
Shipment levels and cost of operations were negatively impacted by reduced
production levels and 

                                      -16-
<PAGE>

costs specifically related to the strike. Fourth quarter 1997 shipments at the
RMSM Division were 123,900 tons compared to shipments of 201,800 tons in the 
fourth quarter of 1996. 

     Company sales in the fourth quarter of 1998 of $184.8 million increased
28.4 percent from sales of $143.9 million in the fourth quarter of 1997. 
Company shipments increased 39.6 percent to 377,800 tons in the fourth quarter 
of 1998 from 270,700 tons in the fourth quarter of 1997. The Company's average
selling price in the fourth quarter of 1998 was $489 per ton versus $532 per 
ton in the fourth quarter of 1997. The increase in sales and shipments for the
fourth quarter of 1998 was primarily due to recovery from the fourth quarter
1997 strike at the RMSM Division and the start-up of the Combination Mill at the
Oregon Steel division. The lower average selling price in the fourth quarter of
1998 is primarily due to reduced average pricing for rod, seamless pipe and
commodity plate products.

     The Oregon Steel Division shipped 377,800 tons with an average selling
price of $610 per ton during the fourth quarter of 1998, compared to 270,700
tons with an average selling price per ton of $616 during the fourth quarter of
1997. Increased fourth quarter 1998 shipment levels are the result of increased
plate production compared to the fourth quarter of 1997 in which production was
negatively impacted by the start-up of the Combination Mill. The Company shut
down its old plate rolling mill in September 1997 and shifted all plate
production to the Combination Mill. The Combination Mill experienced delays and
an outage during the fourth quarter of 1997 which significantly reduced the
Portland Mill's production and increased production costs. The reduced average
selling price is primarily due to substantially lower market prices for steel
plate during the fourth quarter of 1998 compared to the corresponding 1997
period.

     During the fourth quarter of 1998, the RMSM Division shipped 192,500 tons
with an average selling price of $373 per ton compared to 123,900 tons with an
average selling price of $431 per ton during the fourth quarter of 1997.
Increased fourth quarter 1998 shipment levels are the result of increased rail
and rod shipments compared to the fourth quarter of 1997 in which production was
negatively impacted by the strike mentioned above. Rail and rod shipments were
97,000 tons and 87,300 tons, respectively, in the fourth quarter of 1998
compared to 50,300 tons of rail and 54,000 tons of rod in the fourth quarter of
1997. The reduced average selling price compared to 1997 is the result of
adverse market conditions in the seamless pipe and rod markets as described in
the annual comparison below.

     Gross profits as a percentage of sales for the fourth quarter of 1998 were
10.3 percent compared to a negative 4.3 for the fourth quarter of 1997. Gross
profit for the fourth quarter of 1997 was negatively impacted by costs
specifically related to the strike and lower production resulting from both the
strike and the start-up of the Combination Mill.

     The Company expects results of operations to be negatively impacted by
adverse market conditions for its seamless pipe, rod and commodity plate
products during the first half of 1999 and quite possibly for the entire 1999
period. The negative impact of these markets will be partially offset by strong
welded pipe shipments from the Company's Napa and Camrose Pipe Mills and
expected good rail markets in 1999.

     The Company expects to ship approximately 2 million tons of product during
1999. The Oregon Steel Division anticipates that it will ship 500,000 tons of
welded pipe shipments and over 500,000 tons of plate and coil products during
1999. In November 1998, the Napa Pipe Mill began production of welded pipe for
the Alliance Pipeline. During the fourth quarter of 1998, Napa Pipe shipped over
45,000 tons of the Alliance order of which 20,700 tons remained intransit at
year-end. During 1999, the Company expects to ship over 200,000 tons of the
Alliance order from its Napa and Camrose Pipe Mills. The RMSM Division
anticipates that it will ship over 400,000 tons of rail, and 500,000 tons of
rod, bar, seamless pipe and semifinished products. These results are subject to
risks and uncertainties, and actual results could differ materially.

COMPARISON OF 1998 TO 1997

     SALES. Sales in 1998 of $892.6 million increased 16.1 percent from sales
of $768.6 million in 1997. Shipments increased 13.2 percent to 1.7 million tons
in 1998 from 1.5 million tons in 1997. The average selling price in 1998 was
$534 per ton versus $520 per ton in 1997. Of the $124.0 million sales increase,
$101.8 million was the result of volume increases and $24.7 million resulted
from higher average selling prices offset by $2.5 million of 1997 insurance
proceeds.

                                      -17-
<PAGE>


     The increase in sales and shipments was primarily due to increased
shipments of plate, coil and welded pipe products by the Oregon Steel Division
and increased shipments of rail products by the RMSM Division, offset in part by
decreased shipments of seamless pipe and rod and bar products by the RMSM
Division. The increased shipments include a 30 percent increase in welded pipe
shipments, 456,100 in 1998 compared to 351,200 tons in 1997 and increased plate
and coil shipments due to increased production from the Combination Mill. The
increased average selling price for 1998 is due to increased shipments of welded
pipe products as a percent of total products shipped, partially offset by
reduced pricing for seamless pipe, rod and commodity plate products. The markets
for the Company's plate products were negatively affected by high levels of
imports. The Company's commodity plate pricing declined approximately $80 a ton
since the beginning of 1998 as a result of import activity. Reduced seamless
pipe prices are due to the low level of oil prices which have reached a 20-year
low and reduced U.S. rig counts which have fallen near all-time lows. Rod
product is being severely impacted by the high level of imported rod shipments
entering the United States. Average rod pricing has declined over $60 a ton
since the beginning of 1998.

     GROSS PROFITS. Gross profits as a percentage of sales for 1998 were 12.4
percent compared to 11.3 percent for 1997. Gross profit margins were positively
impacted by increased margins on shipments of welded pipe and rail, offset by
lower margins on rod and seamless pipe resulting from the adverse market
conditions described above. Also, 1997 production costs and gross margins were
negatively impacted by the startup of the Combination Mill and by the labor
dispute at the RMSM Division as discussed above.

     SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
("SG&A") expenses for 1998 increased $4.4 million or 8.6 percent compared to
1997 and decreased as a percent of revenues from 6.7 percent in 1997 to 6.3
percent in 1998. The dollar amount increase was primarily due to increased
shipping costs due to increased tons shipped in 1998 compared to 1997 and costs
specifically related to the labor dispute with the Union at RMSM.

     CONTRIBUTION TO ESOP AND PROFIT PARTICIPATION. There was a $1.5 million
contribution to the ESOP in 1997 compared to no contribution in 1998. Profit
participation plan expense (which is paid on a quarterly basis) was $2.9 million
in 1998 compared to $5.7 million in 1997. The decrease in 1998 profit
participation reflects the decreased profitability in the first three quarters
of 1998 compared to those quarters of 1997.

     INTEREST EXPENSE. Total interest cost for 1998 was $39.7 million, an
increase of $1.7 million compared to 1997. The higher interest cost is primarily
the result of higher average debt during 1998 versus 1997. Of the $39.7 million
of interest cost in 1998, $1.2 million was capitalized as part of construction
in progress versus $27.8 million capitalized in 1997.

     INCOME TAX EXPENSE. The Company's effective income tax rate for state and
federal taxes was 41.3 percent for 1998 compared to 35.8 percent for 1997. The
effective income tax rate for 1998 varied from the combined state and federal
statutory rate due to the expiration of certain state tax credits and an
establishment of a $3.1 million valuation allowance for state tax credit
carryforwards.

COMPARISON OF 1997 TO 1996

     SALES. Sales in 1997 of $768.6 million decreased 0.6 percent from sales of
$772.8 million in 1996. Shipments decreased 1.7 percent to 1.47 million tons in
1997 from 1.50 million tons in 1996. The average selling price in 1997 was $520
per ton versus $515 per ton in 1996. Of the $4.3 million sales decrease, $13.5
million was the result of volume decrease offset by $6.7 million resulting from
higher average selling prices and $2.5 million of 1997 insurance proceeds.

     The decrease in sales and shipments was primarily due to decreased
shipments of plate product by the Oregon Steel Division and decreased shipments
of seamless pipe and semifinished products by the RMSM Division, offset in part
by increased shipments of rail and rod products by the RMSM Division. Plate
shipments declined primarily due to the start-up of the Combination Mill at the
Portland Mill. Shipments at the RMSM Division were negatively impacted by the
labor dispute during the fourth quarter of 1997. The higher average selling
price in 1997 was due to increased shipments of welded pipe and higher selling
prices for all pipe products, partially offset by increased shipments of rod,
which have a generally lower selling price per ton than the other finished
products sold by the Company.

                                      -18-
<PAGE>


     GROSS PROFITS. Gross profits as a percentage of sales for 1997 were 11.3
percent compared to 13.2 percent for 1996. Gross profit margins were negatively
impacted by reduced shipments of plate products and increased manufacturing
costs at the Portland Mill due to the start-up of the Combination Mill. Gross
profit was positively impacted by increased rail shipments and higher seamless
pipe prices at the RMSM Division. In spite of the labor dispute, gross profit
was also positively impacted by lower costs at the RMSM Division due to
increased steel production and improved operating efficiencies.

     SELLING,  GENERAL AND ADMINISTRATIVE.  Selling, general and administrative
("SG&A") expenses for 1997 increased $6.9 million or 15.4  percent  compared to
1996 and  increased  as a percent  of  revenues  from 5.8  percent in 1996 to
6.7  percent in 1997.  The increase was primarily due to increased costs 
associated with the labor dispute at RMSM.

     CONTRIBUTION TO ESOP AND PROFIT PARTICIPATION. There was a $1.5 million
contribution to the ESOP in 1997 compared to no contribution in 1996. Profit
participation plan expense was $5.7 million in 1997 compared to $7.8 million in
1996. The decrease in 1997 profit participation reflects the decreased
profitability compared to 1996 of the Oregon Steel Division.

     INTEREST EXPENSE. Total interest cost for 1997 was $38.0 million, an
increase of $4.8 million compared to 1996. The higher interest cost is primarily
the result of additional debt incurred to fund the capital improvement program,
combined with higher interest rates. Of the $38.0 million of interest cost,
$27.8 million was capitalized as part of construction in progress.

     INCOME TAX EXPENSE. The Company's effective income tax rate for state and
federal taxes was 35.8 percent for 1997 compared to a 32.4 percent for 1996. The
effective income tax rate for both periods varied from the combined state and
federal statutory rate due to earned state tax credits and deductible dividends
paid on stock held by the ESOP and paid to ESOP participants.

LIQUIDITY AND CAPITAL RESOURCES

      Cash flow from 1998 operations was $51.9 million compared to $52.1 million
in 1997. The major items affecting the $0.2 million decrease were a larger
increase in inventories ($20.6 million), a lower increase in deferred income
taxes ($5.8 million), and a larger decrease in accounts payable and accrued
expenses ($11.0 million). These cash decreases were partially offset by higher
depreciation and amortization ($14.3 million), a larger increase in accounts
receivable ($7.4 million), and an increase in other current assets versus a
decrease in 1997 ($14.1 million).

      Net working capital at December 31, 1998 decreased $75.1 million compared
to December 31, 1997 reflecting a $29.9 million increase in current assets and a
$105.0 million increase in current liabilities. Short-term debt increased from
none at the end of 1997 to $93.7 million at the end of 1998. The increase
represents the Company's bank borrowing balance (which becomes due in 1999)
being classified as current at the end of 1998 versus non-current at the end
of 1997. 

     The Company has outstanding $235 million principal amount of 11% First
Mortgage Notes due 2003. New CF&I and CF&I guarantee the Notes. The Notes and
the guarantees are secured by a lien on substantially all the property, plant
and equipment and certain other assets of the Company (exclusive of Camrose) and
the Guarantors. The collateral for the Notes and the guarantees does not
include, among other things, inventory and accounts receivable. The indenture
under which the Notes were issued contains potential restrictions on new
indebtedness and various types of disbursements, including dividends, based on
the Company's net income in relation to its fixed charges, as defined.

     The Company maintains a $125 million revolving bank credit facility
("Amended Credit Agreement"), which expires June 11, 1999, and may be drawn upon
based on the Company's accounts receivable and inventory balances, except those
of Camrose. At December 31, 1998, $93.7 million was outstanding under the
Amended Credit Agreement. At the Company's election, interest on the Amended
Credit Agreement is based on (1) the London Interbank Offering Rate ("LIBOR"),
(2) the prime rate or (3) the federal funds rate, plus a margin determined by
the Company's leverage ratio. The annual commitment fees are .5 percent of the
unused portion of the Amended Credit Agreement. The Amended Credit Agreement is
collateralized by substantially all of the Company's consolidated inventory and
accounts receivable, except those of Camrose. The Guarantors guarantee amounts
outstanding under the Amended Credit Agreement. The Amended Credit Agreement
contains various restrictive covenants including a minimum tangible net worth,
minimum interest coverage ratio, and a maximum debt to total capitalization 
ratio.  The Amended Credit Agreement has been amended to,

                                      -19-
<PAGE>

among other things, modify the interest coverage ratio due to lower than
anticipated earnings and higher than anticipated borrowings.

      CF&I Steel, L.P. incurred term debt of $67.5 million as part of the
purchase price of the Pueblo Mill on March 3, 1993. This debt is without stated
collateral and is payable over ten years with interest at 9.5 percent. As of
December 31, 1998, the outstanding balance on the debt was $38.2 million, of
which $31.0 million was classified as long-term.

      Camrose maintains a $15 million (Canadian dollars) revolving credit
facility with a bank, the proceeds of which may be used for working capital and
general corporate purposes. The facility is collateralized by substantially all
of the assets of Camrose and borrowings under this facility are limited to an
amount equal to specified percentages of Camrose's eligible trade accounts
receivable and inventories. The facility expires on December 30, 1999. Depending
on Camrose's election at the time of borrowing, interest is payable based on (1)
the bank's Canadian dollar prime rate, (2) the bank's U.S. dollar prime rate or
(3) LIBOR. Annual commitment fees are .25 percent of the unused portion of this
facility. As of December 31, 1998, Camrose had $4.4 million outstanding under
the facility.

      The Company has uncollateralized and uncommitted revolving lines of credit
with two banks which may be used to support issuance of letters of credit,
foreign exchange contracts and interest rate hedges. At December 31, 1998, $9.0
million was restricted under outstanding letters of credit.

      During 1998 the Company expended approximately $6.0 million (exclusive of
capitalized interest) on the capital projects at the Pueblo Mill, and $18.8
million exclusive of capitalized interest on capital projects at the Oregon
Steel Division. The Company has budgeted approximately $21.6 million for capital
expenditures in 1999 at its manufacturing facilities for upgrade projects to the
present facilities and equipment.

      The Company believes that its anticipated needs for working capital and
capital expenditures through 1999 will be met from funds generated by
operations and borrowings pursuant to the Company's Amended Credit Agreement.  
There is no assurance, however, that the amounts available from these sources 
will be sufficient for such purposes.  In that event, or for other reasons, the
Company may be required to seek additional financing, which may include 
additional bank financing.  There is no assurance that such source of funding 
will be available if required or, if available, will be on terms satisfactory
to the Company.  Failure to obtain required funds would delay or prevent some 
planned capital expenditure projects from being initiated or completed, which 
could have a material adverse effect on the Company.  In addition, the Company's
level of indebtedness presents other risks to investors, including the
possibility that the Company and its subsidiaries may be unable to generate cash
sufficient to pay the principal of and interest on their indebtedness when due.
In the event of a default under the Amended Credit Agreement or the Notes, or 
if the Company or its subsidiaries are unable to comply with covenants contained
in other debt instruments or to pay their indebtedness when due, the holders of
such indebtedness generally will be able to declare all indebtedness owing to 
them to be due and payable immediately and, in the case of collateralized 
indebtedness, to proceed against their collateral, which would likely have a 
material adverse effect on the Company.

      YEAR 2000 ISSUES. As the year 2000 approaches, the Company recognizes the
need to ensure its operations will not be adversely impacted by year 2000
software failures. The Company's approach to the year 2000 issue is discussed
below. The Company necessarily makes certain forward looking statements. There
can be no assurance that actual results will not differ materially from the
projections contained in the forward looking statements. Factors which may cause
actual results to differ materially include, but are not limited to: failure of
Company personnel and outside consultants to properly assess and address the
Company's year 2000 issues; inaccurate or incomplete responses to questionnaires
sent to third parties or inaccurate disclosure to third parties regarding the
year 2000 issue; failure to address the year 2000 issue with all vendors,
including utility vendors; infrastructure failures such as disruptions in the
supply of electricity, gas, water or communications services, or major
institutions, such as the government and banking systems; and failure of the
Company to accurately predict the costs to address the year 2000 issue or the
lost revenues related to interruption in the Company's or its
customers' businesses.

      The Company has identified risks from, among other causes, failure of
internally-developed or purchased software and hardware in its information
technology ("IT") systems, failure of process logic controller ("PLC")
components of manufacturing equipment, and business or service interruptions of

                                      -20-
<PAGE>


certain key customers and suppliers. In mid-1997, the Company began to inventory
critical systems, assess the exposure to year 2000 failures, and replace or
remediate IT and PLC systems as necessary. As of December 31, 1998, the
inventory and assessment of IT and PLC systems was substantially complete, and
investments had been made to replace or remediate critical IT systems and PLCs
where there was an apparent risk of failure at the year 2000. The remaining
remediation effort and testing is expected to continue through the third quarter
of 1999. The most critical business systems have been recently functionally
upgraded, or are in process of upgrade, and concurrently are becoming year 2000
compliant. The Company is soliciting written confirmations from key suppliers
confirming that they are addressing their year 2000 issues.

      Although the potential effects of IT and PLC systems failures due to the
year 2000 change are not predictable or quantifiable with any certainty, the
Company expects that if a PLC failure occurred, the Company would still be able
to continue its core production processes, although at a reduced rate and
possibly at a substantially increased cost. Similarly, it is anticipated that
any affected IT business systems which failed could be supplemented with manual
and other procedures sufficient to continue operations, although at a reduced
efficiency. In general, the Company's customers and sources of supply are 
sufficiently diverse to mitigate the effect on the Company of a supplier or 
customer experiencing year 2000 related failures. However, there would be a 
material adverse impact on the Company if any of its utility providers were 
significantly interrupted. The total cost of preparation for the year 2000 is 
expected to be approximately $2 million, of which less than half has been spent
to date. No reserve has been established. The Company's preparations have not
included a specific contingency plan in the event of systems or supplier 
failures; however, it is anticipated that by mid 1999 all critical systems will
be remediated and under test internally or by independent outside verification.

      IMPACT OF INFLATION. Inflation can be expected to have an effect on many
of the Company's operating costs and expenses. Due to worldwide competition in
the steel industry, the Company may not be able to pass through such increased
costs to its customers.

                                      -21-
<PAGE>



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      The Company has entered into certain market-risk sensitive financial 
instruments for other than trading purposes, principally short-term debt and
long-term debt.

      The following discussion of market risks necessarily makes forward looking
statements.  There can be no assurance that actual changes in market
conditions and rates and fair values will not differ materially from those used
in the sensitivity and fair value calculations discussed. Factors which may
cause actual results to differ materially include, but are not limited to:
greater than 10 percent changes in interest rates or foreign currency exchange
rates, changes in income or cash flows requiring significant changes in the use
of debt instruments or the cash flows associated with them, or changes in
commodity market conditions affecting availability of materials in ways not
predicted by the Company.

INTEREST RATE RISK

      Sensitivity analysis was used to determine the potential impact that 
market risk exposure may have on the fair values of the Company's financial
instruments, including debt and cash equivalents. The Company has assessed the
potential risk of loss in fair values from hypothetical changes in interest
rates by determining the effect on the present value of the future cash flows
related to those market sensitive instruments. The discount rates used for such
present value computations were selected based on market interest rates in
effect at December 31, 1998, plus or minus 10 percent.

      A 10 percent decrease in interest rates with all other variables held
constant would result in a increase in the fair value of the Company's financial
instruments by $9.1 million. A 10 percent increase in interest rates with all
other variables held constant would result in a decrease in the fair value of
the Company's financial instruments by $8.8 million. There would be no material
effect on consolidated net income or cash flows from those changes alone.

FOREIGN CURRENCY RISK

      In general, the Company uses a single functional currency for all
receipts, payments and other settlements at its facilities. Occasionally,
transactions will be denominated in another currency and a foreign currency
forward exchange contract used to hedge currency gains and losses. At December
31, 1998, the Company had (USD) $4.0 million notional amount of such contracts,
which related to transactions of Camrose. Increases or decreases in the year-end
exchange rate of 10 percent would not have a material financial effect on
consolidated net income, cash flows or fair values.


                                      -22-

<PAGE>




ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>

                                                           QUARTERLY FINANCIAL DATA - UNAUDITED
<CAPTION>

                                                   1998                                                1997
                                ------------------------------------------------    -----------------------------------------------
                                     4TH          3RD         2ND         1ST         4TH            3RD           2ND        1ST
                                ----------     -------     -------     --------     --------     ----------    --------    --------
                                                               (IN MILLIONS EXCEPT PER SHARE AMOUNTS)
<S>     <C>    <C>    <C>    <C>    <C>    <C>

Sales                               $184.8      $255.2      $229.6      $223.0        $143.9         $213.6      $204.4      $206.7
Operating income (loss)                4.2        27.8        17.9        13.6         (21.9)          20.0        16.6        15.8
Net income (loss)                     (4.5)       10.0         4.7         1.8         (13.7)          10.4         8.2         7.1
Basic and diluted
   net income (loss)
   per share                         $(.17)       $.38        $.18        $.07        $ (.53)          $.40        $.31        $.27
Dividends declared per
   common share                      $ .14        $.14        $.14        $.14        $  .14           $.14        $.14        $.14
Common stock price range:
   High                            $15-1/8     $19-1/4     $26-1/2     $24-3/8       $29-1/4      $28-15/16     $22-1/2     $18-7/8
   Low                           $10-13/16     $9-7/16     $18-1/4     $18-1/8       $17            $19-1/2     $15-3/4     $15-1/8
Average shares and
   equivalent outstanding             26.4        26.4        26.4        26.3          26.3           26.3        26.3        26.3

</TABLE>


                                      -23-

<PAGE>



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Oregon Steel Mills, Inc.

    In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(i) and (ii) on page 41 present fairly, in all
material respects, the financial position of Oregon Steel Mills, Inc. and its
subsidiaries at December 31, 1998, 1997, and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.




PricewaterhouseCoopers LLP
Portland, Oregon
January 22, 1999


                                      -24-
<PAGE>



<TABLE>

                                                      OREGON STEEL MILLS, INC.
                                                     CONSOLIDATED BALANCE SHEETS
                                               (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                              ASSETS

<CAPTION>
                                                                                                                  
                                                                                                       DECEMBER 31,
                                                                                           -----------------------------------
                                                                                              1998         1997         1996
                                                                                           ---------    ---------    ---------
<S>                                                                                        <C>          <C>          <C>    

Current assets:
   Cash and cash equivalents                                                               $   9,044    $     570    $     739
   Trade accounts receivable, less allowance
       for doubtful accounts of $1,148
       $1,374 and $2,735                                                                      67,254       83,219       91,480
   Inventories                                                                               196,279      148,548      120,636
   Deferred tax asset                                                                         13,593       17,262       17,084
   Other                                                                                       6,595       13,219        5,786
                                                                                           ---------    ---------    ---------    
       Total current assets                                                                  292,765      262,818      235,725
                                                                                           ---------    ---------    ---------    
Property, plant and equipment:
   Land and improvements                                                                      28,811       28,782       29,577
   Buildings                                                                                  49,387       46,805       37,617
   Machinery and equipment                                                                   749,597      422,179      426,912
   Construction in progress                                                                   16,329      329,198      255,558
                                                                                           ---------    ---------    ---------    
                                                                                             844,124      826,964      749,664
   Accumulated depreciation                                                                 (205,515)    (166,485)    (145,096)
                                                                                           ---------    ---------    ---------    
                                                                                             638,609      660,479      604,568
                                                                                           ---------    ---------    ---------    
Cost in excess of net assets acquired, net                                                    35,508       36,590       37,398
Other assets                                                                                  27,088       26,733       35,664
                                                                                           ---------    ---------    ---------    
                                                                                           $ 993,970    $ 986,620    $ 913,355
                                                                                           =========    =========    =========
                                                           LIABILITIES
Current liabilities:
   Current portion of long-term debt                                                       $   7,164    $   7,373    $   6,574
   Short-term debt                                                                            93,700           --           --
   Accounts payable                                                                          106,084       97,860       75,428
   Accrued expenses                                                                           45,568       42,263       32,727
                                                                                           ---------    ---------    ---------    
       Total current liabilities                                                             252,516      147,496      114,729
Long-term debt                                                                               270,440      367,473      330,993
Deferred employee benefits                                                                    20,427       21,018       18,262
Environmental liability                                                                       32,765       34,801       35,103
Deferred income taxes                                                                         36,415       31,641       24,365
                                                                                           ---------    ---------    ---------    
                                                                                             612,563      602,429      523,452
                                                                                           ---------    ---------    ---------    
Minority interests                                                                            36,290       35,184       36,862
                                                                                           ---------    ---------    ---------    
Contingencies (Note 12)
                                                       STOCKHOLDERS' EQUITY
Capital stock:
   Preferred stock, par value $.01 per share;
        1,000 shares authorized; none issued
   Common stock, par value $.01 per share; 30,000
        shares authorized; 25,777, 25,693, and 25,693
        shares issued and outstanding                                                            258          257          257
Additional paid-in capital                                                                   227,584      226,085      226,085
Retained earnings                                                                            125,479      127,984      130,417
Accumulated other comprehensive income:
   Cumulative foreign currency translation
        adjustment                                                                            (8,204)      (5,319)      (3,718)
                                                                                           ---------    ---------    ---------    
                                                                                             345,117      349,007      353,041
                                                                                           ---------    ---------    ---------    
                                                                                           $ 993,970    $ 986,620     $913,355
                                                                                           =========    =========     ========
</TABLE>


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

                                      -25-
<PAGE>


<TABLE>

                                                     OREGON STEEL MILLS, INC.
                                                 CONSOLIDATED STATEMENTS OF INCOME
                                              (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<CAPTION>

                                                                FOR THE YEAR ENDED DECEMBER 31,
                                                              -----------------------------------
                                                                1998          1997         1996
                                                              ---------    ---------    ---------
<S>                                                           <C>          <C>          <C> 

Sales                                                         $ 892,583    $ 768,558    $ 772,815
                                                              ---------    ---------    ---------  
Costs and expenses:
     Cost of sales                                              781,789      681,398      670,819
     Settlement of litigation                                    (7,037)          --           --
     Gain on sale of assets                                      (4,746)      (2,228)          --
     Selling, general and administrative                         56,189       51,749       44,857
     Contributions to employee stock ownership plan                  --        1,501           --
     Profit participation                                         2,890        5,656        7,844
                                                              ---------    ---------    ---------  
                                                                829,085      738,076      723,520
                                                              ---------    ---------    ---------  
          Operating income                                       63,498       30,482       49,295
Other income (expense):
     Interest and dividend income                                   361          406          520
     Interest expense                                           (38,485)     (10,216)     (12,479)
     Loss on termination of interest rate swap
          agreements                                                 --           --       (1,232)
     Minority interests                                          (4,213)      (5,898)      (1,204)
     Other, net                                                    (845)       3,843          254
                                                              ---------    ---------    ---------  
          Income before income taxes                             20,316       18,617       35,154
Income tax expense                                               (8,387)      (6,662)     (11,407)
                                                              ---------    ---------    ---------  
          Net income                                          $  11,929    $  11,955    $  23,747
                                                              =========    =========    =========
Basic and diluted net income per share                             $.45         $.45        $1.02
                                                              =========    =========    =========

</TABLE>




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

                                      -26-


<PAGE>




                            OREGON STEEL MILLS, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                                                                          ACCUMULATED
                                                                ADDITIONAL                   OTHER
                                              COMMON STOCK       PAID-IN      RETAINED   COMPREHENSIVE
                                        --------------------
                                         SHARES      AMOUNT      CAPITAL      EARNINGS       INCOME       TOTAL
                                        -------    ---------    ---------    ---------   -------------   --------
<S>                                      <C>          <C>        <C>          <C>           <C>          <C>

Balances, December 31, 1995              19,422       $194       $150,826     $119,302      $(3,532)     $266,790
                                                                                                                  
Net income                                                                      23,747                     23,747
Foreign currency
  translation adjustment                                                                        (186)          (186)
                                                                                                         --------    
Comprehensive income                                                                                       23,561
Issuance of common stock                  6,271         63         75,259                                  75,322
Dividends paid ($.56 per share)                                                (12,632)                   (12,632)
                                      ---------       ----        -------     --------      -------      -------- 
Balances, December 31, 1996              25,693        257        226,085      130,417       (3,718)      353,041
                                                                                                                  
Net income                                                                      11,955                     11,955
Foreign currency
  translation adjustment                                                                       (1,601)       (1,601)
                                                                                                         --------
Comprehensive income                                                                                       10,354
Dividends paid ($.56 per share)                                                (14,388)                   (14,388)
                                      ---------       ----       --------     --------      -------      -------- 
Balances, December 31, 1997              25,693       $257       $226,085      127,984       (5,319)      349,007
                                                                                                         --------     
Net income                                                                      11,929                     11,929
Foreign currency translation                                       
  adjustment                                                                                 (2,885)       (2,885)
                                                                                                         --------
Comprehensive income                                                                                        9,044
Issuance to employee stock
  ownership plan                             84          1          1,499                                   1,500
Dividends paid ($.56 per share)                                                (14,434)                   (14,434)
                                      ---------       ----       --------     --------      -------      -------- 
Balances, December 31, 1998              25,777       $258       $227,584     $125,479      $(8,204)     $345,117
                                      =========       ====       ========     ========      =======      ========

</TABLE>




 The accompanying notes are anintegral part of the consolidated
 financial statements.

                                      -27-
<PAGE>



                                              OREGON STEEL MILLS, INC.
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (IN THOUSANDS)
<TABLE>

<CAPTION>


                                                                         FOR THE YEAR ENDED DECEMBER 31,
                                                                       -----------------------------------
                                                                          1998         1997         1996
                                                                       ---------    ---------    ---------
<S>                                                                    <C>          <C>          <C>    
Cash flows from operating activities:
   Net income                                                          $  11,929    $  11,955    $  23,747
   Adjustments to reconcile net income to net cash
      provided by operating activities:
          Depreciation and amortization                                   42,909       28,642       29,025
          Deferred income taxes                                            4,774        7,276        9,030
          Accruals for contribution of common stock to
                 employee stock ownership plan                                --        1,501           --
          Gain on sale of assets and investments                          (3,344)      (7,833)        (551)
          Minority interests' share of income                              4,213        5,898        1,204
          Other, net                                                       1,486        8,480        6,864
          Changes in current assets and liabilities:
                 Trade accounts receivable                                14,821        7,404      (11,030)
                 Inventories                                             (49,362)     (28,723)      20,597
                 Deferred tax asset                                        3,669         (177)      (7,623)
                 Accounts payable and accrued expenses                    14,243       25,234        6,599
                 Other                                                     6,569       (7,553)       2,996
                                                                       ---------    ---------    ---------    
   NET CASH PROVIDED BY
      OPERATING ACTIVITIES                                                51,907       52,104       80,858
                                                                       ---------    ---------    ---------    
Cash flows from investing activities:
      Additions to property, plant and equipment                         (25,993)     (81,670)    (156,538)
      Proceeds from disposal of property, plant
        and equipment                                                      5,022       14,913          666
      Other, net                                                          (1,068)      (1,065)         162
                                                                       ---------    ---------    ---------    
      NET CASH USED BY INVESTING ACTIVITIES                              (22,039)     (67,822)    (155,710)
                                                                       ---------    ---------    ---------    

Cash flows from financing activities:
      Net borrowings under Canadian bank
        revolving loan facility                                             (707)        (291)        (911)
      Proceeds from bank debt                                            408,500      424,877      264,300
      Payments on bank and long-term debt                               (410,973)    (387,307)    (478,052)
      Net proceeds from issuance of 11% First
        Mortgage Notes                                                      --           --        226,942
      Net proceeds from issuance of common stock                            --           --         75,322
            Dividends paid                                               (14,435)     (14,388)     (12,632)
      Minority share of subsidiary's distribution                         (3,107)      (7,187)           -
                                                                       ---------    ---------    ---------    
                                                                                                              
      NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                   (20,722)      15,704       74,969
                                                                       ---------    ---------    ---------    
Effects of foreign currency exchange rate changes on
cash                                                                        (672)        (155)         (22)
                                                                       ---------    ---------    ---------    
Net increase (decrease) in cash and cash equivalents                       8,474         (169)          95
Cash and cash equivalents at beginning of year                               570          739          644
                                                                       ---------    ---------    ---------    
Cash and cash equivalents at end of year                               $   9,044    $     570    $     739
                                                                       =========    =========    =========

Supplemental disclosures of cash flow information:
   Cash paid for:
         Interest                                                      $  37,905    $  35,399    $  32,347
         Income taxes                                                  $   1,303    $   7,237    $   8,659
</TABLE>

   See Note 5 for additional supplemental cash flow disclosures 

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

                                      -28-
<PAGE>



                            OREGON STEEL MILLS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  NATURE OF OPERATIONS

    Oregon Steel Mills, Inc. and subsidiaries ("Company") manufactures various
specialty and commodity steel products with operations in the United States and
Canada. The principal markets for the Company's products are steel service
centers, steel fabricators, railroads, oil and gas producers and distributors
and other industrial concerns. The Company's products are primarily marketed in
the United States west of the Mississippi River and western Canada. The Company
also markets products outside North America.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include all wholly-owned and
majority-owned subsidiaries. Affiliates which are 20 percent to 50 percent owned
are accounted for using the equity method. Material wholly-owned and
majority-owned subsidiaries of the Company are Camrose Pipe Corporation ("CPC")
which owns a 60 percent interest in Camrose Pipe Company ("Camrose"), and 87
percent owned New CF&I, Inc. ("New CF&I") which owns a 95.2 percent interest in
CF&I Steel, L.P. ("CF&I") (dba Rocky Mountain Steel Mills). The Company owns 4.3
percent of the remaining interest in CF&I not owned by New CF&I. All significant
intercompany transactions and account balances have been eliminated.

CASH AND CASH EQUIVALENTS

    Cash and cash equivalents include short-term securities which have an
original maturity date of 90 days or less.

CONCENTRATIONS OF CREDIT RISK

    Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and cash equivalents and trade
receivables. The Company places its cash in high credit quality investments and
limits the amount of credit exposure by any one financial institution. At times,
cash balances may be in excess of the Federal Deposit Insurance Corporation
insurance limit. Management believes that risk of loss on the Company's trade
receivables is reduced by ongoing credit evaluation of customer financial
condition and requirements for collateral, such as letters of credit and bank
guarantees.

INVENTORIES

    Inventories are stated at the lower of average cost or market.

PROPERTY, PLANT AND EQUIPMENT

    Property, plant and equipment are stated at cost, including capitalized
interest during construction of $1.2 million, $27.8 million and $20.7 million in
1998, 1997 and 1996, respectively. Depreciation is determined using principally
the straight-line method and the units of production method over the estimated
useful lives of the assets. Maintenance and repairs are expensed as incurred and
costs of improvements are capitalized. Upon disposal, cost and accumulated
depreciation are removed from the accounts and gains or losses are reflected in
income.

COSTS IN EXCESS OF NET ASSETS ACQUIRED

    The costs in excess of net assets acquired by CF&I and Camrose are being
amortized on a straight-line basis over 40 years. Accumulated amortization was
$5.9 million, $4.9 million and $3.9 million in 1998, 1997 and 1996,
respectively. The carrying value of costs in excess of net assets acquired will
be reviewed and adjusted if the facts and circumstances suggest that they may be
impaired.

TAXES ON INCOME

    Deferred income taxes reflect the differences between the financial
reporting and tax bases of assets and liabilities at year end based on enacted
tax laws and statutory tax rates. Tax credits are recognized as a reduction of
income tax expense in the year the credit arises.

                                      -29-
<PAGE>


FINANCIAL INSTRUMENTS

    The Company uses foreign currency forward exchange contracts to reduce its
exposure to fluctuations in foreign currency exchange rates. Gains and losses on
these contracts are deferred and recognized in income as part of the related
transaction.

FOREIGN CURRENCY TRANSLATION

    Assets and liabilities subject to foreign currency fluctuations are
translated at the period-end rate of exchange with related unrealized gains or
losses on the balance sheet date reflected in stockholders' equity. Income and
expenses are translated at the average exchange rate for the period.

NET INCOME PER SHARE

    Basic and diluted net income per share was as follows at December 31:

                                               1998         1997         1996
                                             --------     -------      -------
                                                       (IN THOUSANDS,
                                                   EXCEPT PER SHARE AMOUNTS)

Weighted average number of common
     shares outstanding                        25,770      25,694       22,735
Shares of common stock to be issued
     March 2003                                   598         598          598
                                              -------     -------      -------
                                               26,368      26,292       23,333
                                              =======     =======      =======
Net income                                    $11,929     $11,955      $23,747
                                              =======     =======      =======
Basic and diluted net income per share           $.45        $.45        $1.02
                                              =======     =======      =======


SEGMENT REPORTING

    In 1998, the Company adopted Statement of Financial Accounting Standards
(FAS) 131, "Disclosures about Segments of an Enterprise and Related
Information". In accordance with the criteria of FAS 131, the Company operates
in a single segment.

USE OF ESTIMATES

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.

RECLASSIFICATIONS

    Certain reclassifications have been made in prior years to conform to the
current year presentation. Such reclassifications do not affect results of
operations as previously reported.

NEW ACCOUNTING STANDARD

    The adoption of Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (FAS 133) issued
by the Financial Accounting Standards Board (FASB) on June 15, 1998, is expected
to have no significant effect on the Company's results of operations or its
financial position. See disclosures above and in Note 8.

3.  GEOGRAPHIC INFORMATION

The Company operates in one reportable business segment. Geographical
information is as follows:

                                        1998           1997            1996
                                      --------       --------        --------
                                                  (IN THOUSANDS)
REVENUES FROM EXTERNAL CUSTOMERS
     United States                    $709,239       $635,989        $694,364
     Canada                            183,344        132,569          78,451
                                      --------       --------        --------
                                      $892,583       $768,558        $772,815
                                      ========       ========        ========
ASSETS
     United States                    $935,873       $927,430        $863,773
     Canada                             58,097         59,190          49,582
                                      --------       --------        --------
                                      $993,970       $986,620        $913,355
                                      ========       ========        ========


     Revenue attributed to Canada are from Camrose which is domiciled there.
Revenues attributed to other countries are insignificant.

                                      -30-
<PAGE>



4.  INVENTORIES

     Inventories were as follows at December 31:

                                        1998            1997          1996
                                     ---------       ---------      --------
                                                   (IN THOUSANDS)

Raw materials                         $ 16,842        $ 25,197      $ 24,916
Semifinished product                    93,747          65,545        45,767
Finished product                        60,290          31,105        25,046
Stores and operating supplies           25,400          26,701        24,907
                                      --------        --------      --------
     Total inventory                  $196,279        $148,548      $120,636
                                      ========        ========      ========


5.  SUPPLEMENTAL CASH FLOW INFORMATION

     During 1998, 1997, and 1996, the Company acquired property, plant and 
equipment for $12.9 million,  $16.2 million and $8.9 million,  respectively,
which was included in accounts payable and accrued expenses at the respective
year ends.

     The Company has recorded as a change to stockholders' equity the issuance
of common stock to the Employee Stock Ownership Plan in 1998 and foreign
currency translation adjustments annually, which are noncash transactions.

6.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable include book overdrafts of $12.0 million at December 31, 
1997, and retainage from construction projects of $12.7 million, $13.2 million
and $12.5 million at December 31, 1998, 1997 and 1996, respectively.

     At December 31, 1996, accrued expenses include accrued vacation of $6.5
million.

7.  DEBT AND FINANCING ARRANGEMENTS

     Debt balances were as follows as of December 31:

                                                1998          1997         1996
                                               --------     --------    --------
                                                         (IN THOUSANDS)
11% First Mortgage Notes due 2003              $235,000     $235,000    $235,000
Revolving bank loan                              93,700       88,800      45,500
CF&I acquisition term loan                       38,187       45,559      51,290
Camrose revolving bank loan                       4,417        5,487       5,777
                                               --------     --------    --------
     Total debt                                 371,304      374,846     337,567
Less current maturities and short-term debt     100,864        7,373       6,574
                                               --------     --------    --------
     Non-current maturity of long-term debt    $270,440     $367,473    $330,993
                                               ========     ========    ========


    The Company has outstanding $235 million principal amount of 11% First
Mortgage Notes ("Notes") due 2003. The Notes are guaranteed by New CF&I and CF&I
("Guarantors"). The Notes and the guarantees are secured by a lien on
substantially all the property, plant and equipment and certain other assets of
the Company (exclusive of Camrose) and the Guarantors. The collateral for the
Notes and the guarantees does not include, among other things, inventory and
accounts receivable. The indenture under which the Notes were issued contains
potential restrictions on new indebtedness and various types of disbursements,
including dividends, based on the Company's net income in relation to its fixed
charges, as defined. Under these restrictions, $10.3 million was available for
cash dividends at December 31, 1998.

    The Company maintains a $125 million revolving bank credit facility
("Amended Credit Agreement"), which expires June 11, 1999, and may be drawn upon
based on the Company's accounts receivable and inventory balances, except those
of Camrose. At the Company's election, interest on the Amended Credit Agreement
is based on the (1) London Interbank Offering Rate ("LIBOR"), (2) the prime rate
or (3) the federal funds rate, plus a margin determined by the Company's
leverage ratio. As of December 31, 1998, the average interest rate on borrowings
under the Amended Credit Agreement was 8.1 percent. Annual commitment fees are
 .5 percent of the unused portions of the Amended Credit Agreement. The Amended
Credit Agreement is collateralized by substantially all of the Company's
consolidated inventory and accounts receivable, except 

                                      -31-
<PAGE>

those of Camrose. Amounts outstanding under the Amended Credit Agreement are 
guaranteed by the Guarantors.  The Amended Credit Agreement contains various 
restrictive covenants including a minimum tangible net worth, minimum interest
coverage ratio, and a maximum debt to total capitalization ratio. The Amended 
Credit Agreement has been amended to, among other things, modify the interest 
coverage ratio due to lower than anticipated earnings and higher than 
anticipated borrowings.

    CF&I incurred term debt of $67.5 million as part of the purchase price of
certain assets of CF&I Steel Corporation on March 3, 1993. This debt is without
stated collateral and is payable over ten years with interest at 9.5 percent.

    Camrose maintains a $15 million (Canadian dollars) revolving credit facility
with a bank, the proceeds of which may be used for working capital and general
corporate purposes. The facility is collateralized by substantially all of the
assets of Camrose, and borrowings under this facility are limited to an amount
equal to specified percentages of Camrose's eligible trade accounts receivable
and inventories. The facility expires on December 30, 1999. Depending on
Camrose's election at the time of borrowing, interest is payable based on (1)
the bank's Canadian dollar prime rate, (2) the bank's U.S. dollar prime rate, or
(3) LIBOR.  As of December 31, 1998, the interest rate of this facility was 
6.75 percent.  Annual commitment fees are .25 percent of the unused portion of 
this facility.

    As of December 31, 1998, principal payments on debt are due as follows (in
thousands):

      1999                                                     $100,864
      2000                                                       12,278
      2001                                                        8,625
      2002                                                        9,464
      Balance due in installments through 2003                  240,073
                                                               --------
                                                               $371,304
                                                               ========

     The Company has uncollateralized and uncommitted revolving lines of credit
with two banks which may be used to support issuance of letters of credit,
foreign exchange contracts and interest rate hedges. At December 31, 1998, $9.0
million was restricted under outstanding letters of credit.

8.  FINANCIAL INSTRUMENTS AND FAIR VALUES

     The Company uses foreign currency forward exchange contracts to reduce its
exposure to fluctuations in foreign currency exchange rates. Such contracts are
typically short-term in duration and related to specific transactions. At
December 31, 1998, the Company had used $4.0 million notional amount outstanding
under such contracts, with expiration dates through March 31, 1999. At December
31, 1998, there were no material unrealized gains or losses. The carrying amount
of foreign currency forward exchange contracts approximates fair value based on
year-end currency exchange rates.

     The estimated fair values of the Company's financial instruments are as
follows as of December 31 (in thousands):
<TABLE>
<CAPTION>


                                                 1998                          1997                           1996
                                      ---------------------------    -----------------------       -------------------------
                                        CARRYING       FAIR          CARRYING        FAIR           CARRYING         FAIR
                                         AMOUNT        VALUE          AMOUNT         VALUE           AMOUNT          VALUE
                                      -----------    ---------       ----------    ---------       ----------     ----------
<S>                                   <C>            <C>              <C>           <C>            <C>            <C>
Cash  and cash equivalents            $   9,044      $   9,044        $    570      $    570       $    739       $     739
Short-term debt                          93,700         93,700               -             -              -               -
Long-term debt, including
     current portion                    277,604        282,818         374,846       393,407        337,567         351,011
</TABLE>

     The carrying amounts of cash or cash equivalents and short-term debt
approximate fair value due to their short maturity. The fair value of long-term
debt, including current portion, is estimated based on quoted market prices or
by discounting future cash flows based on the Company's incremental borrowing
rate for similar types of borrowing arrangements.

                                      -32-
<PAGE>


 9.  INCOME TAXES

     The income tax expense consists of the following:

                                         1998       1997        1996
                                      ---------   --------    ---------
                                               (IN THOUSANDS)
Current:
     Federal                          $    806    $    547    $ (9,750)
     State                                 (95)        (99)       (361)
     Foreign                              (654)        (11)        (25)
                                      --------    --------    -------- 
                                            57         437    (10,136)
                                      --------    --------    -------- 
Deferred:
     Federal                            (5,373)     (4,498)     (2,174)
     State                              (2,459)       (343)        541
     Foreign                              (612)     (2,258)        362
                                      --------    --------    -------- 
                                        (8,444)     (7,099)     (1,271)
                                      --------    --------    -------- 
Income tax expense                    $ (8,387)   $ (6,662)   $(11,407)
                                      ========    ========    ========


     The components of the net deferred tax assets and liabilities as of
December 31 were as follows:
<TABLE>
<CAPTION>

                                                             1998            1997            1996
                                                          --------         -------         -------
                                                                      (IN THOUSANDS)
<S>                                                       <C>              <C>             <C>   

Net current deferred tax asset:
     Assets
          Inventories                                     $  4,584         $ 4,531         $ 3,143
          Accrued expenses                                   5,807           9,053           6,345
          Accounts receivable                                  507             576           1,024
          Deferred sales revenue                                 -               -           2,236
          Foreign tax credit                                 3,754           2,886               -
          Net operating loss carryforward                    1,789           2,380               -
          State tax credits                                      -               -             100
          Provision for rolling mill closures                    -           2,928           5,594
                                                          --------         -------         -------
                                                            16,441          22,354          18,442

     Liabilities
          Other                                              2,848           5,092           1,358
                                                          --------         -------         -------
Net current deferred tax asset                            $ 13,593         $17,262         $17,084
                                                          ========         =======         =======

Net noncurrent deferred income tax liability:
     Assets:
          Postretirement benefits other than pensions     $  2,238         $ 1,864         $ 1,467
          State tax credits                                  5,719           6,907           6,637
          Alternative minimum tax credit                    15,561          15,532          12,654
          Environmental liability                           12,791          12,829          12,915
          Foreign tax credit                                 1,258             633              45
          Net operating loss carryforward                   40,117          20,657           7,699
          Other                                              5,304             487           2,502
                                                          --------         -------         -------
                                                            82,988          58,909          43,919
          Valuation allowance                               (3,105)              -               -
                                                          --------         -------         -------
                                                            79,883          58,909          43,919
                                                          --------         -------         -------

     Liabilities
          Property, plant and equipment                    104,054          77,025          54,530
          Cost in excess of net assets acquired             10,917          11,642          11,695
          Other                                              1,327           1,883           2,059
                                                          --------         -------         -------
                                                           116,298          90,550          68,284
                                                          --------         -------         -------
     Net noncurrent deferred income tax liability         $ 36,415         $31,641         $24,365
                                                          ========         =======         =======
</TABLE>

                                      -33-

<PAGE>


     A reconciliation of the statutory tax rate to the effective tax rate on
income before income taxes is as follows:

                                                     1998      1997      1996
                                                    ------    ------    ------

U.S. statutory income tax rate ................     (35.0%)   (35.0%)   (35.0%)
Deduction for dividends to ESOP participants ..       1.8       2.1       1.2
State taxes, net ..............................     (11.8)     (2.9)      (.5)
Foreign sales corporation benefit .............       4.7       2.3       1.1
Foreign tax in excess of U.S. rate ............       (.5)     (2.9)       .2
Other, net ....................................       (.5)       .6        .6
                                                    ------    ------    ------
                                                    (41.3%)   (35.8%)   (32.4%)
                                                    ======    ======    ======

     At  December 31, 1998, the Company has state tax credits of $2.6 million
expiring 2000 through 2010 which are available to reduce future income taxes
payable.

     At December 31, 1998, the Company has $98.8 million in federal net 
operating  loss  carryforwards  expiring in 2012 and 2018. In addition, the
Company has $133.3 million in state net operating loss carryforwards expiring 
in 2009 through 2013.

     A $3.1 million valuation allowance has been established for state tax
credit carryforwards in 1998. Management believes that it is more likely than
not that future taxable income will not be sufficient to realize the full
benefit of the state tax credit carryforwards. No valuation allowance has been
established for net operating loss carryforwards.

10.  EMPLOYEE BENEFIT PLANS

UNITED STATES PENSION PLANS

     The Company has noncontributory defined benefit retirement plans covering
all of its eligible domestic employees. The plans provide benefits based on
participants' years of service and compensation. The Company funds at least the
minimum annual contribution required by ERISA.

     The following table sets forth the funded status of the plans and the
amounts recognized in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>

                                                             1998        1997        1996
                                                            -------     -------     -------
                                                                    (IN THOUSANDS)
<S>                                                         <C>         <C>         <C>    

Change in benefit obligation
   Projected benefit obligation at January 1                $52,566     $46,184     $39,777
   Service cost                                               3,100       3,804       4,431
   Interest cost                                              3,617       3,445       2,930
   Actuarial loss                                             4,407       1,248         684
   Early retirement benefits                                  2,528        --          --
   Benefits paid                                             (1,693)     (2,115)     (1,638)
                                                           --------    --------    --------   
   Projected benefit obligation at December 31               64,525      52,566      46,184
                                                           --------    --------    --------   

Change in plan assets
   Fair value of plan assets at January 1                    49,877      42,087      34,283
   Actual return on plan assets                               9,559       7,139       4,243
   Company contribution                                       2,189       2,766       5,199
   Benefits paid                                             (1,693)     (2,115)     (1,638)
                                                            -------    --------    --------   
   Fair value of plan assets at December 31                  59,932      49,877      42,087
                                                            -------    --------    --------   

Projected benefit obligation in excess of plan assets        (4,593)     (2,689)     (4,097)
Unrecognized net (gain) loss                                    (57)       (711)      1,381
Unrecognized prior service cost                                 506         626         746
Unrecognized net obligation at
  January 1, 1987 being recognized over 15 years                225         301         377
                                                            -------     -------     -------   
Pension liability recognized in
  consolidated balance sheet                                $(3,919)    $(2,473)    $(1,593)
                                                            =======     =======     =======
</TABLE>
                                      -34-
<PAGE>


     Net pension cost was $5.0 million, $3.7 million and $4.5 million for the
years ended December 31, 1998, 1997 and 1996, respectively. During 1998 the
Company offered a voluntary early retirement package to certain management
employees at CF&I. As a result, the projected benefit obligation was increased
by $2.5 million, which is included in the above table, and the annual pension
cost.

     Plan assets are invested in common stock and bond funds (96 percent), 
marketable fixed income  securities (1 percent) and insurance company contracts 
(3 percent) at December 31, 1998.  The plans do not invest in the stock of the
 Company.

CANADIAN PENSION PLANS

     The Company has noncontributory defined benefit retirement plans covering
all of its eligible Camrose employees. The plans provide benefits based on
participants' years of service and compensation.

     The following table sets forth the funded status and the amounts
recognized:
<TABLE>
<CAPTION>

                                                               1998       1997        1996
                                                             ------     -------      ------
                                                                     (IN THOUSANDS)
<S>                                                         <C>         <C>          <C>   
Change in benefit obligation
   Projected benefit obligation at January 1                $ 9,616     $ 7,351      $7,222
   Service cost                                                 541         355         374
   Interest cost                                                706         568         562
   Actuarial (gain) loss                                        295       1,719        (551)
   Benefits paid                                               (126)       (256)       (239)
   Foreign currency exchange rate change                       (722)       (121)        (17)
                                                            -------     -------      ------   
   Projected benefit obligation at December 31               10,310       9,616       7,351
                                                            -------     -------      ------   

Change in plan assets
   Fair value of plan assets at January 1                    11,045       9,953       8,020
   Actual return on plan assets                                 734       1,028       1,702
   Company contribution                                         482         462         492
   Benefits paid                                               (126)       (256)       (239)
   Foreign currency exchange rate change                       (795)       (142)        (22)
                                                            -------     -------      ------   
   Fair value of plan assets at December 31                  11,340      11,045       9,953
                                                            -------     -------      ------   

Plan assets in excess of projected benefit obligation         1,030       1,429       2,602
Unrecognized net (gain) loss                                    718         118      (1,506)
                                                            -------     -------      ------   
Pension asset recognized in consolidated balance sheet      $ 1,748     $ 1,547      $1,096
                                                            =======     =======      ======   

     Net pension cost was $280,000, $6,000 and $222,000 for the years ended
December 31, 1998, 1997, and 1996, respectively.

     The following table sets forth the significant actuarial assumptions for
the United States and Canadian pension plans:

                                                       1998      1997     1996
                                                       ----      ----     ----
Discount rate                                          6.8%      7.0%     7.5%
Rate of increase in future compensation levels:
     United States Plans                               4.0%      4.0%     4.0%
     Canadian Plan                                     4.0%      4.0%     4.0%
Expected long-term rate of return on plan assets       8.5%      8.8%     8.8%
</TABLE>

                                      -35-
<PAGE>


POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS

     The Company provides certain health care and life insurance benefits for
substantially all of its retired employees. Employees are generally eligible for
benefits upon retirement after completion of a specified number of years of
service. The benefit plans are unfunded.

     The following table sets forth the status of the plans as of December 31:
<TABLE>
<CAPTION>

                                                                      1998         1997         1996
                                                                    --------     --------     --------
<S>                                                                 <C>          <C>          <C>    

Change in benefit obligation:
   Accumulated postretirement benefit obligation at January 1       $ 17,372     $ 17,737     $ 17,610
   Service cost                                                          411          397          449
   Interest cost                                                       1,181        1,263        1,298
   Actuarial (gain) loss                                                 399       (1,317)        (920)
   Benefits paid                                                        (852)        (686)        (697)
   Plan Amendments                                                       273           --           --
   Foreign currency exchange rate change                                (123)         (22)          (3)
                                                                    --------     --------     --------     
   Accumulated postretirement benefit obligation
      at December 31                                                  18,661       17,372       17,737
                                                                    --------     --------     --------     

Projected benefit obligation in excess of plan assets                (18,661)     (17,372)     (17,737)
Unrecognized net (gain) loss                                            (351)        (617)         772
Unrecognized transition obligation                                     4,926        5,334        7,923
Unrecognized prior service cost                                          315           --           --
                                                                    --------     --------     --------
Postretirement liability recognized
  in consolidated balance sheet                                     $(13,771)    $(12,655)    $ (9,042)
                                                                    ========     ========     ========
</TABLE>


     Net postretirement benefit cost was $1.8 million, $2.1 million and $2.3
million for the years ended December 31, 1998, 1997 and 1996, respectively.

     For measurement purposes, a long-term inflation rate of 4.5 to 10 percent
is assumed for health care cost trend rates. A one percentage point increase in
the assumed health care cost trend for 1999 would increase the accumulated
postretirement benefit obligation by $525,000; the aggregate service and
interest cost would increase $50,000. A one percentage point decrease in the
assumed health care cost trend for 1999 would decrease the accumulated
postretirement benefit obligation by $444,000; the aggregate service and
interest cost would decrease $43,000. The discount rate used in determining the
accumulated postretirement benefit obligation was 6.8, 7.0 and 7.5 percent for
1998, 1997 and 1996, respectively.

OTHER EMPLOYEE BENEFIT PLANS

     The Company has an unfunded supplemental retirement plan designed to
maintain benefits for all nonunion domestic employees at the plan formula level.
The amount expensed for this plan in 1998, 1997 and 1996 was $297,000, $236,000
and $226,000, respectively.

     The Company has an Employee Stock Ownership Plan ("ESOP") noncontributory
qualified stock bonus plan for eligible domestic employees. Contributions to the
plan are made at the discretion of the Board of Directors and are in the form of
newly issued shares of the Company's common stock. Shares are allocated to
eligible employees' accounts based on annual compensation. At December 31, 1998,
the ESOP held 1.8 million shares of Company common stock. Dividends on shares
held by the ESOP are paid to eligible employees.

     The Company has discretionary profit participation plans under which it
distributes quarterly to eligible employees 12 percent to 20 percent, depending
on operating unit, of its pretax income after adjustments for certain
nonoperating items. Each eligible employee receives a share of the distribution
based upon the employee's base compensation compared with the total base
compensation of all eligible employees of the operating unit.

     The Company has qualified Thrift (401(k)) plans for eligible domestic
employees under which the Company matches 25 or 50 percent, depending on
location, of the first 4 or 6 percent of the participants' deferred
compensation. Company contribution expense in 1998, 1997 and 1996 was $1.4
million, $765,000 and $799,000, respectively.

                                      -36-
<PAGE>


11.   RELATED PARTY TRANSACTIONS

STELCO, INC.

     Camrose purchases steel coil and plate under a steel supply agreement with
Stelco, Inc. ("Stelco") a 40 percent owner of Camrose, or its subsidiaries.
Transactions under the agreement are at negotiated market prices. The following
table summarizes the transactions between Camrose and Stelco.

                                                   1998        1997       1996
                                                 -------     -------    -------
                                                         (IN THOUSANDS)

Sales to Stelco                                  $   435     $   330    $   138
Purchases from Stelco                             24,000      83,478     60,231
Accounts receivable from Stelco at December 31       108          58      3,254
Accounts payable to Stelco at December 31            911       7,303      4,127


     Under the acquisition agreement for the mill, either the Company or Stelco
may initiate a buy-sell procedure pursuant to which the initiating party
establishes a price for Camrose and the other party must either sell its
interest at that price or purchase the initiating party's interest at that
price.


12.  CONTINGENCIES

ENVIRONMENTAL

     All material environmental remediation liabilities which are probable and
estimable are recorded in the financial statements based on current technologies
and current environmental standards at the time of evaluation. Adjustments are
made when additional information is available that may require different
remediation methods or periods, and ultimately affect the total cost. The best
estimate of the probable cost within a range is recorded. If there is no best
estimate, the low end of the range is recorded, and the range is disclosed.

     The Company has accrued $2.1 million at December 31, 1998, for
environmental remediation relating to the Company's Napa, California pipe mill.
The Company's estimate of this environmental liability was based on several
remedial investigations and feasibility studies performed by an independent
engineering consultant. The accrual includes costs for remedial action which is
scheduled to be completed in 1998 with sampling, monitoring and maintenance
costs continuing through 2024.

     In connection with the 1993 acquisition of CF&I, the Company accrued a
liability of $36.7 million for environmental remediation at Pueblo, Colorado
steel mill. The Company believed $36.7 million was the best estimate from a
range of $23.1 to $43.6 million. The Company estimate of this liability was
based on two separate remediation investigations conducted by independent
environmental engineering consultants. The accrual includes costs for the
Resource Conservation and Recovery Act facility investigation, a corrective
measures study, remedial action, and operation and maintenance associated with
the proposed remedial actions. In October 1995, CF&I and the Colorado Department
of Public Health and Environment finalized a postclosure permit for historic
hazardous waste units at the Pueblo Mill. As part of the postclosure permit
requirements, CF&I must conduct a corrective action program for the 82 solid
waste management units at the facility and continue to address projects on a
prioritized corrective action schedule which is substantially reflective of a
straight-line rate of expenditure over 30 years. As of December 31, 1998, 11
solid waste management units have closed with no further action needed. The
State of Colorado stated that the schedule for corrective action could be
accelerated if new data indicated a greater threat to the environment than is
currently known to exist. At December 31, 1998, the accrued liability was $33.3
million, of which $30.9 million was classified as noncurrent in the consolidated
balance sheet.

LABOR DISPUTE

     The labor contract at CF&I expired on September 30, 1997. After a brief
contract extension intended to help facilitate a possible agreement, on October
3, 1997 the United Steel Workers of America ("Union") initiated a strike at CF&I
for approximately 1,000 bargaining unit employees. The parties failed to reach
final agreement on a new labor contract due to differences on economic

                                      -37-
<PAGE>


issues.  As a result of contingency planning, the Company was able to avoid 
complete suspension of operations at the Pueblo Mill by utilizing a combination
of permanent replacement workers, striking employees who returned to work and
salaried employees. 

     On December 30, 1997, the Union called off the strike and made an
unconditional offer to return to work. At the time of this offer, only a few
vacancies existed at the Pueblo Mill. As of the end of December 1998, 90 former
striking employees had returned to work as a result of their unconditional
offer. Approximately 720 former striking workers remain unreinstated
("Unreinstated Employees").

     On February 27, 1998 the Regional Director of the National Labor Relations
Board ("NLRB") Denver office issued a complaint against CF&I, alleging
violations of several provisions of the National Labor Relations Act. The
Company not only denies the allegations, but rather believes that both the facts
and the law fully support its contention that the strike was economic in nature
and that it was not obligated to displace the properly hired permanent
replacement employees. On August 17, 1998, a hearing on these allegations
commenced before an Administrative Law Judge. Testimony and other evidence was
presented on various hearing dates in the latter part of 1998 and early 1999.
The hearing concluded on February 25, 1999. The Administrative Law Judge will
render a decision which is automatically appealable by either party to the NLRB
in Washington, D.C. Ultimate determination of the issue may well require action
by an appropriate United States Court of Appeals. In the event there is an
adverse determination of these issues, Unreinstated Employees could be entitled
to back pay from the date of the Union's unconditional offer to return to work
through the date of the adverse determination ("Backpay Liability"). The number
of Unreinstated Employees entitled to back pay would probably be limited to the
number of replacement workers, currently approximately 470 workers. However, the
Union might assert that all unreinstated employees could be entitled to back
pay. Back pay is generally measured by the quarterly earnings of those working
less interim wages earned elsewhere by the Unreinstated Employees. In addition,
each Unreinstated Employee has a duty to take reasonable steps to mitigate the
Backpay Liability by seeking employment elsewhere that has comparable demands
and compensation. It is not presently possible to estimate the extent to which
interim earnings and failure to mitigate the Backpay Liability would affect the
cost of an adverse determination.

     In addition, during the strike 39 bargaining unit employees of the Colorado
& Wyoming Railway Company ("C&W"), a wholly-owned subsidiary of New CF&I which
provides rail service to the Pueblo Mill, refused to report to work for an
extended period of time. The bargaining unit employees of C&W were not on
strike. C&W considered these employees to have quit their employment and,
accordingly, C&W declined to return those individuals to work. The unions
representing these individuals have filed lawsuits against C&W claiming its
members had refused to cross the picket line because they were honoring the
picket line of another organization or because of safety concerns stemming from
those picket lines. The Company believes it has substantial defenses against
these claims. However, it is possible that one or more of them will proceed to
arbitration before the National Railroad Adjustment Board or otherwise. The
outcome of such proceedings is inherently uncertain and it is not possible to
estimate any potential settlement amount which would result from an adverse
legal or arbitration decision.

CONTRACTS WITH KEY EMPLOYEES

     The Company has employment agreements with certain officers which provide
for severance compensation in the event their employment with the Company is
terminated subsequent to a change in control (as defined) of the Company.

OTHER CONTINGENCIES

     The Company is party to various claims, disputes, legal actions and other
proceedings involving contracts, employment and various other matters. In the
opinion of management, the outcome of these matters should not have a material
adverse effect on the consolidated financial condition of the Company.


                                      -38-
<PAGE>


13.   CAPITAL STOCK

     In connection with the March 1993 acquisition of certain assets of CF&I
Steel Corporation, the Company agreed to issue 598,400 shares of its common
stock in March 2003 to specified creditors of CF&I Steel Corporation. At the
date of acquisition, the stock was valued at $11.2 million using the
Black-Scholes method.

14.  SALES OF SUBSIDIARY'S COMMON STOCK

     In June 1994, New CF&I's Board of Directors approved an increase in New
CF&I's authorized $1 par value common stock from 100 to 1,000 shares and
declared an 80 percent stock dividend, increasing the Company's holding of New
CF&I's common stock to 180 shares. In August 1994, New CF&I sold additional
common stock (10 percent equity interest) to a subsidiary of Nippon Steel
Corporation ("Nippon").

     In connection with the sale, New CF&I and the Company entered into a
stockholders' agreement with Nippon pursuant to which Nippon was granted a right
to sell all, but not less than all, of its 10 percent equity interest in New
CF&I back to New CF&I at the then fair market value in certain circumstances.
Those circumstances include, among other things, a change of control, as
defined, in New CF&I, certain changes involving the composition of the board of
directors of New CF&I, and the occurrence of certain other events which are
within the control of New CF&I and the Company. The Company also agreed not to
transfer voting control of New CF&I to a nonaffiliate except in circumstances
where Nippon is offered the opportunity to sell its interest in New CF&I to the
transferee at the same per share price obtained by the Company. New CF&I has
also retained a right of first refusal in the event that Nippon desires to
transfer its interest in New CF&I to a nonaffiliate. During the fourth quarter
of 1995, the Company sold a 3 percent equity interest in New CF&I to the Nissho
Iwai Group under substantially the same terms and conditions of the Nippon
transaction. The Company believes that it is not probable that the conditions
which would permit a subsidiary stock redemption will occur.

15.    UNUSUAL AND NONRECURRING ITEMS

SETTLEMENT OF LITIGATION

     Operating income for 1998 includes a $7.0 million gain from a settlement of
litigation with certain graphite electrode suppliers.

GAIN ON SALES OF ASSETS

     Operating income for 1998 and 1997 include net gains from sales of assets
of $4.7 million and $2.2 million, respectively.

GAIN ON SALE OF EQUITY OWNERSHIP INTEREST

     Other income for 1997 includes a net gain from the sale of an equity
ownership of $3.0 million.

LOSS ON TERMINATION OF INTEREST RATE SWAP AGREEMENTS

     During 1996, the Company incurred a $1.2 million pretax loss for
terminating certain interest rate swap agreements. The swap agreements were
terminated in conjunction with the repayment of certain borrowings under the
previous bank credit agreement.

PROCEEDS FROM INSURANCE SETTLEMENT

     Sales for 1997 include approximately $2.5 million of insurance proceeds as
reimbursement of lost profits resulting from lost production during the third
and fourth quarters of 1996 related to the failure of one of the power
transformers servicing CF&I. In total, the Company received approximately $7
million in insurance proceeds from this claim of which $4.5 million was recorded
in 1996 as reimbursement of excess costs in that period.



ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON 
          ACCOUNTING AND FINANCIAL DISCLOSURE

     None


                                      -39-
<PAGE>



                                    PART III

ITEMS 10 AND 11. DIRECTORS AND EXECUTIVE OFFICERS OF THE
                 REGISTRANT AND EXECUTIVE COMPENSATION

    A definitive proxy statement of Oregon Steel Mills, Inc. will be filed not
later than 120 days after the end of the fiscal year with the Securities and
Exchange Commission. The information set forth therein under "Nomination and
Election of Class B Directors", "Executive Compensation", "Defined Benefit
Retirement Plans", "Employment Contracts and Termination of Employment and
Change in Control Arrangements", "Compensation Committee Interlocks and Insider
Participation", "Board Compensation Committee Report on Executive Compensation"
and "Section 16(a) Beneficial Ownership Reporting Compliance" is incorporated
herein by reference.  Executive Officers of Oregon Steel Mills, Inc. are 
listed on page 13 of this Form 10-K.





ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                 AND MANAGEMENT

    Information required is set forth under the caption "Principal Stockholders"
in the Proxy Statement for the 1999 Annual Meeting of Stockholders and is
incorporated herein by reference.





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    Information required is set forth under the captions "Nomination and
Election of Class B Directors" and "Executive Compensation" in the Proxy
Statement for the 1999 Annual Meeting of Stockholders and is incorporated herein
by reference.



                                      -40-
<PAGE>



                                     PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
              ON FORM 8-K
                                                                            PAGE

(a) (i)     FINANCIAL STATEMENTS:
            Report of Independent Accountants - 1998, 1997 and 1996.......... 24
            Consolidated Financial Statements:
                Balance Sheets at December 31, 1998, 1997 and 1996........... 25
                Statements of Income for each of the three years
                  in the period ended December 31, 1998...................... 26
                Statements of Changes in Stockholders' Equity for each 
                  of the three years in the period ended December 31, 1998... 27
                Statements of Cash Flows for each of three years
                  in the period ended December 31, 1998...................... 28
                Notes to Consolidated Financial Statements................... 29
    (ii)    Financial Statement Schedule for each of the three
                years in the period ended December 31, 1998:
                Schedule II - Valuation and Qualifying Accounts.............. 42
    (iii)   Exhibits:  Reference is made to the list on page 43 of 
                the exhibits filed with this report.
(b)         Reports on Form 8-K:
                No reports on Form 8-K were required to be filed by
                the Registrant during the fourth quarter of the year
                ended December 31, 1998



                                      -41-
<PAGE>





                            OREGON STEEL MILLS, INC.
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                         FOR THE YEARS ENDED DECEMBER 31
                                 (IN THOUSANDS)
<TABLE>

<CAPTION>

                                                                          COLUMN C
                                                                -------------------------
                                                COLUMN B        ADDITIONS                                           COLUMN E
                                               ----------                                                          ----------
                                               BALANCE AT       CHARGED TO       CHARGED                           BALANCE AT
COLUMN A                                        BEGINNING       COSTS AND        TO OTHER         COLUMN D           END OF
--------                                                                                          ---------                
CLASSIFICATION                                  OF PERIOD        EXPENSES        ACCOUNTS        DEDUCTIONS          PERIOD
--------------                                  ----------       ----------       --------        ----------        -----------
<S>                                             <C>             <C>               <C>             <C>              <C>    

   1998
   ----
Allowance for doubtful accounts                 $ 1,374         $   290              --           $  (516)         $     1,148
   1997
   ----
Allowance for doubtful accounts                 $ 2,735         $ 1,338           $  --           $(2,699)         $     1,374
Provision for rolling mill closures:
   Inventories                                  $ 1,500              --              --           $ (1,500) (1)    $        --
   Property, plant and equipment                $ 7,485              --              --           $ (7,485) (1)    $        --
   Other assets                                 $    78              --              --           $    (78) (1)    $        --
   1996
   ----
Allowance for doubtful accounts                 $ 1,905         $   917              --           $    (87)        $     2,735
Provision for rolling mill closures:
   Inventories                                  $ 1,500              --              --                 --         $     1,500
   Property, plant and equipment                $ 7,485              --              --                 --         $     7,485
   Other assets                                 $    78              --              --                 --         $        78


</TABLE>


--------------
(1) Results from write-offs of related assets.


                                      -42-

<PAGE>


LIST OF EXHIBITS*

 2.0     Asset Purchase Agreement dated as of January 2, 1992, by and between
         Camrose Pipe Company (a partnership) and Stelco Inc. (Filed as exhibit
         2.0 to Form 8-K dated June 30, 1992 and incorporated by reference 
         herein.
 2.1     Asset Purchase Agreement dated as of March 3, 1993, among CF&I
         Steel Corporation, Denver Metals Company, Albuquerque Metals
         Company, CF&I Fabricators of Colorado, Inc., CF&I Fabricators
         of Utah, Inc., Pueblo Railroad Service Company, Pueblo Metals
         Company, Colorado & Utah Land Company, the Colorado and Wyoming
         Railway Company, William J. Westmark as trustee for the estate
         of The Colorado and Wyoming Railway Company, CF&I Steel, L.P.,
         New CF&I, Inc. and Oregon Steel Mills, Inc. (Filed as exhibit
         2.1 to Form 8-K dated March 3, 1993, and incorporated by
         reference herein.)
 3.1     Restated Certificate of Incorporation of the Company.  (Filed as
         exhibit 3.1 to Form 10-K for the year ended December 31, 1992, and
         incorporated by reference herein.)
 3.2     Bylaws of the Company. (Filed as exhibit 3.2 to Form 10-Q dated March 
         31, 1993, and incorporated by reference herein.) 
 3.3     Amendment to Bylaws of the Company. (Filed as exhibit 3.3 to Form 8-K
         dated July 30, 1998, and incorporated by reference herein.)
 4.1     Specimen Common Stock Certificate.  (Filed as exhibit 4.1 to Form S-1
         Registration Statement 33-38379 and incorporated by reference herein.)
 4.4     Indenture dated as of June 1, 1996 among Oregon Steel Mills, Inc., as 
         Issuer, Chemical  Bank, as Trustee, and New CF&I, Inc. and CF&I
         Steel, LP, as Guarantors, with respect to 11% First Mortgage Notes
         due 2003.  (Filed as exhibit 4.1 to Form 10-Q dated June 30, 1996, and
         incorporated by reference herein.)
 4.5     Form of Deed of Trust, Assignment of Rents and  Leases and  Security
         Agreement.  (Filed as exhibit 4.2 to Amendment #1 to Form S-3
         Registration Statement 333-02355 and incorporated by reference herein.)
 4.6     Form of Security Agreement.  (Filed as exhibit 4.3 to Amendment #1 to
         Form S-3 Registration Statement 333-02355 and incorporated by reference
         herein.)
 4.7     Form of Intercreditor Agreement.  (Filed as exhibit 4.4 to Amendment #1
         to Form S-3 Registration Statement 333-02355 and incorporated by
         reference herein.)
10.1**   Form of  Indemnification Agreement between the Company and its 
         directors.  (Filed as exhibit 10.6 to Form S-1 Registration Statement
         33-20407 and incorporated by reference herein.)
10.2**   Form of Indemnification  Agreement between the Company and its 
         executive officers.  (Filed on exhibit 10.7 to Form S-1 Registration
         Statement 33-20407 and incorporated by reference herein.)
10.3     Agreement for Electric Power Service  between  registrant and Portland
         General Electric Company.  (Filed as exhibit 10.20 to Form S-1
         Registration Statement 33-20407 and incorporated by reference herein.)
10.4**   Key  employee contract for Thomas B. Boklund.  (Filed as exhibit
         10.11 to Form 10-K for the year ended December 31, 1988, and 
         incorporated  by reference herein.)
10.5**   Key employee  contract for L. Ray Adams.  (Filed as exhibit 10.10 to
         Form 10-K for the year ended December 31, 1990, and incorporated by
         reference herein.)
10.6**   Key employee  contract for Joe E. Corvin.  (Filed as exhibit 10.10 to
         Form 10-K for the year ended December 31, 1995, and incorporated by
         reference herein.)
10.7     Amended and Restated Credit Agreement dated June 12, 1996,
         among Oregon Steel Mills, Inc., as Borrower, certain Commercial
         Lending Institutions, as the Lenders, First Interstate Bank of
         Oregon, N.A. as the Administrative Agent for the Lenders, the
         Bank of Nova Scotia, as the Syndication Agent for the Lenders,
         and First Interstate Bank of Oregon, N.A. and the Bank of Nova
         Scotia as the Managing Agents for the Lenders. (Filed as
         exhibit 10.0 to Form 10-Q dated June 30, 1996, and incorporated
         by reference herein.)


                                      -43-
<PAGE>

10.8     Second Amendment dated as of December 11, 1997 to the Amended
         and Restated Credit Agreement dated June 12, 1996, among Oregon
         Steel Mills, Inc., as Borrower, certain Commercial Lending
         Institutions as the Lenders, Wells Fargo Bank National
         Association, formerly known as First Interstate Bank of Oregon,
         N.A., as the Administrative Agent for the Lenders; the Bank of
         Nova Scotia, as the syndication Agent for the Lenders, and
         Wells Fargo Bank National Association and the Bank of Nova
         Scotia, as the Managing Agents for the Lenders. (Filed as
         exhibit 10.8 to Form 10-K for the year ended December 31, 1997,
         and incorporated by reference herein.)
10.9     Third Amendment dated February 17, 1998 to the Amended and Restated
         Credit Agreement dated June 12, 1996, among Oregon Steel Mills,
         Inc., as Borrower, certain Commercial Lending Institutions as
         the Lenders, Wells Fargo Bank National Association, formerly
         known as First Interstate Bank of Oregon, N.A., as the
         Administrative Agent for the Lenders; the Bank of Nova Scotia,
         as the syndication Agent for the Lenders, and Wells Fargo Bank
         National Association and the Bank of Nova Scotia, as the
         Managing Agents for the Lenders. (Filed as exhibit 10.9 to Form
         10-K for the year ended December 31, 1997, and incorporated by
         reference herein.)
10.10    Fourth Amendment dated October 30, 1998 to the Amended and
         Restated Credit Agreement dated June 12, 1996, among Oregon
         Steel Mills, Inc., as Borrower, certain Commercial Lending
         Institutions as the Lenders, Wells Fargo Bank National
         Association, formerly known as First Interstate Bank of Oregon,
         N.A., as the Administrative Agent for the Lenders; the Bank of
         Nova Scotia, as the syndication Agent for the Lenders, and
         Wells Fargo Bank National Association and the Bank of Nova
         Scotia, as the Managing Agents for the Lenders.
10.11**  Directors' Retirement Plan.  (Filed as exhibit 10.10 to Form 10-K for
         the year ended December 31, 1997, and incorporated by reference
         herein.)
21.0     Subsidiaries of registrant.  (Filed as exhibit 21.0 to Form 10-K for
         the year ended December 31, 1997, and incorporated by reference
         herein.)
23.0     Consent of Independent Accountants - PricewaterhouseCoopers LLP.
27.0     Financial Data Schedule.
99.0     Partnership  Agreement dated as of January 2, 1992, by and between
         Camrose Pipe Corporation and Stelcam Holding, Inc. (Filed as exhibit
         28.0 to Form 8-K dated June 30, 1992, and incorporated by reference
         herein.)

----------------------

 *   The Company will furnish to stockholders a copy of the exhibit upon payment
     of $.25 per page to cover the expense of furnishing such copies. Requests
     should be directed to Vicki A. Tagliafico, Director of Communications and
     Planning, Oregon Steel Mills, Inc., PO Box 5368, Portland, Oregon 97228.

**   Management contract or compensatory plan.

                                      -44-


<PAGE>


                        SIGNATURES REQUIRED FOR FORM 10-K

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Oregon Steel Mills, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                                OREGON STEEL MILLS, INC.
                                                (Registrant)

                                                By    /s/ Thomas B. Boklund
                                                -------------------------------
                                                       Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of Oregon
Steel Mills, Inc. and in the capacities and on the dates indicated.

         SIGNATURE                        TITLE                         DATE
         ---------                        -----                         ----

  /s/ Thomas B. Boklund           Chairman of the Board            March 1, 1999
----------------------------
    (Thomas B. Boklund)           Chief Executive Officer
                                  (Principal Executive Officer)

/s/ Joe E. Corvin                 President, Chief Operating       March 1, 1999
----------------------------
    (Joe E. Corvin)               Officer and Director

/s/  L. Ray Adams                 Vice President of Finance,       March 1, 1999
---------------------------
    (L. Ray Adams)                and Chief Financial Officer
                                  (Principal Financial Officer)

/s/  Christopher D. Cassard       Corporate Controller             March 1, 1999
-----------------------------
    (Christopher D. Cassard)      (Principal Accounting Officer)


 /s/  V. Neil Fulton              Director                         March 1, 1999
-----------------------------
    (V. Neil Fulton)


 /s/  Robert W. Keener            Director                         March 1, 1999
-----------------------------
    (Robert W. Keener)


 /s/  Richard G. Landis           Director                         March 1, 1999
-----------------------------
    (Richard G. Landis)


 /s/  James A. Maggetti           Director                         March 1, 1999
-----------------------------
    (James A. Maggetti)


 /s/  John A. Sproul              Director                         March 1, 1999
-----------------------------
    (John A. Sproul)


/s/  George J. Stathakis          Director                         March 1, 1999
-----------------------------
    (George J. Stathakis)


 /s/  William Swindells           Director                         March 1, 1999
-----------------------------
    (William Swindells)


                                      -45-