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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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(Mark One)

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



For the fiscal year ended December 31, 2004



or



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



For the transition period from  to



Commission File Number: 333-79587



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CALIFORNIA STEEL INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 33-0051150                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|14000 San Bernardino Avenue Fontana, California                |  | 92335                               
|(Address of principal executive offices)                       |  | (Zip code)                          



(909) 350-6200

(Registrants telephone number, including area code)



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Securities Registered Pursuant to Section 12(b) of the Act:



|                     |  |                                           
|-------------------- |  | ------------------------------------------
|Title of Each Class: |  | Name of Each Exchange on Which Registered:
|None                 |  | None                                      



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



None

(Title of Class)



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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 ̈



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 is an accelerated filer (as defined in Rule 12b-2 of the
Act).    Yes ̈No  x



As of March 28, 2005, there were 1,000 shares of the registrants common
stock, no par value, outstanding.



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##### Table of Contents

CALIFORNIA STEEL INDUSTRIES, INC.



INDEX TO ANNUAL REPORT ON FORM 10-K



For The
Fiscal Year Ended December 31, 2004



|              |  |                                                                                       |  |     
|------------- |  | ------------------------------------------------------------------------------------- |  | ----
|              |  |                                                                                       |  | Page
|PART I        |  |                                                                                       |  |     
|Item 1.       |  | Business                                                                              |  | 1   
|Item 2.       |  | Properties                                                                            |  | 8   
|Item 3.       |  | Legal Proceedings                                                                     |  | 8   
|Item 4.       |  | Submission of Matters to a Vote of Security Holders                                   |  | 8   
|              |  |                                                                                      
|PART II       |  |                                                                                       |  |     
|              |  |                                                                                      
|Item 5.       |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  | 9   
|Item 6.       |  | Selected Consolidated Financial Data                                                  |  | 9   
|Item 7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 10  
|Item 7A.      |  | Quantitative and Qualitative Disclosures about Market Risk                            |  | 15  
|Item 8.       |  | Consolidated Financial Statements and Supplementary Data                              |  | 17  
|Item 9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  | 17  
|Item 9A       |  | Controls and Procedures                                                               |  | 17  
|              |  |                                                                                      
|PART III      |  |                                                                                       |  |     
|              |  |                                                                                      
|Item 10.      |  | Directors and Executive Officers of the Registrant                                    |  | 18  
|Item 11.      |  | Executive Compensation                                                                |  | 20  
|Item 12.      |  | Security Ownership of Certain Beneficial Owners and Management                        |  | 24  
|Item 13.      |  | Certain Relationships and Related Transactions                                        |  | 24  
|Item 14.      |  | Principal Accountant Fees and Services                                                |  | 25  
|              |  |                                                                                      
|PART IV       |  |                                                                                       |  |     
|              |  |                                                                                      
|Item 15.      |  | Exhibits and Financial Statement Schedule                                             |  | 26  
|Signatures    |  |                                                                                      
|Exhibit Index |  |                                                                                      
|Exhibits      |  |                                                                                      



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##### Table of Contents

PART I



Item 1.Business



Statements of our belief in this section are based on our own internal studies or research, estimates of members of our senior sales management team, our knowledge of the industry or other information we have internally compiled.



Introduction



We are the leading producer of flat rolled steel in the western United
States based on tonnage billed. We produce the widest range of flat rolled steel products in the region, including hot rolled, cold rolled and galvanized coil and sheet. We also produce electric resistance welded (referred to herein as ERW) pipe.
Unlike integrated steel mills and mini-mills, we do not manufacture steel. Rather, we process steel slab manufactured by third parties. Our principal market consists of the 11 states located west of the Rocky Mountains. We have two main competitors
located in the western United States. Steel products are also supplied to the western United States via imports from foreign companies and from domestic suppliers located outside the western United States. We believe our slab-based business model,
breadth of products, non-union work environment, southern California location and long-standing customer relationships provide us with significant advantages over our competition.



Industry Overview



The steel industry is highly cyclical in nature. It is influenced by a combination of factors including periods of economic growth or recession, strength
or weakness of the U.S. dollar, worldwide production capacity, levels of steel imports and tariffs. Other factors, including the failure to adapt to technological change, plant inefficiencies, high labor costs and fluctuating energy costs have also
affected the industry. Steel, regardless of product type, responds to forces of supply and demand. Prices have been volatile and have fluctuated in reaction to general and industry-specific economic conditions.



There are generally two types of steel producers: integrated
mills and mini-mills. Steel manufacturing by an integrated producer includes iron making from raw materials, such as iron ore and coal in a blast furnace, followed by steelmaking, slab making, reheating and further rolling into
coil or other shapes. A mini-mill is a steel producer that uses an electric arc furnace rather than a blast furnace to melt steel from ferrous scrap metal.



Unlike integrated steel mills and mini-mills, we do not manufacture steel. Rather, we process steel slab manufactured by third parties. As a result, we do
not have the fixed costs associated with the manufacturing of steel. Historically, raw material costs comprise approximately 70% of our cost of goods sold. In 2004, raw materials costs increased to approximately 80% due to higher slab costs. We
believe we are one of the largest importers and one of the largest purchasers of steel slab in the world. Our purchasing power provides us with the ability to negotiate favorable terms and conditions for steel slab from low cost and high quality
producers throughout the world. Generally, prices of our flat rolled steel products have experienced a correlation to the prices of steel slab. Although we remain subject to the cyclicality inherent in the steel industry, we believe this
correlation, combined with our slab-based business model, has historically protected our operating margins when compared to other flat rolled steel producers.



Recent Industry Conditions



As noted in the Industry Overview above, the steel industry is highly cyclical in nature. Conditions in 2004 were such that worldwide demand
for steel products highly outpaced available supply.



The
average selling price of steel products (including semi-finished steel slabs) increased substantially in 2004, driven particularly by higher costs of scrap steel and other steel inputs. The demand for these products was extraordinarily high from
steel mills in China as that country has increased steelmaking capacity and its own domestic demand for product. This in turn also led to increases in freight rates, as global shipping capacity was insufficient to keep pace.



Demand for product in China and in other Asian countries, together with these
higher shipping costs and a weaker U. S. dollar limited imports of steel products into the Western United States throughout most of 2004. However, domestic policy within China resulted in a reduction of demand for steel products towards the fourth
quarter of the year, while higher US domestic prices led to more competitive market conditions for imports of steel products into the western United States.



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##### Table of Contents

Although moderate in volume, increased levels of imported steel at discounted prices into the western
United States has impacted current market conditions for our steel products, increasing inventory levels at some of our customers, especially at service centers and distributors. We think that is also cyclical and we do not believe it to be
long-term in nature.



As we have historically focused on our
core customers in the western United States, we do not actively pursue foreign sales, including sales to China.



Products and Customers



Our principal product lines are hot rolled coil and sheet, cold rolled coil and sheet, galvanized coil and sheet and electric resistance welded (ERW)
pipe. The following table sets forth our billed tons by product category as a percentage of total shipments for the periods indicated:



|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  
|------------------------------------------------- |  | ----------------------- | - |  | ----- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                                                  |  | Year Ended December 31, |  
|                                                  |  | 2004                    |   |  | 2003  |   |  | 2002  |   |  | 2001  |   |  | 2000  |  
|Hot rolled coil and sheet                         |  | 44.8                    | % |  | 43.1  | % |  | 47.0  | % |  | 45.3  | % |  | 40.7  | %
|Cold rolled coil and sheet                        |  | 10.7                    | % |  | 11.2  | % |  | 11.6  | % |  | 13.9  | % |  | 16.1  | %
|Galvanized coil and sheet                         |  | 35.1                    | % |  | 38.0  | % |  | 35.7  | % |  | 34.2  | % |  | 35.6  | %
|ERW pipe                                          |  | 9.4                     | % |  | 7.7   | % |  | 5.7   | % |  | 6.6   | % |  | 7.6   | %
|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  
|Total                                             |  | 100                     | % |  | 100   | % |  | 100   | % |  | 100   | % |  | 100   | %
|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  
|Total tons billed, excluding scrap (in thousands) |  | 2,106                   |   |  | 1,885 |   |  | 2,014 |   |  | 1,828 |   |  | 1,753 |  
|                                                  |  |                         |   |  |       |   |  |       |   |  |       |   |  |       |  



The western U.S. steel
market is comprised of many consumers typically requiring small order sizes with a wide variety of metallurgical qualities and specifications. In contrast, the majority of other U.S. steel markets primarily depend on heavy-tonnage steel consumers
like the automotive and durable goods manufacturing industries. We believe that the western United States smaller and more diverse customer base helps balance pricing power between the consumer and the supplier. Instead of competing solely on
price, we believe we benefit from having customers that place greater value on our competitive strengths, including integrated service, timeliness of delivery and ability to meet unique customer needs. We further believe that we benefit from our
strategic location in Fontana, California.



We have
approximately 250 active customers, with no single customer accounting for more than 6% of our 2004 net sales. Our customers include service and processing centers, construction and building material companies, roofing and decking manufacturers,
tubing manufacturers, oil and gas producers and distributors, aftermarket automotive manufacturers, as well as various customers in other industries.



We do not actively pursue sales in foreign markets and we make foreign sales only when they are economically advantageous to us. In 2004, we sold
approximately 12,522 tons of steel products to foreign customers, primarily in Canada, which represented less than 1% of our total 2004 tons billed.



Hot rolled coil and sheet is our largest product category as measured by tons billed per year. Our customers use hot rolled steel for a variety of
manufacturing applications, including the production of spiral weld pipe, automobile wheels and rims, strapping, tubing and a variety of construction related products. In 2004, we directed 43.8% of our hot rolled production to outside sales and we
further processed approximately 56.2% internally for our own higher-margin, value added product needs.



Cold rolled coil and sheet are used in exposed steel applications where high surface quality is important. Typically, cold rolled material is coated or
painted. Applications for our cold rolled products include electronic cabinetry, lighting fixtures, metal office furniture, water heaters, container manufacturers, tubing and a variety of construction related products. In 2004, we directed
approximately 24.1% of our cold rolled production to outside sales and we further processed approximately 75.9% internally for our own higher-margin, value added product needs.



Galvanized coil and sheet is produced by adding a coating of zinc to cold rolled steel, and in some instances, to hot rolled
steel, for additional corrosion resistance. We believe we offer the broadest range of thicknesses, widths and coatings of galvanized products in the western U.S. market. Applications for our galvanized coil product include a variety of construction
related products such as roofing, decking, studs, tubing and tanks.



We supply ERW pipe with diameters ranging from 4.5 to 16.0. The principal end-users of our ERW pipe production are oil and gas transmission companies. We also sell standard pipe to industrial accounts for load bearing and
low-pressure applications.



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Operations



We initially began operations in 1984 utilizing certain purchased assets from the former Kaiser Steel Corporation. Based on a business model that depended
on the purchase of semi-finished steel slab from third party vendors, we were the first company in the United States to operate steel rolling mills without a dedicated source of slab feedstock. Significant business success and market acceptance of
our slab based business model encouraged us to consider a modernization program designed to increase production and improve our product mix.



Modernization Program



In 2001, we completed a $265 million modernization program that allowed us to improve our product quality, double production volumes, and increase our
percentage of high value added products to our product mix. Since the completion of our modernization program, we have continued to make selective investments designed to keep our facilities competitive or reduce operating costs. Total capital
spending in 2004 was $23.0 million on various upgrades to our production facilities.



Production efficiencies continue to be gained through improved operating and maintenance practices, targeted capital investments and enhanced production planning and quality control procedures. We believe the success
of our modernization program contributes to our being a low cost producer of flat rolled steel products.



Hot Strip Rolling and Finishing Mills



We produce hot rolled coil and sheet from slab in our hot strip mill. A walking beam furnace reheats slab, directs it to a multi-stand rolling mill to
reduce thickness and rolls it into coil. Equipped with an automatic gauge control system and technologically advanced computer controls, the hot strip mill currently possesses a throughput capacity of approximately 2.2 million tons annually and can
produce hot rolled coil in gauges from 0.053 to 0.750.



The hot strip mill facility is primarily composed of the following:



| |  |  | A walking beam furnace with a capacity of approximately 6,900 tons of slab per day; and
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | An 86 mill which consists of five roughing stands, a scale breaker, six finishing stands and two down coilers.
| | - |  | ---------------------------------------------------------------------------------------------------------------



In addition, the hot strip finishing lines are composed of the following:



| |  |  | An 80 coil slitter line that can trim product up to 0.375 in thickness and can be easily adjusted to meet a variety of customer-specified widths; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 3 skin pass lines used for surface and other coil improvements.
| | - |  | ---------------------------------------------------------------



Continuous Pickle Line



We can further process hot rolled coil on the 62-inch continuous pickle line for direct sales to our customers or for our own cold rolling and galvanizing
production. The continuous pickle line is a conventional horizontal design with a coil entry section, welder, hot water preheat tanks, acid tanks, water rinse, dryer, looper, side trimmer, coiler, oiling equipment and scale. The line can currently
yield up to approximately 1.3 million tons per year.



Five
Stand Cold Reduction Mill



Pickled and oiled material may
be further processed through the Five Stand Cold Reduction Mill, which reduces the pickled steel strip from a gauge range of 0.0075 to 0.225 to a range of 0.010 to 0.172 in thickness, with a maximum width of 60. In the cold
reduction process, pickled and oiled coils pass through five stands, arranged in tandem, with a predetermined amount of reduction taken on each stand until the final thickness is achieved upon exiting the fifth stand. Reductions are taken in one
pass. The capacity of the Five Stand Cold Reduction Mill is 1.1 million tons per year. Direct sales to our customers account for less than 2% of material processed on the Five Stand Cold Reduction Mill; most material is further processed through the
cold rolling or galvanized mills.



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Cold Rolled Mill



Cold rolled sheet is hot rolled steel that has been further processed through the continuous pickle line and Five Stand Cold
Reduction Mill and is then processed through an annealing furnace and temper mill, improving uniformity, ductility and formability. Cold rolling can also impart various surface finishes and textures. Cold rolled steel is used in applications that
demand higher quality or finish.



The cold rolled facility,
with a current annual finished capacity of approximately 360,000 tons, includes the following:



| |  |  | An electrolytic cleaning line;
| | - |  | ------------------------------



| |  |  | Twenty hydrogen annealing bases; and
| | - |  | ------------------------------------



| |  |  | A 60 temper mill.
| | - |  | ------------------



After cold reduction at the Five-Stand Cold Reduction Mill, the coil may be cleaned in a 200 feet to 1,000 feet per minute electrolytic cleaning line and
then annealed. Hydrogen annealing is a process that heats steel coils to annealing temperatures in a pure hydrogen atmosphere and then slowly allows the steel coils to cool. This process restores ductility to our steel products that is lost as a
result of cold reduction rolling. The strip is then run through final production in a 60 temper mill, where the steel is tempered to specified finish, shape and gauge.



Galvanizing Mills



Galvanized coil and sheet represent our highest value added products, requiring the greatest degree of processing and quality controls. We produce
galvanized sheet by taking cold rolled coils, and in some instances, hot rolled coils, heating it in an annealing furnace and run the sheet steel, while still hot, through a pot of molten zinc. As the steel strip leaves the pot, coating controls
ensure product specifications match customer requirements. The steels corrosion resistance makes it ideal for applications like air conditioning units, air ducts, metal ties, studs, siding, decking and roofing.



We currently operate two continuous galvanizing lines and believe that our
galvanizing facilities can produce the full range of coated steel. The first continuous galvanizing line is horizontally configured and produces gauges from 0.012 to 0.174, with a capacity of 460,000 tons per year. The second continuous
galvanizing line is vertically configured and produces gauges from 0.010 to 0.060, with a capacity of 290,000 tons per year.



Electric Resistance Weld (ERW) Pipe Mill



We produce ERW pipe by roll forming hot rolled skelp into a pipe shape, welding the edges together with a high frequency welder, annealing the weld and
cutting the finished product to length on a continuous line. The ERW pipe may then undergo additional testing and/or finishing operations like hydrotesting and end beveling.



The pipe mill produces pipe with outside diameters ranging from 4.5 to 16 and wall thickness ranging from
0.156 to 0.375, with lengths available up to 63 feet without mid-weld. Process coating is available through local coating applicators, one of whom leases space on our property. The ERW pipe mill has a current capacity of approximately
210,000 tons per year.



Semi-Finished Steel Slab and Suppliers



Steel slab is a semi-finished steel raw material in
rectangular form and is generally the first form taken by molten steel after it solidifies. The principal users of steel slab are steel producers or processors that roll slab into finished products like plate or coil.



Historically, our raw material consumption costs have comprised approximately
70% of our cost of goods sold. In 2004, our raw material consumption costs increased to approximately 80% as a result of higher slab costs. We are one of the largest importers and one of the largest purchasers of slab in the world. We purchase slab
from a diverse group of foreign suppliers to obtain high quality steel at competitive cost through reliable sources. Our foreign vendors are located in Brazil, Mexico, Australia, Japan, Russia, Argentina, Venezuela, the United Kingdom and China.



We typically make our slab purchases on a quarterly basis. As
of December 31, 2004 we were committed, in the form of open purchase orders, to purchase approximately $85.1 million in steel slabs. We negotiate slab procurement for longer periods when our purchasing power combined with market conditions provide
us with the opportunity to negotiate on terms which we believe are favorable to us.



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Although we are not reliant on any one single vendor, in 2004, we purchased approximately 45% of our slab
from Ispat Mexicana de C. V. (Imexsa) of Mexico, now known as Mittal Steel Lazaro Cardenas and approximately 24% of our slab from Companhia Siderurgica de Tubarão of Brazil. Ispat Mexicana is the only steel facility in the world dedicated
solely to the production of steel slab.



We own 4% of the
common stock of Companhia Siderurgica de Tubarão (CST), which represents 1.5% of the total equity interest in Companhia Siderurgica de Tubarão. Companhia Siderurgica de Tubarão is an affiliate of both Companhia Vale
do Rio Doce and JFE Steel Corporation, our stockholders parent companies. All slab purchases with our parent or affiliated companies are negotiated on an arms length basis and in accordance with market conditions. In October
2004, the Company agreed in principal to sell its interest in CST to Arcelor S.A. (Arcelor). The transaction was structured by entering into an option and waiver agreement whereby Arcelor granted the Company an option to sell and the
Company granted Arcelor an option to purchase the Companys interest in CST. These options may be exercised during the thirty day period following the termination of the CST shareholders agreement on May 25, 2005. It is the intention of the
Company to exercise its option. Notwithstanding the sale of our interest in CST, we will continue to purchase slab from CST when we believe terms are favorable.



We negotiate with a variety of shipping companies to deliver our slab directly to the Port of Los Angeles. The vessels are loaded following a specific
stowage plan that we developed. The plan is designed to provide high productivity rates at both the loading and unloading sites. Our agents are on site for the loading of each shipment. After unloading, the slab is transported to our facility by
rail using the services of Burlington Northern Santa Fe Railroad. Our current contract with Burlington Northern Santa Fe Railroad is effective through December 2013. This agreement provides us with transportation services at fixed rates and ensures
us a dedicated level of rail availability through the term of the agreement. Additionally, Burlington Northern Santa Fe Railroad utilizes rail cars designed specifically to transport steel slab. We believe this improves the efficiency and safety of
steel slab transportation through our community.



We believe
that our integrated slab procurement system allows us to manage our slab inventory levels, improve tonnage levels as well as the slab quality necessary to meet our customers order specifications. As of December 2004, we had what we believed to
be firm backlog orders to sell approximately 141,000 tons. Based on our average sales price at that time, the backlog value was approximately $83,000,000. As of December 2003, we had what we believed to be firm backlog orders of approximately
335,000 tons. Based on our average sales price at that time, the backlog value was approximately $135,000,000.



Marketing and Customer Service



We believe that we provide a high level of customer service and product support in the western U.S. market. Our emphasis on customer service and product quality has enabled us to establish long-standing relationships with our customers. Our
relationships with 90% of our top 30 customers extend beyond 10 years. We attribute this customer loyalty, in large part, to the successful execution of our marketing strategies to provide a broad range of products and our ability to provide
consistent service, reliable product availability and ancillary value added services.



We are the only producer of flat rolled steel products located in the western United States who can supply hot rolled, cold rolled and galvanized coil and sheet. We also produce ERW pipe in diameters ranging from
4.5 to 16.0. We believe that we are well equipped to provide one-stop shopping for our customers and we believe that this maximizes sales opportunities and increases the convenience and value of the service we provide to
customers. We will continue to invest in the quality of our products across all product lines, allowing us to market ourselves as a full-service provider of flat rolled steel in the region.



Our location in southern California not only gives us a significant freight
cost advantage over our competitors, but also allows us to provide a more service-oriented approach to our customers. Our operating structure allows us to respond quickly to changes in the timing of customer requirements, adjust schedules, source
stock inventory and meet specialized shipping needs. Our ability to deliver made-to-order products in a timely manner allows our customers to maximize their inventory turns and meet production targets. By maintaining a regional focus, we believe
that we can most effectively service our customers and achieve our goal of increasing market share in higher margin value added products.



As part of our strategy to provide superior customer service, upon request of our current and prospective customers, we offer ancillary services such as
engineering and metallurgical services to assist such customers with specific product needs. Substantial portions of our customers are small to medium-sized businesses. As a result, many do not have the resources to employ a sophisticated
metallurgical engineering staff. Our metallurgical engineers work with our customers on a daily basis, often on site, providing advisory services focused on reducing procurement costs and improving overall production efficiency. In addition to
ancillary services, we also provide service center like operations including slitting, shearing, coating and single-billing for third party processing. We believe that these value added services help to further differentiate us from our
competitors. These services are provided at no charge and no revenues are generated for such services.



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Competition



The steel industry is cyclical in nature and highly competitive. We compete with domestic and foreign steel producers on the basis of customer service,
product quality and price. The domestic steel industry has been adversely affected in past years by high levels of steel imports, worldwide production overcapacity, increased domestic and international competition, rising energy costs and other
factors. More recently, the domestic steel industry has been affected by increased global demand for steel products (largely driven by increased demand by China) and increased freight rates. We believe that the competitive landscape within the steel
industry will continue to evolve, especially as new technologies and production methods are introduced. We believe that because of our slab-based business model, breadth of products, non-union work environment, southern California location and
long-standing customer relationships, we are well positioned to meet competitive threats. However, some of our competitors are larger and may have substantially greater capital resources, more modern technology and lower production costs than us, as
well as excess production capacity in some products and could exert downward pressure on prices for some of our products in the future.



We are also subject to general economic trends and conditions, such as the presence or absence of sustained economic growth and currency exchange rates.
We are particularly sensitive to trends in the construction, oil and gas transmission industries because these industries are significant markets for our steel products. If there were a downturn in one or more of these industries, our sales volume,
prices, profitability and liquidity could be adversely affected.



U. S. Competition



High transportation costs
have historically deterred mid-western and eastern steel producers from accessing the western United States market, a condition that continued during most of 2004. Weaker market conditions during fourth quarter led producers to attempt to push into
this market, although with little impact to the western market during this time frame. However, continued competition from these mills at any significant level could negatively impact sales tonnage and average sales prices.



In hot rolled products, our principal domestic competition comes from a
number of producers located in the Midwestern United States, although this is cyclical in nature, based in economic conditions in the mid-western markets. Some hot rolled products are produced by Oregon Steel Mills, located in Portland, Oregon,
although Oregon Steel Mills typically ships to customers located in the Northwest United States. USS-POSCO Industries (UPI), located in Pittsburg, California is our principal competitor in galvanized and cold rolled products. We also compete in the
galvanized market with Steelscape, Inc., which operates facilities located in Kalama, Washington and Rancho Cucamonga, California.



We also compete with steel service and processing centers, although such centers are customers as well as competitors. Service centers serve as wholesale
distributors for a broad line of sheet products, providing value-added services including slitting, shearing and painting. We face increasing competition from producers of materials such as aluminum, composites, plastics and concrete that competes
with steel in many markets.



Foreign Competition



Historically, foreign steel producers have competed in
the western United States in all of our product categories. Although imported steel has relatively long lead times to reach the western United States markets, economic and currency dislocations in foreign markets may encourage importers to target
the United States with excess capacity at aggressive prices. Some foreign producers benefit from low labor costs, weak local currencies and government subsidies. With strong worldwide demand for steel products during most of 2004, particularly from
China, higher freight costs and a weaker U.S. dollar, little steel was available from foreign suppliers in our market. However, domestic policy within China resulted in a reduction of demand for steel products towards the fourth quarter of the year,
while higher US domestic prices led to more competitive market conditions for imports of steel products into the western United States. Although moderate in volume, increased levels of imported steel at discounted prices into the western United
States has impacted current market conditions for our steel products, increasing inventory levels at some of our customers, especially at service centers and distributors. We think that is also cyclical and we do not believe it to be long-term in
nature.



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##### Table of Contents

Employee Relations



At December 31, 2004, we had 944 full-time employees. We have the largest non-union workforce located at any one steel facility in the United States. We
provide our employees with supplemental work training and education programs. Our officers also routinely discuss our business plan with them. We believe that we have a good relationship with our employees.



Environmental Matters



Compliance with environmental laws and regulations is a significant factor in our business. We are subject to various
federal, state and local environmental laws and regulations concerning, among other things, air emissions, waste water discharges and hazardous materials handling and waste disposal. We own property and conduct or have conducted operations at
properties that are contaminated with hazardous materials and will require investigation and remediation according to federal, state or local environmental laws and regulations. Expenditures on environmental matters, including expenditures on
pollution control equipment and remediation activities, totaled approximately $1.4 million in 2002, $1.4 million in 2003 and $1.4 million in 2004. We plan to spend approximately $1.5 million in 2005, with the largest component representing
investigation and remediation activities at our Fontana site.



In 1996, we entered into an Expedited Remedial Action Voluntary Enforceable Agreement with the California Environmental Protection Agency, Department of Toxic Substances Control. This agreement superseded a Voluntary and Enforceable
Agreement and Imminent and/or Substantial Endangerment Order issued by the Department in 1992 and amended in 1994. According to the agreement, we engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan
and remediation cost projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, we developed an estimate for future costs of the remediation plan. The total aggregate cost of remediation was estimated
to be approximately $1.8 million, which was accrued in 2002 and is included in other accrued expenses in 2004, 2003 and 2002 in our consolidated financial statements. The California Department of Toxic Substances Control has not yet completed its
review and approval of our plan; however, preliminary discussions with the DTSC have not indicated the need for any significant changes to the remediation plan or to the Companys estimate of related costs. The estimate of costs could change as
a result of changes to the remediation plan required by the DTSC or unforeseen circumstances at the site.



Forward-Looking Statements



Certain information included in this Form 10-K and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral or written statements made by us or on our behalf), may
contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters. These statements may be contained in our filings with the Securities and Exchange Commission, in our press
releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers. Words or phrases such as believe, plan, will likely result, expect,
intend, will continue, is anticipated, estimate, project, may, could, would, should and similar expressions are intended to identify
forward-looking statements. These statements, and any other statements that are not historical facts, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as codified in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended from time to time (the Act).



In connection with the safe harbor provisions of the Act, we are filing the following summary to identify important factors, risks and
uncertainties that could cause our actual results to differ materially from those projected in forward-looking statements made by us, or on our behalf. These cautionary statements are to be used as a reference in connection with any forward-looking
statements. The factors, risks and uncertainties identified in these cautionary statements are in addition to those contained in any other cautionary statements, written or oral, which may be made or otherwise addressed in connection with a
forward-looking statement or contained in any of our subsequent filings with the Securities and Exchange Commission. Because of these factors, risks and uncertainties, we caution against placing undue reliance on forward-looking statements. Although
we believe that the assumptions underlying forward-looking statements are reasonable, any of the assumptions could be incorrect, and there can be no assurance that forward-looking statements will prove to be accurate. Forward-looking statements
speak only as of the date on which they are made. We do not undertake any obligation to modify or revise any forward-looking statement to take into account or otherwise reflect subsequent events, or circumstances arising after the date that the
forward-looking statement was made.



The following risk factors
may affect our operating results and the environment within which we conduct our business. If our projections and estimates regarding these factors differ materially from what actually occurs, our actual results could vary significantly from any
results expressed or implied by forward-looking statements. In addition to the risks and uncertainties referenced in this Annual Report on Form 10-K, these risk factors include, but are not limited to:



| |  |  | Fluctuations in raw materials and freight prices as a result of changes in global steel consumption;
| | - |  | ----------------------------------------------------------------------------------------------------



7



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##### Table of Contents

| |  |  | Our substantial indebtedness, interest expense and principal repayment obligations under our bank facility, when drawn upon, and 6.125% senior notes, which could limit our ability
to use operating cash flow in our business other than for debt-servicing obligations, obtain additional financing and react to changing market and general economic conditions, and which increase our vulnerability to interest rate increases;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The possibility of deadlocks among our board of directors that could result in delays in making important business decisions which could result in a competitive disadvantage due to
the size of our board currently consisting of four members as elected by our two stockholders, each of whom holds 50% of our stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fluctuations in commodity prices for our electricity and natural gas requirements, as well as the viability of the electrical power distribution system within the State of
California;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Possible adverse effects resulting from new U.S. trade measures or increases in tariffs on imported steel slab;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Competitive factors and pricing pressures; our ability to control costs and maintain quality;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | Future expenditures for capital projects;
| | - |  | -----------------------------------------



| |  |  | Fluctuations in the cost of management and hourly labor or other resources necessary to successfully operate the Companys manufacturing plant;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Companys ability to raise prices sufficiently to offset cost increases, including increased costs for minimum wages, employee benefits and insurance arrangements;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Legal claims and litigation against the Company;
| | - |  | ------------------------------------------------



| |  |  | Changes in, or any failure to comply with, governmental regulations;
| | - |  | --------------------------------------------------------------------



| |  |  | Industry-wide market factors and general economic and business conditions; changes in general economic, demographic, geopolitical or public safety conditions which affect consumer
behavior and spending for the products which use our goods, including the ongoing ramifications of the September 11, 2001 terrorist attacks and the governmental response thereto, including the continuing armed conflict in Iraq or in other countries;
and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in accounting standards or interpretations of existing standards adopted by the Financial Accounting Standards Board, the Securities and Exchange Commission, and the
American Institute of Certified Public Accountants that could impact our reported financial results.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Item 2.Properties



We are located on approximately 450 acres in Fontana, California. Our facilities are situated on approximately 115 acres of this space. The property includes a 22 mile railroad system serviced by Burlington Northern Santa Fe and Union
Pacific rail lines.



Item 3.Legal Proceedings



The Company is subject to lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. We believe that the final disposition of such lawsuits, proceedings and claims will not have
a material adverse effect on our financial position, results of operations or liquidity. It is possible, however, that our future results of operations for a particular quarter or fiscal year could be impacted by changes in circumstances relating to
lawsuits, proceedings or claims.



Item 4.Submission of Matters to a Vote of Security Holders



None.



8



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##### Table of Contents

PART II



Item 5.Market for Registrants Common Equity and Related Stockholder Matters



Not applicable.



Item 6.Selected Financial Data (1)



The selected consolidated financial information presented below as of and for the fiscal years ended December 31, 2004, 2003, 2002, 2001, and 2000, has been derived from our audited consolidated financial statements.
The consolidated balance sheets as of December 31, 2004 and 2003 and the consolidated statements of operations for the years ended December 31, 2004, 2003 and 2002 are contained elsewhere in this Form 10-K. The following selected consolidated
financial information is qualified by reference to, and should be read in conjunction with the historical consolidated financial statements, including notes accompanying them and Managements Discussion and Analysis of Financial Condition
and Results of Operations found elsewhere in this Form 10-K.



|                                                            |  |                         |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                            |  | Year Ended December 31, |          
|                                                            |  | 2004                    |           |   | 2003 |   |         | 2002 |  |   | 2001    |   |  | 2000 |        
|                                                            |  | (dollars in thousands)  |          
|Statement of Operations Data:                               |  |                         |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net sales                                                   |  | $                       | 1,256,992 |   |      | $ | 770,787 |      |  | $ | 769,719 |   |  | $    | 652,938 |   |  | $ | 744,180 |  
|Cost of sales                                               |  |                         | 1,020,316 |   |      |   | 727,166 |      |  |   | 672,449 |   |  |      | 625,261 |   |  |   | 639,918 |  
|Gross profit                                                |  |                         | 236,676   |   |      |   | 43,621  |      |  |   | 97,270  |   |  |      | 27,677  |   |  |   | 104,262 |  
|Selling, general and administrative expenses                |  |                         | 29,179    |   |      |   | 24,997  |      |  |   | 26,013  |   |  |      | 23,350  |   |  |   | 32,185  |  
|(Gain) loss on disposition of property, plant and equipment |  |                         | 546       |   |      |   | 114     |      |  |   | (492    | ) |  |      | 802     |   |  |   | (28     | )
|Income from operations                                      |  |                         | 206,951   |   |      |   | 18,510  |      |  |   | 71,749  |   |  |      | 3,525   |   |  |   | 72,105  |  
|Interest expense, net                                       |  |                         | (10,660   | ) |      |   | (13,730 | )    |  |   | (14,127 | ) |  |      | (16,316 | ) |  |   | (18,756 | )
|Income (loss) before income tax expense (benefit)           |  |                         | 184,743   |   |      |   | 6,815   |      |  |   | 58,139  |   |  |      | (7,317  | ) |  |   | 56,138  |  
|Net income (loss)                                           |  | $                       | 109,335   |   |      | $ | 4,544   |      |  | $ | 35,001  |   |  | $    | (3,711  | ) |  | $ | 34,845  |  
|                                                            |  |                         |           |   |     
|Other Data:                                                 |  |                         |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Operating margin                                            |  |                         | 16.5      | % |      |   | 2.4     | %    |  |   | 9.3     | % |  |      | 0.5     | % |  |   | 9.7     | %
|Cash flows (used in) provided by operating Activities       |  | $                       | (355      | ) |      | $ | 78,254  |      |  | $ | 47,728  |   |  | $    | 83,720  |   |  | $ | 33,715  |  
|Cash flows used in investing activities                     |  |                         | (19,685   | ) |      |   | (14,620 | )    |  |   | (19,544 | ) |  |      | (14,510 | ) |  |   | (33,057 | )
|Cash flows used in financing activities                     |  |                         | (21,806   | ) |      |   | (23,878 | )    |  |   | (34,045 | ) |  |      | (63,000 | ) |  |   | (6,015  | )
|Capital expenditures                                        |  |                         | 22,953    |   |      |   | 16,484  |      |  |   | 20,812  |   |  |      | 14,753  |   |  |   | 33,995  |  
|Common share cash dividend declared and paid (2)            |  |                         | 3,516     |   |      |   | 1,970   |      |  |   | 3,761   |   |  |      |        |   |  |   | 2,629   |  
|                                                            |  |                         |           |   |     
|Total tons billed, excluding scrap (in thousands)           |  |                         | 2,106     |   |      |   | 1,885   |      |  |   | 2,014   |   |  |      | 1,828   |   |  |   | 1,753   |  
|Number of employees at end of period                        |  |                         | 944       |   |      |   | 921     |      |  |   | 929     |   |  |      | 952     |   |  |   | 973     |  
|Man hours per ton produced                                  |  |                         | 1.00      |   |      |   | 1.04    |      |  |   | 1.02    |   |  |      | 1.14    |   |  |   | 1.18    |  
|                                                            |  |                         |           |   |     
|EBITDA(3)                                                   |  |                         |           |   |      |   |         |      |  |   |         |   |  |      |         |   |  |   |         |  
|Net income (loss)                                           |  | $                       | 109,335   |   |      | $ | 4,544   |      |  | $ | 35,001  |   |  | $    | (3,711  | ) |  | $ | 34,845  |  
|Income tax expense (benefit)                                |  |                         | 75,408    |   |      |   | 2,271   |      |  |   | 23,138  |   |  |      | (3,606  | ) |  |   | 21,293  |  
|Interest expense, net                                       |  |                         | 10,660    |   |      |   | 13,730  |      |  |   | 14,127  |   |  |      | 16,316  |   |  |   | 18,756  |  
|Depreciation and amortization                               |  |                         | 28,595    |   |      |   | 28,049  |      |  |   | 28,827  |   |  |      | 30,204  |   |  |   | 28,852  |  
|EBITDA                                                      |  | $                       | 223,998   |   |      | $ | 48,594  |      |  | $ | 101,093 |   |  | $    | 39,200  |   |  | $ | 103,746 |  
|EBITDA margin (4)                                           |  |                         | 17.8      | % |      |   | 6.3     | %    |  |   | 13.1    | % |  |      | 6.0     | % |  |   | 13.9    | %



9



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##### Table of Contents

|                                                                          |  |                    |         |      |   |         |  |      |         |      |   |         |  |   |        
|------------------------------------------------------------------------- |  | ------------------ | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|                                                                          |  | As of December 31,
|                                                                          |  | 2004               |         | 2003 |   | 2002    |  | 2001 |         | 2000
|                                                                          |  | (in thousands)    
|Balance Sheet Data:                                                       |  |                    |         |      |   |         |  |      |         |      |   |         |  |   |        
|Cash and cash equivalents                                                 |  | $                  | 801     |      | $ | 42,647  |  | $    | 2,891   |      | $ | 8,752   |  | $ | 2,542  
|Property, plant and equipment, net                                        |  |                    | 229,732 |      |   | 233,612 |  |      | 245,193 |      |   | 252,796 |  |   | 268,429
|Total assets                                                              |  |                    | 637,869 |      |   | 507,345 |  |      | 552,314 |      |   | 499,198 |  |   | 602,158
|Total long-term debt including current portion and notes payable to banks |  |                    | 154,000 |      |   | 150,000 |  |      | 163,000 |      |   | 179,000 |  |   | 239,000
|Redeemable Preferred Stock                                                |  |                    | 30,000  |      |   | 30,000  |  |      | 30,000  |      |   | 30,000  |  |   | 30,000 
|Total stockholders equity                                                |  |                    | 303,094 |      |   | 210,820 |  |      | 217,154 |      |   | 200,198 |  |   | 206,909

---

|(1) | Certain prior years amounts have been reclassified to conform to the current year presentation due to the presentation of the item (gain) loss on disposition of
property, plant and equipment separately from Other income (expense)  other net and the reclassification of shipping costs, from net sales to cost of goods sold.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Common share cash dividends are distributed to the holders of the 1,000 shares of common stock of the Company which are issued and outstanding. See Item 12  Security Ownership
of Certain Beneficial Owners and Management.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | EBITDA represents net income, plus income taxes, net interest expense and depreciation and amortization. EBITDA is not intended to represent cash flows from operations, cash flows
from investing or cash flows from financing activities as defined by accounting principles generally accepted in the United States of America and should not be considered as an alternative to cash flow or a measure of liquidity or as an alternative
to net earnings (loss) as indicative of operating performance. EBITDA is included because we believe that investors find it a useful tool for measuring our ability to service our debt.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | EBITDA margin represents EDITDA per (1) above divided by net sales.
|--- | -------------------------------------------------------------------



Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations



Introduction



From our site in Fontana, California, we produce flat rolled steel products: hot rolled, cold rolled, and galvanized, as well as ERW pipe, with a current
annual finished shipment capability of approximately 2.0 million tons. We service a broad range of customers with applications that include pipe and tubing, heating, ventilating and air conditioning, strapping, drums, steel wheels and a variety of
construction related products.



We ship our products by truck
and rail to manufacturers, contractors and distributors primarily in the 11 states west of the Rocky Mountains. We generally sell our products free on board (FOB), shipping point, and title is transferred when products are loaded for shipment. We
recognize revenue from product sales when products are shipped or delivered to the customer, depending on the terms of the sale. For products shipped FOB, shipping point, revenue is recognized at the time of shipment and title has transferred to the
customer. For products shipped FOB destination, revenue is recognized at the time of delivery and title is transferred to the customer. Our revenue is dependent on the volume, product mix and sales prices of our products. General economic conditions
as well as the supply and demand of steel products within our market influence sales prices. We generally set our sales prices quarterly, and we maintain no long-term sales agreements.



Cost of goods sold consists primarily of raw materials, labor, natural gas, electricity, depreciation and zinc costs. Raw
material costs have historically comprised approximately 70% of our cost of goods sold. In 2004, our raw material costs increased to approximately 80% of our costs of goods sold as a result of higher slab costs. Our slab consumption unit cost in
2004 was much higher compared to 2003 and 2002.



We generally
purchase steel slab in boatload quantities. Imported slab arrives on chartered vessels in the Port of Los Angeles and is transported by rail to our Fontana facility. We generally purchase steel slab on open negotiated payment terms. Steel slab
consumption costs include the FOB value of steel slab, quality extras, ocean transportation, rail freight, duties, unloading, insurance and handling costs. Historically, we have negotiated slab FOB prices quarterly and other rates through contracts
of varying lengths. Our purchasing power and extensive knowledge of the worldwide slab market continues to provide us with the opportunity to negotiate with slab suppliers on terms that we believe are favorable to us. We will continue to actively
manage slab procurement to minimize costs and may opportunistically purchase slab in the future.



10



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##### Table of Contents

We use zinc in the production of our galvanized products. We currently purchase zinc from various
suppliers. Zinc is purchased on a monthly basis with both fixed price and floating price contracts and is priced using a formula tied to the London Metals Exchange zinc index plus negotiated delivery premiums. For 2005, we have locked in pricing for
approximately 50% of our delivered zinc requirements.



We
require an average of approximately 40 megawatts of electricity demand in operating our equipment to produce our products. During 2004, we participated in the direct access program whereby electricity customers can contract directly with energy
service providers for energy. We continuously evaluate our options for energy, including the possibility of leaving the direct access program and returning to the full-service bundled tariff from the local utility distribution company, Southern
California Edison. The Public Utilities Commission of the State of California (PUC) issued an order on November 7, 2002, imposing exit fees of 2.7 cents per kilowatt-hour on utility customers who entered into the direct access program during the
California electricity crisis in 2001. The PUCs stated purpose for the exit fees (officially termed as the Cost Responsibility Surcharge or CRS) is to recoup the substantial sums spent by the State of California and the utilities
to purchase electricity during the crisis. The CRS, if continued at 2.7 cents per kWh, is projected to result in additional costs for our electricity service of approximately $9,000,000 per year at our current production levels. In 2004, our
electricity costs accounted for approximately 3.0% of our cost of goods sold compared to approximately 3.7% in 2003.



For February 2005, we purchased a fixed-price block of electricity covering approximately 85% of our energy requirements, with the remainder of our
requirements purchased at the floating hourly market price. In an effort to manage risk effectively, we will continue to monitor the electricity forward market pricing for possible additional hedge buying.



We generally utilize a daily average of about 12,000 million British thermal
units, or MMBTUs, of natural gas to produce our products. We pay for the commodity and delivery charges from the Southern California border. For the last several years, natural gas prices have experienced volatility. To stabilize such volatility, we
regularly use a risk management approach to fix the price on portions of our natural gas requirements up to two years ahead through financial and/or physical hedging arrangements. These arrangements include fixed-price contracts for the New York
Mercantile Exchange (NYMEX), and/or the Southern California border basis (basis represents the difference between the NYMEX price at Henry Hub, Louisiana and the price at the Southern California border).



We currently have in place purchase agreements for approximately 20% of our
natural gas commodity requirements for 2005, and approximately 80% of basis. We continue to monitor the near and long term price trends of natural gas and may enter into additional purchase agreements when we deem it appropriate or when
opportunities present themselves. In 2004, our natural gas costs accounted for approximately 2.6% of our cost of goods sold compared to approximately 3.8% in 2003.



Selling, general and administrative expense consist primarily of sales and labor, various administrative expenses, and
shipping costs. In 2004, labor costs comprised approximately 62% of our total selling, general and administrative expenses compared to 59% in 2003.



Results of Operations



|                        |  |                         |  |           |  |          
|----------------------- |  | ----------------------- |  | --------- |  | ---------
|                        |  | Tons Billed            
|                        |  | Year Ended December 31,
|                        |  | 2004                    |  | 2003      |  | 2002     
|Hot Rolled              |  | 943,353                 |  | 813,029   |  | 945,663  
|Cold Rolled             |  | 225,057                 |  | 210,834   |  | 234,505  
|Galvanized              |  | 740,685                 |  | 716,740   |  | 719,711  
|ERW pipe                |  | 197,275                 |  | 144,585   |  | 113,902  
|                        |  |                         |  |           |  |          
|Total (excluding scrap) |  | 2,106,370               |  | 1,885,188 |  | 2,013,781
|                        |  |                         |  |           |  |          



Year Ended
December 31, 2004 Compared to Year Ended December 31, 2003



Net sales. Net sales were $1,256,992,000 for the year ended December 31, 2004. This was a $486,205,000 improvement over the prior year. This increase is attributable to an increase in demand for our products as a result of
market conditions and an improved average sales unit price, offset by a change in product mix. Our average sales price increased by more than $188 per ton increasing our net sales by approximately $409,401,000 while an increase in volume added
approximately $88,395,000 to our net sales. We sold over 2,106,000 net tons in 2004, an increase of 221,000 net tons when compared to 1,885,000 net tons in 2003. The change in product mix when compared to prior year reduced our net sales by
approximately $7,147,000.



11



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##### Table of Contents

Gross profit.Gross profit increased $193,055,000 from $43,621,000 last year to
$236,676,000 this year. Gross profit as a percentage of net sales also increased from 5.7% in 2003 to 18.8% in 2004. The main reason for the increase in our gross profit was the result of a higher average sales unit price per ton in 2004 compared to
2003. The higher average sales unit price per ton was partially off set by an increase in slab consumption cost per ton.



Selling, general and administrative (SG&A) expenses.Selling, general and administrative expenses increased $4,182,000 from
$24,997,000 last year to $29,179,000 this year, primarily due to an increase in salaries and wages, including profit sharing. However, our SG&A expenses as a percentage of net sales decreased from 3.2% in 2003 to 2.3% in 2004.



Gain(loss) on disposition of property, plant and equipment
(PP&E). For the year ending December 31, 2004, we had a net loss of $546,000 on the disposition of PP&E compared to a net loss of $114,000 for the same period in 2003.



Loss on redemption of 8.5% senior notes. We incurred a loss of $9,025,000 from early redemption of our 8.5%
senior notes due in 2009. We incurred premium costs of $6,870,000 and expensed the remaining unamortized issuance cost of $2,155,000 related to these senior notes. The redeemed senior notes were replaced by 10 year 6.125% senior notes issued in
March 2004 and are due in 2014. By early redemption of our 8.5% senior notes and the issuance of 6.125% senior notes, there will by a reduction of over $3,562,000 in our interest cost annually.



Equity in income (loss) of affiliate.During 2004, we
entered into an option and waiver agreement with Arcelor S.A. (Arcelor) regarding Arcelors acquisition of our 4% interest in the common stock (which equates to 1.5% of total shareholders equity) in Companhia Siderurgica de
Tubarão (CST). CSI and Arcelor are both shareholders in CST and are parties to the existing CST Shareholders Agreement governing the transfer of CSTs shares. Pursuant to the option agreement, Arcelor granted to CSI an
option to sell, and CSI granted to Arcelor an option to purchase CSIs interest in CST. These options may be exercised during the thirty day period following the termination of the CST Shareholders agreement on May 25, 2005. In the waiver
agreement, CSI further agreed to waive its right of first refusal under the CST Shareholders Agreement. This transaction resulted in an impairment loss of approximately $5,258,000. For the year ended December 31, 2004, we recognized a net loss
of $3,047,000 compared to income of $1,950,000 last year, which consists of our pro-rata share of Companhia Siderurgica de Tubarãos income and the impairment loss during 2004. Companhia Siderurgica de Tubarão is a publicly traded
Brazilian company engaged in the production of steel slab and hot rolled coils.



Net interest expense.Net interest expense decreased $3,070,000 from $13,730,000 last year to $10,660,000 this year. The decrease in interest expense is attributable to a lower interest on our
senior notes from 8.5% to 6.125% and a lower average loan balance in 2004 compared to 2003. Interest expense figures are net of interest income and capitalized interest of $239,000 and $172,000 in 2004 and 2003, respectively.



Other income, net.Other income, net, increased $439,000
from $85,000 last year to $524,000 this year. Other income is comprised of miscellaneous income items such as rental income, proceeds from legal settlements, refund from anti dumping subsidy, etc. As many of these items occur infrequently or result
in a one-time recognition of income, this category is subject to significant fluctuation from year to year.



Income tax expense. Income tax expense increased $73,137,000 from $2,271,000 last year to $75,408,000 this year. This increase is
attributable to an increase in pretax income from last year. The effective tax rate for 2004 was 40.8% compared to an effective tax rate of 33.3% in 2003. Income tax expense for 2003 is net of a state manufacturing investment credit of $526,000, net
of federal tax benefit.



Net income.Net
income for the year was $109,335,000 compared to the net income last year in the amount of $4,544,000.



Year Ended December 31, 2003 Compared to Year Ended December 31, 2002



Net sales. Net sales were $770,787,000 for the year ended December 31, 2003. This was a $1,068,000 improvement
over 2002. This increase is attributable to an improved average sales unit price and improved product mix, offset by a decrease in volume of products sold. Our average sales price increased by more than $29 per ton increasing our net sales by
approximately $50,930,000 and improved product mix added more than six million dollars to our net sales. We sold over 1,885,000 net tons in 2003, a decrease of 129,000 net tons when compared to 2,014,000 net tons in 2002. This decrease in tonnage
was the result of market conditions and decreased our net sales by approximately $48,435,000. Other factors, primarily reclassification of shipping costs, reduced our 2003 net sales by approximately $7,427,000.



12



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##### Table of Contents

Gross profit.Gross profit decreased $53,649,000 from $97,270,000 in 2002 to
$43,621,000 in 2003. Gross profit as a percentage of net sales also decreased from 12.6% in 2002 to 5.7% in 2003. The main reason for the decrease in our gross profit was the result of a higher slab consumption cost per ton in 2003 compared to 2002.
The higher slab consumption cost per ton was partially off set by an increase in our average selling price.



Selling, general and administrative (SG&A) expenses.Selling, general and administrative expenses decreased $1,016,000 from
$26,013,000 in 2002 to $24,997,000 in 2003, primarily due to a one time non-cash accrual in 2002 of $1,800,000 for future environmental remediation expenditures. SG&A expenses as a percentage of net sales was 3.2% and 3.4% in 2003 and 2002,
respectively.



Gain/Loss on disposition of property,
plant and equipment (PP&E). For the year ending December 31, 2003, we had a net loss of $114,000 on the disposition of PP&E compared to the net gain of $492,000 for the same period in 2002.



Equity in income of affiliate.We maintained a 1.5%
ownership interest in Companhia Siderurgica de Tubarão (CST), which was based on our ownership of 4.0% of its common stock. Our investment in CST was accounted for under the equity method of accounting. For the year ended December
31, 2003, we recognized income of $1,950,000 compared to the income of $150,000 in 2002, which consists of our pro-rata share of CSTs income. CST is a publicly traded Brazilian company engaged in the production of steel slab and hot rolled
coils. Over the period 2000 to 2003, approximately 85% of CSTs products were exported outside of Brazil. This high percentage of U.S. dollar denominated cash flow tends to lessen the impact of market risks related to fluctuations in currency
exchange rates.



Net interest expense.Net
interest expense decreased $397,000 from $14,127,000 in 2002 to $13,730,000 in 2003. The decrease in interest expense is attributable to lower average loan balances in 2003 compared to 2002. Interest expense figures are net of interest income of
$120,000 and $508,000 in 2003 and 2002 respectively and capitalized interest of $52,000 in 2003 and $319,000 in 2002.



Other income, net.Other income, net, decreased $282,000 from $367,000 in 2002 to $85,000 in 2003. Other income is comprised of
miscellaneous income items such as rental income, proceeds from legal settlements, refund from anti dumping subsidy, etc. As many of these items occur infrequently or result in a one-time recognition of income, this category is subject to
significant fluctuation from year to year.



Income tax
expense. Due to lower income before income tax of $6,815,000 in 2003 compared to 2002 income before income tax of $58,139,000, our income tax expense for 2003 was $2,271,000 compared to $23,138,000 in 2002. The effective tax rate for 2003
was 33.3% compared to an effective tax rate of 39.8% in 2002. Income tax expense is net of state manufacturing investment credit of $526,000 in 2003 and $724,000 in 2002, net of federal tax benefit.



Net income.Net income for 2003 was $4,544,000 compared
to the net income for 2002 in the amount of $35,001,000.



Liquidity and
Capital Resources



At December 31, 2004, we had $801,000
in cash and cash equivalents and $104,074,000 available under our bank facility. During the year, cash flow from operations used $355,000, which consisted of $109,335,000 in net income, $26,889,000 in depreciation and amortization expense and a net
cash flow decrease of $145,603,000 due to changes in assets and liabilities. Operating cash flow increased as a result of an $16,929,000 increase in accounts payable and an $11,485,000 increase in income tax payable. Operating cash flow was
decreased as a result of a $135,436,000 increase in inventories and $45,010,000 in accounts receivable. Cash flow from investing activities consisted primarily of $22,953,000 of capital expenditures partially offset by dividends received from our
affiliate in the amount of $2,242,000 and $1,180,000 received as advance for the 2005 sale of our stock in affiliate company. Cash flow from financing activities consisted of net proceeds from issuance of our new 6.125% 2014 senior notes of
$148,125,000, offset by the redemption of our 8.50% senior notes of $150,000,000, plus premiums paid on early redemption of our 8.50% senior notes of $6,870,000. We also paid dividends in the amount of $17,061,000 during 2004. In 2004, we also paid
$10,594,000, representing payment of interest on our 8.50% senior notes (retired in March 2004) and 6.125% senior notes due in 2014.



In March 1999, we entered into a $130,000,000 five-year bank facility. Subject to the satisfaction of customary conditions and a borrowing base, advances
under the bank facility may be made at any time prior to the bank facility termination date, which was the earlier to occur of March 10, 2004 or the date which is 60 days prior to the maturity of the 8.5% senior notes. On June 30, 2003 this bank
facility was amended with the same bank group to $110,000,000 for a new period of three years expiring on June 30, 2006. There was $4,000,000 outstanding under this facility as of December 31, 2004. The bank facility is collateralized by cash,
accounts receivable, inventory and other assets. Advances under this facility may be used for working capital, capital expenditures, payment of dividends and other lawful corporate purposes, including the refinancing of existing debt.



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On March 22, 2004, we issued an aggregate of $150,000,000, ten-year, 6.125% senior unsecured notes due in
2014. With the proceeds of this issue and cash on hand we retired our 8.50% senior notes due in 2009. Interest on our 6.125% senior notes is payable on March 15 and September 15 of each year. The notes are senior in right of payment to all of our
subordinated indebtedness and equal in right of payment to all of our existing and future indebtedness that is not by its terms subordinated to the notes. We may redeem the notes at any time after March 15, 2009. In addition, we may redeem up to 35%
of the notes before March 15, 2007 with the net cash proceeds from a public equity offering. The indenture governing the notes contains covenants that limit our ability to incur additional indebtedness, pay dividends on, redeem or repurchase capital
stock and make investments, create liens, sell assets, sell capital stock of certain of our subsidiaries, engage in transactions with affiliates and consolidate, merge or transfer all or substantially all of our assets and the assets of our
subsidiary on a consolidated basis.



On June 24, 2004, the
Company completed an exchange offer exchanging its unregistered 6.125% senior notes for 6.125% senior notes registered by the Company pursuant to a registration statement filed pursuant to the Securities Act of 1933.



We currently have approximately $3,076,000 in material commitments for
capital expenditures expected to be completed during fiscal 2005. These represent signed purchase orders for various production facility upgrades. Our total budget for capital improvements in 2005 is approximately $46,000,000, including $20,000,000
for refinancing of our Continuous Galvanizing Line #2.



We
anticipate that our primary liquidity requirements will be for working capital, capital expenditures, debt service and the payment of dividends. We believe that cash generated from operations and available borrowings under our bank facility will be
sufficient to enable us to meet our liquidity requirements for fiscal 2005.



Commitments and Contingencies



The following
table represents a comprehensive list of the Companys contractual obligations and commitments as of December 31, 2004 (in thousands):



|                                                                                   |  |       |         |                  |   |           |  |           |        |                   |   |        |  |   |        
|---------------------------------------------------------------------------------- |  | ----- | ------- | ---------------- | - | --------- |  | --------- | ------ | ----------------- | - | ------ |  | - | -------
|                                                                                   |  | Total |         | Less Than 1 Year |   | 1-3 Years |  | 3-5 Years |        | More Than 5 Years
|Long Term Debt                                                                     |  | $     | 154,000 |                  | $ |          |  | $         | 4,000  |                   | $ |       |  | $ | 150,000
|Capital Lease Obligations                                                          |  |       |        |                  |   |          |  |           |       |                   |   |       |  |   |       
|Operating Leases                                                                   |  |       | 19,464  |                  |   | 3,439     |  |           | 10,043 |                   |   | 5,982  |  |   |       
|Purchase Obligations (1)                                                           |  |       | 109,234 |                  |   | 109,234   |  |           |       |                   |   |       |  |   |       
|Estimated Interest Payments on Debt (2)                                            |  |       | 84,726  |                  |   | 9,187     |  |           | 18,375 |                   |   | 18,375 |  |   | 38,789 
|Planned Expenditures on Environmental Matters (3)                                  |  |       | 1,800   |                  |   |          |  |           | 300    |                   |   | 1,000  |  |   | 500    
|Other Long Term Liabilities Reflected On the Registrants Balance Sheet under GAAP |  |       |        |                  |   |          |  |           |       |                   |   |       |  |   |       
|                                                                                   |  |       |         |                  |   |           |  |           |        |                   |   |        |  |   |        
|Total                                                                              |  | $     | 369,224 |                  | $ | 121,860   |  | $         | 32,718 |                   | $ | 25,357 |  | $ | 189,289
|                                                                                   |  |       |         |                  |   |           |  |           |        |                   |   |        |  |   |        

---

|(1) | Amounts relate to contractual commitments to purchase $85.1 million of steel slabs and assorted other contractual commitments.
|--- | ------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts represent the annual accrued interest on our $150,000,000 ten year 6.125% senior unsecured notes, which are due and payable in April, 2014.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------



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|(3) | Amounts reflect the anticipated expenditures on environmental matters pursuant to a proposed remediation plan submitted to the California Department of Toxic Substances Control. See
discussion in Item 2  Environmental Matters.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



When market conditions warrant, we will also enter into contracts to purchase certain commodities used in the manufacture of our products, such as electricity and natural gas. Any such commodity commitments are expected to be purchased and
used over a reasonable period of time in the normal course of business. Pursuant to SFAS No. 133, they are not accounted for as a derivative.



Critical Accounting Policies



In December 2001, the Securities and Exchange Commission (SEC) requested that all registrants list their most critical accounting
policies in Managements Discussion and Analysis of Financial Condition and Results of Operations. The SEC indicated that a critical accounting policy is one which is both important to the portrayal of the companys
financial condition and results of operations and requires managements most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We believe that
our following accounting policies fit this definition:



Allowance for Doubtful Accounts. We have attempted to reserve for expected credit losses based on our past experience with similar accounts receivable and believe our reserves to be adequate. It is possible, however, that the
accuracy of our estimation process could be materially impacted as the composition of this pool of accounts receivable changes over time. We continually review and refine the estimation process to make it as reactive to these changes as possible;
however, we cannot guarantee that we will be able to accurately estimate credit losses on these accounts receivable.



Environmental reserve: We have engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan and
remediation cost projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, we developed an estimate for future costs of the remediation plan. The total aggregate cost of remediation is estimated to
be approximately $1.8 million, which was accrued in 2002 and is included in accrued expenses in the 2004, 2003 and 2002 consolidated financial statements. The California Department of Toxic Substances Control has not yet completed its review and
approval of our plan; however, preliminary discussions with DTSC have not indicated the need for any significant changes to the remediation plan or to the Companys estimate of related costs. The estimate of costs could change as a result of
changes to the remediation plan required by the DTSC or unforeseen circumstances at the site.



Revenue Recognition: The Company recognizes revenue when products are shipped or delivered to the customer, depending on the terms of the sale. For products shipped FOB shipping point, revenue is recognized at
the time of shipment when title and risk of loss are transferred to the customer. For products shipped FOB destination, revenue is recognized at the time of delivery. In certain cases, at the customers request, the Company will enter into bill
and hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. Revenue on such transactions is recognized when the product is ready for shipment, and only after all conditions set forth
under Staff Accounting Bulletin (SAB) No. 101 have been met.



Item 7A.Quantitative and Qualitative Disclosures about Market Risk



We are exposed to market risks related to fluctuations in interest rates on our 6.125% senior notes and our $110,000,000 floating interest rate bank
facility. We do not currently use interest rate swaps or other types of derivative financial instruments. The carrying value of the floating rate bank facility approximates fair value as the interest rate is variable and resets frequently. The bank
facility bears interest at the Euro dollar rate or the prime rate, which was approximately 3.56% (including margin) and 5.25% respectively at December 31, 2004. We estimate that the average amount of debt outstanding under the facility for fiscal
year 2005 will be approximately $5.4 million. Therefore, a one-percentage point increase in interest rates would result in an increase in interest expense of $54,000 for the year.



For fixed rate debt instruments such as our 6.125% senior notes, changes in interest rates generally affect the fair value
of such debt instruments. For variable rate debt such as our bank facility, changes in interest rates generally do not affect the fair value of such debt, but do affect earnings and cash flow. We do not have an obligation to repay our 6.125% senior
notes prior to maturity in 2014 and, as a result, interest rate risk and changes in fair value should not have a significant impact on us. We believe that the interest rate on our 6.125% senior notes approximates the current rates available for
similar types of financing and as a result the carrying amount of the 6.125% senior notes approximates fair value. The fair value of our senior notes at December 31, 2004 was approximately $150,375,000. We do not believe that the future market rate
risk related to our 6.125% senior notes and floating rate bank facility will have a material impact on our financial position, results of operations or liquidity.



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We require an average of approximately 40 megawatts of electricity demand in operating our equipment to
produce our products. During 2004, we participated in the direct access program whereby electricity customers can contract directly with energy service providers for energy. We continuously evaluate our options for energy, including the possibility
of leaving the direct access program and returning to the full-service bundled tariff from the local utility distribution company, Southern California Edison. The Public Utilities Commission of the State of California (PUC) issued an order on
November 7, 2002, imposing exit fees of 2.7 cents per kilowatt-hour on utility customers who entered into the direct access program during the California electricity crisis in 2001. The PUCs stated purpose for the exit fees (officially termed
as the Cost Responsibility Surcharge or CRS) is to recoup the substantial sums spent by the State of California and the utilities to purchase electricity during the crisis. The CRS, if continued at 2.7 cents per kWh, is projected to
result in additional costs for our electricity service of approximately $9,000,000 per year at our current production levels. In 2004, our electricity costs accounted for approximately 3.0% of our cost of goods sold compared to approximately 3.7% in
2003.



For February 2005, we purchased a fixed-price
block of electricity covering about 85% of our energy requirements, with the remainder of requirements purchased at the floating hourly market price. In an effort to manage risk effectively, we will continue to monitor the electricity forward market
pricing for possible additional hedge buying.



We generally
utilize a daily average of about 12,000 million British thermal units, or MMBTUs, of natural gas to produce our products. We pay for the commodity and for delivery charges from the Southern California border. For the last several years natural gas
prices have experienced volatility. To stabilize such volatility, we regularly use a risk management approach to fix the price on portions of our natural gas requirements up to two years ahead, through financial and/or physical hedging arrangements.
These arrangements include fixed-price contracts for the New York Mercantile Exchange (NYMEX), and/or the Southern California border basis.



We currently have in place purchase agreements for 20% of our natural gas commodity requirements for 2005, and approximately 80% of basis. We continue to
monitor the near and long term price trends of natural gas and may enter into additional purchase agreements when we deem it appropriate or when opportunities present themselves. In 2004, our natural gas costs accounted for approximately 2.6% of our
cost of goods sold compared to approximately 3.8% in 2003.



Recently Issued
Accounting Standards



On September 30, 2004, the FASB
issued FASB Staff Position Issue 03-1-b which delays the effective date of EITF 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, with the exception of the disclosure requirements
contained in paragraphs 21-22 of the abstract which were largely effective for annual financial statements for fiscal years ending after December 15, 2003. This abstract provides guidance on the meaning of the phrase other-than-temporary impairment
and its application to several types of investments, including equity method investments accounted for under APB 18, The Equity Method of Accounting for Investments in Common Stock, to clarify impairment model for equity
securities that can be prepaid or otherwise settled in such a way that the investor would not receive substantially all of its cost and equity securities. The adoption of this recent accounting pronouncement did not have a material impact on the
Companys results of operations and financial condition.



On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the Act). The Act raises a number of issues with respect to accounting for income taxes. For companies that pay U.S. income taxes on manufacturing
activities in the U.S., the Act provides a deduction from taxable income equal to a stipulated percentage of qualified income from domestic production activities. The Act also creates a temporary incentive for U.S. multinationals to repatriate
accumulated income earned abroad by providing an 85% dividends received deduction for certain dividends from controlled foreign corporations. The deduction is subject to a number of limitations. The Act also provides for other changes in tax law
that will affect a variety of taxpayers. On December 21, 2004, the FASB issued two FASB Staff Positions (FSP) regarding the accounting implications of the Act related to (1) the deduction for qualified domestic production activities and
(2) the one-time tax benefit for the repatriation of foreign earnings. The FASB decided that the deduction for qualified domestic production activities should be accounted for as a special deduction under FASB Statement No. 109, Accounting
for Income Taxes. The FASB also confirmed, that upon deciding that some amount of earnings will be repatriated, a company must record in that period the associated tax liability. The guidance in the FSPs applies to financial statements for
periods ending after the date the Act was enacted. The Company is currently assessing the impact the Act will have on its financial position and results of operations.



In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, Inventory Costs
 An Amendment of ARB No. 43, Chapter 4,(SFAS 151). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges
regardless of whether they meet the criterion of so abnormal as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the



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costs of conversion be based on the normal capacity of the production facilities. SFAS 151 is effective for fiscal years
beginning after June 15, 2005 and is required to be adopted by the Company in the first quarter of fiscal 2006, beginning on January 1, 2006. The Company is currently evaluating the effect that the adoption of SFAS 151 will have on its consolidated
results of operations and financial condition but does not expect SFAS 151 to have a material impact.



On December 15, 2004 the FASB issued Statement No. 153, Exchanges of Nonmonetary Assets an Amendment of Accounting Principles Board
Opinion No. 29 (SFAS 153).This standard requires exchanges of productive assets to be accounted for at fair value, rather than at carryover basis, unless (1) neither the asset received nor the asset surrendered has a
fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. The new standard is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company expects
the adoption of SFAS 153 will not have a material impact on its financial position or results of operations.



Item 8.Consolidated Financial Statements and Supplementary Data



The Consolidated Financial Statements required to be filed hereunder are set forth on pages F-1 through F-23.



Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



None.



Item 9A.Controls and Procedures



For the period ending December 31, 2004 (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive
Officer and our Chief Financial Officer (the principal finance and accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as
amended (the Exchange Act). Based upon this evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that, as of December 31, 2004, our disclosure controls and procedures were effective to ensure
that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SECs rules and forms.



Additionally, our President and Chief Executive Officer and Chief Financial
Officer determined, as of December 31, 2004, that there were no changes in our internal controls or in other factors that could significantly affect our internal controls.





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PART III



Item 10.Directors and Executive Officers of the Registrant



The following table sets forth our Directors and executive officers as of December 31, 2004. Directors are elected to terms of one year. All Directors
hold their positions until their term expires and until their respective successor is elected and qualified. Executive officers are elected by and serve at the discretion of the Board of Directors until their term expires and their successor is duly
chosen and qualified.



|                   |  |     |  |                                                       
|------------------ |  | --- |  | ------------------------------------------------------
|Name               |  | Age |  | Position                                              
|Vicente Wright     |  | 52  |  | Chairman of the Board of Directors                    
|Hidenori Tazawa    |  | 52  |  | Director                                              
|Toshihiro Kabasawa |  | 50  |  | Director                                              
|Dalton Nose        |  | 56  |  | Director                                              
|Masakazu Kurushima |  | 56  |  | President and Chief Executive Officer                 
|Ricardo Bernardes  |  | 41  |  | Executive Vice President and Chief Financial Officer  
|Toshiyuki Tamai    |  | 53  |  | Executive Vice President, Operations                  
|James Wilson       |  | 55  |  | Vice President, Commercial                            
|Brett Guge         |  | 50  |  | Vice President, Administration and Corporate Secretary



Vicente Wright
has served as Chairman of the Board of Directors since July 1, 2004. Mr. Wright was named President and Chief Executive Officer in February 2003. Mr. Wright served as the Executive Vice President, Finance, from February 1998 to February 2003. Mr.
Wright was the Steel Division General Manager from 1992 to 1998 and Iron Ore Sales General Manager from 1991 to 1992 of Companhia Vale do Rio Doce. From 1987 to 1988, he served as Iron Ore Sales General Manager for Rio Doce Asia Ltd., a subsidiary
of Companhia Vale do Rio Doce. In 1986 and 1987, he was the assistant to the President of California Steel Industries in charge of slab procurement and all of its related logistics. From 1978 to 1986, Mr. Wright served as Purchasing Executive and
Slab Marketing Manager at Companhia Siderurgica de Tubarão. Mr. Wright was a member of the Board of Directors of Companhia Siderurgica Nacional, the largest steel company in Brazil, from 1993 to 1997; Acominas, a Brazilian steel mill, from
1994 to 1998; Siderar, an Argentine steel mill, from 1994 to 1997; Chairman of Nova Era Silicon, a Brazilian ferro-silicon company mill, from 1994 to 1997; and SEAS from 1994 to 1998. He graduated from Marquette University, Milwaukee, Wisconsin with
a Bachelors Degree in Business Administration.



Hidenori Tazawa has served as a Director since 2004. He has been employed by JFE Steel America since 2004 where he serves as President. From 1976 through 2003, Mr. Tazawa held various management positions at NKK and NKK America with
a primary focus on sales. Mr. Tazawa graduated from Touhoku University in 1976 with a Bachelors Degree in Law.



Toshihiro Kabasawahas served as a Director since July 2000. He has been employed by Kawasaki Steel Corporation since 1977 where he has held
positions as Human Development Manager, Organization & Systems Manager, Steel Business Planning Manager and Manager of Overseas Business in Corporate Planning Department. He graduated from Tokyo University with a Bachelors Degree in Law.



Dalton Nosé has served as a Director since
January 1, 2002. He has been employed by Companhia Vale do Rio Doce since February 2001 where he served as the Development Director. From 1975 through 2001, Mr. Nosé held management positions, including that of President and CEO, at a number
of Brazilian steel and manufacturing companies, including twenty years of working with the KORF Group and associated companies in Germany and Brazil. Mr. Nosé had specialized in operations and engineering with a strong emphasis on
implementing new technologies. Mr. Nosé graduated from Instituto Maua de Technologia with a B.S. in Metallurgical Engineering. Mr. Nose resigned his position with CVRD effective March 4, 2005.



Masakazu Kurushima joined the Company in July, 2004 as President and
Chief Executive Officer. Mr. Kurushima came to the Company from JFE Steel America, Inc. where he served as President. Prior to his appointment to JFE Steel America, Mr. Kurushima was Staff General Manager of the Export Department of JFE Steel
Corporation, Tokyo. He joined Kawasaki Steel Corporation in 1972 after graduating from Waseda University, Japan, with a degree in Economics.



Ricardo Bernardes joined the Company on September 15, 2003 as Executive Vice President and Chief Financial Officer. Mr. Bernardes held various
financial and executive positions in Brazil with RBS Group from November 1995 to July 2003, including the positions of Executive Director of Business Development, CFO Media, Broadcasting Finance Director and Telecommunications Director. He is
familiar with the steel industry from his work on various projects as a senior consultant for Booz Allen & Hamilton in Latin America and from his work experience with the Gerdau Group. Mr. Bernardes holds a Masters of Business Administration
from the University of California, Los Angeles.



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Toshiyuki Tamaihas served as Executive Vice President, Operations since July 2001. He has been
with CSI since 1995, previously holding positions as Manager, Hot Strip Rolling and Finishing Operations and General Manager, Hot Rolling and Tubular Products. He joined Kawasaki Steel Corporation in 1973 where he served as Manager at the No. 2 Hot
Strip Mill at Chiba Works. Prior to joining CSI, he worked as Senior Staff Engineer at AK Steel, Middletown, Ohio. Mr. Tamai graduated from Kyoto University with a Bachelors Degree in Mechanical Engineering.



James Wilsonhas served as Vice President, Commercial since June,
2004, prior to which he served as Vice President, Sales since November 2000. He has been employed by California Steel Industries since 1984 holding the positions of Manager, Galvanized Products and Manager, Cold Rolled Products. Prior to joining
California Steel Industries, he worked in various segments of the metals industry, including J.T. Ryerson & Sons, a service center, and in manufacturing. He graduated from the University of California, Berkeley, with a Bachelor of Science degree
in Industrial Engineering.



Brett Gugehas served as
Vice President, Administration and Corporate Secretary since May 1997. From 1994 to 1997, he served as the Manager of Administration of Gallatin Steel. From 1983 to 1994, he was employed by Alcoa where he held positions as the Superintendent of
Industrial Relations and Employment, Supervisor of Employee Relations and Superintendent of Industrial Relations and Training. Mr. Guge graduated from the University of Tennessee with a Bachelors Degree in Communications, and from Xavier
University with a Masters Degree in Business Administration.



Board
Committees



Our Board of Directors has a Compensation
Committee and an Operations and Finance Committee.



The
Compensation Committee is comprised of four members: Mr. Toshi Kabasawa and Mr. Kazuo Fujisawa, both of JFE Steel Corporation, and Dalton Nosé, Director, and Mr. Marcus Roger M.M. da Costa, both of Companhia Vale do Rio Doce. The Compensation
Committee met twice during 2004. The Compensation Committee reviews compensation packages for our officers and prepares the executive compensation proposal to the Board.



The Operations and Finance Committee is comprised of four members including Director Hidenori Tazawa and Mr. Hiroyuki
Tezuka, both of JFE Steel Corporation, and Chairman of the Board, Mr. Vicente Wright and Mr. Leonardo Moretzsohn Andrade, both of Companhia Vale do Rio Doce. This committee met twice during 2004. The Operations and Finance Committee mainly reviews
our investment plans, business plan, annual operating plan and budget. The Operations and Finance Committee is also responsible for reviewing our operating results and performance.



There is no separate Audit Committee as audit related decisions are made by the entire Board of Directors. The Board of
Directors does not contain an audit committee financial expert as such term is defined in Item 401(h)(2) of Regulation S-K as the Board has determined that such an expert is not necessary to properly carry out its oversight responsibilities.



Director Compensation



JFE Steel Corporation and Companhia Vale do Rio Doce were paid by the
Company for providing the services of the Directors and the Committee Members for fiscal year 2004. The payment for Directors, except the Chairman, was $3,000 per month and $1,000 per month for committee members. Mr. Hamamoto, Chairman of the Board
of Directors, until June 30, 2004, was paid a salary of $180,266 as our employee. In addition to his salary he received $28,849 in incentive compensation, $53,499 in other compensation and $9,211 in matching contribution to his account in our 401(k)
plan. Mr. Vicente Wright, who became Chairman of the Board of Directors effective July 1, 2004, was President and CEO until June 30, 2004. His total compensation is shown under Item 11  Executive Compensation Summary.



Code of Ethics



In 2004, we adopted a written code of ethics for our principal executive officer, principal financial officer, principal
accounting officer or controller, and persons performing similar functions. A copy of the Code of Ethics is attached hereto as Exhibit 14.1.



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##### Table of Contents

Item 11.Executive Compensation



The following summary compensation table sets forth information regarding compensation earned in the fiscal years ended December 31, 2004, 2003, and 2002 by our Chief Executive Officer and each of our other four most
highly compensated executive officers whose salary and bonus exceeded $100,000.



Summary Compensation Table



|                                                                       |  |                     |  |        |                        |                        |                        |                           |  |     |                       |           |  |         |  |     |                 |          
|---------------------------------------------------------------------- |  | ------------------- |  | ------ | ---------------------- | ---------------------- | ---------------------- | ------------------------- |  | --- | --------------------- | --------- |  | ------- |  | --- | --------------- | ---------
|                                                                       |  | Annual Compensation |  |        | Long-Term Compensation |                        | All Other Compensation |                          
|Name and Principal Position                                            |  | Year                |  | Salary |                        | Incentive Compensation |                        | Other Annual Compensation |  |     | LTIP Payouts          |           |  |        
|Vicente Wright (1) President and Chief Executive Officer               |  | 200420032002        |  | $$$    | 355,469327,081217,360  |                        | $$$                    | 33,207110,93845,010       |  | $$$ | 179,167139,526110,001 | (3)(4)(5) |  |      |  | $$$ | 9,7609,2608,500 | (2)(2)(2)
|                                                                       |  |                     |  |        |                        |                       
|Masakazu Kurushima (1) President and Chief Executive Officer           |  | 2004                |  | $      | 173,886                |                        | $                      | 11,885                    |  | $   | 25,734                | (10)      |  |        |  |     |                |          
|                                                                       |  |                     |  |        |                        |                       
|Ricardo Bernardes Executive Vice President and Chief Financial Officer |  | 20042003            |  | $$     | 229,33460,568          |                        | $$                     | 21,354200                 |  | $$  | 81,8155,299           | (11)(12)  |  |        |  | $$  | 10,0002,596     | (2)(2)   
|                                                                       |  |                     |  |        |                        |                       
|Mr. Toshiyuki Tamai Executive Vice President, Operations               |  | 200420032002        |  | $$$    | 229,334224,763217,360  |                        | $$$                    | 38,226115,50264,789       |  | $$$ | 47,70559,45826,984    | (6)(7)(8) |  |      |  | $$$ | 9,8659,9735,462 | (2)(2)(2)
|                                                                       |  |                     |  |        |                        |                       
|Jim Wilson Vice President, Commercial                                  |  | 200420032002        |  | $$$    | 211,017206,042200,000  |                        | $$$                    | 22,979106,37123,650       |  | $$$ | 15,39617,56316,797    | (9)(9)(9) |  |      |  | $$$ | 9,7699,9428,500 | (2)(2)(2)
|                                                                       |  |                     |  |        |                        |                       
|Brett Guge Vice President, Administration & Corporate Secretary        |  | 200420032002        |  | $$$    | 211,017206,812200,000  |                        | $$$                    | 36,609102,17160,050       |  | $$$ | 15,17515,17514,751    | (9)(9)(9) |  |      |  | $$$ | 9,7699,9438,500 | (2)(2)(2)

---

|(1) | Mr. Masakazu Kurushima took over the position following the resignation of Mr. Vicente Wright on July 1, 2004 as Mr. Wright became Chairman of the Board of Directors.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents matching contributions made to the executives account in the Companys 401(k) plan.
|--- | -----------------------------------------------------------------------------------------------

|(3) | Represents $10,250 in car allowance and $168,917 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Represents $10,250 in car allowance and $129,276 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Represents $10,679 in car allowance and $99,322 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Represents $9,924 in car allowance and $37,781 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(7) | Represents $6,850 in car allowance and $52,608 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Represents $6,850 in car allowance and $20,134 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | Represents car allowance and other fringe benefits.
|--- | ---------------------------------------------------



|(10) | Represents $4,268 in car allowance and $21,466 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(11) | Represents $10,250 in car allowance and $71,565 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(12) | Represents $3,033 in car allowance and $2,266 in medical expenses and home leave reimbursements. Home leave reimbursement is paid to our executives who are foreign nationals in
connection with trips by them and their family members to their country of origin.
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Supplemental Executive Retirement Plans and Separation Agreement



On January 16, 2003, the Company entered into a Supplemental Executive Retirement Plan with James L. Wilson, Vice President, Sales, intended to induce Mr.
Wilson to remain in the Companys employ. Upon his retirement, the Company is obligated to pay Mr. Wilson a monthly benefit for 180 months calculated as follows: one-twelfth of the product of 2.5% multiplied by the number of years he is
employed with us limited to 18 years, multiplied by his average annual compensation. This benefit vests at the rate of 6% for 2003 and 7% per year thereafter, continuing yearly except for the year Mr. Wilson turns 65, when the vesting will be 24%.
The payment of the vested portion of this benefit will start at the first day of the month following the month in which Mr. Wilson reaches age 65. At December 31, 2004, he was vested 13% under this agreement.



On September 19, 2000, the Company entered into a Supplemental Executive
Retirement Plan with Brett J. Guge, Vice President, Administration and Corporate Secretary, intended to induce Mr. Guge to remain in our employ. Upon his retirement, the Company is obligated to pay Mr. Guge a monthly benefit for 180 months
calculated as follows: one-twelfth of the product of 2.5% multiplied by the number of years he is employed with us limited to 18 years, multiplied by his average annual compensation. This benefit vests at the rate of 4% per year, continuing yearly
except for the year Mr. Guge turns 65, when the vesting will be 24%. The payment of the vested portion of this benefit will start at the first day of the month following the month in which Mr. Guge reaches age 65. At December 31, 2004, he was vested
20% under this agreement.



Shareholders Agreement



We are owned 50% by JFE Steel Corporation (formerly Kawasaki Steel
Corporation), a Japanese corporation, and 50% by Rio Doce Limited, a New York corporation and a subsidiary of Companhia Vale do Rio Doce (CVRD), a Brazilian corporation. In June 2004, JFE Steel USA, Inc., a Delaware corporation (formerly
Kawasaki Steel Holdings (USA), Inc.), also a subsidiary of JFE Steel Corporation, transferred its shares to JFE Steel Corporation. Our two stockholders entered into a Shareholders Agreement dated June 27, 1995, replacing a Shareholders
Agreement dated June 1, 1987. According to the Shareholders Agreement, the stockholders agreed to subscribe for additional shares of our stock in proportion to their respective ownership if any new stock is issued, and increases in our capital
stock from time to time shall be allocated between our common stock and preferred stock as agreed upon by the stockholders. Each of the stockholders has the right and obligation to subscribe and pay fully for the new shares in proportion to its
respective ownership of the Companys common stock. In addition, either stockholder may let its Affiliated Corporations, as defined the Shareholders Agreement, subscribe, in whole or in part, to the new shares to be issued to it under the
terms described below.



The Shareholders Agreement
provides that the Board of Directors shall be constituted of five directors, one of whom shall be chairman, as elected by and among the directors. Each stockholder shall have the right to appoint two Directors and the fifth Director shall be elected
by unanimous affirmative vote of the shareholders (in July 1999, the stockholders approved a revision to the Bylaws of the Company changing the number of directors to 4, however, no corresponding change was made to the



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Shareholders Agreement). In addition, the stockholders shall jointly appoint a president, who shall appoint other
officers designated by the Board of Directors. The Shareholders Agreement also provides for a Consultative Council consisting of two members, one appointed by each of the stockholders. It is unclear whether the Consultative Council provisions
are valid under Delaware corporation law. The Consultative Council decides on all relevant matters submitted to it by both or either of the stockholders and specifically resolves any deadlock among the Directors. Because no stockholder holds a
majority of our stock and the Directors and members of the Consultative Council are elected by the stockholders in proportion to each of the stockholders holdings, there is a possibility that a deadlock may occur on any issue voted on by the
stockholders, Board of Directors and Consultative Council. If a deadlock were to occur and the Consultative Council could not resolve the issue, the last recourse is arbitration according to the Shareholders Agreement. Furthermore, according
to the Shareholders Agreement, we have agreed to purchase slab from Companhia Siderurgica de Tubarão and use Seamar Shipping Corporation for ocean transportation of slab at negotiated prices, however, with the approval of the
stockholders, we ceased using Seamar for ocean transportation in 2001.



The Shareholders Agreement provides that, subject to any limitation on the payment of dividends contained in any agreement we are a party to, the stockholders shall cause us to distribute from our profits the maximum dividend that may
be distributed under the applicable laws and regulations, provided that the profits shall first be applied to the payment of dividends on the preferred stock. We have historically paid dividends of 50% of our net income per year.



If either one of the stockholders wishes to transfer or assign their shares
of our stock to a third party, other than to one of its affiliated corporations, the stockholder must first offer to sell those shares to the other stockholder upon the same terms and conditions that the third party has offered to purchase the
shares. Any stockholder who sells, transfers, assigns, or creates a pledge or other encumbrance on its shares in favor a third party, other than its affiliated corporations, is obligated to obtain an undertaking letter from the third party according
to which the third party undertakes unconditionally and irrevocably the obligations of the transferring stockholder under the Shareholders Agreement in proportion to the number of shares transferred. Either stockholder may sell, transfer or
assign to its affiliated corporations all or any part of its shares or preemptive rights to subscribe for new shares of our stock by giving written notice to the other stockholder, provided that the affiliated corporation has agreed to become a
party to the Shareholders Agreement. In this case, both the transferor and the affiliated corporation shall jointly assume all of the obligations of the transferor under the Shareholders Agreement.



Dispatched Personnel



Pursuant to agreements with our stockholders CVRD and JFE, certain of our executive officers and employees coming from the
stockholders are treated as dispatched personnel, which means that these executive officers and employees retain active employment status in their home country with the stockholder who appointed them. These agreements further require that the
Company provide certain benefits to employees who have been sent by a stockholder to work at the Company, such as extended home leave, home leave reimbursements and some other benefits. We further have an agreement with our stockholder, JFE, to
reimburse JFE for the salary of employees who are designated as dispatched personnel, whereas dispatched personnel from our stockholder, CVRD, are paid directly by the Company.



Executive officers who in 2004 were treated as dispatched personnel from JFE Steel Corporation and its subsidiaries included
Tatsuhiko Hamamoto, Masakazu Kurushima and Toshiyuki Tamai. Executive officers who in 2004 were treated as dispatched personnel from CVRD and its subsidiaries included Vicente Wright and Ricardo Bernardes. Mr. Hamamoto from JFE left CSI on June 30,
2004 and Mr. Vicente Wright, who left the company as a full time employee on December 31, 2004, is currently Chairman of the Board. Notwithstanding the retention of formal active status, all individuals designated as dispatched personnel, with the
exception of Vicente Wright, are full time employees of the Company.



The compensation and benefits of executive dispatched personnel, including any home leave reimbursement, is set forth in the Summary Compensation Table in Item 11.



401(k) Plan



We maintain the California Steel Industries, Inc. 401(k) Savings Plan, a tax qualified cash or deferred tax arrangement under Section 401(k) of the
Internal Revenue Code of 1986, as amended. The 401(k) Plan provides the participants with benefits upon retirement, death, disability or termination of employment with us. Employees are eligible to participate in the salary reduction portion of the
plan on the first day of the calendar month following their date of hire.



Participants may authorize us to contribute to the 401(k) Plan on their behalf a percentage of their compensation, not to exceed legally permissible limits, including an overall dollar limit of $13,000 for 2004. The
401(k) Plan provides for our



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discretionary matching and profit sharing contributions. We currently match 100% of the first 4% of the
participants deferral under the 401(k) Plan each year and 50% of the next 2% of the participants deferral under the 401(k) Plan each year. Each plan year we may also elect to make an additional contribution to the 401(k) Plan. This
discretionary employer contribution, if we make it, is allocated to each participants account based on the participants compensation for the year relative to the compensation of all participants for that year. In order to share in the
allocation of the discretionary employer contribution, if any, a participant must complete 1,000 hours of service in the plan year.



Profit-Sharing Plan



We maintain a profit sharing plan under which bonuses are awarded based on a pool amount equal to 8% of our income before taxes excluding gain or loss on
disposition of fixed assets and the results of Companhia Siderurgica de Tubarão. The basis for determining the profit sharing pool is subject to review and approval of our Board of Directors. The employees share in the pool amount is
based on his or her length of service with us during the profit sharing period. Employees who voluntarily terminate their employment for reasons others than retirement before the end of the profit sharing period and employees whose employment is
involuntarily terminated are not eligible to receive any profit sharing award.



Compensation Committee Interlocks and Inside Participation



Mr. Toshihiro Kabasawa, Director, Dalton Nosé, Director, Mr. Kazuo Fujisawa, and Mr. Marcus Roger M.M. da Costa served as members of our Compensation Committee. None of the members of the Compensation Committee
was, during 2004, an officer, employee or formerly an officer or employee of ours or our subsidiary.



Mr. Kabasawa served as General Manager of Overseas Business Planning of JFE Steel Corporation (formerly Kawasaki Steel Corporation) during 2004. JFE Steel
Corporation is one of our stockholders. In 2004, Mr. Fujisawa served as Deputy General Manager of Overseas Business Planning of JFE Steel Corporation. In 2004, Mr. Marcus Roger M.M. de Costa served as General Manager of Human Resources and Corporate
Administration of Companhia Vale do Rio Doce.



Board Compensation Committee
Report on Executive Compensation



Executive compensation
at California Steel Industries, including plan design and scope, covers five corporate executive officer positions and the Chairman of the Board. Executive compensation is the responsibility of the Board of Directors. Periodically the Board, through
its Compensation Committee, authorizes benchmarking surveys of executive compensation for similarly sized manufacturing companies, including private companies and those publicly traded. The surveys are conducted by recognized consulting firms,
analyzing executive compensation within the steel industry and other manufacturing sectors. California Steel Industries executive compensation program currently includes as its major elements a base annual salary and a management incentive
program based on (i) annual performance of California Steel Industries, and (ii) individual performance measured against annual objectives.





| |  |                                                                   
| |  | ------------------------------------------------------------------
| |  | Submitted by the Compensation Committee of the Board of Directors:
| | 
| |  | Toshi Kabasawa                                                    
| |  | Dalton Nosé                                                       
| |  | Kazuo Fujisawa                                                    
| |  | Marcus Roger M.M. de Costa                                        



23



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##### Table of Contents

Item 12.Security Ownership of Certain Beneficial Owners and Management



The following table sets forth, as of December 31, 2004, information regarding the shares of our common stock and Class C preferred stock beneficially
owned by each stockholder that beneficially owns in excess of 5% of the outstanding shares of our common stock and Class C preferred stock. No director or named executive officer beneficially owns any shares of our common stock or Class C preferred
stock.



|                                                                                   |  |        |  |            |                   |  |        |  |            |  
|---------------------------------------------------------------------------------- |  | ------ |  | ---------- | ----------------- |  | ------ |  | ---------- | -
|                                                                                   |  | Common |  |            | Class C Preferred | 
|Name of Beneficial Owner                                                           |  | Number |  | % of Class |                   |  | Number |  | % of Class |  
|Rio Doce Limited546 5th Avenue, 12th FloorNew York, New York 10036                 |  | 500    |  | 50         | %                 |  | 1,500  |  | 50         | %
|JFE Steel Corporation (1)2-3 Uchisaiwai-cho 2-chomeChiyoda-ku, Tokyo 100-0011Japan |  | 500    |  | 50         | %                 |  | 1,500  |  | 50         | %

---

|(1) | In 2004, JFE Steel U.S.A., Inc., transferred its common and Class C preferred stock in the Company to JFE Steel Corporation.
|--- | ----------------------------------------------------------------------------------------------------------------------------



Rio Doce Limited is a subsidiary of Companhia Vale do Rio Doce, a Brazilian
corporation.



Item 13.Certain Relationships and Related Transactions



Our stockholders, JFE Steel Corporation, and Rio Doce Limited, a subsidiary of Companhia Vale do Rio Doce, are parties to a Shareholders Agreement.
According to the Shareholders Agreement, the stockholders control the election of the Board of Directors. The stockholders also indirectly control the appointment of officers through their right to jointly elect the president, who is entitled
to appoint our other officers.



The Shareholders
Agreement also provides for a Consultative Council, comprised of two members. Each stockholder is entitled to elect one member. The Consultative Council decides on all matters submitted to it by either or both of the stockholders and resolves
deadlocks among the Board of Directors. We have transactions in the normal course of business with affiliated companies. For example, we purchase slab from Companhia Siderurgica de Tubarão, an affiliate of both Companhia Vale do Rio Doce and
JFE Steel Corporation. During 2004, we purchased $151,863,000 of slab from Companhia Siderurgica de Tubarão and $14,611,000 of slab from JFE Steel Corporation. We conducted arms-length negotiations with Companhia Siderurgica de Tubarão
and JFE Steel Corporation in 2004. The Shareholders Agreement provides that we shall continuously purchase slabs from Companhia Siderurgica de Tubarão under terms and conditions as agreed upon by Companhia Siderurgica de Tubarão
and us. The executive officer negotiating the market price for the steel slab was our Executive Vice President & CFO.



We also hold a 4% interest in the common stock of Companhia Siderurgica de Tubarão, which represents 1.5% of the total equity interest in the
company. Companhia Siderurgica de Tubarão is an affiliate of both Companhia Vale do Rio Doce and JFE Steel Corporation, our stockholders parent companies. In October 2004, we agreed in principal to sell our 4% interest in the common
stock of CST to Arcelor S.A. (Arcelor). The Company and Arcelor are both shareholders in CST and are parties to the existing CST Shareholders Agreement governing the transfer of CST shares. The transaction was structured by
entering into an option and waiver agreement whereby Arcelor granted the Company an option to sell and the Company granted Arcelor an option to purchase the Companys interest in CST. These options may be exercised during the thirty day period
following the termination of the CST shareholders agreement on May 25, 2005. It is the intention of the Company to exercise its option. In the waiver agreement, the Company further agreed to waive its right of first refusal under the CST
Shareholders Agreement. Under the option agreement, all earnings or losses as well as dividends and distributions accrue to the benefit of Arcelor during the period from the execution of the option agreement to the date of exercise.



We further maintain contractual relationships with our
stockholders in the form of Dispatched Personnel Agreements, as described in Item 11. Executive Compensation  Dispatched Personnel. These agreements provide for certain benefits and salary reimbursements with respect to personnel who are sent
by the stockholders to work at the Company. All compensation and benefits paid to such personnel, including salary which is reimbursed, is set forth in Item 11. Executive Compensation  Summary Compensation Schedule.



24



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Item 14. Principal Accounting Fees and Services



Aggregate Fees Billed by Principal Accountant in the Past Two Years.



|                            |  |      |         |      |   |        
|--------------------------- |  | ---- | ------- | ---- | - | -------
|                            |  | 2004 |         | 2003
|PricewaterhouseCoopers, LLP |  |      |         |      |   |        
|Audit Fees                  |  | $    | 225,500 |      | $ | 151,000
|Audit Related Fees          |  | $    | 15,000  |      | $ |       
|Tax Fees                    |  | $    |        |      | $ |       
|Other Fees                  |  | $    |        |      | $ |       





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##### Table of Contents

PART IV



Item 15.Exhibits and Financial Statement Schedules



(a) (1) and (2) Financial Statements:



The following consolidated financial statements and schedule of the Registrant are included in response to Item 8 of this Report:



1. Consolidated Financial Statements:



|                                                                                                                                                |  |     
|----------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                |  | Page
|Index to Consolidated Financial Statements                                                                                                      |  | F-1 
|Report of Independent Registered Public Accounting Firm by PricewaterhouseCoopers LLP as of and for the years ended December 31, 2004 and 2003 |  | F-2 
|Report of Independent Registered Public Accounting Firm by KPMG LLP for the year ended December 31, 2002                                        |  | F-3 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                                                    |  | F-4 
|Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002                                                      |  | F-5 
|Consolidated Statements of Stockholders Equity for the years ended December 31,2004, 2003 and 2002                                             |  | F-6 
|Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003and 2002                                                       |  | F-7 
|Notes to Consolidated Financial Statements                                                                                                      |  | F-8 
|                                                                                                                                                | 
|2. Consolidated Financial Statement Schedule:                                                                                                   |  |     
|                                                                                                                                                | 
|Schedule IIValuation and Qualifying Accounts                                                                                                   |  | S-1 



All other schedules
have been omitted since they are either not required, not applicable or the information is otherwise included.



(a)(3) Exhibits:



The Exhibits required to be filed with this Annual Report on Form 10-K are listed in the Exhibit Index included herein immediately following the Signature
Page.



26



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##### Table of Contents

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                              |  |     
|------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                              |  | Page
|Report of Independent Registered Public Accounting Firm by PricewaterhouseCoopers LLP as of December 31, 2004 |  | F-2 
|                                                                                                              | 
|Report of Independent Registered Public Accounting Firm by KPMG LLP for the year ended December 31, 2002      |  | F-3 
|                                                                                                              | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                  |  | F-4 
|                                                                                                              | 
|Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002                    |  | F-5 
|                                                                                                              | 
|Consolidated Statements of Stockholders Equity for the years ended December 31, 2004, 2003 and 2002          |  | F-6 
|                                                                                                              | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002                    |  | F-7 
|                                                                                                              | 
|Notes to Consolidated Financial Statements                                                                    |  | F-8 



F - 1



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Board of Directors and Shareholders

of California Steel Industries, Inc.:



In our opinion, the consolidated financial statements listed in the index appearing under
Item 15(a)(1) present fairly, in all material respects, the financial position of California Steel Industries, Inc. and its subsidiary (the Company) at December 31, 2004 and 2003, and the results of their operations and their cash flows
for the years then ended in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) for the years ended
December 31, 2004 and 2003 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 our opinion.



/s/ PricewaterhouseCoopers LLP

Los Angeles, California

January 21, 2005



F - 2



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



The Board of Directors



California Steel Industries, Inc.:



We have audited the accompanying consolidated statements of operations,
stockholders equity, and cash flows of California Steel Industries, Inc. and subsidiary for the year ended December 31, 2002. These consolidated financial statements are the responsibility of the Companys management. Our responsibility
is to express an opinion on these consolidated financial statements based on our audit.



We conducted our audit in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform,
an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.



In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the results of operations and cash flows of California Steel Industries, Inc. and subsidiary for the year ended December 31, 2002 in conformity with accounting principles generally accepted
in the United States of America.



|                       |  |             
|---------------------- |  | ------------
|                       |  | /s/ KPMG LLP
|                       | 
|Costa Mesa, California |  |             
|                       | 
|January 17, 2003       |  |             



F - 3



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##### Table of Contents

California Steel Industries, Inc. and Subsidiary

Consolidated Balance Sheets

December 31, 2004 and 2003

(Dollars in thousands, except for share
amounts)



|                                                                                                                   |  |      |         |      |   |        
|------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | ---- | - | -------
|                                                                                                                   |  | 2004 |         | 2003
|Assets                                                                                                             |  |      |         |      |   |        
|Current assets                                                                                                     |  |      |         |      |   |        
|Cash and cash equivalents (Note 2)                                                                                 |  | $    | 801     |      | $ | 42,647 
|Trade accounts receivable, less allowance for doubtful receivables of $700 and $400 in 2004 and 2003, respectively |  |      | 95,216  |      |   | 50,206 
|Inventories (Note 3)                                                                                               |  |      | 272,248 |      |   | 136,812
|Deferred income taxes (Note 11)                                                                                    |  |      | 1,887   |      |   | 463    
|Other receivables and prepaid expenses                                                                             |  |      | 5,225   |      |   | 4,191  
|                                                                                                                   |  |      |         |      |   |        
|Total current assets                                                                                               |  |      | 375,377 |      |   | 234,319
|                                                                                                                   |  |     
|Investment in affiliated company (Notes 6 and 9)                                                                   |  |      | 30,283  |      |   | 36,753 
|Other assets (Note 2)                                                                                              |  |      | 2,477   |      |   | 2,661  
|Property, plant and equipment, net (Note 4)                                                                        |  |      | 229,732 |      |   | 233,612
|                                                                                                                   |  |      |         |      |   |        
|Total assets                                                                                                       |  | $    | 637,869 |      | $ | 507,345
|                                                                                                                   |  |      |         |      |   |        
|Liabilities and Stockholders Equity                                                                               |  |      |         |      |   |        
|Current liabilities                                                                                                |  |      |         |      |   |        
|Accounts payable (Note 9)                                                                                          |  | $    | 59,266  |      | $ | 42,337 
|Accrued interest expense (Note 7)                                                                                  |  |      | 2,731   |      |   | 3,252  
|Accrued utilities                                                                                                  |  |      | 7,354   |      |   | 3,303  
|Income taxes payable (Note 11)                                                                                     |  |      | 13,467  |      |   | 1,982  
|Deferred rent                                                                                                      |  |      | 1,812   |      |   | 4,432  
|Other accrued expenses (Notes 10 and 12)                                                                           |  |      | 10,178  |      |   | 6,646  
|                                                                                                                   |  |      |         |      |   |        
|Total current liabilities                                                                                          |  |      | 94,808  |      |   | 61,952 
|                                                                                                                   |  |      |         |      |   |        
|Long-term debt (Note 7)                                                                                            |  |      | 154,000 |      |   | 150,000
|Deferred income taxes (Note 11)                                                                                    |  |      | 55,967  |      |   | 54,573 
|Commitments and contingencies (Notes 5, 7, 9, 10, 11 and 12)                                                       |  |      |         |      |   |        
|                                                                                                                   |  |     
|Redeemable preferred stock (Note 8)                                                                                |  |      |         |      |   |        
|Class C preferred stock, $10,000 par value per share. Authorized 3,000 shares; issued and outstanding 3,000 shares |  |      | 30,000  |      |   | 30,000 
|                                                                                                                   |  |     
|Stockholders equity (Note 8)                                                                                      |  |      |         |      |   |        
|Class A preferred stock, $10,000 par value per share. Authorized 1,000 shares; issued none                         |  |      |        |      |   |       
|Class B preferred stock, $10,000 par value per share. Authorized 2,000 shares; issued none                         |  |      |        |      |   |       
|Common stock, no par value. Authorized 2,000 shares; issued and outstanding 1,000 shares                           |  |      | 10,000  |      |   | 10,000 
|Retained earnings                                                                                                  |  |      | 293,094 |      |   | 200,820
|                                                                                                                   |  |      |         |      |   |        
|Total stockholders equity                                                                                         |  |      | 303,094 |      |   | 210,820
|                                                                                                                   |  |      |         |      |   |        
|Total liabilities and stockholders equity                                                                         |  | $    | 637,869 |      | $ | 507,345
|                                                                                                                   |  |      |         |      |   |        





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##### Table of Contents

California Steel Industries, Inc. and Subsidiary

Consolidated Statements of Operations

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars in
thousands)



|                                                            |  |      |           |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------- |  | ---- | --------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                            |  | 2004 |           |   | 2003 |   |         | 2002 | 
|Net sales                                                   |  | $    | 1,256,992 |   |      | $ | 770,787 |      |  | $ | 769,719 |  
|Cost of sales (Note 9)                                      |  |      | 1,020,316 |   |      |   | 727,166 |      |  |   | 672,449 |  
|                                                            |  |      |           |   |      |   |         |      |  |   |         |  
|Gross profit                                                |  |      | 236,676   |   |      |   | 43,621  |      |  |   | 97,270  |  
|                                                            |  |      |          
|Selling, general and administrative expenses (Note 12)      |  |      | 29,179    |   |      |   | 24,997  |      |  |   | 26,013  |  
|(Gain) loss on disposition of property, plant and equipment |  |      | 546       |   |      |   | 114     |      |  |   | (492    | )
|                                                            |  |      |           |   |      |   |         |      |  |   |         |  
|Income from operations                                      |  |      | 206,951   |   |      |   | 18,510  |      |  |   | 71,749  |  
|Other income (expense)                                      |  |      |           |   |      |   |         |      |  |   |         |  
|Loss on redemption of 8.5% senior notes (Note 7)            |  |      | (9,025    | ) |      |   |        |      |  |   |        |  
|Equity in income (loss) of affiliate (Note 6)               |  |      | (3,047    | ) |      |   | 1,950   |      |  |   | 150     |  
|Interest expense, net (Note 7)                              |  |      | (10,660   | ) |      |   | (13,730 | )    |  |   | (14,127 | )
|Other, net                                                  |  |      | 524       |   |      |   | 85      |      |  |   | 367     |  
|                                                            |  |      |           |   |      |   |         |      |  |   |         |  
|Income before income tax expense                            |  |      | 184,743   |   |      |   | 6,815   |      |  |   | 58,139  |  
|                                                            |  |      |          
|Income tax expense (Note 11)                                |  |      | 75,408    |   |      |   | 2,271   |      |  |   | 23,138  |  
|                                                            |  |      |           |   |      |   |         |      |  |   |         |  
|Net income                                                  |  |      | 109,335   |   |      |   | 4,544   |      |  |   | 35,001  |  
|                                                            |  |      |          
|Preferred dividends declared and paid                       |  |      | (13,545   | ) |      |   | (8,909  | )    |  |   | (14,284 | )
|                                                            |  |      |           |   |      |   |         |      |  |   |         |  
|Net income available to common stockholders                 |  | $    | 95,790    |   |      | $ | (4,365  | )    |  | $ | 20,717  |  
|                                                            |  |      |           |   |      |   |         |      |  |   |         |  



F - 5



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##### Table of Contents

California Steel Industries, Inc. and Subsidiary

Consolidated Statements of Stockholders Equity

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars in
thousands, except per share amounts)



|                                                |  |             |        |                  |   |         |                          |  |   |         |  
|----------------------------------------------- |  | ----------- | ------ | ---------------- | - | ------- | ------------------------ |  | - | ------- | -
|                                                |  | CommonStock |        | RetainedEarnings |   |         | TotalStockholdersEquity | 
|Balance at December 31, 2001                    |  | $           | 10,000 |                  | $ | 190,198 |                          |  | $ | 200,198 |  
|                                                |  |             |       
|Net income for the year ended December 31, 2002 |  |             |       |                  |   | 35,001  |                          |  |   | 35,001  |  
|Cash dividends (Note 8)                         |  |             |        |                  |   |         |                          |  |   |         |  
|Class C preferred stock, $4,761 on 3,000 shares |  |             |       |                  |   | (14,284 | )                        |  |   | (14,284 | )
|Common stock, $3,761 on 1,000 shares            |  |             |       |                  |   | (3,761  | )                        |  |   | (3,761  | )
|                                                |  |             |        |                  |   |         |                          |  |   |         |  
|Balance at December 31, 2002                    |  |             | 10,000 |                  |   | 207,154 |                          |  |   | 217,154 |  
|                                                |  |             |       
|Net income for the year ended December 31, 2003 |  |             |       |                  |   | 4,544   |                          |  |   | 4,544   |  
|Cash dividends (Note 8)                         |  |             |        |                  |   |         |                          |  |   |         |  
|Class C preferred stock, $2,970 on 3,000 shares |  |             |       |                  |   | (8,909  | )                        |  |   | (8,909  | )
|Common stock, $1,969 on 1,000 shares            |  |             |       |                  |   | (1,969  | )                        |  |   | (1,969  | )
|                                                |  |             |        |                  |   |         |                          |  |   |         |  
|Balance at December 31, 2003                    |  |             | 10,000 |                  |   | 200,820 |                          |  |   | 210,820 |  
|                                                |  |             |       
|Net income for the year ended December 31, 2004 |  |             |       |                  |   | 109,335 |                          |  |   | 109,335 |  
|Cash dividends (Note 8)                         |  |             |        |                  |   |         |                          |  |   |         |  
|Class C preferred stock, $4,515 on 3,000 shares |  |             |       |                  |   | (13,545 | )                        |  |   | (13,545 | )
|Common stock, $3,516 on 1,000 shares            |  |             |       |                  |   | (3,516  | )                        |  |   | (3,516  | )
|                                                |  |             |        |                  |   |         |                          |  |   |         |  
|Balance at December 31, 2004                    |  | $           | 10,000 |                  | $ | 293,094 |                          |  | $ | 303,094 |  
|                                                |  |             |        |                  |   |         |                          |  |   |         |  



F - 6



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##### Table of Contents

California Steel Industries, Inc. and Subsidiary

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2004, 2003 and 2002

(Dollars in
thousands)



|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------------ |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                           |  | 2004 |          |   | 2003 |   |         | 2002 | 
|Cash flows from operating activities                                                       |  |      |          |   |      |   |         |      |  |   |         |  
|Net income                                                                                 |  | $    | 109,335  |   |      | $ | 4,544   |      |  | $ | 35,001  |  
|Adjustments to reconcile net income to net cash provided by (used in) operating activities |  |      |          |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                              |  |      | 26,889   |   |      |   | 28,660  |      |  |   | 28,827  |  
|Loss on redemption of 8.50% senior notes                                                   |  |      | 9,025    |   |      |   |        |      |  |   |        |  
|Deferred income taxes                                                                      |  |      | (30      | ) |      |   | 6,780   |      |  |   | 3,791   |  
|(Gain) loss on disposition of property, plant and equipment                                |  |      | 546      |   |      |   | 114     |      |  |   | (492    | )
|(Income) loss from equity investments                                                      |  |      | 3,047    |   |      |   | (1,950  | )    |  |   | (150    | )
|Changes in assets and liabilities                                                          |  |      |          |   |      |   |         |      |  |   |         |  
|Trade accounts receivable, net                                                             |  |      | (45,010  | ) |      |   | 17,434  |      |  |   | (16,103 | )
|Inventories                                                                                |  |      | (135,436 | ) |      |   | 53,897  |      |  |   | (54,560 | )
|Other receivables and prepaid expenses                                                     |  |      | (1,577   | ) |      |   | (1,485  | )    |  |   | 4,025   |  
|Accounts payable                                                                           |  |      | 16,929   |   |      |   | (29,535 | )    |  |   | 41,394  |  
|Accrued interest expense                                                                   |  |      | (521     | ) |      |   | (162    | )    |  |   | 2       |  
|Income tax payable                                                                         |  |      | 11,485   |   |      |   | (792    | )    |  |   | 2,774   |  
|Other accrued expenses and deferred rent                                                   |  |      | 4,963    |   |      |   | 749     |      |  |   | 3,219   |  
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) operating activities                                        |  |      | (355     | ) |      |   | 78,254  |      |  |   | 47,728  |  
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Cash flows from investing activities                                                       |  |      |          |   |      |   |         |      |  |   |         |  
|Additions to property, plant and equipment                                                 |  |      | (22,953  | ) |      |   | (16,484 | )    |  |   | (20,812 | )
|Proceeds (disposal costs) from sale of property, plant and equipment                       |  |      | (155     | ) |      |   | (98     | )    |  |   | 701     |  
|Advance on sale of investments                                                             |  |      | 1,181    |   |      |   |        |      |  |   |        |  
|Dividends received from affiliate                                                          |  |      | 2,242    |   |      |   | 1,962   |      |  |   | 567     |  
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Net cash used in investing activities                                                      |  |      | (19,685  | ) |      |   | (14,620 | )    |  |   | (19,544 | )
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Cash flows from financing activities                                                       |  |      |          |   |      |   |         |      |  |   |         |  
|Net advances (repayments) under line of credit agreement with banks                        |  |      | 4,000    |   |      |   | (13,000 | )    |  |   | (16,000 | )
|Net proceeds from issuance of 6.125% senior notes                                          |  |      | 148,125  |   |      |   |        |      |  |   |        |  
|Redemption of 8.50% senior notes                                                           |  |      | (150,000 | ) |      |   |        |      |  |   |        |  
|Premium on redemption of 8.50% senior notes                                                |  |      | (6,870   | ) |      |   |        |      |  |   |        |  
|Dividends paid                                                                             |  |      | (17,061  | ) |      |   | (10,878 | )    |  |   | (18,045 | )
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Net cash used in financing activities                                                      |  |      | (21,806  | ) |      |   | (23,878 | )    |  |   | (34,045 | )
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                       |  |      | (41,846  | ) |      |   | 39,756  |      |  |   | (5,861  | )
|                                                                                           |  |      |         
|Cash and cash equivalents at beginning of year                                             |  |      | 42,647   |   |      |   | 2,891   |      |  |   | 8,752   |  
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of year                                                   |  | $    | 801      |   |      | $ | 42,647  |      |  | $ | 2,891   |  
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Supplemental disclosures of cash flow information                                          |  |      |          |   |      |   |         |      |  |   |         |  
|Cash paid (received) during the year for:                                                  |  |      |          |   |      |   |         |      |  |   |         |  
|Interest (net of amount capitalized)                                                       |  | $    | 10,972   |   |      | $ | 13,454  |      |  | $ | 13,885  |  
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  
|Income taxes                                                                               |  | $    | 63,954   |   |      | $ | (3,718  | )    |  | $ | 14,576  |  
|                                                                                           |  |      |          |   |      |   |         |      |  |   |         |  



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##### Table of Contents

California Steel Industries, Inc. and Subsidiary

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2004, 2003 and 2002



|1. | Organization and Nature of Operations
|-- | -------------------------------------



California Steel Industries, Inc. and Subsidiary (the Company) was incorporated in the state of Delaware on November 3, 1983. Its stockholders
consist of two U.S. companies, JFE Steel USA, Inc. (formerly Kawasaki Steel Holdings (USA), Inc.), a Delaware corporation, and Rio Doce Limited, a New York corporation, which each own 50% of the stock of the Company. From its site in Fontana,
California, the Company manufactures a wide range of flat rolled steel products, including hot rolled, cold rolled, and galvanized coil and sheet. The Company also produces electric resistant welded pipe.



|2. | Summary of Significant Accounting Policies
|-- | ------------------------------------------



a)    Principles of Consolidation



The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.



b)    Cash and Cash Equivalents



The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. These bank accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000.
At times, cash balances of any single account may be in excess of the FDIC insurance limit.



c)    Trade Accounts Receivable



Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for
doubtful accounts by identifying troubled accounts, using historical experience applied to an aging of accounts, regularly evaluating individual customer receivables and considering a customers financial condition and credit history, and
current economic conditions. Trade accounts receivable are written off when deemed uncollectible. Recoveries of trade accounts receivable previously written off are recorded when received.



d)    Inventories



Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method of inventory accounting. Management routinely evaluates the carrying value of inventories and provides reserves when appropriate to reduce inventories to the lower of cost or market to reflect
estimated net realizable value.



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##### Table of Contents

|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



e)    Investment in Affiliated Company



Investment in affiliated company consists of 4% of the common stock of Companhia Siderurgica de Tubarao (CST), a Brazilian
semi-finished steel slab and hot rolled manufacturer. The investment is accounted for by the equity method, since combined investments in CST by the Company and certain other related companies allow for significant influence over the financing and
operating activities of CST. The Companys share of earnings or losses from this investment is reflected in other income (expense) in the accompanying consolidated statements of operations. Dividends are credited against the investment when
received.



f)    Deferred Financing
Costs



Debt issuance costs are amortized on a
straight-line basis (which approximates the effective interest method) over the term of the related debt agreement. Amortization of issuance costs is included as a component of interest expense for the fiscal period. These costs are included in the
other assets in the 2004 and 2003 consolidated balance sheets.



g)    Property, Plant and Equipment



Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. The estimated useful lives of the assets are as follows:



|                          |  |              
|------------------------- |  | -------------
|Plant and equipment       |  | 3 to 25 years
|Plant refurbishment costs |  | 10 years     
|Furniture and fixtures    |  | 5 years      



Assets under
construction are not depreciated until placed into service. Ordinary repairs and maintenance are charged to operating costs when incurred. When assets are sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated
from the respective accounts, and any related gain or loss is included in the statement of operations.



h)    Impairment of Long-Lived Assets



The Company accounts for long-lived assets in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. This Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds it
estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less
costs to sell.



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##### Table of Contents

|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



i)    Income Taxes



Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. A valuation allowance is provided against the deferred tax asset for amounts which are not considered more likely than not to be realized.



j)    Environmental



Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures are
capitalized if they meet one of the following criteria: (1) extend the useful life, increase the capacity, or improve the safety or efficiency of property, (2) mitigate or prevent environmental contamination that has yet to occur and that otherwise
may result from future operations or activities, or (3) incurred in preparing property currently held for sale. The Company accrues for costs associated with environmental remediation obligations when such losses are probable and reasonably
estimable. Accruals for estimated losses from environmental remediation obligations are recognized no later than completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change (see
Note 10). Costs of future expenditures for environmental remediation obligations are not discounted to their present value.



k)    Self-Insurance Liability



The Company is self-insured for workers compensation. The accrued liability associated with these programs is based on managements estimate of
the ultimate costs to settle known claims as well as claims incurred but not yet reported (IBNR claims) as of the balance sheet date. The estimated liability is not discounted and is based on information provided by the Companys
insurance brokers and insurers, combined with managements judgments regarding a number of assumptions and factors, including the frequency and severity of claims, the Companys claims development history, case jurisdiction, related
legislation, and the Companys claims settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual claim trends, including the severity or frequency of claims, differ from
managements estimates, the Companys financial results could be impacted.



l)    Use of Estimates



Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.



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##### Table of Contents

|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



m)    Fair Value of Financial Instruments



The carrying value of cash and cash equivalents, trade accounts receivable, other receivables, accounts payable, and other
accrued expenses are measured at cost which approximates their fair value because of the short maturity of those instruments. The fair values of long-term indebtedness are estimated based on the quoted market prices for the same or similar issues,
or the current rates offered to the Company for debt of similar maturities. The carrying amounts and fair values of financial instruments at December 31, 2004 and 2003 are listed as follows (dollars in thousands):



|              |  |                 |         |            |   |                 |  |            |         |  |   |        
|------------- |  | --------------- | ------- | ---------- | - | --------------- |  | ---------- | ------- |  | - | -------
|              |  | 2004            |         | 2003      
|              |  | Carrying Amount |         | Fair Value |   | Carrying Amount |  | Fair Value
|Senior notes  |  | $               | 150,000 |            | $ | 150,375         |  | $          | 150,000 |  | $ | 157,500
|Notes payable |  |                 | 4,000   |            |   | 4,000           |  |            |        |  |   |       



n)    Revenue Recognition



The Company recognizes revenue when products are shipped or delivered to the customer, depending on the terms of the sale. For products shipped FOB shipping point, revenue is recognized at the time of shipment and title has transferred to
the customer. For products shipped FOB destination, revenue is recognized at the time of delivery and title has transferred to the customer.



o)    Shipping Costs



The Company charges shipping fees to certain customers based upon the actual amounts incurred. Amounts billed for shipping costs are included in net sales
for 2004, 2003 and 2002. The Company includes the associated shipping costs in cost of sales, which were approximately $7,061,000, $7,231,000 and $15,364,000 during 2004, 2003 and 2002, respectively. Previously the Company had netted these costs
against the amounts billed, included in net sales. Net sales and cost of sales for 2003 and 2002 have been adjusted to conform to this presentation.



p)    Reclassification



Certain prior years amounts have been reclassified to conform to the current year presentation.





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##### Table of Contents

|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



q)    Recent Accounting Pronouncements



In November 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 151, Inventory Costs
 An Amendment of ARB No. 43, Chapter 4,(SFAS 151). SFAS 151 amends the guidance in ARB No. 43, Chapter 4, Inventory Pricing, to clarify the accounting for abnormal amounts of idle facility expense,
freight, handling costs, and wasted material (spoilage). Among other provisions, the new rule requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling costs be recognized as current-period charges
regardless of whether they meet the criterion of so abnormal as stated in ARB No. 43. Additionally, SFAS 151 requires that the allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the
production facilities. SFAS 151 is effective for fiscal years beginning after June 15, 2005 and is required to be adopted by the Company in the first quarter of fiscal 2006, beginning on January 1, 2006. The Company is currently evaluating the
effect that the adoption of SFAS 151 will have on its consolidated results of operations and financial condition but does not expect SFAS 151 to have a material impact.



On September 30, 2004, the FASB issued FASB Staff Position Issue 03-1-b which delays the effective date of EITF 03-1,
The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, with the exception of the disclosure requirements contained in paragraphs 21-22 of the abstract which were largely effective for annual
financial statements for fiscal years ending after December 15, 2003. This abstract provides guidance on the meaning of the phrase other-than-temporary impairment and its application to several types of investments, including equity method
investments accounted for under APB 18, The Equity Method of Accounting for Investments in Common Stock, to clarify impairment model for equity securities that can be prepaid or otherwise settled in such a way that the investor
would not receive substantially all of its cost and equity securities. The adoption of this recent accounting pronouncement did not have a material impact on the Companys results of operations and financial condition.



On December 15, 2004 the FASB issued Statement No. 153, Exchanges
of Nonmonetary Assets an Amendment of Accounting Principles Board Opinion No. 29 (SFAS 153).This standard requires exchanges of productive assets to be accounted for at fair value, rather than at carryover
basis, unless (1) neither the asset received nor the asset surrendered has a fair value that is determinable within reasonable limits or (2) the transactions lack commercial substance. The new standard is effective for nonmonetary asset exchanges
occurring in fiscal periods beginning after June 15, 2005. The Company expects the adoption of SFAS 153 will not have a material impact on its financial position or results of operations.



On October 22, 2004, the President signed the American Jobs Creation Act of
2004 (the Act). The Act raises a number of issues with respect to accounting for income taxes. For companies that pay U.S. income taxes on manufacturing activities in the U.S., the Act provides a deduction from taxable income equal to a
stipulated percentage of qualified income from domestic production activities. The Act also creates a temporary incentive for U.S. multinationals to repatriate accumulated income earned abroad by providing an 85% dividends received deduction for
certain dividends from controlled foreign corporations.



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##### Table of Contents

|2. | Summary of Significant Accounting Policies (Continued)
|-- | ------------------------------------------------------



The deduction is subject to a number of limitations. The Act also provides for other changes in tax law that will affect a variety of taxpayers. On
December 21, 2004, the FASB issued two FASB Staff Positions (FSP) regarding the accounting implications of the Act related to (1) the deduction for qualified domestic production activities and (2) the one-time tax benefit for the
repatriation of foreign earnings. The FASB decided that the deduction for qualified domestic production activities should be accounted for as a special deduction under FASB Statement No. 109, Accounting for Income Taxes. The FASB
also confirmed, that upon deciding that some amount of earnings will be repatriated, a company must record in that period the associated tax liability. The guidance in the FSPs applies to financial statements for periods ending after the date the
Act was enacted. The Company is currently assessing the impact the Act will have on its financial position and results of operations.



|3. | Inventories
|-- | -----------



Inventories at December 31, 2004 and 2003 consist of the following (dollars in thousands):



|                  |  |      |         |      |   |        
|----------------- |  | ---- | ------- | ---- | - | -------
|                  |  | 2004 |         | 2003
|Finished goods    |  | $    | 36,665  |      | $ | 17,562 
|Work in process   |  |      | 33,528  |      |   | 29,236 
|Raw materials     |  |      | 194,243 |      |   | 81,923 
|Supplies          |  |      | 7,812   |      |   | 8,091  
|                  |  |      |         |      |   |        
|Total inventories |  | $    | 272,248 |      | $ | 136,812
|                  |  |      |         |      |   |        



|4. | Property, Plant and Equipment
|-- | -----------------------------



The following is a summary of property, plant and equipment at December 31, 2004 and 2003 (dollars in thousands):



|                                         |  |      |         |      |   |        
|---------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                         |  | 2004 |         | 2003
|Land                                     |  | $    | 17,682  |      | $ | 17,682 
|Plant and equipment                      |  |      | 484,766 |      |   | 477,002
|Plant refurbishment costs                |  |      | 22,220  |      |   | 22,220 
|Furniture and fixtures                   |  |      | 10,924  |      |   | 10,488 
|Construction in progress                 |  |      | 11,580  |      |   | 4,525  
|                                         |  |      |         |      |   |        
|                                         |  |      | 547,172 |      |   | 531,917
|Less accumulated depreciation            |  |      | 317,440 |      |   | 298,305
|                                         |  |      |         |      |   |        
|Total property, plant and equipment, net |  | $    | 229,732 |      | $ | 233,612
|                                         |  |      |         |      |   |        



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##### Table of Contents

|4. | Property, Plant and Equipment (Continued)
|-- | -----------------------------------------



There was no capitalized interest for the year ended 2004. Capitalized interest was approximately $52,000 and $319,000 for the years ended 2003 and 2002,
respectively.



Depreciation expense for the years ended
December 31, 2004, 2003 and 2002 was $26,441,000, $28,049,000 and $28,206,000, respectively.



|5. | Leases
|-- | ------



The Company is obligated under various equipment leases that expire at various dates during the next four years. At December 31, 2004, the future minimum
lease payments under noncancelable operating leases with commitments of at least one year are as follows (dollars in thousands):



|                          |  |   |       
|------------------------- |  | - | ------
|Years ending December 31, |  |  
|2005                      |  | $ | 3,439 
|2006                      |  |   | 5,003 
|2007                      |  |   | 5,040 
|2008                      |  |   | 5,982 
|Thereafter                |  |   |      
|                          |  |   |       
|                          |  | $ | 19,464
|                          |  |   |       



Rental expense
totaled approximately $5,575,000, $5,687,000 and $6,260,000 for the years ended December 31, 2004, 2003 and 2002, respectively.



|6. | Investment in Affiliated Company
|-- | --------------------------------



The investment in the net assets of CST accounted for under the equity method amounted to $30,283,000 and $36,753,000 at December 31, 2004 and 2003,
respectively.



The Company received $2,242,000, $1,962,000 and
$567,000 in dividends from CST during the years ended December 31, 2004, 2003 and 2002, respectively.



Summarized balance sheet information at September 30, 2004 and 2003 of the Companys equity-method investee is as follows (dollars in thousands):



|                                   |  |      |           |      |   |          
|---------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                   |  | 2004 |           | 2003
|Current assets                     |  | $    | 664,061   |      | $ | 403,040  
|Property, plant and equipment, net |  |      | 2,750,590 |      |   | 2,832,081
|Other assets                       |  |      | 122,577   |      |   | 138,423  
|Current liabilities                |  |      | 339,851   |      |   | 410,818  
|Long-term liabilities              |  |      | 487,392   |      |   | 581,106  





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##### Table of Contents

|6. | Investment in Affiliated Com pany (Continued)
|-- | ---------------------------------------------



Summarized statement of operations information for the nine months ended September 30, 2004, 2003 and 2002 of the Companys equity-method investee,
is as follows (dollars in thousands):



|                                    |  |      |           |      |   |         |  |   |        
|----------------------------------- |  | ---- | --------- | ---- | - | ------- |  | - | -------
|                                    |  | 2004 |           | 2003 |   | 2002   
|Net sales                           |  | $    | 1,245,405 |      | $ | 962,224 |  | $ | 684,364
|Gross profit                        |  |      | 527,457   |      |   | 336,689 |  |   | 102,697
|Net income and comprehensive income |  |      | 392,835   |      |   | 100,943 |  |   | 61,982 



In October 2004, the
Company agreed in principal to sell its 4% interest in the common stock of CST to Arcelor S.A. (Arcelor). The Company and Arcelor are both shareholders in CST and are parties to the existing CST Shareholders Agreement governing the
transfer of CST shares. The transaction was structured by entering into an option and waiver agreement whereby Arcelor granted the Company an option to sell and the Company granted Arcelor an option to purchase the Companys interest in CST.
These options may be exercised during the thirty day period following the termination of the CST shareholders agreement on May 25, 2005. It is the intention of the Company to exercise its option. In the waiver agreement, the Company further agreed
to waive its right of first refusal under the CST Shareholders Agreement. Under the option agreement, all earnings or losses as well as dividends and distributions accrue to the benefit of Arcelor during the period from the execution of the
option agreement to the date of exercise.



As a result of
these agreements, the Company evaluated the carrying value of its investment in CST and recognized an impairment loss of approximately $5,258,000. The impairment loss was determined by comparing the carrying value of the investment to the ultimate
cash flow to be generated to the Company as a result of the option agreement. The Company determined that this cash flow would essentially be the sales proceeds as agreed to in the option agreement. The impairment loss recognized in 2004 is offset
by earnings of CST recognized by the Company prior to executing the option agreement in the amount of $2,211,000, resulting in a net loss of $3,047,000 in equity of affiliate in the 2004 consolidated statement of operations. As of December 31, 2004,
the Company has received $1,181,000 as a cash advance, which is classified as a reduction of the in investment CST in the 2004 consolidated balance sheet.



|7. | Notes Payable and Line of Credit
|-- | --------------------------------



In March 1999, the Company entered into a five-year revolving credit facility (the Facility) with a syndicate of three financial institutions.
The Facility provided for an aggregate principal amount of up to $130,000,000, including a $25,000,000 sublimit for letters of credit, subject in all respects to a borrowing base coverage requirement. The Company drew a substantial portion of the
advances available under the Facility on the closing date to repay advances under its previously existing credit agreement.



On June 30, 2003, the Facility was amended with the then existing syndication of four financial institutions for an aggregate principal amount of up to
$110,000,000. The term of the Facility was also extended for a period of three years expiring on June 30, 2006.





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##### Table of Contents

|7. | Notes Payable and Line of Credit (Continued)
|-- | --------------------------------------------



Under the Facility, a commitment fee is applied on the average daily undrawn portion of the commitments at a rate equal to the applicable margin. The
applicable margin in effect from time to time will range from 0.2% to 0.5%, based upon the leverage ratio.



At the Companys election, the amounts advanced under the facility bear interest at the base rate or the Eurodollar rate, plus the applicable margin.
Interest is generally payable monthly and any accrued interest and principal is due and payable in June 2006.



As of December 31, 2004, outstanding borrowings of $4,000,000 consisted of advances payable at the base rate, which was 5.25%. There were no outstanding
borrowings as of December 31, 2003. As of December 31, 2004, the Company had three outstanding letters of credit in the amount of $1,926,000 which expire on various dates through August 2005. This outstanding balance reduces the borrowing base. The
Company had $104,074,000 of borrowings available under the Facility as of December 31, 2004.



Fees incurred on the Facility are being amortized over the term of the life of the loan. The unamortized amount of the financing costs was approximately $249,000 and $416,000 at December 31, 2004 and 2003,
respectively, and are classified as other assets in the consolidated balance sheet.



The line of credit is collateralized by the Companys accounts receivable, inventories less than one year old and equipment. The agreement requires compliance with certain covenants and restrictions with regard
to the current ratio, tangible net worth, capital expenditures and shareholder distributions. At December 31, 2004 and 2003, the Company was in compliance with all covenants and restrictions.



On March 22, 2004, the Company issued an aggregate of $150,000,000 of
ten-year, 6.125% unsecured senior notes due in March 2014. The interest on these new senior notes is payable on March 15 and September 15 of each year, commencing September 15, 2004.



The notes are senior in right of payment to all of the Companys subordinated indebtedness and equal in right of
payment to all of the Companys existing and future indebtedness that is not by its terms subordinated to the notes. The Company may redeem the notes at any time after March 15, 2009. In addition, the Company may redeem up to 35% of the notes
before March 15, 2007 with the net cash proceeds from a public equity offering.



With the proceeds of the 6.125% senior notes and cash on hand, the Company retired the 8.5% senior notes due in 2009. Of the total $150,000,000 payable, the Company redeemed $132,140,000 in March 2004, with the
remaining $17,860,000 in April 2004. The Company also incurred a loss of $9,025,000 from early redemption of the 8.5% senior notes due in 2009, which included premium costs of $6,870,000 and expensing the unamortized issuance costs of $2,155,000.
The unamortized portion of the financing costs related to the 6.125% senior notes due in 2014 was approximately $2,228,000 at December 31, 2004 and are classified as other assets in the consolidated balance sheet.



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##### Table of Contents

|7. | Notes Payable and Line of Credit (Continued)
|-- | --------------------------------------------



On June 24, 2004, the Company completed an exchange offer exchanging its unregistered 6.125% senior notes for 6.125% senior notes registered by the
Company pursuant to a registration statement filed under the Securities Act of 1933.



Long-term debt at December 31, 2004 and 2003 consisted of the following (dollars in thousands):



|                                                                                                                                                                                                                                                                                                                                       |  |      |         |      |   |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                                                                                                                                                                                                                                                                                                                       |  | 2004 |         | 2003
|Senior Notes bearing interest at 6.125% interest payable semi-annually, due March 2014                                                                                                                                                                                                                                                 |  | $    | 150,000 |      | $ |       
|                                                                                                                                                                                                                                                                                                                                       |  |     
|Senior Notes bearing interest at 8.5%, interest payable semi- annually, due April 2009                                                                                                                                                                                                                                                 |  |      |        |      |   | 150,000
|                                                                                                                                                                                                                                                                                                                                       |  |     
|Revolving Line of Credit payable to bank consist of amounts advanced under a $110,000,000 revolving credit facility, being interest at either
the Eurodollar rate or the base rate, plus the applicable margin. Interest is generally payable monthly and any accrued interest and principal are due and payable in full in June 2006. |  |      | 4,000   |      |   |       
|                                                                                                                                                                                                                                                                                                                                       |  |      |         |      |   |        
|                                                                                                                                                                                                                                                                                                                                       |  | $    | 154,000 |      | $ | 150,000
|                                                                                                                                                                                                                                                                                                                                       |  |      |         |      |   |        



|8. | Redeemable Preferred Stock and Stockholders Equity
|-- | ---------------------------------------------------



The Class A, B and C preferred stock is redeemable by the Company at its option, in whole or in part, at par value. The Class C preferred stock has been
classified outside of equity as the preferred stockholders control a majority of the board of directors and therefore control the redemption rights.



Class C preferred stock has priority over the common stock in the distribution of dividends and is entitled to a dividend equivalent to 10% of the par
value per annum on a cumulative basis and is thereafter entitled to participate in the distribution of dividends at the same rate and upon the same conditions as the common stock.



Each holder of common stock is entitled to one vote for each share held of record on each matter submitted to a vote of the
stockholders. Holders of the common stock have no cumulative voting, conversion, or redemption rights, but are entitled to preemptive rights to subscribe for additional shares of common stock in any additional issuance of common stock or any
security convertible into common stock. Subject to any preferences that may be granted to the holders of preferred stock, each holder of common stock is entitled to receive ratably dividends as may be declared by the board of directors, and in the
event of liquidation, dissolution, or winding up, is entitled to share ratably in all Company assets remaining after payment of liabilities.



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##### Table of Contents

|8. | Redeemable Preferred Stock and Stockholders Equity (Continued)
|-- | ---------------------------------------------------------------



During the years ended December 31, 2004, 2003 and 2002, $17,061,000, $10,878,000 and $18,045,000, respectively, in dividends were declared and paid.



|9. | Related Party Transactions
|-- | --------------------------



The Company has transactions in the normal course of business with affiliated companies. The Company is 50% owned by JFE Steel USA, Inc., a subsidiary of
JFE Steel, a Japanese corporation, and 50% owned by Rio Doce Limited, a subsidiary of Companhia Vale do Rio Doce (CVRD), a Brazilian corporation.



The Company purchases steel slab from CST, an investee, and JFE Steel. For part of 2002, the Company chartered vessels from Seamar Shipping
Corporation, a subsidiary of CVRD, for the ocean transfer of slab from Brazil to the Port of Los Angeles. The following represents amounts paid to the various affiliated companies for the years ended December 31 (dollars in thousands):



|                            |  |      |         |      |   |        |  |        
|--------------------------- |  | ---- | ------- | ---- | - | ------ |  | -------
|                            |  | 2004 |         | 2003 |   | 2002  
|CST                         |  | $    | 151,863 |      | $ | 87,252 |  | 128,976
|JFE Steel                   |  |      | 14,611  |      |   | 6,048  |  | 5,664  
|Seamar Shipping Corporation |  |      |        |      |   |       |  | 574    



At December 31, 2004
and 2002, no amounts were owed to affiliated companies. At December 31, 2003, the Company owed $12,611,000 for goods and services.



|10. | Commitments and Contingencies
|--- | -----------------------------



At December 31, 2004, the Company is committed, in the form of open purchase orders, to purchase approximately $109,234,000 in steel slabs and other
commitments, of which none is from related parties.



When
market conditions warrant, the Company enters into contracts to purchase certain commodities used in the manufacturing of its products, such as electricity and natural gas. Any such commodity commitments are expected to be purchased and used over a
reasonable period of time in the normal course of business. Accordingly, pursuant to SFAS No. 133, they are not accounted for as a derivative.



The Company has been contacted by various governmental agencies regarding specified environmental matters at its operating facility in Fontana,
California. During September 1990, the Company reached a preliminary agreement with the California Regional Department of Health Services, which allows the Company to draft its own remediation agreement and move forward with its own plan of action
at its operating facility.



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##### Table of Contents

|10. | Commitments and Contingencies (Continued)
|--- | -----------------------------------------



In November 1992, the Company entered into a Voluntary and Enforceable Agreement (the Agreement) with the California Department of Toxic
Substances Control (DTSC) which sets forth certain terms and conditions related to the remediation of hazardous substances at the Companys operating facility. The Agreement also preserves the Companys right as to future
assignment and apportionment of costs to other parties.



The
Company is addressing environmental concerns caused by the former occupant at the Companys Fontana site. The Company engaged an environmental consultant to conduct a remedial investigation and develop a remediation plan and remediation cost
projections based upon that plan. Utilizing the remediation plan developed by the environmental consultant, the Company developed an estimate of future costs of the remediation plan. The total aggregate cost of remediation is estimated to be
approximately $1,800,000, which is included in the other accrued expenses in the 2004 and 2003 consolidated financial statements. The DTSC has not yet completed its review and approval of the Companys remediation plan; however, preliminary
discussions between the DTSC and the Company have not indicated the need for any significant changes to the remediation plan or to the Companys estimate of related costs. The estimate of costs could change as a result of changes to the
remediation plan required by the DTSC or unforeseen circumstances, including without limitations, unknown site conditions, changes to applicable regulations or increased enforcement requirements by the regulators existing at the site.



The Company is involved in legal actions and claims arising in the ordinary
course of business. It is the opinion of management, based on advice of legal counsel, that this litigation will be resolved without material effect on the Companys financial position, results of operations, or liquidity.



The Company is self-insured for workers compensation. The accrued
liability associated with these programs is based on managements estimate of the ultimate costs to settle known claims as well as claims incurred but not yet reported (IBNR claims) as of the balance sheet date. The estimated
liability is not discounted and is based on information provided by the Companys insurance brokers and insurers, combined with managements judgments regarding a number of assumptions and factors, including the frequency and severity of
claims, the Companys claims development history, case jurisdiction, related legislation, and the Companys claims settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If
actual claim trends, including the severity or frequency of claims, differ from managements estimates, the Companys financial results could be impacted.



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##### Table of Contents

|11. | Income Taxes
|--- | ------------



Income tax expense (benefit) for the years ended December 31, 2004, 2003 and 2002 consists of the following (dollars in thousands):



|          |  |      |        |   |      |   |        |      |  |   |       
|--------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------
|          |  | 2004 |        |   | 2003 |   |        | 2002
|Current:  |  |      |        |   |      |   |        |      |  |   |       
|Federal   |  | $    | 61,258 |   |      | $ | (3,393 | )    |  | $ | 16,296
|State     |  |      | 14,180 |   |      |   | (1,116 | )    |  |   | 3,051 
|          |  |      |        |   |      |   |        |      |  |   |       
|          |  |      | 75,438 |   |      |   | (4,509 | )    |  |   | 19,347
|          |  |      |        |   |      |   |        |      |  |   |       
|Deferred: |  |      |        |   |      |   |        |      |  |   |       
|Federal   |  |      | (2,206 | ) |      |   | 5,840  |      |  |   | 2,781 
|State     |  |      | 2,176  |   |      |   | 940    |      |  |   | 1,010 
|          |  |      |        |   |      |   |        |      |  |   |       
|          |  |      | (30    | ) |      |   | 6,780  |      |  |   | 3,791 
|          |  |      |        |   |      |   |        |      |  |   |       
|          |  | $    | 75,408 |   |      | $ | 2,271  |      |  | $ | 23,138
|          |  |      |        |   |      |   |        |      |  |   |       



Actual tax expense
from the expected tax expense (computed by applying the U.S. federal statutory tax rate of 35% to income before income tax expense) is as follows (dollars in thousands):



|                                                              |  |      |        |      |   |       |      |  |   |        |  
|------------------------------------------------------------- |  | ---- | ------ | ---- | - | ----- | ---- |  | - | ------ | -
|                                                              |  | 2004 |        | 2003 |   |       | 2002 | 
|Computed expected tax expense                               |  | $    | 64,660 |      | $ | 2,385 |      |  | $ | 20,349 |  
|State income taxes, net of federal benefit                    |  |      | 10,615 |      |   | 412   |      |  |   | 3,363  |  
|State manufacturing investment credit, net of federal benefit |  |      |       |      |   | (526  | )    |  |   | (724   | )
|Other                                                         |  |      | 133    |      |   |      |      |  |   | 150    |  
|                                                              |  |      |        |      |   |       |      |  |   |        |  
|                                                              |  | $    | 75,408 |      | $ | 2,271 |      |  | $ | 23,138 |  
|                                                              |  |      |        |      |   |       |      |  |   |        |  



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##### Table of Contents

|11. | Income Taxes (Continued)
|--- | ------------------------



The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31,
2004 and 2003 are as follows (dollars in thousands):



|                                     |  |      |         |   |      |   |         |  
|------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | -
|                                     |  | 2004 |         |   | 2003 |  
|Deferred tax assets:                 |  |      |         |   |      |   |         |  
|Inventory                            |  | $    | 1,030   |   |      | $ | 565     |  
|State taxes                          |  |      | 7,130   |   |      |   | 1,997   |  
|Allowance for doubtful accounts      |  |      | 307     |   |      |   | 175     |  
|Accrued expenses                     |  |      | 2,517   |   |      |   | 1,861   |  
|Net operating loss carryforward      |  |      |        |   |      |   | 971     |  
|Other                                |  |      |        |   |      |   | 26      |  
|                                     |  |      |         |   |      |   |         |  
|Total gross deferred tax assets      |  |      | 10,984  |   |      |   | 5,595   |  
|Less valuation allowance             |  |      |        |   |      |   |        |  
|                                     |  |      |         |   |      |   |         |  
|Net deferred tax assets              |  |      | 10,984  |   |      |   | 5,595   |  
|                                     |  |      |         |   |      |   |         |  
|Deferred tax liabilities:            |  |      |         |   |      |   |         |  
|Property, plant and equipment        |  |      | (57,671 | ) |      |   | (54,567 | )
|Undistributed earnings of affiliate  |  |      | (2,624  | ) |      |   | (2,129  | )
|Other                                |  |      | (4,769  | ) |      |   | (3,009  | )
|                                     |  |      |         |   |      |   |         |  
|Total gross deferred tax liabilities |  |      | (65,064 | ) |      |   | (59,705 | )
|                                     |  |      |         |   |      |   |         |  
|Net deferred tax liabilities         |  | $    | (54,080 | ) |      | $ | (54,110 | )
|                                     |  |      |         |   |      |   |         |  



Based on the
Companys historical pretax earnings, management believes it is more likely than not that the Company will realize the benefit of the deferred tax assets existing at December 31, 2004. Management believes the existing deductible temporary
differences will reverse during periods in which the Company generates net taxable income. Nevertheless certain tax planning or other strategies will be implemented, if necessary, to supplement income from operations to fully realize the recorded
tax benefits.



|12. | Employee Benefit and Retirement Plans
|--- | -------------------------------------



a) 401(k) Plan



The Company maintains a 401(k) savings plan (the 401(k) Plan), a tax qualified cash or deferred tax arrangement defined contribution plan
under Section 401(k) of the Internal Revenue Code of 1986, as amended. The 401(k) Plan provides the participants with benefits upon retirement, death, disability or termination of employment with the Company. Employees are eligible to participate in
the salary reduction portion of the 401(k) Plan on the first day of the calendar month following their date of hire. Participants may authorize the Company to contribute to the 401(k) Plan on their behalf a percentage of their compensation, not to
exceed the legally permissible limits.



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##### Table of Contents

|12. | Employee Benefit and Retirement Plans (Continued)
|--- | -------------------------------------------------



The 401(k) Plan provides for the Companys discretionary matching and profit sharing contributions. The Company currently matches 100% of the first
4% of the participants deferral under the 401(k) Plan and 50% of the next 2% of the participants deferral under the 401(k) Plan each year. Participants are immediately 100% vested in both their contributions and Company contributions
plus actual earnings and losses thereon. Company contributions are accrued as participant contributions are withheld and are paid in full to the trustee of the 401(k) Plan on a pay period basis. Each year the Company may elect to make additional
contributions to the 401(k) Plan. This discretionary employer contribution, if the Company makes it, is allocated to each participants account based on the participants compensation for the year relative to the compensation of all the
participants for that year. In order to share in the allocation of the discretionary employer contribution, if any, a participant must complete 1,000 hours of service in the plan year.



Plan expense for the years ended December 31, 2004, 2003 and 2002 were approximately $2,446,000, $2,247,000 and $2,235,000,
respectively.



b)    Profit Sharing
Plan



The Company sponsors a profit sharing plan under
which contributions are established based on a pool amount, equal to 8% of the Companys income before taxes, gain or loss on disposition of fixed assets, and equity in income (loss) of affiliate. The basis for determining the profit sharing
pool is subject to review and approval of the Companys board of directors. The employees share in the pool amount is based on his or her length of service with the Company during the profit sharing period. Employees who voluntarily
terminate their employment for reasons other than retirement before the end of the profit sharing period and employees whose employment is involuntarily terminated are not eligible to receive any profit sharing award. Profit sharing expense for the
years ended December 31, 2004, 2003 and 2002 were approximately $17,772,000, $891,000 and $5,215,000, respectively.



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##### Table of Contents

|13. | Selected Quarterly Financial Data (Unaudited)
|--- | ---------------------------------------------



Summarized quarterly financial data for 2004 and 2003 is as follows (dollars in thousands):



|                              |  |         |         |     |   |         |  |   |         |   |       |   |         |  |   |          
|----------------------------- |  | ------- | ------- | --- | - | ------- |  | - | ------- | - | ----- | - | ------- |  | - | ---------
|                              |  | Quarter |         |    
|                              |  | 1st     |         | 2nd |   | 3rd     |  |   | 4th     |   | Total
|2004:                         |  |         |         |     |   |         |  |   |         |   |       |   |         |  |   |          
|Net sales                     |  | $       | 234,798 |     | $ | 290,048 |  | $ | 390,255 |   |       | $ | 341,891 |  | $ | 1,256,992
|Gross profit                  |  |         | 20,406  |     |   | 52,654  |  |   | 95,004  |   |       |   | 68,612  |  |   | 236,676  
|Income from operations        |  |         | 14,071  |     |   | 46,059  |  |   | 86,106  |   |       |   | 60,715  |  |   | 206,951  
|Net income                    |  |         | 1,819   |     |   | 26,302  |  |   | 46,111  |   |       |   | 35,103  |  |   | 109,335  
|                              |  |         |         |     |  
|2003:                         |  |         |         |     |   |         |  |   |         |   |       |   |         |  |   |          
|Net sales                     |  | $       | 200,185 |     | $ | 183,411 |  | $ | 193,523 |   |       | $ | 193,668 |  | $ | 770,787  
|Gross profit                  |  |         | 20,259  |     |   | 7,793   |  |   | 1,577   |   |       |   | 13,992  |  |   | 43,621   
|Income (loss) from operations |  |         | 12,127  |     |   | 2,567   |  |   | (3,990  | ) |       |   | 7,806   |  |   | 18,510   
|Net income (loss)             |  |         | 5,364   |     |   | 20      |  |   | (3,955  | ) |       |   | 3,115   |  |   | 4,544    



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CALIFORNIA STEEL INDUSTRIES, INC.



AND SUBSIDIARY



SCHEDULE IIVALUATION
AND QUALIFYING ACCOUNTS



|                                           |  |                              |         |                          |   |                       |  |   |                        |   |            |   |  |   |        
|------------------------------------------ |  | ---------------------------- | ------- | ------------------------ | - | --------------------- |  | - | ---------------------- | - | ---------- | - |  | - | -------
|                                           |  | Balance atBeginning ofPeriod |         | Additions                |   | Deductions to Reserve |  |   | Balance atEnd ofPeriod
|                                           |  | Charged to Costs andExpenses |         | Charged to otheraccounts |   |                      
|Year ended December 31, 2004 A/R Allowance |  | $                            | 400,000 |                          | $ | 300,000               |  |  |                        | $ |           |   |  | $ | 700,000
|Year ended December 31, 2003 A/R Allowance |  |                              | 300,000 |                          |   | 322,859               |  |  |                        |   | (222,859   | ) |  |   | 400,000
|Year ended December 31, 2002 A/R Allowance |  |                              | 600,000 |                          |   | 1,204,041             |  |  |                        |   | (1,504,041 | ) |  |   | 300,000





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##### Table of Contents

SIGNATURES



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



March 28, 2005



CALIFORNIA STEEL INDUSTRIES, INC.By:

/s/    MASAKAZU KURUSHIMAMasakazu Kurushima,President and 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 the Registrant and in the capacities and on the dates indicated.



|                                         |  |                                                                                                   |  |               
|---------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                |  | Title                                                                                             |  | Date          
|                                         |  |                                                                                                  
|/s/ MASAKAZU KURUSHIMAMasakazu Kurushima |  | President and Chief Executive Officer (Principal
Executive Officer)                               |  | March 28, 2005
|                                         |  |                                                                                                  
|/s/ RICARDO BERNARDESRicardo Bernardes   |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |  | March 28, 2005
|                                         |  |                                                                                                  
|/s/ VICENTE WRIGHTVicente Wright         |  | Chairman of the Board                                                                             |  | March 28, 2005
|                                         |  |                                                                                                  
|/s/ TOSHIHIRO KABASAWAToshihiro Kabasawa |  | Director                                                                                          |  | March 28, 2005
|                                         |  |                                                                                                  
|/s/ DALTON NOSEDalton Nose               |  | Director                                                                                          |  | March 28, 2005
|                                         |  |                                                                                                  
|/s/ HIDENORI TAZAWAHidenori Tazawa       |  | Director                                                                                          |  | March 28, 2005







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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3.1         |  | Certificate of Incorporation of the Registrant as amended by Amendment to the Certificate of Incorporation filed June 6, 1984, with Delaware Secretary of State, as amended by the Certificate
of Amendment to the Certificate of Incorporation filed August 2, 1984, with the Delaware Secretary of State, as amended by the Certificate of Amendment to the Certificate of Incorporation, filed January 12, 1988, with the Delaware Secretary of
State, and as amended by the Certificate of Ownership merging California Steel Industries Tubular Products, Inc. into the Registrant, filed with the Delaware Secretary of State on December 20, 1993. (1)
|            | 
|3.2         |  | Certificate of Amendment to the Certificate of Incorporation filed July 27, 1999, with the Delaware Secretary of State. (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|            | 
|3.3         |  | Bylaws of the Registrant, as amended on July 16, 1999. (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 
|4.1         |  | Indenture dated as of April 6, 1999 between the Registrant and State Street Bank Trust Company of California, N.A., Trustee, relating to the Registrants 8% Senior Notes due April 6,
2009.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            | 
|4.2         |  | Specimen Series B note.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|            | 
|4.3         |  | Indenture, dated as of March 22, 2004, between the Registrant and U.S. Bank National Association, Trustee. (8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|            | 
|4.4         |  | Specimen Series A note  6.125% Senior Notes due 2014 (included in Exhibit 4.4). (8)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|            | 
|4.5         |  | First Supplemental Indenture dated March 19, 2004 between the Registrant and U.S. Bank National Association, a national banking association, as successor Trustee to State Street Bank and
Trust Company of California, N.A. (8)                                                                                                                                                                                                                                                                                                                                                                                                                             
|            | 
|4.6         |  | Shareholders Agreement, dated June 27, 1995, by and among Rio Doce Limited, Companhia Vale do Rio Doce, Kawasaki Steel Holdings (USA), Inc. and Kawasaki Steel
Corporation.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|            | 
|10.1        |  | Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Lending Institutions from time to time party thereto as lenders, BankBoston, N.A., in its capacity as Loan
and Collateral Agent, and Bank of America National Trust and Savings Association, in its capacity as Letter of Credit and Documentation Agent and BancBoston Robertson Stephens Inc. and NationsBanc Montgomery Securities LLC, as the
Arrangers.(1)                                                                                                                                                                                                            
|            | 
|10.2        |  | Agreement for the Purchase of Carbon Steel Slabs, dated as of December 5, 1984, by and between the Registrant and Companhia Siderurgica de Tubarão, as amended by Memorandum of
Agreement, dated as of June 7, 1985, Memorandum of Agreement No. MA-02, dated as of December 9, 1986, Memorandum of Agreement No. MA-03, dated as of December 11, 1986, Memorandum of Agreement No. MA-04, dated as of December 11, 1986, Memorandum of
Agreement No. MA-05, dated as of May 22, 1987 and Memorandum of Agreement No. MA-06, dated as of December 11, 1996.(1)                                                                                               
|            | 
|10.3        |  | Contract, dated August 20, 1990, by and between the Registrant and Seamar Shipping Corporation of Monrovia, Liberia.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|            | 
|10.4        |  | The Burlington Northern and Santa Fe Railway Company BNSFC 302606 Regulated Transportation Contract, dated as of November 19, 1998, by and between the Registrant and Burlington Northern
Railroad Company.(1)                                                                                                                                                                                                                                                                                                                                                                                                                                               



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                                                                             
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.5  |  | Equipment Lease Agreement, dated as of September 30, 1998, by and between the Registrant and State Street Bank and Trust Company of California, National Association.(1)                                                                                                                                                                                                    
|      | 
|10.6  |  | Settlement Agreement, dated as of June 1, 1995, by and among the Registrant, Kaiser Ventures, Inc., KSC Recovery, Inc. and Kaiser Steel Land Development, Inc.(1)                                                                                                                                                                                                           
|      | 
|10.7  |  | Groundwater Indemnity Agreement, dated as of June 1, 1995, between the Registrant and Kaiser Ventures, Inc.(1)                                                                                                                                                                                                                                                              
|      | 
|10.8  |  | A 1996 Expedited Remedial Action Voluntary Enforceable Agreement, by and among the Registrant and the California Environmental Protection Agency, Department of Toxic Substances
Control.(1)                                                                                                                                                                                
|      | 
|10.9  |  | Purchase Agreement dated March 30, 1999 by and among the Registrant, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancBoston Robertson Stephens Inc. and
NationsBanc Montgomery Securities LLC.(1)                                                                                                                                              
|      | 
|10.10 |  | Registration Rights Agreement dated as of April 6, 1999 by and among the Registrant, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BancBoston Robertson
Stephens Inc. and NationsBanc Montgomery Securities LLC.(1)                                                                                                                              
|      | 
|10.11 |  | Addendum No. 39, dated May 31, 2000, to Contract, dated August 20, 1990, by and between the Registrant and Seamar Shipping Corporation of Monrovia, Liberia.(2)                                                                                                                                                                                                             
|      | 
|10.12 |  | First Amendment, dated as of April 28, 2000, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, Fleet National Bank (f/k/a BancBoston,
N.A.), as loan and collateral agent for the Banks, and Bank of America National Trust and Savings Association, as documentation and letter of credit agent for the Banks.(2)  
|      | 
|10.13 |  | Amendment to Supplemental Executive Retirement Plan, dated October 10, 2000, between the Registrant and James E. Declusin.(3)                                                                                                                                                                                                                                               
|      | 
|10.14 |  | Supplemental Executive Retirement Plan, dated as of September 19, 2000, between the Registrant and Brett J. Guge.(3)                                                                                                                                                                                                                                                        
|      | 
|10.15 |  | The Burlington Northern and Santa Fe Railway Company BNSFC 302606Amendment 1 Regulated Transportation Contract, dated as of January 15, 2001, by and between the Registrant and The
Burlington Northern and Santa Fe Railway Company (4)                                                                                                                                   
|      | 
|10.16 |  | Second Amendment, dated as of March 12, 2001, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, Fleet National Bank (f/k/a BankBoston,
N.A.), as loan and collateral agent for the Banks, and Bank of America National Trust and Savings Association, as documentation and letter of credit agent for the Banks. (5)
|      | 
|10.17 |  | Fourth Amendment to Revolving Credit Agreement dated September 26, 2001, among the Registrant, the Banks named therein, Bank of America, N.A., as loan and collateral agent for the Banks, and
Bank of America, N.A., as documentation and letter of credit agent for the Banks. (5)                                                                                        
|      | 
|10.18 |  | Fifth Amendment, dated as of March 22, 2002, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, and Bank of America National Trust and
Savings Association, as loan and collateral agent and as documentation and letter of credit agent for the Banks. (7)                                                          



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##### Table of Contents

|      |  |                                                                                                                                                                                                                                                                                                                   
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19 |  | The Burlington Northern and Santa Fe Railway Company BNSFC 302606Amendment 2 Regulated Transportation Contract, dated as of September 4, 2002, by and between the Registrant and The
Burlington Northern and Santa Fe Railway Company. (10)                                                                      
|      | 
|10.20 |  | Sixth Amendment, dated as of July 17, 2003, to Revolving Credit Agreement, dated as of March 10, 1999, among the Registrant, the Banks named therein, and Bank of America National Trust and
Savings Association, as loan and collateral agent and as documentation and letter of credit agent for the Banks. (10)
|      | 
|10.21 |  | Supplemental Executive Retirement Plan, dated as of January 16, 2003, between the Registrant and James L. Wilson (10)                                                                                                                                                                                             
|      | 
|10.22 |  | Call and Put Option Agreement dated October 14, 2004 between Arcelor (a company organized under the laws of the Luxembourg) and California Steel Industries, Inc. (9)                                                                                                                                             
|      | 
|10.23 |  | Waiver dated October 14, 2004 executed by California Steel Industries, Inc., in favor of Arcelor. (9)                                                                                                                                                                                                             
|      | 
|14.1  |  | Code of Ethics.                                                                                                                                                                                                                                                                                                   
|      | 
|21.1  |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                   
|      | 
|31.1  |  | Certification of President and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 
|      | 
|31.2  |  | Certification of Executive Vice President, Finance pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                     
|      | 
|32.1  |  | Certification of President and Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                 
|      | 
|32.2  |  | Certification of Executive Vice President, Finance pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                     

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|(1) | Incorporated by reference to the Registrants Registration Statement on Form S-4, File No. 333-79587, as filed with the Securities and Exchange Commission on May 28, 1999, as
amended.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended June 30, 2000, as filed with the Securities and Exchange Commission on August
4, 2000.
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|(3) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended September 30, 2000, as filed with the Securities and Exchange Commission on
October 27, 2000.
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|(4) | Incorporated by reference to the Registrants Annual Report on Form 10-K, for the year ended December 31, 2000, as filed with the Securities and Exchange Commission on March
29, 2001.
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|(5) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended September 30, 2001, as filed with the Securities and Exchange Commission on
November 9, 2001.
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|(6) | Incorporated by reference to the Registrants Annual Report on Form 10-K, for the year ended December 31, 2001, as filed with the Securities and Exchange Commission on March
28, 2002.
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|(7) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended March 31, 2002, as filed with the Securities and Exchange Commission on April
29, 2002.
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##### Table of Contents

|(8) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on April
28, 2004.
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|(9) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the period ended September 30, 2004, as filed with the Securities and Exchange Commission on
October 15, 2004
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|(10) | Incorporated by reference to the Registrants Annual Report on Form 10-K, for the year ended December 31, 2003, as filed with the Securities and Exchange Commission on March 8,
2004.
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