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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-Q







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

For the quarterly period ended June 30, 2008

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





CALIFORNIA STEEL INDUSTRIES, INC.

(Exact name of registrant as specified in
its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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 of Registrant) |  | (Zip Code)

(909) 350-6200

(Registrants telephone number including area code)





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.    x  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated file, or a non-accelerated filer, or a smaller reporting company. See
definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer   ̈    Accelerated Filer   ̈    Non-Accelerated
Filer  x     Smaller reporting company   ̈

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of the Exchange Act.):     ̈  Yes    x  No

As of July 28, 2008, 4,000 shares of the Companys common stock, no par value, were outstanding.









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##### Table of Contents

CALIFORNIA STEEL INDUSTRIES, INC.

Table of Contents



|                                                                                               |  |     
|---------------------------------------------------------------------------------------------- |  | ----
|                                                                                               |  | Page
|PART I FINANCIAL INFORMATION                                                                   |  | 1   
|                                                                                               | 
|ITEM 1.  FINANCIAL STATEMENTS                                                                  |  | 1   
|                                                                                               | 
|Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007                           |  | 1   
|                                                                                               | 
|Statements of Income for the three and six months ended June 30, 2008 and 2007 (unaudited)     |  | 2   
|                                                                                               | 
|Statements of Cash Flows for the six months ended June 30, 2008 and 2007 (unaudited)           |  | 3   
|                                                                                               | 
|Notes to Financial Statements (unaudited)                                                      |  | 4   
|                                                                                               | 
|ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 7   
|                                                                                               | 
|ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 11  
|                                                                                               | 
|ITEM 4.  CONTROLS AND PROCEDURES                                                               |  | 12  
|                                                                                               | 
|PART II OTHER INFORMATION                                                                      |  | 13  
|                                                                                               | 
|ITEM 1.  LEGAL PROCEEDINGS                                                                     |  | 13  
|                                                                                               | 
|ITEM 5.  OTHER MATTERS                                                                         |  | 13  
|                                                                                               | 
|ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K                                                      |  | 13  
|                                                                                               | 
|SIGNATURE                                                                                      |  | 14  
|                                                                                               | 
|INDEX TO EXHIBITS                                                                              |  | 15  
|                                                                                               | 
|EXHIBITS                                                                                       |  |     



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PART I FINANCIAL INFORMATION

|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

CALIFORNIA STEEL INDUSTRIES, INC.

Balance Sheets

(In thousands except share and per share data)



|                                                                                           |  |              |         |                  |   |        
|------------------------------------------------------------------------------------------ |  | ------------ | ------- | ---------------- | - | -------
|                                                                                           |  | June 30,2008 |         | December 31,2007
|                                                                                           |  | (Unaudited)  |         |                 
|Assets                                                                                     |  |              |         |                  |   |        
|Current assets                                                                             |  |              |         |                  |   |        
|Cash and cash equivalents                                                                  |  | $            | 160,176 |                  | $ | 13,630 
|Trade accounts receivable, less allowance for doubtful accounts of $675 at                 |  |              |         |                  |   |        
|June 30, 2008 and $400 at December 31, 2007                                                |  |              | 112,483 |                  |   | 67,365 
|Inventories, net                                                                           |  |              | 205,324 |                  |   | 271,949
|Prepaid income taxes                                                                       |  |              |        |                  |   | 14,495 
|Other receivables and prepaid expenses                                                     |  |              | 1,836   |                  |   | 3,914  
|                                                                                           |  |              |         |                  |   |        
|Total current assets                                                                       |  |              | 479,819 |                  |   | 371,353
|Other assets                                                                               |  |              | 4,825   |                  |   | 5,001  
|Property, plant and equipment, net                                                         |  |              | 243,260 |                  |   | 247,064
|                                                                                           |  |              |         |                  |   |        
|Total assets                                                                               |  | $            | 727,904 |                  | $ | 623,418
|                                                                                           |  |              |         |                  |   |        
|                                                                                           |  |             
|Liabilities and Stockholders Equity                                                       |  |              |         |                  |   |        
|Current liabilities                                                                        |  |              |         |                  |   |        
|Accounts payable                                                                           |  | $            | 78,611  |                  | $ | 51,936 
|Accrued interest expense                                                                   |  |              | 3,044   |                  |   | 2,838  
|Accrued utilities                                                                          |  |              | 5,086   |                  |   | 3,159  
|Income taxes payable                                                                       |  |              | 6,953   |                  |   |       
|Deferred income taxes                                                                      |  |              | 2,583   |                  |   | 2,583  
|Other accrued expenses                                                                     |  |              | 7,574   |                  |   | 6,262  
|                                                                                           |  |              |         |                  |   |        
|Total current liabilities                                                                  |  |              | 103,851 |                  |   | 66,778 
|                                                                                           |  |              |         |                  |   |        
|Other liabilities                                                                          |  |              | 2,988   |                  |   | 2,924  
|Long-term debt                                                                             |  |              | 190,000 |                  |   | 176,500
|Deferred income taxes                                                                      |  |              | 49,794  |                  |   | 49,794 
|Commitments and contingencies                                                              |  |              |         |                  |   |        
|                                                                                           |  |             
|Stockholders equity                                                                       |  |              |         |                  |   |        
|Class A preferred stock, $10,000 par value per share. Authorized 1,000 shares; none issued |  |              |        |                  |   |       
|Class B preferred stock, $10,000 par value per share. Authorized 2,000 shares; none issued |  |              |        |                  |   |       
|Class C preferred stock, $10,000 par value per share. Authorized 3,000 shares; none issued |  |              |        |                  |   |       
|Common stock, no par value. Authorized 5,000 shares; 4,000 shares issued and outstanding   |  |              | 40,000  |                  |   | 40,000 
|Retained earnings                                                                          |  |              | 341,271 |                  |   | 287,422
|                                                                                           |  |              |         |                  |   |        
|Total stockholders equity                                                                 |  |              | 381,271 |                  |   | 327,422
|                                                                                           |  |              |         |                  |   |        
|Total liabilities and stockholders equity                                                 |  | $            | 727,904 |                  | $ | 623,418
|                                                                                           |  |              |         |                  |   |        

See accompanying notes to financial statements.



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CALIFORNIA STEEL INDUSTRIES, INC.

Statements of Income

(In thousands)



|                                                     |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                     |  | Three months endedJune 30, |         |   | Six months endedJune 30, |  
|                                                     |  | (Unaudited)                |        
|                                                     |  | 2008                       |         |   | 2007                     |   |         | 2008 |  |   | 2007    |  
|Net sales                                            |  | $                          | 431,118 |   |                          | $ | 335,792 |      |  | $ | 800,315 |   |  | $ | 650,475 |  
|Cost of sales                                        |  |                            | 352,153 |   |                          |   | 310,827 |      |  |   | 695,404 |   |  |   | 615,056 |  
|                                                     |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Gross profit                                         |  |                            | 78,965  |   |                          |   | 24,965  |      |  |   | 104,911 |   |  |   | 35,419  |  
|Selling, general and administrative expenses         |  |                            | 8,023   |   |                          |   | 7,068   |      |  |   | 14,847  |   |  |   | 14,926  |  
|Loss on disposition of property, plant and equipment |  |                            | 304     |   |                          |   | 76      |      |  |   | 2,105   |   |  |   | 201     |  
|                                                     |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Income from operations                               |  |                            | 70,638  |   |                          |   | 17,821  |      |  |   | 87,959  |   |  |   | 20,292  |  
|Other (expense) income:                              |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Interest expense, net                                |  |                            | (2,065  | ) |                          |   | (2,416  | )    |  |   | (4,518  | ) |  |   | (5,354  | )
|Other, net                                           |  |                            | 1,536   |   |                          |   | (1,145  | )    |  |   | 2,711   |   |  |   | 1,480   |  
|                                                     |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Income before income tax expense                     |  |                            | 70,109  |   |                          |   | 14,260  |      |  |   | 86,152  |   |  |   | 16,418  |  
|Income tax expense                                   |  |                            | 25,868  |   |                          |   | 6,085   |      |  |   | 32,303  |   |  |   | 6,937   |  
|                                                     |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income                                           |  |                            | 44,241  |   |                          |   | 8,175   |      |  |   | 53,849  |   |  |   | 9,481   |  
|                                                     |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  

See accompanying notes to financial statements.



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CALIFORNIA STEEL INDUSTRIES, INC.

Statements of Cash Flows

(In
thousands)



|                                                                                 |  |                          |         |   |      |   |         |  
|-------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                 |  | Six months endedJune 30, |        
|                                                                                 |  | 2008                     |         |   | 2007 |  
|                                                                                 |  | (Unaudited)              |        
|Cash flows from operating activities:                                            |  |                          |         |   |      |   |         |  
|Net income                                                                       |  | $                        | 53,849  |   |      | $ | 9,481   |  
|Adjustments to reconcile net income to net cash provided by operating activities |  |                          |         |   |      |   |         |  
|Depreciation and amortization                                                    |  |                          | 16,379  |   |      |   | 15,510  |  
|Loss on disposition of property, plant and equipment                             |  |                          | 2,105   |   |      |   | 201     |  
|Change in assets and liabilities:                                                |  |                          |         |   |      |   |         |  
|Trade accounts receivable, net                                                   |  |                          | (45,118 | ) |      |   | 7,930   |  
|Inventories, net                                                                 |  |                          | 66,625  |   |      |   | 21,433  |  
|Other receivables and prepaid expenses                                           |  |                          | 2,078   |   |      |   | 948     |  
|Accounts payable                                                                 |  |                          | 26,675  |   |      |   | 16,272  |  
|Income taxes payable                                                             |  |                          | 21,448  |   |      |   | 4,558   |  
|Accrued interest expense                                                         |  |                          | 206     |   |      |   | (118    | )
|Other accrued expenses and liabilities                                           |  |                          | 3,303   |   |      |   | (2,994  | )
|                                                                                 |  |                          |         |   |      |   |         |  
|Net cash provided by operating activities                                        |  |                          | 147,550 |   |      |   | 73,221  |  
|                                                                                 |  |                          |         |   |      |   |         |  
|Cash flows from investing activities:                                            |  |                          |         |   |      |   |         |  
|Additions to property, plant and equipment                                       |  |                          | (12,466 | ) |      |   | (12,899 | )
|Removal cost for the sale of property, plant and equipment                       |  |                          | (2,038  | ) |      |   | (187    | )
|Additions to intangible assets                                                   |  |                          |        |   |      |   | (72     | )
|                                                                                 |  |                          |         |   |      |   |         |  
|Net cash used in investing activities                                            |  |                          | (14,504 | ) |      |   | (13,158 | )
|                                                                                 |  |                          |         |   |      |   |         |  
|Cash flows from financing activities:                                            |  |                          |         |   |      |   |         |  
|Net repayments on line-of-credit                                                 |  |                          | (26,500 | ) |      |   |        |  
|Borrowings of long-term debt                                                     |  |                          | 40,000  |   |      |   |        |  
|Dividends paid                                                                   |  |                          |        |   |      |   | (21,183 | )
|                                                                                 |  |                          |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                              |  |                          | 13,500  |   |      |   | (21,183 | )
|                                                                                 |  |                          |         |   |      |   |         |  
|Net increase in cash and cash equivalents                                        |  |                          | 146,546 |   |      |   | 38,880  |  
|Cash and cash equivalents at beginning of period                                 |  |                          | 13,630  |   |      |   | 5,561   |  
|                                                                                 |  |                          |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                       |  | $                        | 160,176 |   |      | $ | 44,441  |  
|                                                                                 |  |                          |         |   |      |   |         |  
|Supplemental disclosures of cash flow information:                               |  |                          |         |   |      |   |         |  
|Cash paid during the period for:                                                 |  |                          |         |   |      |   |         |  
|Interest (net of amount capitalized)                                             |  | $                        | 4,878   |   |      | $ | 5,506   |  
|                                                                                 |  |                          |         |   |      |   |         |  
|Income taxes                                                                     |  | $                        | 12,498  |   |      | $ | 2,260   |  
|                                                                                 |  |                          |         |   |      |   |         |  

See accompanying notes to financial statements.



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CALIFORNIA STEEL INDUSTRIES, INC.

Notes To Financial Statements (Unaudited)

1.
Basis of Presentation

The accompanying unaudited financial statements of California Steel Industries, Inc. as of June 30,
2008 and December 31, 2007 (audited) and for the three and six months ended June 30, 2008 and 2007 have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and
the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. However, the information reflects all adjustments
(consisting only of normal recurring adjustments) that, in the opinion of management, are necessary to present fairly the financial position and results of operations for the periods indicated.

The accompanying financial statements should be read in conjunction with the audited financial statements and notes thereto contained in California Steel
Industries, Inc.s Form 10-K for the year ended December 31, 2007. Results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of results expected for the full year ending December 31,
2008.

Certain items in prior year financial statements have been reclassified to conform to the current year presentation.

2. New Accounting Pronouncements

In December
2007, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 141 (revised 2007), Business Combinations (SFAS 141R). SFAS 141R
establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS
141R also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective for fiscal years beginning after December 15, 2008, and is required to be adopted by
the Company in the first quarter of fiscal year 2009, beginning January 1, 2009. The Company is currently evaluating the effect that the adoption of SFAS 141R will have on its results of operation and financial position or cash flows, but does
not expect it to have a material impact.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements  an amendment of Accounting Research Bulletin No. 51 (SFAS 160). SFAS 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by
parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest, changes in a parents ownership interest and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS 160 is effective for fiscal years
beginning after December 15, 2008, and is required to be adopted by the Company in the first quarter of fiscal year 2009, beginning January 1, 2009. The Company is currently evaluating the effect that the adoption of SFAS 160 will have on
its results of operation and financial position or cash flows, but does not expect it to have a material impact.

In December 2007, the
FASB ratified Emerging Issues Task Force (EITF) Issue No. 07-1, Accounting for Collaborative Arrangements (EITF 07-1). EITF 07-1 provides accounting guidance on collaborative arrangements within the
scope of this Issue on the classification of the payments between participants of the arrangement, the appropriate income statement presentation as well as disclosures related to these arrangements. EITF 07-1 is effective for fiscal years beginning
after December 15, 2008 and will be adopted by the Company in the first quarter of fiscal year 2009. The Company is currently evaluating the potential impact, if any, of the adoption of EITF 07-1 on its results of operations and financial
condition.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities
 an amendment of FASB Statement No. 133 (SFAS 161). SFAS 161 establishes disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced disclosures about
(a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations, and (c) how derivative instruments and related
hedged items affect an entitys financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, and is required to be
adopted by the Company in the first quarter of fiscal year 2009, beginning January 1, 2009. The Company is currently evaluating the effect that the adoption of SFAS 161 will have on its results of operation and financial position or cash flows,
but does not expect it to have a material impact.



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In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS
157). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. SFAS 157 does not require any new fair value measurements, but rather eliminates inconsistencies in
guidance found in various prior accounting pronouncements. SFAS 157 is effective for fiscal years beginning after November 15, 2007; however, FASB Staff Position FAS 157-2 Effective Date of FASB Statement No. 157 delayed
the effective date of SFAS 157 for most nonfinancial assets and nonfinancial liabilities until fiscal years beginning after November 15, 2008.

SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in
active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Companys assumptions used to measure assets and liabilities at fair value. A financial asset or liabilitys
classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

At
June 30, 2008, the Companys hedges (see note 5) are carried at fair value measured on a recurring basis. Fair values are determined through the use of models that consider various assumptions, including time value, yield curves, as well
as other relevant economic measures, which are inputs that are classified as Level 2 in the valuation hierarchy.

In April 2008, the FASB
Staff Position (FSP) issued SFAS No. 142-3, Determination of the Useful Life of Intangible Assets (FSP SFAS 142-3). FSP SFAS 142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, Goodwill and Other Intangible Assets. The intent of FSP SFAS 142-3 is to improve the consistency between the useful
life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 (revised 2007), Business Combinations, and other U.S. generally
accepted accounting principles (GAAP). FSP SFAS 142-3 is effective for fiscal years beginning after December 15, 2008 and will be adopted by the Company in the first quarter of fiscal year 2009. The Company is currently evaluating
the effect that the adoption of FSP SFAS 142-3 will have on its results of operation and financial position or cash flows, but does not expect it to have a material impact.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Principles (SFAS 162). SFAS 162
identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles
(the GAAP hierarchy). SFAS 162 will become effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU 411, the Meaning of Present Fairly in Conformity With Generally Accepted
Accounting Principles. The Company does not expect the adoption of SFAS 162 to have a material effect on its results of operations and financial condition.

In May 2008, the FASB issued FSP Accounting Principles Board (APB) 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (FSP APB 14-1). FSP ABP 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and (conversion
option) components of the instrument in a manner that reflects the issuers non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis and will be adopted by the
Company in the first quarter of fiscal year 2009. The Company is currently evaluating the potential impact, if any, of the adoption of FSP APB 14-1 on its results of operations and financial condition.



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3. Inventories

Inventories are stated at the lower of cost (determined under the first-in, first-out method of accounting) or market value and consist of the following (in thousands):



|                   |  |              |         |                  |   |         |  
|------------------ |  | ------------ | ------- | ---------------- | - | ------- | -
|                   |  | June 30,2008 |         | December 31,2007 |  
|                   |  | (Unaudited)  |         |                  |  
|Finished goods     |  | $            | 23,402  |                  | $ | 23,400  |  
|Work in process    |  |              | 43,601  |                  |   | 44,330  |  
|Raw materials      |  |              | 107,699 |                  |   | 178,774 |  
|Supplies           |  |              | 30,622  |                  |   | 26,402  |  
|                   |  |              |         |                  |   |         |  
|                   |  |              | 205,324 |                  |   | 272,906 |  
|Inventory reserves |  |              |        |                  |   | (957    | )
|                   |  |              |         |                  |   |         |  
|Total              |  | $            | 205,324 |                  | $ | 271,949 |  
|                   |  |              |         |                  |   |         |  

4. Credit Facility

On March 28, 2008, the Company entered into a Term Loan Agreement with The Bank of Tokyo-Mitsubishi, Ltd. For a $40,000,000 unsecured five-year term loan to finance construction of the second reheat furnace and
other working capital needs. The Term Loan Agreement provides for a single loan disbursement of the entire principal amount on April 1, 2008. Interest on the principal balance of the loan shall accrue at a rate of 3.38% for the first two years
of the loan and a rate of 3.58% for the remaining three years of the loan. Quarterly principal payments commence in July 2009 and the Term Loan matures in April 2013.

In September 2005, the Company entered into a five year $110,000,000 credit facility with a bank group led by Mizuho Corporate Bank, as administrative agent and a lender, The Bank of Tokyo-Mitsubishi, Ltd., Citibank
(West), FSB and Wells Fargo Bank. Subject to the satisfaction of customary conditions and a borrowing base, advances under this facility may be made at any time prior to the credit facility termination date. There were no outstanding borrowings
under the credit facility as of June 30, 2008. The credit facility is collateralized by accounts receivable and inventory. Advances under this facility may be used for letters of credit, working capital, capital expenditures, payment of
dividends and other lawful corporate purposes, including the refinancing of existing debt. The facility requires that the Company maintain certain financial ratios and other financial covenants. The Company was in compliance with all the covenants
at June 30, 2008.

5. Commitments and Contingencies

At June 30, 2008, the Company is committed in the form of open purchase orders, to purchase approximately $488,937,000 in steel and other goods and services, of which $35,627,000 are 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. Some of these forward contracts do not require derivative accounting as the Company takes possession of the commodities in the normal course of business whereas other forward contracts are accounted for
as derivatives in accordance with SFAS No 133 by the Company. None of the Companys current contracts are designated as hedges. As of June 30, 2008, the fair value of these contracts was an asset of approximately $421,000.

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 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. 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 the 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 other liabilities at June 30, 2008 and December 31, 2007. The DTSC has not yet completed its review
and approval of the Companys remediation plan; however, preliminary discussions



6



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between the DTSC and the Company have not indicated the need for any significant changes to the remediation plan or 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 claim settlement practice. Significant judgment is required to estimate IBNR claims as parties have yet to assert such claims. If actual trends, including the severity or frequency of claims, differ from
managements estimates, the Companys financial results could be impacted.

6. Income Taxes

The Company accounts for uncertain tax positions in accordance with FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
an interpretation of SFAS No. 109 (FIN 48). The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. As of June 30, 2008, the
Company does not have any unrecognized tax benefits. As of December 31, 2007, the balance of the Companys unrecognized tax benefits was $1,590,000. The decrease in the unrecognized tax benefits is due to the completion of audits that were
in progress as of December 31, 2007 and the expiration of the statute of limitations. The entire decrease of $1,590,000 reduced the Companys effective tax rate. The tax years 2005 through 2007 remain open to examination by the major
taxing jurisdictions to which the Company is subject.



|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

Forward-Looking Statements

Certain statements contained in this Form 10-Q may contain
forward-looking statements about the Companys current and expected performance trends, growth plans, business goals and other matters. These statements may contain 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, management is identifying important risk factors that could cause the
Companys 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 risk
factors 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
the Companys subsequent filing with the Securities and Exchange Commission. Because of these risk factors, management cautions against placing undue reliance on forward-looking statements. Although management believes 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. Management does 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 the Companys operating results and the environment within which the Company conducts its
business:



| |  |  | Fluctuations in raw materials and freight prices as a result of changes industry dynamics, increased oil prices and global steel consumption;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



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



| |  |  | The possibility of deadlocks among the Companys 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 the board currently consisting of four members as elected by the Companys two stockholders, each of whom holds 50% of the Companys stock;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fluctuations in commodity prices for the Companys 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;
| | - |  | ------------------------------------------



| |  |  | The 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 the Companys goods, including the ongoing armed conflict in Iraq and security concerns related to the continuing response of governments to the threat of terrorism and
instability in certain regions of the world; 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 the Companys reported financial results.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Results of Operations



|            |  |                                       |  |                                     |  |         |  |        
|----------- |  | ------------------------------------- |  | ----------------------------------- |  | ------- |  | -------
|            |  | Tons BilledThree months endedJune 30, |  | Tons BilledSix months endedJune 30,
|            |  | 2008                                  |  | 2007                                |  | 2008    |  | 2007   
|Hot Rolled  |  | 169,930                               |  | 159,530                             |  | 346,161 |  | 323,779
|Cold Rolled |  | 45,681                                |  | 44,750                              |  | 103,721 |  | 79,942 
|Galvanized  |  | 146,853                               |  | 179,801                             |  | 314,471 |  | 356,690
|ERW Pipe    |  | 70,307                                |  | 59,251                              |  | 133,380 |  | 115,851
|            |  |                                       |  |                                     |  |         |  |        
|Total       |  | 432,771                               |  | 443,332                             |  | 897,733 |  | 876,262
|            |  |                                       |  |                                     |  |         |  |        

Net sales.Net sales for the three months ended June 30, 2008 increased $95,326,000, or
28.4%, to $431,118,000 as compared to $335,792,000 for the three months ended June 30, 2007. Year-to-date net sales increased $149,840,000, or 23.0% to $800,315,000 for the six months ended June 30, 2008 as compared to $650,475,000 for the
six months ended June 30, 2007. Billed tons decreased by 10,561 net tons, or 2.4%, for the three months ended June 30, 2008 compared to the three months ended June 30, 2007 which decreased net sales by $8,125,000. Year-to-date billed
tons increased by 21,471 net tons, or 2.5%,



8



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for the six months ended June 30, 2008 compared to the six months ended June 30, 2007 which increased net sales by $14,862,000. The average unit
price was higher for the three and six months ended June 30, 2008, compared to the three and six months ended June 30, 2007. The higher average unit price increased net sales approximately $104,853,000 for the three months and $132,952,000
for the six months ended June 30, 2008. Additionally, higher value product mix increased net sales approximately $1,074,000 for the three months ended June 30, 2008 compared to the three months ended June 30, 2007. Year-to-date net
sales decreased $536,000 due to lower value product mix during the six months ended June 30, 2008 compared to the six months ended June 30, 2007.

Gross profit. Gross profit for the three months ended June 30, 2008 increased $54,000,000, or 216.3%, to $78,965,000 as compared to $24,965,000 for the three months ended June 30, 2007. Year-to-date gross
profit increased $69,492,000, or 196.2%, to $104,911,000 for the six months ended June 30, 2008 compared to $35,419,000 for the six months ended June 30, 2007. Gross profit as a percentage of net sales increased to 18.3% for the three
months ended June 30, 2008 from 7.4% for the three months ended June 30, 2007 and to 13.1% for the six months ended June 30, 2008 from 5.4% for the six months ended June 30, 2007. The increase in gross profit is attributable to
the higher average selling price, which was partially offset by the increase in raw material consumption costs.

Selling, general and administrative
expenses (SG&A). Selling, general and administrative expenses for the three months ended June 30, 2008 increased $955,000, or 13.5%, to $8,023,000 as compared to $7,068,000 for the three months ended June 30, 2007.
Year-to-date SG&A expenses decreased $79,000, or 0.5%, to $14,847,000 for the six months ended June 30, 2008 compared to $14,926,000 for the six months ended June 30, 2007. SG&A as a percentage of net sales was 1.9% for the three
and six months ended June 30, 2008 as compared to 2.1% and 2.3% for the three and six months ended June 30, 2007. There was no single factor which attributed to this decrease except for the increase in net sales due to the higher average
sales price.

Interest expense, net. Interest expense for the three months ended June 30, 2008 decreased $351,000, or 14.5%, to
$2,065,000 as compared to $2,416,000 for the three months ended June 30, 2007. Year-to-date interest expense decreased $836,000, or 15.6%, to $4,518,000 for the six months ended June 30, 2008 as compared to $5,354,000 for the six months
ended June 2007. The decrease is largely attributable to a lower average interest rate and higher interest income during the three and six months ended June 30, 2008 compared to the three and six months ended June 30, 2007. Interest
expense is net of interest income and capitalized interest. Interest income for the three and six months ended June 30, 2008 was $639,000 and $742,000, respectively, compared to $189,000 and $210,000 for the three and six months ended
June 30, 2007. Capitalized interest for the three and six months ended June 30, 2008 was $101,000 and $168,000, respectively, as compared to $20,000 and $43,000 for the three and six months ended June 30, 2007.

Other income.Other income, net for the three months ended June 30, 2008 increased $2,681,000, or 234.1%, to $1,536,000 as compared to an
expense of $1,145,000 for the three months ended June 30, 2007. Year-to-date other income increased $1,231,000, or 83.2%, to $2,711,000 for the six months ended June 30, 2008 as compared to $1,480,000 for the six months ended June 20,
2007. Other income is comprised of miscellaneous income items such as rental income, proceeds from legal settlements, refund from anti dumping subsidy, refund of property taxes, 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 period to period.

Income taxes.Due to higher income
before taxes, the Companys income tax expense increased $19,783,000 to $25,868,000 for the three months ended June 30, 2008 from $6,085,000 for the three months ended June 30, 2007. As a result of higher income before taxes,
year-to-date income tax expense increased $25,366,000 to $32,303,000 for the six months ended June 30, 2008 from $6,937,000 for the six months ended June 30, 2007. The effective tax rate was 36.9% and 37.5% for the three and six months
ended June 30, 2008 compared to 42.7% and 42.3% for the three and six months ended June 30, 2007. The decrease in the effective tax rate is attributable to (i) an increase in the deduction of permanent differences as a percentage of
pre-tax book income, which is significantly greater in 2008 compared to 2007, and (ii) a credit resulting from the expiration of the statute of limitations in connection with an unrecognized tax benefit of $1,230,000.

Net income. Net income for the three and six months ended June 30, 2008 was $44,241,000 and $53,849,000, respectively, compared to net income
of $8,175,000 and $9,481,000 for the three and six months ended June 30, 2007.

Certain Liquidity and Capital Resources

At June 30, 2008, the Company had $160,176,000 in cash and cash equivalents and over $109,250,000 in financing available under its credit facility.
During the six months ended June 30, 2008, cash flows provided by operating activities were $147,550,000 which consisted of generation of cash flow of $53,849,000 in net income, $16,379,000 in depreciation and amortization expense, $2,105,000
on the loss on the disposition of property, plant and equipment and $75,217,000 due to changes in assets and liabilities. Changes in assets and liabilities which increased operating cash flow were a $66,625,000 decrease in inventories, a $2,078,000
decrease in other receivables and prepaid expenses, a $26,675,000 increase in accounts



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payable, a $21,448,000 increase in income tax payable, a $206,000 increase in accrued interest expense and a $3,303,000 increase in other accrued expenses
and liabilities. Changes in assets and liabilities which decreased operating cash flow were a $45,118,000 increase in accounts receivable. Cash flows used in investing activities during the six months ended June 30, 2008 consisted of
$12,466,000 of capital expenditures and $2,038,000 for removal cost on the disposition of property, plant and equipment. Cash flows from financing activities during the six months ended June 30, 2008 consisted of $26,500,000 net payments under
the revolver and borrowings of $40,000,000 on the new term loan which was funded on April 1, 2008. This term loan is with The Bank of Tokyo-Mitsubishi, Ltd. and is an unsecured five-year term loan which will be used to finance construction of
the second reheat furnace and other working capital needs. During the six months ended June 30, 2008, the Company also made interest payments of $4,593,750 on its 6.125% senior notes due in 2014.

The Company maintains a five year $110,000,000 credit facility, which expires in September 2010, with a bank group led by Mizuho Corporate Bank, as
administrative agent and a lender, The Bank of Tokyo-Mitsubishi, Ltd., Citibank (West), FSB and Wells Fargo Bank. Subject to satisfaction of customary conditions and a borrowing base, advances under this new credit facility may be made at any time
prior to the credit facility termination date. There were no borrowings under the credit facility as of June 30, 2008. The credit facility is collateralized by account receivable and inventory. Advances under this facility may be used for
letters of credit, working capital, capital expenditures, payment of dividends and other lawful corporate purposes, including the refinancing of existing debt. The facility requires that the Company maintain certain financial ratios and other
financial covenants. The Company was in compliance with all the covenants at June 30, 2008.

The Company has outstanding an aggregate
of $150,000,000 of ten-year, 6.125% senior unsecured notes due in March 2014. Interest on the Companys 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 the
Companys subordinated indebtedness and equal in right of payment to all of its 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. The
indenture governing the notes contains covenants that limit the Companys ability to incur additional indebtedness, pay dividends, redeem or repurchase capital stock and make investments, create liens, sell assets, sell capital stock of certain
subsidiaries, engage in transactions with affiliates and consolidate, merge or transfer all or substantially all of its assets and the assets of certain subsidiaries on a consolidated basis. The Company was in compliance with all the bank covenants
at June 30, 2008.

The Company currently has approximately $40,898,000 in material commitments for capital expenditures expected to be
completed during fiscal year 2008. These represent signed purchase orders for various production facility upgrades. The Companys total budget for capital improvements in 2008 is approximately $51,076,000, of which $31,076,000 relates to the
second reheat furnace.

The Company anticipates that its primary liquidity requirements will be for working capital, capital expenditures,
debt service and payment of dividends. The Company believes that cash generated from operations and available borrowing under its credit facility will be sufficient to enable it to meet its liquidity requirements for fiscal year 2008.



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##### Table of Contents

Commitments and Contingencies

The following table represents a comprehensive list of the Companys contractual obligations and commitments as of June 30, 2008 (in thousands):



|                                                                                   |  |       |         |                |   |          |  |          |        |                 |   |        |  |   |        
|---------------------------------------------------------------------------------- |  | ----- | ------- | -------------- | - | -------- |  | -------- | ------ | --------------- | - | ------ |  | - | -------
|                                                                                   |  | Total |         | LessThan 1Year |   | 1-3Years |  | 3-5Years |        | MoreThan 5Years
|Long Term Debt                                                                     |  | $     | 190,000 |                | $ |         |  | $        | 20,000 |                 | $ | 20,000 |  | $ | 150,000
|Capital Lease Obligations                                                          |  |       |        |                |   |         |  |          |       |                 |   |       |  |   |       
|Operating Leases                                                                   |  |       | 839     |                |   | 573      |  |          | 266    |                 |   |       |  |   |       
|Purchase Obligations (1)                                                           |  |       | 488,937 |                |   | 488,937  |  |          |       |                 |   |       |  |   |       
|Estimated Interest Payments on Debt (2)                                            |  |       | 56,834  |                |   | 10,559   |  |          | 20,572 |                 |   | 19,196 |  |   | 6,507  
|Planned Expenditures on Environmental Matters (3)                                  |  |       | 1,800   |                |   |         |  |          | 800    |                 |   | 1,000  |  |   |       
|Other Long Term Liabilities Reflected on the Registrants Balance Sheet under GAAP |  |       | 1,260   |                |   | 72       |  |          | 145    |                 |   | 145    |  |   | 898    
|                                                                                   |  |       |         |                |   |          |  |          |        |                 |   |        |  |   |        
|Total                                                                              |  | $     | 739,670 |                | $ | 500,141  |  | $        | 41,783 |                 | $ | 40,341 |  | $ | 157,405
|                                                                                   |  |       |         |                |   |          |  |          |        |                 |   |        |  |   |        



|(1) | Amounts relate to contractual commitments to purchase $441,662,000 ($35,627,000 from a related party) of steel slabs, material commitments for capital expenditures of $40,898,000
and the remaining $6,377,000 relates to other assorted contractual commitments.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts represent the annual accrued interest on the Companys $150,000,000 ten-year, 6.125% senior unsecured notes, which are due and payable in March 2014 and the interest on
the Companys $40,000,000 five-year unsecured term loan maturing in April 2013.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 Note 5 to the Financial Statements.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Critical Accounting Policies

Managements Discussion and Analysis of Financial Condition and Results of Operations discusses the Companys unaudited financial statements,
which have been prepared in accordance with U.S. generally accepted accounting principles. When the financial statements are prepared, the Company is required to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates and
judgments, including those related to allowance for doubtful accounts, inventory reserves, environmental reserve, self-insurance, and deferred tax assets. The Company basis its estimates and judgments on historical experience and on various other
factors that it believes to be reasonable under the circumstances, the results of which form the basis for the Companys judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or conditions. For further information concerning those accounting policies that the Company believes to be critical accounting policies and that affect the Companys more
significant judgments and estimates used in preparing its Financial Statements, see the Critical Accounting Policies section under Item 7 of Part II of the Companys Annual Report on Form 10-K for the period ending
December 31, 2007.



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- | ----------------------------------------------------------

The Company is exposed to market risks related to fluctuations in interest rates on its $110,000,000 floating interest rate credit facility. The Company does not currently use interest rate swaps or other types of derivative financial
instruments.

For fixed rate debt instruments such as the Companys 6.125% senior notes and term loan, changes in the interest rates
generally affect the fair value of such debt instruments. For variable rate debt such as its credit facility, changes in interest rates generally do not affect the fair value of such debt, but does affect earnings and cash flow. The Company does not
have an obligation to repay its fixed rate debt prior to maturity and, as a result, interest rate risk and changes in fair value should not have a significant impact on the Company. The Company believes that the interest rate on its 6.125% senior
notes and term loan approximate the current rates available for similar types of financing and as a result the $150,000,000 and $40,000,000, respectively, carrying amount of the senior notes and term loan approximate fair value. The carrying value
of the floating rate credit facility approximates fair value as the interest rate is variable and resets frequently. The credit facility



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bears interest at the Eurodollar rate or the prime rate, which were 3.4% (one months rate) (including margin) and 5.0%, respectively, at June 30, 2008.
The Company does not expect to borrow any money from its credit facility during the remainder of 2008, however, if the Company had to borrow and its estimated average amount of debt outstanding under the facility for the remaining of fiscal year
2008 was approximately $10,000,000, a one-percentage point increase in interest rates would result in an increase in interest expense of $100,000 for the year.

The Company does not believe that the future market rate risk related to its fixed rate debt and floating rate credit facility will have a material impact on its financial position, results of operations or liquidity.

The Companys daily average electrical demand is approximately 35 megawatts to operate production equipment in manufacturing its
products. The Company is currently a full-service bundled utility customer of Southern California Edison. During 2008, the Companys electricity costs are not expected to change materially from 2007 levels. The Companys electricity costs
as a component of cost of goods sold for the three and six months ended June 30, 2008 and 2007, respectively, were approximately 1.8% and 1.9% for 2008 and 2.2% and 2.2% for 2007.

The Company generally utilizes a daily average of approximately 12,000 million British thermal units, or MMBTUs, of natural gas to produce its
products. To stabilize price volatility, the Company regularly uses a risk management approach to fix the price on portions of its 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).

The Company currently has in place fixed-price purchase agreements for approximately 12% of its natural gas
commodity requirements for 2008, and approximately 14% of basis. The Company continues to monitor the near and long term price trends of natural gas and may enter into additional purchase agreements when the Company deems it appropriate or when
opportunities present themselves. The Companys natural gas costs as a component of cost of goods sold for the three and six months ended June 30, 2008 and 2007, respectively, were approximately 2.4% and 2.5% for 2008 and 2.2% and 2.4% for
2007.



|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

For the period ending
June 30, 2008 (the Evaluation Date), the Company carried out an evaluation, under the supervision and with the participation of its management, including the President and Chief Executive Officer and the Chief Financial Officer (the
principal finance and accounting officer), of the effectiveness of the design and operation of its disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the Exchange
Act). Based upon this evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that, as of June 30, 2008, the Companys disclosure controls and procedures were effective to ensure that
information required to be disclosed by the Company in the reports filed or submitted by the Company under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SECs rules and forms.

Additionally, the President and Chief Executive Officer and the Chief Financial Officer determined, as of June 30, 2008, that there
were no changes in the Companys internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) or in other factors that could significantly affect its internal controls over financial reporting.



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PART II OTHER INFORMATION



|ITEM 1. | LEGAL PROCEEDINGS
|------- | -----------------

The Company is from time to time
in the ordinary course of business, subject to various pending or threatened legal actions. The Company believes that any ultimate liability arising from pending or threatened legal actions should not have a material adverse effect on its financial
position, results of operations or liquidity.



|ITEM 5. | OTHER MATTERS
|------- | -------------



|(a) | During the July 2008, meeting of the Board of Directors, the Board approved a restatement of the Companys Bylaws dated as of April 1, 2008. The purpose of the restatement
was to update the Bylaws to provide for enhanced corporate governance and to conform to changes in the agreement between the Companys shareholders.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------



|(a) | Exhibits.
|--- | ---------

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



|(b) | Reports on Form 8-K.
|--- | --------------------



| | (1) | Form 8-K filed on May 8, 2008
| | --- | -----------------------------

Item 5.02(c).
Election of Directors; Appointment of Certain Officers

Announcement of appointment of Vicente Wright as Chief Executive Officer and
Masakazu Kurushima as Chairman of the Board of Directors



| | (2) | Form 8-K filed on July 15, 2008
| | --- | -------------------------------

Item 2.02.
Result of Operations and Financial Condition

Use of Non-GAAP Financial Measures in Second Quarter 2008 Financial Results disclosed in Press
Release



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SIGNATURE

Pursuant to the requirements 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.

July 28, 2008



CALIFORNIA STEEL INDUSTRIES, INC.By:

/s/ VICENTE WRIGHTVicente WrightPresident and Chief Executive Officer




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INDEX OF EXHIBITS



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|3.1            |  | Certificate of Incorporation of the Registrant, as amended by Amendment to the Certificate of Incorporation filed June 6, 1984 with the Delaware Secretary of State, as amended by the Certificate
of Amendment to the Certificate of Incorporation filed on August 2, 1984 with the Delaware Secretary of State, as amended by the Certificate of Amendment to the Certificate of Incorporation file on January 12, 1988 with the Delaware Secretary of
State, and, as amended by the Certificate of Ownership merging CSI 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. (2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|               | 
|3.3            |  | Certificate of Amendment to the Certificate of Incorporation filed July 24, 2006, with the Delaware Secretary of State. (3)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|               | 
|3.4            |  | Restated Bylaws of the Registrant dated as of April 1, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|               | 
|4.1            |  | Indenture, dated as of March 22, 2004, between the Registrant and U.S. Bank National Association, Trustee. (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|               | 
|4.2            |  | Specimen Series A note  6.125% Senior Notes due 2014 (included in Exhibit 4.4). (4)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|               | 
|4.3            |  | 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           |  | Senior Secured Revolving Credit Agreement dated as of September 29, 2005 by and among California Steel Industries, Inc., Mizuho Corporate Bank, The Bank of Tokyo-Mitsubishi, Ltd., Citibank
(West), FSB and Wells Fargo Bank. (5)                                                                                                                                                                                                                                                                                                                                                                                                         
|               | 
|10.2           |  | Term Loan Agreement dated March 28, 2008 by and among California Steel Industries, Inc., and The Bank of Tokyo-Mitsubishi, Ltd. (6)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|               | 
|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 and Chief Financial Officer 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 and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  



|(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.
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|(2) | 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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the quarter ended September 30, 2006, as filed with the Securities and Exchange Commission
on October 27, 2006.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | 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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the quarter ended September 30, 2005, as filed with the Securities and Exchange Commission
on October 28, 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to the Registrants Quarterly Report on Form 10-Q, for the quarter ended March 31, 2008, as file with the Securities and Exchange Commission on
April 25, 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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