SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q
                                   (Mark One)
                   [X] QUARTERLY REPORT PURSUANT TO SECTION 13
                 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended December 31, 2006

                                       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 0-14061

                             STEEL TECHNOLOGIES INC.
             (Exact name of registrant as specified in its charter)

                               Kentucky 61-0712014
                (State or other jurisdiction of (I.R.S. Employer
               incorporation or organization) Identification No.)

                 15415 Shelbyville Road, Louisville, KY   40245
               (Address of principal executive offices) (Zip Code)

                                 (502) 245-2110
              (Registrant's telephone number, including area code)

                                 Not applicable
--------------------------------------------------------------------------------
 (Former name, former address and former fiscal year, if changed since last
                                     report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by  Sections  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 whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the  Exchange  Act.  Large
accelerated filer __   Accelerated filer X   Non-accelerated filer __

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X].

Indicate the number of shares  outstanding  of each of the  Issuer's  classes of
common stock as of the latest practical date.

There were 13,059,257 shares outstanding of the Registrant's  common stock as of
January 31, 2007.


<PAGE>





                             STEEL TECHNOLOGIES INC.

                                      INDEX



                                                                     Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Condensed Consolidated Balance Sheets
        December 31, 2006 and September 30, 2006 ..........................  3

        Condensed Consolidated Statements of Income
        Three Months Ended December 31, 2006 and 2005 .....................  4

        Condensed Consolidated Statements of Comprehensive Income
        Three Months Ended December 31, 2006 and 2005 .....................  5

        Condensed Consolidated Statements of Cash Flows
        Three Months Ended December 31, 2006 and 2005 .....................  6

        Notes to Condensed Consolidated Financial Statements .............. 7-14

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations .............................................15-25

Item 3. Quantitative and Qualitative Disclosures About Market
        Risk .............................................................. 25

Item 4. Controls and Procedures ........................................... 25

PART II.OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders ...............25-26

Item 6. Exhibits .......................................................... 26

Signature ................................................................. 27



<PAGE>

                         Part I. - FINANCIAL INFORMATION
                          Item 1. Financial Statements

                             STEEL TECHNOLOGIES INC.
                      Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands, except shares)                         December 31   September 30
(Unaudited)                                              2006           2006
--------------------------------------------------------------------------------
 <S>                                                   <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents ...................      $   4,576       $  12,066
   Trade accounts receivable, net ..............        107,886         104,356
   Inventories .................................        168,923         181,267
   Deferred income taxes .......................          1,975           1,688
   Prepaid expenses and other assets ...........          8,187           6,607
                                                      ---------       ---------
      Total current assets .....................        291,547         305,984
                                                      ---------       ---------

Property, plant and equipment, net .............        113,971         112,642
Investments in unconsolidated affiliates .......         64,282          63,626
Goodwill .......................................         25,489          25,678
Other assets ...................................          5,472           5,687
                                                      ---------       ---------
      Total assets ............................      $  500,761       $ 513,617
                                                      =========       =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ............................      $  53,666       $  62,204
   Bank overdrafts .............................          8,783          13,617
   Accrued liabilities .........................         13,849          15,993
   Income taxes payable ........................          2,583           2,500
   Current portion of debt and
      capital lease obligations ................          1,979           2,074
                                                      ---------       ---------
      Total current liabilities ................         80,860          96,388
                                                      ---------       ---------

Long-term debt and capital lease obligations ...        124,795         119,911
Deferred income taxes ..........................         19,118          20,243
Other long-term liabilities.....................          4,191           3,941
                                                      ---------       ---------
      Total liabilities ........................        228,964         240,483
                                                      ---------       ---------
Commitments and contingencies

Minority interest ..............................          3,470           3,374

 Shareholders' equity:
   Preferred stock, no par value: 500,000 shares
    authorized; none issued or outstanding.....             -               -
   Common stock, no par value: 50,000,000 shares
    authorized; issued and outstanding shares:
    13,057,319 at December 31, 2006 and
    13,055,331 at September 30, 2006............         71,251          71,176
   Treasury stock at cost:  2,636,067 shares at
    December 31, 2006 and 2,635,513 at September
    30, 2006....................................        (24,496)        (24,486)
   Additional paid-in capital ..................          6,755           6,551
   Retained earnings ...........................        218,885         219,971
   Accumulated other comprehensive loss ........         (4,068)         (3,452)
                                                      ---------       ---------
      Total shareholders' equity ...............        268,327         269,760
                                                      ---------       ---------
                                                      $ 500,761       $ 513,617
                                                      =========       =========
</TABLE>


   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.
                                       3
<PAGE>


                             STEEL TECHNOLOGIES INC.
                   Condensed Consolidated Statements of Income
<TABLE>
<CAPTION>
(In thousands, except per share results)    For The Three Months Ended
(Unaudited)                                       December 31
----------------------------------------------------------------------
                                               2006          2005
                                                          As Restated,
                                                           See Note 1
                                         -----------------------------
<S>                                         <C>            <C>
Sales ................................      $200,816       $201,185
Cost of goods sold ...................       190,542        188,947
                                            --------       --------
   Gross profit ......................        10,274         12,238

Selling, general and
   administrative expenses ...........         9,513          8,546
                                            --------       --------
   Operating income ..................           761          3,692

Interest expense .....................        (1,992)          (799)
Interest income ......................           205            339
Minority interest in income of
   consolidated subsidiary ...........          (165)          (236)
Equity in net income of unconsolidated
   affiliates, net ...................         2,270            849
                                            --------       --------
   Income before income taxes ........         1,079          3,845

Provision for income taxes ...........           184            974
                                            --------       --------
   Income from continuing operations .           895          2,871

   Discontinued operations, net of tax           (22)           469
                                            --------       --------
   Net Income ........................      $    873       $  3,340
                                            ========       ========
Weighted average number of common
   shares outstanding-diluted ........        13,135         13,085
                                            ========       ========

Diluted earnings per common share:
   From continuing operations ........      $   0.07       $   0.22
   From discontinued operations ......         (0.00)          0.04
                                            --------       --------
                                            $   0.07       $   0.26
                                            ========       ========

Weighted average number of common
   shares outstanding-basic ..........        12,979         12,936
                                            ========       ========

Basic earnings per common share:
   From continuing operations ........      $   0.07       $   0.22
   From discontinued operations ......         (0.00)          0.04
                                            --------       --------
                                            $   0.07       $   0.26
                                            ========       ========

Cash dividends per common share ......      $   0.15       $   0.15
                                            ========       ========
</TABLE>
   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.


                                        4
<PAGE>
            Condensed Consolidated Statements of Comprehensive Income

<TABLE>
<CAPTION>

(In thousands)                            For The Three Months Ended
(Unaudited)                                       December 31
----------------------------------------------------------------------
                                              2006           2005
                                                          As Restated,
                                                           See Note 1
                                         -----------------------------
<S>                                       <C>         <C>
Net income ...............................  $    873       $  3,340
  Foreign currency translation
        adjustment .......................      (611)           540
  Change in unrealized gain or loss on
        cash flow hedges, net of taxes ...        (5)           -
                                            --------       --------
Net other comprehensive income ...........      (616)           540
                                            --------       --------
Comprehensive income .....................  $    257       $  3,880
                                            ========       ========
</TABLE>
   The accompanying notes are an integral part of the condensed consolidated
                             financial statements.


                                       5
<PAGE>

                             STEEL TECHNOLOGIES INC.
                 Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In thousands)                                               Three Months Ended
(Unaudited)                                                     December 31
--------------------------------------------------------------------------------
                                                             2006       2005
                                                                    As Restated,
                                                                     See Note 1
                                                          ----------------------
<S>                                                       <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income .........................................   $    873    $  3,340
   Adjustments to reconcile net income to net cash
    provided by (used in )operating activities:
       Depreciation ...................................      4,693       4,025
       Stock-based compensation expense ...............        186         131
       Deferred income taxes ..........................     (1,173)       (781)
       Minority interest in income of consolidated
        subsidiary ....................................        165         236
       Undistributed equity in net income of
        unconsolidated affiliates .....................       (657)       (848)
       Provision (benefit) for bad debts ..............          4         (66)
       Increase (decrease) in cash resulting
        from changes in:
             Trade accounts receivable ................     (3,869)     14,070
             Inventories ..............................     12,005     (32,771)
             Prepaids expenses and other assets .......     (1,435)       (702)
             Accounts payable .........................     (8,361)      7,720
             Income taxes payable .....................        100       1,846
             Accrued liabilities ......................     (1,852)     (1,972)
                                                          --------    --------
Net cash provided by (used in) operating activities ...        679      (5,772)
                                                          --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment .........     (5,819)     (6,225)
                                                          --------    --------
Net cash used in investing activities .................     (5,819)     (6,225)
                                                          --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt .......................      7,000         -
   Principal payments on debt and capital
    lease obligations .................................     (2,577)        -
   Changes in bank overdraft ..........................     (4,834)        -
   Cash dividends on common stock .....................     (1,959)     (1,941)
   Net issuance of common stock .......................         66         135
   Excess tax benefits from stock options .............         18          14
                                                          --------    --------
Net cash used in financing activities .................     (2,286)     (1,792)
                                                          --------    --------
Effect of exchange rate changes on cash ...............        (64)        322
                                                          --------    --------
Net decrease in cash and cash equivalents .............     (7,490)    (13,467)
Cash and cash equivalents, beginning of year ..........     12,066      30,991
                                                          --------    --------
Cash and cash equivalents, end of period ..............   $  4,576    $ 17,524
                                                          ========    ========

Supplemental Schedule of Non-Cash Investing and Financing Activities:

  Equipment acquired with capital lease obligations ...   $    367    $    -


</TABLE>

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

                                       6
<PAGE>

                             STEEL TECHNOLOGIES INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.  BASIS OF PRESENTATION

The  condensed  consolidated  balance  sheet  as of  December  31,  2006 and the
condensed consolidated statements of income, comprehensive income and cash flows
for the three months ended  December  31, 2006 and 2005,  have been  prepared by
Steel  Technologies  Inc.  (the  Company)  without  audit.  In  the  opinion  of
management,  all adjustments  (which include only normal recurring  adjustments)
necessary to present  fairly the financial  position,  results of operations and
cash flows as of and for the three  months  ended  December 31, 2006 and for all
periods presented have been made.

Certain  information  and footnote  disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have  been  condensed  or  omitted.   It  is  suggested  that  these   condensed
consolidated  financial  statements  be read in  conjunction  with the financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the fiscal year ended September 30, 2006. The results of operations for
the three months ended December 31, 2006 are not  necessarily  indicative of the
operating results for the full year.

As discussed in Notes 1 and 22 in the  Company's  Annual Report on Form 10-K for
the fiscal year ended  September  30,  2006,  the  accompanying  2005  condensed
consolidated  financial  statements  have been  restated.  In addition,  certain
disclosures  in the  following  notes  have been  restated  consistent  with the
consolidated financial statements. The following table summarizes the effects of
the  restatement  to  correct  income tax  expense  for the three  months  ended
December 31, 2005 (in thousands):

<TABLE>
                   Condensed Consolidated Statement of Income
                  For the Three Months Ended December 31, 2005
                         Summary of Restatement Impacts
               (Unaudited, in thousands, except per share amounts)
--------------------------------------------------------------------------------
                                                       December 31, 2005
                                               ---------------------------------
                                               Previously
                                               Reported (1)      Adj.   Restated
                                               ------------    ------   --------
        <S>                                      <C>          <C>      <C>
Minority interest in income of
 consolidated subsidiary                       $     (224)     $ (12)   $  (236)
Income before income taxes                          3,857        (12)     3,845
Provision for income taxes                          1,092       (118)       974
Income from continuing operations                   2,765        106      2,871
Net income                                          3,234        106      3,340

Diluted earnings per common share:
 From continuing operations                    $     0.21      $0.01    $  0.22
 From discontinued operations                        0.04        -         0.04
                                               ------------    ------    -------
                                               $     0.25      $0.01    $  0.26
                                               ============    =====    ========
</TABLE>

                                       7
<PAGE>
In addition to the items  discussed  above,  the  Company has  reclassified  its
income  statement  presentation  of  equity  in  net  income  of  unconsolidated
affiliates  and  minority  interest  in income of its  Mexican  subsidiary.  The
Company previously reported equity in net income of unconsolidated affiliates as
a component of operating income; this amount has now been reclassified to income
before taxes.  Also, the Company  previously  reported its minority  interest in
income of its  Mexican  operations  as a component  of cost of goods sold;  this
amount has now been reclassified as a separate line item in income before taxes.
The impact on the consolidated statement of income follows:

<TABLE>
                   Condensed Consolidated Statement of Income
                  For the Three Months Ended December 31, 2005
                       Summary of Reclassificaiton Impacts
                            (Unaudited, in thousands)
--------------------------------------------------------------------------------
                                                      December 31, 2005
                                            ------------------------------------
                                              Previously
                                            Reported (1)(2)      Adj.   Restated
                                            ---------------    ------   --------
        <S>                                    <C>            <C>      <C>
Cost of goods sold                             $ 189,183      $ (236)  $188,947
Gross profit                                      12,002         236     12,238
Operating income                                   3,456         236      3,692
Minority interest in income of
  consolidated subsidiary                             -         (236)      (236)
Equity in net income of unconsolidated
  affiliates, net                                    849         -          849
Income before income taxes                         3,845         -        3,845

</TABLE>
     (1)  Previously  reported  amounts  include Custom Steel accounted for as a
          discontinued operation.

     (2)  Previously  reported  amounts include effect of restatement  discussed
          above.


2.  ACQUISITION OF KASLE STEEL
On May 8, 2006, the Company (through its wholly owned  subsidiary)  acquired all
of the outstanding stock of privately held Kasle Steel Corporation (Kasle Steel)
headquartered in Dearborn, Michigan. The acquisition has been recorded under the
purchase method of accounting,  with the operating results being included in the
Company's  condensed   consolidated  financial  statements  since  the  date  of
acquisition.   The  following  unaudited  pro  forma  consolidated   results  of
operations have been prepared as if the acquisition of the assets of Kasle Steel
had occurred at the beginning of the corresponding period.


<TABLE>
                                                      Three Months Ended
    (In thousands, except per share data)                December 31
    (Unaudited)                                              2005
    ----------------------------------------------------------------------------
        <S>                                            <C>
      Sales                                              $  206,904
      Net income                                              2,500
      Diluted net income per common share                $     0.19
      Basic net income per common share                  $     0.19
</TABLE>

This  unaudited pro forma  information is presented for  informational  purposes
only and is not necessarily indicative of future operating results.



                                       8
<PAGE>


3.  SALE OF CUSTOM STEEL
On March 31, 2006,  the Company  completed  the sale of all the capital stock of
its wholly owned Custom Steel,  Inc. (Custom Steel) subsidiary to a wholly owned
subsidiary of American  Railcar  Industries,  Inc.  (ARI).  In  accordance  with
Statement of Financial  Accounting Standards (SFAS) No. 144, "Accounting for the
Impairment or Disposal of Long-Lived  Assets," the sale of Custom Steel has been
accounted  for  as  a  discontinued  operation.   Accordingly,  the  results  of
operations  and the  gain on the  sale  have  been  classified  as  discontinued
operations,  net of income taxes,  in the  accompanying  condensed  consolidated
statements  of income.  Interest  expense on debt that cannot be  attributed  to
other operations of the Company has been allocated to discontinued operations.


Summarized condensed  consolidated income statement  information of Custom Steel
follows:


<TABLE>


(In thousands)                                  Three Months Ended
(Unaudited)                                        December 31
-------------------------------------------------------------------
                                                 2006       2005
                                             ----------------------
<S>                                            <C>        <C>
Sales ....................................       $   -     $ 11,369
(Loss) income before income taxes ........          (37)        721
(Loss) income from continuing operations .          (22)        469
Net (loss) income ........................          (22)        469

</TABLE>

4.  INVENTORIES
Inventories consists of:
<TABLE>
<CAPTION>

(In thousands)                                       December 31   September 30
(Unaudited)                                             2006           2006
-------------------------------------------------------------------------------
<S>                                                 <C>           <C>
Raw materials ....................................   $  116,587   $  129,427
Finished goods and work in process ...............       52,336       51,840
                                                     ----------   ----------
                                                     $  168,923   $  181,267
                                                     ==========   ==========
</TABLE>


5.  INVESTMENTS IN UNCONSOLIDATED AFFILIATES
Summarized condensed consolidated income statement information of Mi-Tech Steel,
Inc.  (Mi-Tech  Steel),  RSDC  of  Michigan,   L.L.C.  (RSDC)  and  Kasle  Metal
Processing,  LLC (Kasle Metal Processing),  50% owned unconsolidated affiliates,
and  Delaco-Kasle  LLC  (Delaco-Kasle  Processing)  and Ferrolux Metals Co., LLC
(Ferrolux Metals), 49% owned unconsolidated  affiliates, all accounted for using
the equity method of accounting, follows:

<TABLE>
<CAPTION>
(In Thousands)          Three Months Ended
(Unaudited)                 December 31
-----------------      ---------------------
                         2006         2005
                         ----         ----

                    <c>          <c>
Sales                  $91,252      $67,668
Gross profit            11,030        5,243
Net income               4,553        1,700
</TABLE>

                                       9
<PAGE>


6.  STOCK OPTIONS
The  Company  awarded  restricted  stock  to  employees  pursuant  to  the  2006
Restricted  Stock Plan (the 2006 Plan). The 2006 Plan authorizes the award of up
to 300,000  shares of the  Company's  Common Stock,  no par value,  which may be
awarded as authorized,  but unissued,  shares.  The terms of any award of shares
will be determined by the  Compensation  Committee in its sole discretion at the
time of the award.  Unless  otherwise  specified by the  Committee,  none of the
shares  awarded shall be  restricted  for a period of less than one year or more
than ten years. The number of shares which may be awarded to any single employee
will not be limited by the 2006 Plan. As of January 1, 2007,  there were 223,000
shares remaining to be awarded.

The Company  granted  incentive stock options to employees to purchase shares at
not less  than  100% of  market  value at date of grant or  non-qualified  stock
options at a price  determined  by the  Compensation  Committee of the Company's
Board of Directors.  Generally,  options were  exercisable  at the rate of 20% a
year  beginning  one year from date of grant and expired ten years from the date
of grant.  As of  January  1,  2007,  there were  19,950  shares  available  for
granting.

Under  SFAS  No.   123(R),   "Share-Based   Payment,"  the  Company   recognizes
compensation  expense for restricted  stock awards on a straight-line  basis and
stock  option  grants on a  graded-vesting  basis  over the  employee's  vesting
period.

Since all outstanding options are incentive stock options,  the Company does not
receive  any  income tax  deductions  for  options  granted  unless  there is an
exercise and disqualifying  disposition of those shares as defined under current
tax laws.  Upon the  occurrence  of a  disqualifying  disposition,  the  Company
recognizes  the income tax  benefit  that  corresponds  to the  cumulative  book
compensation  cost as a reduction to income tax expense and any excess  benefits
are recorded as an addition to additional paid-in capital.

As a result of  adopting  SFAS No.  123(R),  the  Company  recorded  stock-based
compensation expense included in selling, general and administrative expenses of
$186,000 and  $131,000  for the three  months ended  December 31, 2006 and 2005,
respectively.  In  addition,  the  Company  recognized  an income tax benefit of
$39,000 and $31,000  during the three months  ended  December 31, 2006 and 2005,
respectively,  of which  approximately  $21,000 and  $17,000  was  recorded as a
reduction in income tax expense  during the three months ended December 31, 2006
and 2005, respectively.

                                       10
<PAGE>
The summary of stock  options as of December  31, 2006,  and changes  during the
three months ended December 31, 2006, are presented below.



<TABLE>
                                    Shares        Weighted
                                 Outstanding      Average
                                    Under         Exercise
                                    Plans          Price
   --------------------------------------------------------
   <S>                             <C>            <C>
   Balance, September 30, 2006     338,400        $ 13.30
   Granted                             -              -
   Exercised                        (4,000)         10.49
   Forfeited                        (5,250)         19.60
                                   -------        -------
   Balance, December 31, 2006      329,150        $ 13.24
                                   =======        =======
  </TABLE>


<TABLE>

                      Shares    Weighted    Weighted     Aggregate
                   Outstanding   Average     Average     Intrinsic     Aggregate
                       Under    Exercise   Contractual   Value Per     Intrinsic
                       Plan      Price        Term       Share (1)     Value (1)
--------------------------------------------------------------------------------
<S>                    <C>          <C>          <C>        <C>         <C>
Options outstanding
 at December 31, 2006  329,150    $ 13.24    5.25 years   $  6.24     $2,054,000
Options exercisable
 at December 31, 2006  188,000       8.85    3.76 years      8.70      1,635,000
Options vested and
  expected to vest     329,150      13.24    5.25 years      6.24      2,054,000

</TABLE>

     (1)  Computed  based upon the amount by which the fair market  value of the
     Company's  common stock at December 31, 2006, of $17.55 per share  exceeded
     the weighted  average  exercise price for all shares  included in the fully
     diluted earnings per share calculation.

The total  intrinsic  value of stock options  exercised  during the three months
ended  December 31, 2006 and 2005 was $39,000 and  $226,000,  respectively.  All
unexercised options expire from 2008 to 2015.

The summary of restricted  stock as of December 31, 2006, and changes during the
three months ended December 31, 2006 are presented below.

<TABLE>
                               Restricted
                                  Stock
                               ----------
<S>                             <C>

Balance, September 30, 2006      80,000
Granted                             -
Exercised                           -
Forfeited                        (3,000)
                                 ------
Balance, December 31, 2006       77,000
                                 ======

</TABLE>
                                      11
<PAGE>

Total  compensation  costs  related to nonvested  options and  restricted  stock
awards not yet recognized was approximately  $1,912,000 at December 31, 2006. We
expect to recognize this  compensation  cost as follows using the graded vesting
method over a weighted average period of 1.72 years:



<TABLE>
                                       Amount
                                   --------------
        <S>                          <C>

         Remainder of fiscal 2007    $  663,000
         2008                           745,000
         2009                           424,000
         2010                            59,000
         2011                            21,000
                                   --------------
         Total                       $1,912,000
                                   ==============
</TABLE>


7.  NET INCOME PER COMMON SHARE COMPUTATIONS
The following is a  reconciliation  of the  denominator of the basic and diluted
per common share computations:
<TABLE>
<CAPTION>

                                                           Three Months Ended
                                                               December 31
                                                             2006        2005
(In thousands, except per common share data)                        As Restated,
(Unaudited)                                                          See Note 1
-----------------------------------------------------   ----------  -----------
<S>                                                       <C>         <C>
Net income ..........................................   $     873   $   3,340
                                                        ==========  ==========
Shares (denominator) used for diluted
   per common share computations:
    Weighted average shares of common  stock
        outstanding .................................      12,979      12,936
    Plus: dilutive effect of stock options ..........         156         149
                                                        ---------   ---------
           Diluted weighted average shares ..........      13,135      13,085
                                                        ---------   ---------
Shares (denominator) used for basic per
   common share computations:
   Weighted average shares of common stock
       outstanding ..................................      12,979      12,936
                                                        ---------   ---------
Net income per common share data:
    Diluted
       From continuing operations ...................   $    0.07   $    0.22
       From discontinued operations .................       (0.00)       0.04
                                                        ---------   ---------
                                                        $    0.07   $    0.26
                                                        =========   =========
    Basic
       From continuing operations ...................   $    0.07   $    0.22
       From discontinued operations .................       (0.00)       0.04
                                                        ---------   ---------
                                                        $    0.07   $    0.26
                                                        =========   =========
</TABLE>

Outstanding  options of 80,250 and 7,500 shares were  excluded  from the diluted
earnings per common share  calculation  for the three months ended  December 31,
2006 and 2005,  respectively,  because  the  exercise  price of the  options was
greater than the average market price of the Company's stock.



                                       12
<PAGE>

8.  RELATED PARTIES
The Company has various  transactions  with its  unconsolidated  affiliates (see
Note  5).  Both  the  Company  and its  unconsolidated  affiliates  buy and sell
products and services at prevailing market prices from each other. Equity in the
net  income of  unconsolidated  affiliates  and  management  fee income are also
included in net income of the  Company.  A summary of  transactions  between the
Company and its unconsolidated affiliates during the three months ended December
31, 2006 and 2005 follows:


<TABLE>
<CAPTION>
(In Thousands)                           Three Months Ended
(Unaudited)                                 December 31
------------------------------------------------------------
                                          2006         2005
                                        -------      -------

                                     <c>          <c>
Sales to unconsolidated affiliates      $   927      $ 1,119
Purchases from Mi-Tech Steel                214          542
Equity in net income of
   unconsolidated affiliates, net         2,270          849

</TABLE>

Accounts receivable from  unconsolidated  affiliates was $1,496,000 and $741,000
as of December  31, 2006 and  September  30,  2006,  respectively,  and accounts
payable to unconsolidated affiliates was $93,000 and $235,000 as of December 31,
2006, and September 30, 2006, respectively.

The Company has also recorded  sales of $2,466,000  and $3,383,000 for the three
months ended December 31, 2006 and 2005,  respectively,  for scrap products sold
to a company owned by a director of the Company.  Accounts receivable associated
with these sales were  $1,411,000  and  $1,084,000 as of December 31, 2006,  and
September 30, 2006,  respectively.  Management reports these transactions to the
Audit  Committee  of the Board of Directors  as  frequently  as requested by the
Committee,  but at least  annually.  Most  recently,  in April  2006,  the Audit
Committee reviewed and approved these transactions.  The Company has the ability
to continue or cease selling scrap steel to this company at any time.

9.  CONTINGENCIES
The  Company  recently  became  aware that a  customer  who  previously  filed a
voluntary  petition for reorganization  under Chapter 11 of the U.S.  Bankruptcy
Code will be filing preference  actions against its suppliers.  This customer is
expected to allege that approximately  $10,500,000 of payments were made by them
to the Company during the 90 days preceding their filing date. While the outcome
of this matter  cannot be predicted at this time,  the Company  believes that it
has meritorious  defenses with respect to any potential claim by them that these
payments  meet the  legal  definition  of  preference  payments.  We  intend  to
vigorously defend our position.

                                       13
<PAGE>


10. IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 2006, the Emerging  Issues Task Force (EITF) reached a consensus on EITF
06-03  "How  Taxes   Collected  from  Customers  and  Remitted  to  Governmental
Authorities  Should Be Presented in the Income  Statement (That Is, Gross Versus
Net Presentation)".  EITF 06-03 requires that any tax assessed by a governmental
authority that is imposed  concurrent with or subsequent to a  revenue-producing
transaction  between a seller  and a  customer  should be  presented  on a gross
(included in revenues and costs) or a net (excluded  from  revenues)  basis.  In
addition,  for any such  taxes that are  reported  on a gross  basis,  a company
should  disclose  the  amounts of those  taxes in interim  and annual  financial
statements  for each period for which an income  statement is presented if those
amounts are  significant.  The  requirements  of EITF 06-03 are effective for us
beginning  January 1, 2007.  The  Company is in the  process of  evaluating  the
effect of EITF 06-03 and has not  determined  whether its  adoption  will have a
material impact on our financial position, results of operations or cash flows.

In July 2006,  the  Financial  Accounting  Standards  Board  (FASB)  issued FASB
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes - an
Interpretation  of FASB  Statement No. 109". FIN 48 clarifies the accounting for
uncertainty in income taxes  recognized in a company's  financial  statements in
accordance with FASB Statement No. 109,  "Accounting  for Income Taxes".  FIN 48
prescribes a recognition  threshold and measurement  attribute for the financial
statement  recognition and measurement of a tax position taken or expected to be
taken  in a  tax  return.  FIN  48  also  provides  guidance  on  derecognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure  and  transition.  The  requirements  of FIN 48 are effective for our
fiscal  year  beginning  October  1,  2007.  The  Company  is in the  process of
evaluating the effect of FIN 48 and has not determined whether its adoption will
have a material impact on our financial position,  results of operations or cash
flows.


                                       14
<PAGE>

     Item 2. Management's Discussion and Analysis of Financial Condition and
                             Results of Operations

When  used  in the  following  discussion,  the  words  "estimates,"  "expects,"
"intends,"  "anticipates," "believes" and other similar expressions are intended
to  identify  forward-looking  statements,  which are made  pursuant to the safe
harbor provisions of the Private Securities  Litigation Reform Act of 1995. Such
forward-looking  statements are subject to certain risks and uncertainties  that
could cause actual results to differ  materially from those projected.  Specific
risks and uncertainties  include,  but are not limited to,  competitive  factors
such as  pricing  and  availability  of  steel;  cyclical  demand  in the  steel
industry,  specifically  in the  automotive  market;  our  ability  to make  and
integrate acquisitions;  our inability to obtain sufficient capital resources to
fund our operations  and our growth;  risk of business  interruptions  affecting
automotive manufacturers;  changes in the exchange rate of the Mexican peso; and
reliance on key customers.  Readers are cautioned not to place undue reliance on
these  forward-looking  statements,  which speak only as of the date hereof.  We
undertake no  obligation  to republish  revised  forward-looking  statements  to
reflect the occurrence of unanticipated  events or circumstances  after the date
hereof. Unless the context otherwise requires, references to "we," "us" or "our"
refer collectively to Steel Technologies Inc. and its subsidiaries.

Overview
--------

Steel  Technologies  is  one  of  the  largest  independent  flat  rolled  steel
processors and exposed automotive blankers in North America.  Our North American
platform  of 25  facilities,  including  our joint  ventures,  is  strategically
positioned  in steel  producing  and  consuming  markets  throughout  the United
States,  Canada and Mexico. We bring value to our customers with precision steel
processing,  supply chain management,  quality control and technical support. We
specialize  in  meeting  exact  specifications  for  customers  in a variety  of
industries  and end-use  markets  including  automotive,  lawn and  garden,  and
appliance industries. Our growth and profitability initiatives have focused on a
four  pronged  strategy:  growth  through  acquisitions,  expansion  of existing
facilities,  greenfield  construction  and  development  of  our  joint  venture
operations.

Income  from  continuing  operations  for the first  quarter of fiscal  2007 was
$895,000 or $0.07 per diluted share,  down from  $2,871,000 or $0.22 per diluted
share in the same period  last year.  Sales for the  quarter  were  $200,816,000
compared with  $201,185,000  reported in the first quarter last year. During our
first  quarter,  we reduced  our  estimated  rebate  obligation  to our  largest
customer by approximately  $1,000,000 based on our successful generation of cost
savings to the customer.  This rebate  reduction  resulted in an increase to our
first  quarter net income of  $645,000 or $0.05 per share.  We expect the future
rebate with our customer will be finalized and recorded on a quarterly basis.

Our tons sold  decreased 9% compared to the same period last year.  This decline
in shipments was largely a result of production  shifting from the first quarter
to our second  quarter  of fiscal  2007 and softer  automotive  schedules.  As a
result,  we anticipate  significant  improvement in volume for our fiscal second
quarter. Our volume decline was offset by higher average selling prices compared
to the fiscal first  quarter of 2006.  Net income for the first  quarter of 2007
includes a $0.05 per diluted share benefit.

                                     15

<PAGE>


For the first fiscal quarter ended  December 31, 2006,  equity in the net income
of our unconsolidated joint ventures was $2,270,000, up approximately $1,421,000
from the same period last year.  Our joint venture  companies  continue to be an
important part of our growth strategy.

Our inventory  levels  decreased by  $12,005,000  during our first  quarter.  We
continue to aggressively manage our inventory to match demand. We have continued
to invest our  capital in  improving  productivity  and quality  throughout  our
operations to ensure that we have the most efficient and modern steel processing
facilities in North America.  During the first quarter,  we spent  approximately
$5,819,000 on capital  projects,  primarily  associated with our Juarez,  Mexico
greenfield expansion.  We expect to invest an additional  $14,000,000 in capital
projects over the remainder of fiscal 2007.

Financial Highlights (in thousands except per common share data and percentages)
--------------------------------------------------------------------------------

<table>
<caption>


                                For the Three Months Ended December 31
                                         2006             2005
                                  ----------------  ----------------
                                            % of              % of         %
(Unaudited)                        Actual   Sales    Actual   Sales      Change
--------------------------------- -------- -------  -------- -------    --------

                              <c>       <c>      <c>       <c>         <c>
Sales                            $200,816  100.0%   $201,185  100.0%      (0)%
Gross profit                       10,274    5.1      12,238    6.1      (16)
Selling, general and
   administrative expenses          9,513    4.7       8,546    4.3       11
Operating income                      761    0.4       3,692    1.8      (79)
Interest expense, net               1,787    0.9         460    0.2      288
Equity in net income of
   unconsolidated affiliates, net   2,270    1.1         849    0.4      167
Income from continuing
   operations before income taxes   1,079    0.5       3,845    1.9      (72)
Discontinued operations               (22)  (0.0)        469    0.2     (105)
Net income                            873    0.4       3,340    1.7      (74)
Diluted earnings per common share
   from continuing operations       $0.07              $0.22             (68)
Diluted earnings per common share   $0.07              $0.26             (73)
Cash dividends per common share     $0.15              $0.15              -

Other data
----------
Average days sales outstanding      48.4               41.8               16
Inventory turnover                   4.5                4.9               (8)
Return on equity (annualized)        1.3%               5.0%             (74)

</table>
                                       16
<PAGE>


Results of Operations
---------------------

     Sales
     -----
     We posted net sales of  $200,816,000  for the first quarter ended  December
     31, 2006, just slightly below the $201,185,000 for the first fiscal quarter
     ended December 31, 2005.  Shipments of company-owned  steel products in the
     first  quarter of fiscal 2007 were  235,000  tons,  a 9% decrease  from the
     first  quarter of fiscal 2006.  This decline in shipments  was  primarily a
     result of production  shifting from the first quarter to our second quarter
     of fiscal 2007 and softer automotive  schedules.  The average selling price
     of company-owned steel products increased  approximately 9% due to a firmer
     pricing environment.

     Kasle Steel, acquired in May 2006, contributed  approximately $4,033,000 of
     sales for the three months ended December 31, 2006.

     We recorded as a reduction of revenue the estimated maximum possible annual
     rebate  obligation to our largest  customer  during calendar year 2006. Per
     the terms of the agreement  with our  customer,  we are entitled to receive
     credit  against the rebate for a  percentage  of the cost  savings  that we
     generate.  During the three months ended  December 31, 2006, we reduced our
     estimated  rebate  obligation   accrued  through  September  30,  2006,  by
     approximately  $1,000,000  in accordance  with  Emerging  Issues Task Force
     Issue (EITF) 01-09,  "Accounting for  Consideration  Given by a Vendor to a
     Customer  On  December 3, 1999",  as we  successfully  demonstrated  to our
     customer  that we had provided  them with cost savings that  exceeded  this
     amount.  This rebate reduction resulted in an increase to our first quarter
     net income of $645,000,  or $0.05 per diluted  share.  We expect the future
     rebate with our  customer  will be  finalized  and  recorded on a quarterly
     basis.

     Gross profit
     ------------
     Our gross  profit  margin  was 5.1% in the  first  quarter  of fiscal  2007
     compared to 6.1% in the first  quarter of fiscal  2006.  Cost of goods sold
     increased approximately $1,595,000, or 0.8%, in the first quarter of fiscal
     2007  compared  to the first  quarter  of fiscal  2006,  due  primarily  to
     $3,497,000  expenses  associated with the Kasle Steel acquisition and lower
     volume spread over certain fixed  manufacturing  expenses  which  adversely
     affected  production  cost  efficiencies.  This cost increase was partially
     offset  by  decreases  of  $1,224,000  in our  cost of  materials  sold and
     $678,000 in delivery costs related to lower sales volume.


     Selling, general and administrative expenses
     --------------------------------------------
     Selling,  general and  administrative  costs were  $9,513,000 for the three
     months ended December 31, 2006, compared to $8,546,000 for the three months
     ended  December  31,  2005.  The  increase  is  primarily  attributable  to
     $1,119,000 of additional  expenses associated with the acquisition of Kasle
     Steel. Excluding increases related to our Kasle Steel acquisition, selling,
     general  and  administrative  expenses  were down 2% from the year  earlier
     period.


                                       17
<PAGE>


     We continue to actively  manage and  rationalize  the level at which we add
     selling, general and administrative expenses to our cost structure.

     Interest expense
     ----------------
     Net  interest  expense for the first  quarter of fiscal 2007  increased  to
     $1,787,000 from $460,000 for the first quarter of fiscal 2006. The increase
     is primarily  attributable  to additional  debt  associated  with the Kasle
     Steel  acquisition  and higher  interest rates on variable rate debt during
     the first  quarter of fiscal 2007  compared to the first  quarter of fiscal
     2006.

     Equity in net income of unconsolidated affiliates
     -------------------------------------------------
     Our share of the income of unconsolidated affiliates was $2,270,000 for the
     first  quarter of fiscal 2007  compared to $849,000 in 2006.  Kasle Steel's
     three unconsolidated  affiliates  contributed  approximately  $1,908,000 to
     equity in net  income of  unconsolidated  affiliates  for the three  months
     ended December 31, 2006.

     Our unconsolidated  affiliates reported  $91,252,000 in sales for the first
     quarter of fiscal 2007, an increase of 35% compared to the first quarter of
     fiscal  2006.  Kasle  Steel's  three   unconsolidated   affiliates   posted
     approximately  $24,075,000 in sales for the three months ended December 31,
     2006. Our unconsolidated  affiliates  continue to play an important role in
     our North American platform, and growth of our joint ventures is a key part
     of our  overall  strategy  as we expand our  position  with large  national
     customers.

     Income tax expense
     ------------------
     Our  effective  income  tax  rate  was   approximately   17.1%  and  25.3%,
     respectively,  for the first quarters of fiscal 2007 and 2006. The decrease
     between years is  attributable to a decline in income in the United States,
     which is taxed at a higher tax rate than our Mexico income.


     Discontinued Operations
     -----------------------
     We  completed  the  sale of all  the  capital  stock  of our  Custom  Steel
     subsidiary  to ARI  (see  Note 3 of our  Notes  to  Condensed  Consolidated
     Financial Statements) on March 31, 2006.


                                       18
<PAGE>

     Summarized  condensed  consolidated income statement  information of Custom
     Steel follows:

        <TABLE>


        (In thousands)                                  Three Months Ended
        (Unaudited)                                        December 31
        -------------------------------------------------------------------
                                                         2006       2005
                                                     ----------------------
        <S>                                            <C>        <C>
        Sales ....................................       $   -     $ 11,369
        (Loss) income before income taxes ........          (37)        721
        (Loss) income from continuing operations .          (22)        469
        Net (loss) income ........................          (22)        469

        </TABLE>

Liquidity and Capital Resources
-------------------------------

As of December 31, 2006, we had $210,687,000 of working capital, we maintained a
current ratio of 3.6:1 and our total debt was 32% of capitalization.  In periods
of economic expansion and increased demand for our products, our working capital
requirements generally increase.  Conversely, in periods of economic contraction
and reduced demand for our products, our working capital requirements decrease.

Average days sales  outstanding  to  customers  was 48 days for the three months
ended December 31, 2006,  compared to 42 for the three months ended December 31,
2005.  We expect  average days sales  outstanding  to remain  consistent  in our
second  quarter  compared  to our first  quarter of fiscal  2007.  Average  days
inventory  increased to 80 days for the three  months  ended  December 31, 2006,
compared to 74 days for the three months ended  December 31, 2005, due to weaker
shipment  levels during the first quarter of fiscal 2007. We expect average days
inventory to decrease to 70 days during our second quarter of fiscal 2007.

Our average  payment  days to  suppliers  was 30 days as of December  31,  2006,
compared to 32 days as of December 31, 2005. We expect  average  payment days to
suppliers  to remain  consistent  in our second  quarter  compared  to our first
quarter of fiscal 2007.

Cash  provided by  operations  during the first three  months of fiscal 2007 was
$679,000,  compared to cash used in operations  of  $5,772,000  during the first
three months of fiscal 2006.  Our increased  operating  cash flows resulted from
changes in working capital offset by lower net income.

We decreased  inventory by  $12,005,000  during the first three months of fiscal
2007 to match current demand.  Accounts payable decreased by $8,361,000  related
to  the  decrease  in our  inventory  purchases,  and  our  accounts  receivable
increased by $3,869,000 during the first three months of fiscal 2007 compared to
fiscal 2006.

Capital  expenditures  for  the  first  three  months  of  fiscal  2007  totaled
approximately $5,819,000. We continue to expand production capacity to serve the
growing needs of customers, invest in information systems to improve quality and
service to our customers and invest in  automation to improve  productivity  and
efficiency.  For fiscal 2007, we expect to spend  approximately  $20,000,000  on
capital improvements to our facilities.


                                       19
<PAGE>


Debt and capital lease  obligations  associated  with the  acquisition  of Kasle
Steel include a consulting and  non-compete  agreement with a former Kasle Steel
shareholder  and two notes  payable  to former  Kasle  Steel  Shareholders.  The
consulting and non-compete agreement calls for monthly payments of $25,000 until
May 2011. Under the notes payable arrangements,  we are required to make monthly
payments of  $20,559,  including  interest at an annual rate of 7%,  through May
2017 to a former Kasle Steel shareholder,  and make annual principal payments of
$350,000  plus interest at 9% each year until January 1, 2010 to a second former
Kasle Steel  shareholder.  Existing  capital  lease  obligations  of Kasle Steel
require monthly  payments  ranging from  approximately  $28,000 to $33,000 until
June 2007.

On March 31, 2006,  we completed the sale of all the capital stock of our wholly
owned Custom Steel subsidiary to a wholly owned subsidiary of ARI. In connection
with the closing of this  transaction,  the final sales price was  approximately
$17,061,000,  of which $16,311,000 was remitted to us and an additional $750,000
to a third party escrow agent.

In connection  with the sale of Custom Steel, we agreed to indemnify ARI for any
payments they make for  liabilities  incurred by Custom Steel prior to March 31,
2006. The  indemnification  provisions for most liabilities  expire on March 31,
2008,  and they  require  the  buyer to incur  at  least  $75,000  in  aggregate
liabilities  before a claim  can be  asserted.  Indemnification  provisions  for
certain  liabilities,  primarily  taxes,  expire  with  applicable  statutes  of
limitations, and the remaining provisions,  primarily environmental, do not have
a  stated   expiration.   We  have  not  recorded  any   liabilities  for  these
indemnifications since management has determined that none are probable. We will
receive  $750,000  from escrow at various  times prior to March 31, 2008, to the
extent there are no indemnification claims made by ARI.

We  maintain  an equity  investment  of  $25,744,000  in our  90%-owned  Mexican
subsidiary. We would expect to finance any additional required investment in our
Mexican operations with cash, local borrowings and / or available funds from our
bank line of credit.

Translation of our Mexican subsidiary's financial statements from local currency
to the U.S. dollar subjects us to exposure from  fluctuating  currency  exchange
rates.  The relative  stability of the Mexican peso and the large  percentage of
U.S. dollar  denominated  transactions of our Mexican  subsidiary  mitigate this
exposure to a large extent. We historically  have not used derivative  financial
instruments  to manage our  foreign  currency  exchange  rate  risk.  We include
foreign currency  transaction  gains (losses) in our sales as incurred.  Foreign
currency  gains (losses) were $167,000 and ($320,000) for the three months ended
December 31, 2006 and 2005, respectively.

We  maintain  50% equity  investments  in Mi-Tech  Steel,  RSDC and Kasle  Metal
Processing and 49% equity  investments in  Delaco-Kasle  Processing and Ferrolux
Metals. Though we do not expect to make additional equity contributions to these
unconsolidated  affiliates,  Kasle  Steel has  guaranteed  debt  obligations  of
$2,500,000 for Kasle Metal Processing and $490,000 for Delaco-Kasle  Processing.
These  guarantees  are  proportionate  to the  obligations  of the other  equity
investors in Kasle Metal Processing and Delaco-Kasle Processing. Cash flows from
operations  and existing  credit  facilities  are expected to meet the liquidity
needs of these unconsolidated affiliates.



                                       20
<PAGE>

Operating agreements require our unconsolidated  affiliates,  with the exception
of Mi-Tech  Steel,  to make periodic  minimum  distributions  to their  members.
Though Mi-Tech Steel's board of directors may authorize cash distributions, such
distributions are restricted by one of Mi-Tech Steel's loan agreements to 15% of
Mi-Tech Steel's net income in any fiscal year.  Distributions from Mi-Tech Steel
are not, and are not expected to be, a material source of liquidity for us.

We issued  $50,000,000 in unsecured senior notes on October 21, 2004,  comprised
of  $10,000,000  of 5.33%  Series A Senior  Notes  due  October  21,  2011,  and
$40,000,000  of 5.75% Series B Senior Notes due October 21, 2014. The notes have
an  average  term of 9.4  years and a blended  interest  rate of 5.67%.  We used
proceeds from the notes to reduce borrowings on our revolving credit facility.

We have a $135,000,000  unsecured revolving credit facility that matures October
2010. Upon our meeting certain requirements, we can request our existing banking
group to expand our revolving credit facility  availability to $200,000,000.  We
can elect to pay interest on the  facility at various  floating  rates,  none of
which is greater  than the banks'  prime rate.  At  December  31,  2006,  we had
$69,000,000 of borrowings outstanding under the revolving credit.

We borrow under our  revolving  credit  facility as needed to fund our operating
and investing  activities  described  above.  During the fiscal first quarter of
2007, we borrowed  $7,000,000 to fund our working capital needs and we paid down
$2,577,000  of debt from  operating  cash flows.  We had  outstanding  checks of
$8,783,000 as of December 31, 2006, that may result in additional line of credit
borrowings if our bank accounts do not have  sufficient  funds when these checks
are presented to the bank.

Our debt agreements'  covenants  require us to maintain  specified levels of net
worth and certain financial ratios, and to limit capital expenditures, operating
leases,  capital leases and additional  debt. We are in compliance with our loan
covenants,  and  none of  these  covenants  would  restrict  the  completion  of
currently planned capital expenditures.

We meet  our  liquidity  needs  primarily  with  operating  cash  flows  and our
revolving  credit  facility.  Cyclicality  of  demand  in  the  steel  industry,
especially in the automotive  market, can influence our operating cash flows. We
anticipate  additional  borrowings on our existing  revolving credit facility to
support our continued growth and to meet our working capital needs.

We have entered into leasing  arrangements to meet certain  property,  plant and
equipment  requirements of our facilities.  These  obligations  have not changed
significantly  from those  disclosed  in our Annual  Report on Form 10-K for the
year ended September 30, 2006.

We maintain contracts with our union employees in our Canton,  Michigan facility
which expires in March 2010 and our Windsor,  Canada  facility  which expires in
December 2009.

                                       21
<PAGE>
We  recently  became  aware that a customer  who  previously  filed a  voluntary
petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code will be
filing  preference  actions  against its  suppliers.  We expect this customer to
allege that approximately $10,500,000 of payments were made by them to us during
the 90 days preceding their filing date. While the outcome of this matter cannot
be predicted at this time,  we believe that we have  meritorious  defenses  with
respect  to any  potential  claim by them  that  these  payments  meet the legal
definition of preference payments. We intend to vigorously defend our position.

At this time, we have no other known material  off-balance  sheet  arrangements,
contractual obligations,  contingent liabilities or commitments that must be met
beyond the next twelve months.

We believe  all  manufacturing  facilities  are in  compliance  with  applicable
federal and state environmental  regulations.  We are not presently aware of any
fact or circumstance that would require material  expenditures for environmental
compliance.

During the first fiscal  quarter ended  December 31, 2006, we paid a semi-annual
cash dividend of $0.15 per share.

Related Party Transactions
--------------------------

We have various  transactions  at prevailing  market prices with  unconsolidated
affiliates  (see  Note  8 of  our  Notes  to  Condensed  Consolidated  Financial
Statements).

We sell scrap steel  products at prevailing  market prices to a company owned by
Stuart N. Ray,  a  director  of Steel  Technologies  (see Note 8 of our Notes to
Condensed   Consolidated   Financial   Statements).   Management  reports  these
transactions  to the Audit  Committee of the Board of Directors as frequently as
requested by the Committee, but at least annually. Most recently, in April 2006,
the Audit  Committee  reviewed  and  approved  these  transactions.  We have the
ability to continue or cease selling scrap steel to this company at any time.

Impact of Recently Issued Accounting Pronouncements
---------------------------------------------------

In June 2006, the Emerging  Issues Task Force (EITF) reached a consensus on EITF
06-03  "How  Taxes   Collected  from  Customers  and  Remitted  to  Governmental
Authorities  Should Be Presented in the Income  Statement (That Is, Gross Versus
Net Presentation)".  EITF 06-03 requires that any tax assessed by a governmental
authority that is imposed  concurrent with or subsequent to a  revenue-producing
transaction  between a seller  and a  customer  should be  presented  on a gross
(included in revenues and costs) or a net (excluded  from  revenues)  basis.  In
addition,  for any such  taxes that are  reported  on a gross  basis,  a company
should  disclose  the  amounts of those  taxes in interim  and annual  financial
statements  for each period for which an income  statement is presented if those
amounts are  significant.  The  requirements  of EITF 06-03 are effective for us
beginning  January 1, 2007.  We are in the process of  evaluating  the effect of
EITF 06-03 and have not  determined  whether its  adoption  will have a material
impact on our financial position, results of operations or cash flows.


                                       22
<PAGE>

In July 2006,  the  Financial  Accounting  Standards  Board  (FASB)  issued FASB
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes - an
Interpretation  of FASB  Statement No. 109". FIN 48 clarifies the accounting for
uncertainty in income taxes  recognized in a company's  financial  statements in
accordance with FASB Statement No. 109,  "Accounting  for Income Taxes".  FIN 48
prescribes a recognition  threshold and measurement  attribute for the financial
statement  recognition and measurement of a tax position taken or expected to be
taken  in a  tax  return.  FIN  48  also  provides  guidance  on  derecognition,
classification,   interest  and  penalties,   accounting  in  interim   periods,
disclosure  and  transition.  The  requirements  of FIN 48 are effective for our
fiscal year  beginning  October 1, 2007. We are in the process of evaluating the
effect  of FIN 48 and have not  determined  whether  its  adoption  will  have a
material impact on our financial position, results of operations or cash flows.

Application of Critical Accounting Policies
-------------------------------------------

Our  consolidated  financial  statements  have been prepared in accordance  with
generally  accepted  accounting  principles.  The preparation of these financial
statements requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements.  Actual results could
differ from these  estimates  under  different  assumptions  or  conditions.  We
monitor and evaluate our estimates and assumptions on an ongoing basis.

A summary of  significant  accounting  policies used in the  preparation  of the
consolidated  financial  statements  is  described  in  Note 2 of the  Notes  to
Consolidated  Financial  Statements  in our  Annual  Report on Form 10-K for the
fiscal year ended September 30, 2006.

Our  most  critical  accounting  policies  include  the  valuation  of  accounts
receivable,  which affects  selling,  general and  administrative  expense,  the
assessment of  recoverability  of goodwill and  long-lived  assets,  and revenue
recognition.  Our management  reviews these  estimates on a regular basis and we
make adjustments based on historical experiences,  current conditions and future
expectations.  We perform  our reviews  regularly,  and we make  adjustments  as
required by currently  available  information.  We believe  these  estimates are
reasonable,  but actual results could differ from these estimates.  Summaries of
our critical accounting policies are presented below.

Allowance for Doubtful Accounts Receivable
------------------------------------------

Our accounts  receivable balances represent those amounts that we have billed to
our customers but have not yet collected.  We maintain an allowance for doubtful
accounts for estimated  losses  resulting from the inability of our customers to
make required payments at a level considered appropriate based on historical and
other  factors that affect  collectibility.  These  factors  include  historical
trends of write-offs,  sales,  recoveries  and credit losses,  the monitoring of
portfolio  credit  quality,  and  current  and  projected  economic  and  market
conditions.  If the financial  condition of our  customers  was to  deteriorate,
resulting in an impairment of their ability to make payments in accordance  with
previously  established terms,  additional  allowances may be required. We write
off  uncollectible  accounts  receivable  against  the  allowance  for  doubtful
accounts  receivable  when our  management  determines  that the  probability of
payment is remote and collection efforts have ceased.


                                       23
<PAGE>

Long-Lived Assets
-----------------

We depreciate or amortize long-lived assets with estimable useful lives to their
residual  values over their useful  lives in  proportion  to the economic  value
consumed.  We review the carrying value of our long-lived  assets for impairment
whenever changes in events and  circumstances  indicate that the carrying amount
of the assets may not be recoverable. If an evaluation were required, we compare
the estimated  future  undiscounted  cash flows  associated with an asset to the
asset's  carrying  value  to  determine  if a  write-down  to  market  value  or
undiscounted cash flows value is required. Future changes in circumstances, cash
flow estimates and estimates of fair value could affect the valuations.

We review goodwill  annually,  or sooner if indicators of impairment  exist, for
impairment  using the present value  technique to determine  the estimated  fair
value of  goodwill  associated  with  each  reporting  entity.  If  goodwill  is
indicated as being impaired (the present value of cash flows (fair value) of the
reporting  unit is less than the carrying  amount),  we would  allocate the fair
value of the reporting unit to our assets and liabilities in a manner similar to
the  purchase  price  allocation  to  determine  the  implied  fair value of the
reporting  unit  goodwill.  We would then compare this implied fair value of the
reporting unit goodwill with the carrying  amount of the reporting unit goodwill
and, if it were less, we would then recognize an impairment loss.

Considerable  management  judgment  is  necessary  to assess  impairment  and to
estimate  fair  value.  The  projection  of future  cash flows for the  goodwill
impairment analysis requires us to make significant judgments and estimates with
respect to future  revenues  related to the assets and the future  cash  outlays
related to those revenues.  Actual revenues and related cash flows or changes in
anticipated  revenues  and  related  cash flows  could  result in changes in our
assessment and could result in an impairment charge. The assumptions used in our
evaluations,  such as forecasted  growth rates,  cost of capital,  tax rates and
residual  values are  consistent  with our internal  projections  and  operating
plans.  Our use of  different  assumptions,  including  cash flows and  discount
rates, could increase or decrease the related impairment charge.


Revenue Recognition
-------------------

We recognize revenue when all of the following criteria are met:

     *    Persuasive  evidence of an  arrangement  exists:  We have  received an
          order from a customer.

     *    Delivery has occurred: For the sale of Company-owned products, revenue
          recognition  occurs when title and risk of ownership  have been passed
          to the customer.  For the sale of toll  processing  services,  revenue
          recognition  occurs upon  completion  of the  service and  shipment of
          goods.

     *    Our price to the customer is fixed or  determinable:  Sales prices are
          agreed with our customer before delivery has occurred.

     *    Collectibility is reasonably assured: We have a customer credit policy
          to ensure collectibility is reasonably assured.

We record  sales  returns and  allowances  as  reductions  to sales,  and we set
reserves  based  on  historical  experience  and  current  customer  activities.
Shipping  and  handling  fees billed to  customers  are  included in sales,  and
shipping  and  handling  costs  incurred by the Company are  included in cost of
goods sold.


                                       24
<PAGE>
We record rebates as reductions to sales based on each of the underlying revenue
transactions that result in progress by the customer toward earning the rebates.
If the expected amount of rebates to be awarded cannot be reasonably  estimated,
then the maximum potential amount of rebate that could be awarded is recorded as
reductions to sales.


       Item 3. Quantitative and Qualitative Disclosures About Market Risk

To mitigate a portion of the market risk on our variable  rate debt,  we entered
into an interest rate swap contract with a major  financial  institution on June
20, 2005 that matures in September  2008.  Under the terms of the  contract,  we
receive a LIBOR based variable interest rate and we pay a fixed interest rate of
4.31% on a notional amount of $30,000,000.  The variable interest rate we pay on
the  contract  is  determined  based on the three  month  LIBOR  rate,  which is
consistent with the variable rate determination on the underlying debt.

We have not  experienced  any  material  change  during the three  months  ended
December 31, 2006, from the disclosures about market risk provided in our Annual
Report on Form 10-K for the year ended September 30, 2006.


                        Item 4. Controls and Procedures

Management,  including our Chief Executive Officer and Chief Financial  Officer,
evaluated the design and operational  effectiveness  of our disclosure  controls
and  procedures  as of the  end of the  first  fiscal  quarter  covered  by this
Quarterly Report on Form 10-Q.  Based upon that evaluation,  our Chief Executive
Officer and Chief Financial Officer  concluded that the disclosure  controls and
procedures  are  effective to ensure that  material  information  required to be
disclosed in the reports we file or submit under the Securities  Exchange Act of
1934  is  made  known  to  us  by  others  within  our  company,  including  our
consolidated  subsidiaries,  particularly during the period for which reports of
our company,  including this  Quarterly  Report on Form 10-Q, are being prepared
and to permit our  company to report  that  information  within the time  period
specified by the Securities and Exchange Commission.

We made no changes in our internal  control over financial  reporting during our
first fiscal quarter that have materially affected,  or are reasonably likely to
materially affect, our internal control over financial reporting.


                           Part II - Other Information

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

Our annual shareholders  meeting was held on January 25, 2007. The matters voted
upon at the meeting were the election of three  directors for  three-year  terms
and adoption of the 2007 Steel Technologies Inc. Cash Bonus Plan.

                                      25

<PAGE>
The number of votes  cast for or  withheld  with  respect  to each  nominee  for
director elected at the meeting were as follows:


        Nominee                  Votes For     Votes Withheld
        -------                  ---------     --------------

        Michael J. Carroll       7,865,499        2,706,308
        Stuart N. Ray            7,821,392        2,750,415
        William E. Hellmann      7,881,999        2,689,808


The number of votes cast for,  against or abstained  with respect to approval to
adopt the 2007 Steel Technologies Inc. Cash Bonus Plan.

         Votes For     Votes Against      Votes Abstained
         ---------     -------------      ---------------
        10,167,366         387,499             16,940


                                Item 6. Exhibits

Exhibits filed or furnished with this report:


   Exhibit 31.1    Certification of Chief Executive  Officer Pursuant to
                   Section 302 of the  Sarbanes-Oxley  Act of 2002

   Exhibit 31.2    Certification of Chief Financial  Officer Pursuant to
                   Section 302 of the  Sarbanes-Oxley  Act of 2002

   Exhibit 32.1    Certification of Chief Executive  Officer  Pursuant to
                   Title 18, United States Code,  Section 1350 as adopted
                   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

   Exhibit 32.2    Certification of Chief Financial  Officer  Pursuant to
                   Title 18, United States Code,  Section 1350 as adopted
                   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


                                       26

<PAGE>


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.



STEEL TECHNOLOGIES INC.
----------------------
    (Registrant)




By      /s/ Roger D. Shannon
        -----------------------------
        Roger D. Shannon
        Chief Financial Officer
        (Principal Financial and Chief Accounting Officer)




Dated:  February 9, 2007

                                       27

<PAGE>
                                  EXHIBIT 31.1
                CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bradford T. Ray, certify that:

1.   I have reviewed this  quarterly  report on Form 10-Q of Steel  Technologies
     Inc. for the fiscal quarter ended December 31, 2006;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and  15d-15(e))and  internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f)) for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;

     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          first fiscal  quarter that has materially  affected,  or is reasonably
          likely to materially  affect,  the registrant's  internal control over
          financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.


Date: February 9, 2007

/s/ Bradford T. Ray
--------------------
Bradford T. Ray
Chief Executive Officer


<PAGE>
                                  EXHIBIT 31.2
                CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO
                  SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Roger D. Shannon, certify that:

1.   I have reviewed this  quarterly  report on Form 10-Q of Steel  Technologies
     Inc. for the fiscal quarter ended December 31, 2006;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     report;

3.   Based on my  knowledge,  the  financial  statements,  and  other  financial
     information  included  in  this  report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The  registrant's  other  certifying  officer  and  I are  responsible  for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules  13a-15(e) and 15d-15(e))  and internal  control over
     financial  reporting  (as  defined  in  Exchange  Act Rules  13a-15(f)  and
     15d-15(f))for the registrant and have:

     a)   Designed  such  disclosure  controls  and  procedures,  or caused such
          disclosure   controls  and   procedures  to  be  designed   under  our
          supervision,  to ensure  that  material  information  relating  to the
          registrant,  including its consolidated subsidiaries, is made known to
          us by others within those entities,  particularly during the period in
          which this report is being prepared;

     b)   Designed such internal  control over  financial  reporting,  or caused
          such internal  control over  financial  reporting to be designed under
          our  supervision,   to  provide  reasonable  assurance  regarding  the
          reliability  of financial  reporting and the  preparation of financial
          statements for external purposes in accordance with generally accepted
          accounting principles;


     c)   Evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures and presented in this report our conclusions  about the
          effectiveness of the disclosure controls and procedures, as of the end
          of the period covered by this report based on such evaluation; and

     d)   Disclosed  in this  report  any  change in the  registrant's  internal
          control over financial reporting that occurred during the registrant's
          first fiscal  quarter that has materially  affected,  or is reasonably
          likely to materially  affect,  the registrant's  internal control over
          financial reporting; and

5.   The registrant's  other certifying  officer and I have disclosed,  based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's  auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)   All significant  deficiencies and material weaknesses in the design or
          operation  of internal  control  over  financial  reporting  which are
          reasonably  likely to  adversely  affect the  registrant's  ability to
          record, process, summarize and report financial information; and

     b)   Any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          control over financial reporting.

Date: February 9, 2007

/s/ Roger D. Shannon
---------------------
Roger D. Shannon
Chief Financial Officer


<page>

                                  EXHIBIT 32.1


                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
             PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Title 18, United States Code,  Section 1350, as adopted  pursuant to
Section  906 of the  Sarbanes-Oxley  Act of 2002,  I,  Bradford  T.  Ray,  Chief
Executive Officer of Steel Technologies Inc., (the Company) certify, to the best
of my knowledge, based upon a review of the Quarterly Report on Form 10-Q of the
Company for the quarter ended December 31, 2006:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

                                                      /s/ Bradford T. Ray
                                                      -------------------
                                                      Bradford T. Ray
                                                      Chief Executive Officer
                                                      Date: February 9, 2007

<page>
                                  EXHIBIT 32.2


                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
             PURSUANT TO TITLE 18, UNITED STATES CODE, SECTION 1350
      AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Title 18, United States Code,  Section 1350, as adopted  pursuant to
Section  906 of the  Sarbanes-Oxley  Act of 2002,  I,  Roger D.  Shannon,  Chief
Financial Officer of Steel Technologies Inc., (the Company) certify, to the best
of my knowledge, based upon a review of the Quarterly Report on Form 10-Q of the
Company for the quarter ended December 31, 2006:

     (1)  The Report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

     (2)  The  information  contained  in the  Report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of the Company.

                                                      /s/ Roger D. Shannon
                                                      ---------------------
                                                      Roger D. Shannon
                                                      Chief Financial Officer
                                                      Date: February 9, 2007