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 March 31, 2007

                                       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 13,052,197 shares outstanding of the Registrant's  common stock as of
April 30, 2007.


<PAGE>





                             STEEL TECHNOLOGIES INC.

                                      INDEX



                                                                     Page Number
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

        Condensed Consolidated Balance Sheets
        March 31, 2007 and September 30, 2006 ..........................  3

        Condensed Consolidated Statements of Income
        Three and Six Months Ended March 31, 2007 and 2006 .............  4

        Condensed Consolidated Statements of Comprehensive Income
        Three and Six Months Ended March 31, 2007 and 2006 .............  5

        Condensed Consolidated Statements of Cash Flows
        Three and Six Months Ended March 31, 2007 and 2006 .............  6

        Notes to Condensed Consolidated Financial Statements ........... 7-16

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations ..........................................17-28

Item 3. Quantitative and Qualitative Disclosures About Market
        Risk ........................................................... 28

Item 4. Controls and Procedures ........................................ 29

PART II.OTHER INFORMATION

Item 1A.Risk Factors ...................................................29-30

Item 6. Exhibits ....................................................... 30

Signature .............................................................. 31



<PAGE>

                         Part I. - FINANCIAL INFORMATION
                          Item 1. Financial Statements

                             STEEL TECHNOLOGIES INC.
                      Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(In thousands, except shares)                          March 31     September 30
(Unaudited)                                              2007           2006
--------------------------------------------------------------------------------
 <S>                                                   <C>             <C>
ASSETS
Current assets:
   Cash and cash equivalents ...................      $  10,257       $  12,066
   Trade accounts receivable, net ..............        139,757         104,356
   Inventories .................................        167,085         181,267
   Deferred income taxes .......................          1,942           1,688
   Prepaid expenses and other assets ...........          4,734           6,607
                                                      ---------       ---------
      Total current assets .....................        323,775         305,984
                                                      ---------       ---------

Property, plant and equipment, net .............        113,602         112,642
Investments in unconsolidated affiliates .......         64,733          63,626
Goodwill .......................................         25,472          25,678
Other assets ...................................          5,378           5,687
                                                      ---------       ---------
                                                     $  532,960       $ 513,617
                                                      =========       =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable ............................      $  70,304       $  62,204
   Bank overdrafts .............................          6,204          13,617
   Accrued liabilities .........................         19,237          15,993
   Income taxes payable ........................          4,115           2,500
   Current portion of debt and
      capital lease obligations ................          1,992           2,074
                                                      ---------       ---------
      Total current liabilities ................        101,852          96,388
                                                      ---------       ---------

Long-term debt and capital lease obligations ...        134,884         119,911
Deferred income taxes ..........................         17,750          20,243
Other long-term liabilities.....................          4,247           3,941
                                                      ---------       ---------
      Total liabilities ........................        258,733         240,483
                                                      ---------       ---------
Commitments and contingencies

Minority interest ..............................          3,588           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:
    13,059,257 at March 31, 2007 and
    13,055,331 at September 30, 2006............         71,285          71,176
   Treasury stock at cost:  2,636,067 shares at
    March 31, 2007 and 2,635,513 at September
    30, 2006....................................        (24,496)        (24,486)
   Additional paid-in capital ..................          6,963           6,551
   Retained earnings ...........................        221,731         219,971
   Accumulated other comprehensive loss ........         (4,844)         (3,452)
                                                      ---------       ---------
      Total shareholders' equity ...............        270,639         269,760
                                                      ---------       ---------
                                                      $ 532,960       $ 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                        For the               For the
 per share results)                     Three Months Ended     Six Months Ended
(Unaudited)                                  March 31              March 31
--------------------------------------------------------------------------------
                                         2007       2006       2007      2006
                                                As Restated,        As Restated,
                                                 See Note 1          See Note 1
                                       -----------------------------------------
<S>                                   <C>        <C>        <C>       <C>
Sales ................................ $251,501   $238,336   $452,317  $439,521
Cost of goods sold ...................  236,647    225,697    427,189   414,644
                                       --------   --------   --------  --------
   Gross profit ......................   14,854     12,639     25,128    24,877

Selling, general and administrative
   expenses ..........................   11,239      9,274     20,756    17,822
Gain on disposals of property, plant
   and equipment .....................      239          4        243         6
                                       --------   --------   --------   -------
   Operating income ..................    3,854      3,369      4,615     7,061

Interest expense .....................   (2,105)      (942)    (4,097)   (1,741)
Interest income ......................      192        192        397       531
Minority interest in income of
   consolidated subsidiary ...........     (197)      (132)      (362)     (368)
Equity in net income of unconsolidated
   affiliates, net ...................    2,443        627      4,713     1,476
                                       --------   --------   --------   -------
   Income before income taxes ........    4,187      3,114      5,266     6,959

Provision for income taxes ...........    1,341        874      1,525     1,848
                                       --------   --------   --------   -------
   Income from continuing operations .    2,846      2,240      3,741     5,111

   Discontinued operations, net of
     tax (including gain on disposal
     of $246, net of tax for the
     three and six months ended
      March 31, 2006).................      -          645        (22)    1,114
                                       --------   --------   --------   -------
   Net Income ........................ $  2,846   $  2,885   $  3,719   $ 6,225
                                       ========   ========   ========   =======
Diluted weighted average number of
   common shares outstanding..........   13,170     13,101     13,153    13,093
                                       ========   ========   ========   =======

Diluted earnings per common share:
   From continuing operations ........ $   0.22   $   0.17   $   0.28   $  0.39
   From discontinued operations ......       -        0.05      (0.00)     0.09
                                       --------   --------   --------   -------
                                       $   0.22   $   0.22   $   0.28   $  0.48
                                       ========   ========   ========   =======

Basic weighted average number of
   common shares outstanding .........   12,982     12,948     12,980    12,942
                                       ========   ========   ========   =======

Basic earnings per common share:
   From continuing operations ........ $   0.22   $   0.17   $   0.29   $  0.39
   From discontinued operations ......       -        0.05      (0.00)     0.09
                                       --------   --------   --------   -------
                                       $   0.22   $   0.22   $   0.29   $  0.48
                                       ========   ========   ========   =======

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, except                        For the               For the
 per share results)                     Three Months Ended     Six Months Ended
(Unaudited)                                  March 31              March 31
--------------------------------------------------------------------------------
                                         2007       2006       2007      2006
                                                As Restated,        As Restated,
                                                 See Note 1          See Note 1
                                       -----------------------------------------
<S>                                   <C>        <C>        <C>       <C>
Net income ........................... $  2,846   $  2,885   $  3,719  $  6,225
  Foreign currency translation
     adjustment ......................     (716)       471     (1,327)    1,593
  Change in unrealized loss on
     cash flow hedges, net of taxes ..      (60)       154        (65)      241
                                       --------   --------   --------  --------
  Net other comprehensive (loss)
     income ..........................     (776)       625     (1,392)    1,834
                                       --------   --------   --------  --------
Comprehensive income ................. $  2,070   $  3,510   $  2,327  $  8,059
                                       ========   ========   ========  ========

</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)                                                Six Months Ended
(Unaudited)                                                       March 31
--------------------------------------------------------------------------------
                                                             2007       2006
                                                                    As Restated,
                                                                     See Note 1
                                                          ----------------------
<S>                                                       <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income .........................................   $  3,719    $  6,225
   Adjustments to reconcile net income to net cash
    provided by (used in )operating activities:
       Depreciation ...................................      9,342       8,078
       Stock-based compensation expense ...............        394         297
       Deferred income taxes ..........................     (2,402)     (1,815)
       Undistributed equity in net income of
        unconsolidated affiliates .....................     (1,107)     (1,330)
       Minority interest in income of consolidated
        subsidiary ....................................        362         368
       Provision for bad debts ........................        129         178
       Gain on disposals of property, plant and
          equipment ...................................       (243)         -
       Gain on sale of Custom Steel ...................         -         (246)
       Increase (decrease) in cash resulting
        from changes in:
             Trade accounts receivable ................    (36,271)     (8,955)
             Inventories ..............................     13,502     (36,082)
             Prepaid expenses and other assets ........      2,007      (1,043)
             Accounts payable .........................      8,500       8,352
             Income taxes payable .....................      1,655       3,454
             Accrued liabilities ......................      3,641         985
                                                          --------    --------
Net cash provided by (used in) operating activities ...      3,228     (21,534)
                                                          --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchases of property, plant and equipment .........    (10,125)    (11,809)
   Net cash proceeds from sale of Custom Steel ........         -       17,974
   Proceeds from sale of property, plant and equipment         976          -
                                                          --------    --------
Net cash (used in) provided by investing activities ...     (9,149)      6,165
                                                          --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from long-term debt .......................     28,978      17,000
   Principal payments on debt and capital
    lease obligations .................................    (15,395)    (17,000)
   Changes in bank overdraft ..........................     (7,413)     (2,614)
   Cash dividends on common stock .....................     (1,959)     (1,941)
   Net issuance of common stock .......................         99         239
   Excess tax benefits from stock options .............         18          52
                                                          --------    --------
Net cash provided by (used in) financing activities ...      4,328      (4,264)
                                                          --------    --------
Effect of exchange rate changes on cash ...............       (216)        374
                                                          --------    --------
Net decrease in cash and cash equivalents .............     (1,809)    (19,259)
Cash and cash equivalents, beginning of year ..........     12,066      30,991
                                                          --------    --------
Cash and cash equivalents, end of period ..............   $ 10,257    $ 11,732
                                                          ========    ========

Supplemental Schedule of Non-Cash Investing and Financing Activities:

  Equipment acquired with capital lease obligations ...   $  1,308    $    -


</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 AND RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL
    STATEMENTS

The condensed  consolidated balance sheet as of March 31, 2007 and the condensed
consolidated  statements of income,  comprehensive income and cash flows for the
three and six months ended March 31, 2007 and 2006,  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 and six months  ended  March 31,  2007 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 and six months ended March 31, 2007 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  2006  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 and six months ended
March 31, 2006 (in thousands):

<TABLE>
<CAPTION>

                   Condensed Consolidated Statement of Income
                    For the Three Months Ended March 31, 2006
                         Summary of Restatement Impacts
               (Unaudited, in thousands, except per share amounts)
--------------------------------------------------------------------------------
                                                         March 31, 2006
                                               ---------------------------------
                                               Previously
                                               Reported (1)      Adj.   Restated
                                               ------------    ------   --------
        <S>                                      <C>          <C>      <C>
Minority interest in income of
 consolidated subsidiary                       $     (142)     $  10    $  (132)
Income before income taxes                          3,104         10      3,114
Provision for income taxes                            776         98        874
Income from continuing operations                   2,328        (88)     2,240
Net income                                          2,973        (88)     2,885

Diluted earnings per common share:
 From continuing operations                    $     0.18      $(0.01)  $  0.17
 From discontinued operations                        0.05          -       0.05
                                               ------------    ------   -------
                                               $     0.23      $(0.01)  $  0.22
                                               ============    ======   =======
</TABLE>

                                       7
<PAGE>
<TABLE>
<CAPTION>

                   Condensed Consolidated Statement of Income
                     For the Six Months Ended March 31, 2006
                         Summary of Restatement Impacts
               (Unaudited, in thousands, except per share amounts)
--------------------------------------------------------------------------------
                                                         March 31, 2006
                                               ---------------------------------
                                               Previously
                                               Reported (1)      Adj.   Restated
                                               ------------    ------   --------
        <S>                                      <C>          <C>      <C>
Minority interest in income of
 consolidated subsidiary                       $     (366)     $  (2)   $  (368)
Income before income taxes                          6,961         (2)     6,959
Provision for income taxes                          1,868        (20)     1,848
Income from continuing operations                   5,093         18      5,111
Net income                                          6,207         18      6,225

Diluted earnings per common share:
 From continuing operations                    $     0.39      $0.00    $  0.39
 From discontinued operations                        0.09          -       0.09
                                               ----------      -----    -------
                                               $     0.47      $0.00    $  0.48
                                               ==========      =====    =======
</TABLE>

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>
<CAPTION>

                   Condensed Consolidated Statement of Income
                    For the Three Months Ended March 31, 2006
                       Summary of Reclassification Impacts
                            (Unaudited, in thousands)
--------------------------------------------------------------------------------
                                                        March 31, 2006
                                            ------------------------------------
                                              Previously
                                            Reported (1)(2)   Reclass    Amount
                                            ---------------   -------   --------
        <S>                                    <C>            <C>      <C>
Cost of goods sold                             $ 225,829      $ (132)  $255,697
Gross profit                                      12,507         132     12,639
Operating income                                   3,864        (495)     3,369
Minority interest in income of
  consolidated subsidiary                             -         (132)      (132)
Equity in net income of unconsolidated
  affiliates, net                                    627         -          627
Income before income taxes                         3,114         -        3,114

</TABLE>

                                       8
<PAGE>


<TABLE>
<CAPTION>

                   Condensed Consolidated Statement of Income
                     For the Six Months Ended March 31, 2006
                       Summary of Reclassification Impacts
                            (Unaudited, in thousands)
--------------------------------------------------------------------------------
                                                        March 31, 2006
                                            ------------------------------------
                                              Previously
                                            Reported (1)(2)   Reclass    Amount
                                            ---------------   -------   --------
        <S>                                    <C>            <C>      <C>
Cost of goods sold                             $ 415,012      $ (368)  $414,644
Gross profit                                      24,509         368     24,877
Operating income                                   8,169      (1,108)     7,061
Minority interest in income of
  consolidated subsidiary                             -         (368)      (368)
Equity in net income of unconsolidated
  affiliates, net                                  1,476         -        1,476
Income before income taxes                         6,959         -        6,959

</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.  MERGER AGREEMENT
On February 28, 2007,  the Company  entered into an Agreement and Plan of Merger
with  Mitsui  &  Co.  (U.S.A.),  Inc.  (Mitsui  USA)  pursuant  to  which  Steel
Technologies  and a subsidiary of Mitsui USA will merge with Steel  Technologies
continuing as the surviving  corporation and a wholly owned subsidiary of Mitsui
USA following completion of the merger. Under the terms of the merger agreement,
at the effective time of the merger, the Company's shareholders will be entitled
to receive $30 per share,  without interest and less any applicable  withholding
taxes in an all-cash transaction. The Federal Trade Commission has granted early
termination  of  the  waiting  period  under  the  Hart-Scott-Rodino   Antitrust
Improvements  Act of 1976,  as amended,  in connection  with the pending  merger
agreement  with Mitsui USA. The  transaction  remains  subject to the receipt of
shareholder  approval as well as the  satisfaction of other closing  conditions,
including  clearance by  governmental  authorities  under the antitrust  laws of
Mexico.  A special meeting of the Company's  shareholders  has been scheduled on
Wednesday, May 30, 2007, to consider and vote on a proposal to ratify, adopt and
approve the merger agreement.

3.  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.


                                       9
<PAGE>

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>
<CAPTION>

(In thousands except per
 common share data)                      Three Months Ended    Six Months Ended
(Unaudited)                                March 31, 2006       March 31, 2006
--------------------------------------------------------------------------------

<S>                                          <C>                   <C>
Sales ................................        $244,234              $451,138
Net income ...........................          $3,761                $6,261
Diluted net income per share .........           $0.29                 $0.48
Basic net income per share ...........           $0.29                 $0.48

</TABLE>

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

4.  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>
<CAPTION>

(In thousands)                          Three Months Ended    Six Months Ended
(Unaudited)                                  March 31             March 31
--------------------------------------------------------------------------------
                                        2007      2006        2007      2006
                                      ------------------------------------------
<S>                                    <C>       <C>        <C>        <C>
Sales ................................  $  -      $ 12,101   $     -    $23,470
Income (loss) before income taxes ....     -           702        (37)    1,423
Income (loss) from continuing
  operations .........................     -           399        (22)      868
Gain on sale, net of income taxes ....     -           246         -        246
Net income (loss) ....................     -           645        (22)    1,114

</TABLE>


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

(In thousands)                                         March 31   September 30
(Unaudited)                                              2007         2006
-------------------------------------------------------------------------------
<S>                                                 <C>           <C>
Raw materials ....................................   $  121,165   $  129,427
Finished goods and work in process ...............       45,920       51,840
                                                     ----------   ----------
                                                     $  167,085   $  181,267
                                                     ==========   ==========
</TABLE>
                                       10

<PAGE>


6. 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. of Michigan,  LLC (Ferrolux
Metals), 49% owned unconsolidated affiliates, all accounted for using the equity
method of accounting, follows:

<TABLE>
<CAPTION>
(In Thousands)          Three Months Ended            Six Months Ended
(Unaudited)                  March 31                     March 31
-----------------      ---------------------      -----------------------
                         2007         2006          2007           2006
                         ----         ----          ----           ----

                    <c>          <c>           <c>            <c>
Sales                  $96,710      $68,857       $187,962        $136,525
Gross profit            11,849        4,229         22,879           9,472
Net income               4,898        1,256          9,450           2,956
</TABLE>


7.  EQUITY BASED COMPENSATION

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 March 31, 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 March 31, 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.

                                       11
<PAGE>

As a result of  adopting  SFAS No.  123(R),  the  Company  recorded  stock-based
compensation expense included in selling, general and administrative expenses of
$208,000  and  $394,000  for the  three and six  months  ended  March 31,  2007,
respectively,  compared to $166,000  and  $297,000  for the three and six months
ended March 31, 2006,  respectively.  In  addition,  the Company  recognized  an
income tax benefit of $0 and $39,000 during the three and six months ended March
31, 2007, respectively, compared to $52,000 and $84,000 during the three and six
months ended March 31, 2006, respectively.  Approximately $0 and $21,000 of this
income tax benefit was recorded as a reduction in income tax expense  during the
three  and  six  months   ended  March  31,  2007,   respectively   compared  to
approximately  $15,000 and $32,000  during the three and six months  ended March
31, 2006, respectively.

The summary of stock  options as of March 31, 2007,  and changes  during the six
months ended March 31, 2007, are presented below.

<TABLE>
<CAPTION>

                                    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, March 31, 2007         329,150        $ 13.24
                                   =======        =======
  </TABLE>


<TABLE>
<CAPTION>


                      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 March 31, 2007  329,150    $ 13.24    5.00 years   $ 16.34     $5,380,000
Options exercisable
 at March 31, 2007  200,425      10.19    3.83 years     19.39      3,887,000
Options vested and
  expected to vest  329,150      13.24    5.00 years     16.34      5,380,000

</TABLE>

     (1)  Computed  based upon the amount by which the fair market  value of the
          Company's common stock at March 31, 2007, of $29.58 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 and six
months  ended  March 31,  2007 was $0 and  $39,000,  respectively,  compared  to
$169,000 and  $395,000,  respectively,  for the three and six months ended March
31, 2006. All unexercised options expire from 2008 to 2015.

                                      12
<PAGE>


The summary of restricted  stock as of March 31, 2007, and changes during the
six months ended March 31, 2007 are presented below.

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

Balance, September 30, 2006      80,000
Granted                             -
Exercised                           -
Forfeited                        (3,000)
                                 ------
Balance, March 31, 2007          77,000
                                 ======

</TABLE>

Total  compensation  costs  related to nonvested  options and  restricted  stock
awards not yet  recognized  was  approximately  $1,688,000 at March 31, 2007. We
expect to recognize this  compensation  cost as follows using the graded vesting
method over a weighted average period of 1.6 years:



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

         Remainder of fiscal 2007    $  439,000
         2008                           745,000
         2009                           424,000
         2010                            59,000
         2011                            21,000
                                   --------------
         Total                       $1,688,000
                                   ==============
</TABLE>


8.  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
                                                                March 31
                                                             2007        2006
(In thousands, except per share data)                               As Restated,
(Unaudited)                                                          See Note 1
-----------------------------------------------------   ----------  -----------
<S>                                                       <C>         <C>
Net income from continuing operations ...............   $   2,846   $   2,240
Discontinued operations .............................          -          645
                                                        ----------  ---------
Net income                                              $   2,846   $   2,885
                                                        ==========  ==========
Shares (denominator) used for diluted
   per common share computations:
    Weighted average shares of common  stock
        outstanding .................................      12,982      12,948
    Plus: dilutive effect of stock options ..........         188         153
                                                        ---------   ---------
           Diluted weighted average shares ..........      13,170      13,101
                                                        ---------   ---------
Shares (denominator) used for basic per common
   share computations:
   Weighted average shares of common stock
       outstanding ..................................      12,982      12,948
                                                        ---------   ---------

</TABLE>

                                       13
<PAGE>
<TABLE>

<CAPTION>


                                                           Three Months Ended
                                                                March 31
                                                             2007        2006
(In thousands, except per share data)                               As Restated,
(Unaudited)                                                          See Note 1
-----------------------------------------------------   ----------  -----------
<S>                                                     <C>         <C>
Net income per common share data:
    Diluted
       From continuing operations ...................   $    0.22   $    0.17
       From discontinued operations .................          -         0.05
                                                        ---------   ---------
                                                        $    0.22   $    0.22
                                                        =========   =========
    Basic
       From continuing operations ...................   $    0.22   $    0.17
       From discontinued operations .................          -         0.05
                                                        ---------   ---------
                                                        $    0.22   $    0.22
                                                        =========   =========
</TABLE>
<TABLE>
<CAPTION>

                                                            Six Months Ended
                                                                March 31
                                                             2007        2006
(In thousands, except per share data)                               As Restated,
(Unaudited)                                                          See Note 1
-----------------------------------------------------   ----------  -----------
<S>                                                       <C>         <C>
Net income from continuing operations ...............   $   3,741   $   5,111
Discontinued operations .............................         (22)      1,114
                                                        ----------  ---------
Net income                                              $   3,719   $   6,225
                                                        ==========  =========
Shares (denominator) used for diluted
   per common share computations:
    Weighted average shares of common  stock
        outstanding .................................      12,980      12,942
    Plus: dilutive effect of stock options ..........         173         151
                                                        ---------   ---------
           Diluted weighted average shares ..........      13,153      13,093
                                                        ---------   ---------
Shares (denominator) used for basic per
   common share computations:
   Weighted average shares of common stock
       outstanding ..................................      12,980      12,942
                                                        ---------   ---------
Net income per common share data:
    Diluted
       From continuing operations ...................   $    0.28   $    0.39
       From discontinued operations .................       (0.00)       0.09
                                                        ---------   ---------
                                                        $    0.28   $    0.48
                                                        =========   =========
    Basic
       From continuing operations ...................   $    0.29   $    0.39
       From discontinued operations .................       (0.00)       0.09
                                                        ---------   ---------
                                                        $    0.29   $    0.48
                                                        =========   =========
</TABLE>


                                       14
<PAGE>

Outstanding  options of 80,250 and 7,500 shares were  excluded  from the diluted
earnings per common share  calculation  for the three ans six months ended March
31, 2007 and 2006,  respectively,  because the exercise price of the options was
greater than the average market price of the Company's stock.

9.  RELATED PARTIES
The Company has various  transactions  with its  unconsolidated  affiliates (see
Note  6).  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 and six months ended March 31, 2007 and 2006 follows:


<TABLE>
<CAPTION>
(In thousands)                      Three Months Ended         Six Months Ended
(Unaudited)                              March 31                 March 31
-----------------                   ---------------------   --------------------
                                      2007         2006         2007       2006
                                      ----         ----         ----       ----

                                  <c>          <c>         <c>         <c>
Sales to unconsolidated affiliates   $ 1,523       $ 894      $ 2,450    $ 2,013
Purchases from Mi-Tech Steel             462         330          676        871
Equity in net income of
   unconsolidated affiliates           2,443         627        4,713      1,476

</TABLE>

Accounts receivable from  unconsolidated  affiliates was $2,118,000 and $741,000
as of March 31, 2007 and September 30, 2006, respectively,  and accounts payable
to unconsolidated affiliates was $199,000 and $235,000 as of March 31, 2007, and
September 30, 2006, respectively.

The Company has also recorded  sales of $3,442,000  and $5,908,000 for the three
and six months ended March 31, 2007, respectively,  for scrap products sold to a
company owned by a director of the Company  compared to sales of $3,295,000  and
$6,679,000,  respectively, during the three and six months ended March 31, 2006.
Accounts  receivable  associated with these sales were $2,559,000 and $1,084,000
as of March 31, 2007, 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.

10.  CONTINGENCIES
A customer who previously filed a voluntary  petition for  reorganization  under
Chapter 11 of the U.S. Bankruptcy Code has filed a preference action against its
suppliers   including  the  Company.   This  customer  alleges  that  they  made
approximately  $10,500,000  of  payments  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 this  customer's  claim  that  these  payments  meet the legal
definition of preference payments. We intend to vigorously defend our position.



                                       15
<PAGE>


11. 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 were effective for us
beginning  January  1, 2007.  The  Company  presents  such taxes on a net basis.
Therefore,  the  adoption  of EITF 06-03 did not 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.

12.  SUBSEQUENT EVENTS
On April 27, 2007, the Company's Board of Directors  declared a semi-annual cash
dividend of $0.15 per share payable on May 22, 2007, to  shareholders  of record
as of May 7, 2007.

                                       16
<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 the following factors:
     o    the occurrence of any event,  change or other circumstances that could
          give rise to the  termination  of the  merger  agreement  with  Mitsui
          USA;
     o    the outcome of any legal proceedings that may be instituted against us
          and others in connection with the merger;
     o    the  inability  to  complete  the merger due to the  failure to obtain
          shareholder  approval or the failure to satisfy  other  conditions  to
          consummation of the merger;
     o    the failure of the merger to close for any other reason;
     o    the timing of the closing of the merger and receipt by shareholders of
          the merger consideration;
     o    risks  that  the  proposed  transaction  disrupts  current  plans  and
          operations and the potential  difficulties in employee  retention as a
          result of the merger;
     o    the effect of the announcement of the merger on our customer, supplier
          and other  business  relationships,  operating  results  and  business
          generally;
     o    the amount of the costs,  fees,  expenses  and charges  related to the
          merger,  including the  possibility  that the merger  agreement may be
          terminated  under  circumstances  that  require us to pay Mitsui USA a
          termination  fee of  $13,910,759  and up to  $1,500,000  of the  costs
          incurred by Mitsui USA in connection with the merger agreement;
     o    competitive factors such as pricing and availability of steel;
     o    cyclical demand in the steel industry,  specifically in the automotive
          market;
     o    our ability to make and integrate acquisitions;
     o    our  inability  to obtain  sufficient  capital  resources  to fund our
          operations and our growth;
     o    risk of business interruptions affecting automotive manufacturers;
     o    changes in the exchange rate of the Mexican peso; and
     o    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.


                                       17
<PAGE>

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.

For the three months ended March 31, 2007, income from continuing operations was
$2,846,000  or $0.22 per  diluted  share,  up 27% from  income  from  continuing
operations of $2,240,000 or $0.17 per diluted share posted in the second quarter
last year. For the quarter,  we incurred after-tax expenses of $552,000 or $0.04
per share  related to our  announced  merger  transaction  with a subsidiary  of
Mitsui & Co., Ltd. Income from discontinued operations for the second quarter of
2007 was  negligible,  compared  with $645,000 or $0.05 per diluted share in the
same period last year.  The Company's net income for the quarter was  $2,846,000
or $0.22 per diluted share,  unchanged from the second quarter last year.  Sales
for the  quarter  were  $251,501,000,  6% above  the year  earlier  period.  The
increases in sales and income from  continuing  operations were driven by higher
average selling prices and increased volumes.

For the second fiscal quarter ended March 31, 2007,  equity in the net income of
our unconsolidated  joint ventures was $2,443,000,  up approximately  $1,816,000
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  $1,838,000  during our second  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 six months of fiscal  2007,  we
spent approximately  $10,125,000 on capital projects,  primarily associated with
our  Juarez,  Mexico  greenfield  expansion.  We expect to invest an  additional
$9,875,000 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 March 31
                                         2007             2006
                                                      As Restated,
                                                       See Note 1
                                  ----------------  ----------------
                                            % of              % of         %
(Unaudited)                        Actual   Sales    Actual   Sales      Change
--------------------------------- -------- -------  -------- -------    --------

                              <c>       <c>      <c>       <c>         <c>
Sales                            $251,501  100.0%   $238,336  100.0%       6 %
Gross profit                       14,854    5.9      12,639    5.3       18
Selling, general and
   administrative expenses         11,239    4.5       9,274    3.9       21
Operating income                    3,854    1.5       3,369    1.4       14
</TABLE>


                                       18
<PAGE>

<table>
<caption>


                                  For the Three Months Ended March 31
                                         2007             2006
                                                      As Restated,
                                                       See Note 1
                                  ----------------  ----------------
                                            % of              % of         %
(Unaudited)                        Actual   Sales    Actual   Sales      Change
--------------------------------- -------- -------  -------- -------    --------

                              <c>       <c>      <c>       <c>         <c>

Interest expense, net               1,913    0.8         750    0.3      155
Equity in net income of
   unconsolidated affiliates, net   2,443    1.0         627    0.3      290
Income from continuing
   operations before income taxes   4,187    1.7       3,114    1.3       34
Discontinued operations                -     0.0         645    0.3     (100)
Net income                          2,846    1.1       2,885    1.2       (1)
Diluted earnings per common share
   from continuing operations       $0.22              $0.17              29
Diluted earnings per common share   $0.22              $0.22              (0)
Cash dividends per common share     $  -               $  -               -

Other data
----------
Average days sales outstanding      50.0               45.9                9
Inventory turnover                   5.7                5.8               (2)
Return on equity (annualized)        4.2%               4.5%              (7)

</table>



<table>
<caption>


                                   For the Six Months Ended March 31
                                        2007               2006
                                                       As restated,
                                                        See Note 1
                                  ----------------  ----------------
                                            % of              % of         %
(Unaudited)                        Actual   Sales    Actual   Sales      Change
--------------------------------- -------- -------  -------- -------    --------

                              <c>       <c>      <c>       <c>         <c>
Sales                            $452,317  100.0%   $439,521  100.0%       3 %
Gross profit                       25,128    5.6      24,877    5.7        1
Selling, general and
   administrative expenses         20,756    4.6      17,822    4.1       16
Operating income                    4,615    1.0       7,061    1.6      (35)
Interest expense, net               3,700    0.8       1,210    0.3      206
Equity in net income of
   unconsolidated affiliates, net   4,713    1.0       1,476    0.3      219
Income from continuing
   operations before income taxes   5,266    1.2       6,959    1.6      (24)
Discontinued operations               (22)  (0.0)      1,114    0.3     (102)
Net income                          3,719    0.8       6,225    1.4      (40)
Diluted earnings per common share
   from continuing operations       $0.28              $0.39             (28)
Diluted earnings per common share   $0.28              $0.48             (42)
Cash dividends per common share     $0.15              $0.15              -

Other data
----------
Average days sales outstanding      55.6               48.5               15
Inventory turnover                   5.1                5.4               (6)
Return on equity (annualized)        2.7%               4.7%             (43)

</table>
                                       19
<PAGE>

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

     Sales
     -----
     We posted net sales of $251,501,000  for the second quarter ended March 31,
     2007,  an  increase  of 6% from the  $238,336,000  recorded  for the second
     fiscal  quarter  ended March 31,  2006.  Shipments of  company-owned  steel
     products  in the second  quarter of fiscal  2007 were  314,000  tons,  a 2%
     increase from the second quarter of fiscal 2006. The average  selling price
     of company-owned steel products increased approximately 3%.

     Our sales for the six months ended March 31, 2007 were $452,317,000,  up 3%
     from the  $439,521,000 of sales recorded for the six months ended March 31,
     2006 of . Tons shipped in the first six months of fiscal 2007  decreased 3%
     compared to the first six months of fiscal 2006.  Average selling prices of
     steel for the first six months of fiscal 2007  increased  approximately  6%
     compared to fiscal 2006.

     Our   acquisition  of  Kasle  Steel   acquired  in  May  2006   contributed
     approximately  $5,263,000  and $9,296,000 of sales for the three months and
     six months ended March 31, 2007, respectively.

     Per the terms of an agreement with our largest customer,  we grant a rebate
     based on volume,  and we are entitled to receive  credit against the rebate
     for a percentage of the cost savings that we generate.  We reduced  revenue
     during calendar year 2006 by the estimated  maximum  possible annual rebate
     obligation. 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  increased  our first quarter net income by
     $645,000,  or $0.05 per diluted  share.  As of the quarter ending March 31,
     2007 and going forward, the net rebate with our customer is being finalized
     and recorded on a quarterly basis.

     Gross profit
     ------------
     Our gross  profit  margin in the  second  quarter  of fiscal  2007 was 5.9%
     compared to 5.3% in the second  quarter of fiscal 2006.  Cost of goods sold
     increased approximately $10,950,000, or 5%, in the second quarter of fiscal
     2007  compared to the second  quarter of fiscal  2006,  due  primarily to a
     $7,666,000 increase in our cost of materials sold and a $4,389,000 increase
     associated  with the  Kasle  Steel  acquisition.  This  cost  increase  was
     partially  offset by a delivery  cost decrease of $932,000 due primarily to
     higher  levels of freight  collect  shipments.  The  remaining  decrease of
     $173,000 in cost of goods sold in the second  quarter of fiscal 2007 versus
     the second  quarter of fiscal 2006  resulted  primarily  from higher volume
     spread over certain fixed manufacturing expenses.

     Our gross  profit  margin was 5.6% in the first six  months of fiscal  2007
     compared to 5.7% in the first six months of fiscal 2006.  Our cost of goods
     sold increased approximately $12,545,000, or 3%, in the first six months of
     fiscal 2007 compared to the first six months of fiscal 2006,  due primarily
     to a  $5,210,000  increase in our cost of  materials  sold and a $7,962,000
     increase  associated with the Kasle Steel  acquisition.  This cost increase
     was  partially  offset  by a  decrease  of  $1,829,000  in  delivery  costs
     primarily from higher levels of freight  collect  shipments.  The remaining
     costs of goods sold in the first six  months of fiscal  2007  increased  by
     $1,202,000  compared to the first six months of fiscal 2006 as lower volume
     spread  over  certain  fixed  manufacturing   expenses  adversely  affected
     production cost efficiencies.

                                       20
<PAGE>

     Selling, general and administrative expenses
     --------------------------------------------

     Selling,  general and  administrative  costs were $11,239,000 for the three
     months ended March 31, 2007,  compared to  $9,274,000  for the three months
     ended March 31, 2006. The increase is primarily  attributable to $1,083,000
     of additional  expenses  associated with the acquisition of Kasle Steel and
     $813,000  of  additional  expenses  associated  with our  announced  merger
     transaction  with a  subsidiary  of  Mitsui  & Co.,  Ltd.

     Selling,  general and  administrative  costs were  $20,756,000  for the six
     months ended March 31,  2007,  compared to  $17,822,000  for the six months
     ended March 31, 2006. The increase is primarily  attributable to $2,202,000
     of additional  expenses  associated with the acquisition of Kasle Steel and
     $813,000  of  additional  expenses  associated  with our  announced  merger
     transaction  with a  subsidiary  of  Mitsui  & Co.,  Ltd.

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

     Interest expense
     ----------------

     Our net interest expense for the second quarter of fiscal 2007 increased to
     $1,913,000  from  $750,000  for the second  quarter  of fiscal  2006 due to
     additional  debt  associated  with the Kasle Steel  acquisition  and higher
     interest  rates on variable  rate debt during the second  quarter of fiscal
     2007 compared to the second quarter of fiscal 2006.

     Net interest  expense for the first six months of fiscal 2007  increased to
     $3,700,000  from  $1,210,000  for the first six months 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 six months of fiscal 2007 compared to the first six months
     of fiscal 2006.

     Equity in net income of unconsolidated affiliates
     -------------------------------------------------

     Our share of the income of  unconsolidated  affiliates  was  $2,443,000 and
     $4,713,000 for the first three and six months of fiscal 2007, respectively,
     compared to $627,000 and  $1,476,000 in 2006,  respectively.  Kasle Steel's
     three unconsolidated  affiliates contributed  approximately  $1,749,000 and
     $3,657,000  to equity in net income of  unconsolidated  affiliates  for the
     three and six months ended March 31, 2007, respectively.

     Our  unconsolidated  affiliates  reported  $96,710,000 and  $187,963,000 in
     sales for the first three and six months of fiscal 2007,  respectively,  an
     increase of 40% and 38% compared to 2006, respectively. Kasle Steel's three
     unconsolidated  affiliates posted approximately $23,575,000 and $47,651,000
     in sales for the three and six months ended March 31,  2007,  respectively.
     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.


                                       21
<PAGE>

     Income tax expense
     ------------------

     Our  effective  income  tax  rate  was   approximately   32.0%  and  28.1%,
     respectively,  for the second quarters of fiscal 2007 and 2006. For the six
     months of fiscal 2007 and 2006 our effective  income tax rate was 29.0% and
     26.6%,  respectively.  The increase  between  years is  attributable  to an
     increase in net income in the United States and Canada, 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 4 of our  Notes  to  Condensed  Consolidated
     Financial Statements) on March 31, 2006.

     Summarized  condensed  consolidated income statement  information of Custom
     Steel follows:

<TABLE>
<CAPTION>

(In thousands)                          Three Months Ended    Six Months Ended
(Unaudited)                                  March 31             March 31
--------------------------------------------------------------------------------
                                        2007      2006        2007      2006
                                      ------------------------------------------
<S>                                    <C>       <C>        <C>        <C>
Sales ................................  $  -      $ 12,101   $     -    $23,470
Income (loss) before income taxes ....     -           702        (37)    1,423
Income (loss) from continuing
  operations .........................     -           399        (22)      868
Gain on sale, net of income taxes ....     -           246         -        246
Net income (loss) ....................     -           645        (22)    1,114

</TABLE>

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

As of March 31, 2007, we had  $221,923,000 of working  capital,  we maintained a
current ratio of 3.2:1 and our total debt was 34% 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 50 days for the three months
ended March 31, 2007,  compared to 46 for the three months ended March 31, 2006.
We expect  average  days sales  outstanding  to remain  consistent  in our third
quarter  compared to our second  quarter of fiscal 2007.  Average days inventory
increased  to 64 days for the three  months  ended March 31,  2007,  compared to
62 days  for the three  months  ended March 31,  2006.  We expect  average  days
inventory to approximate 65 days during our third quarter of fiscal 2007.

Our average payment days to suppliers was 27 days as of March 31, 2007, compared
to 26 days as of March 31, 2006. We expect average  payment days to suppliers to
remain  consistent in our third quarter compared to our second quarter of fiscal
2007.

Cash  provided  by  operations  during the first six  months of fiscal  2007 was
$3,228,000,  compared to cash used in operations of $21,534,000 during the first
six months of fiscal 2006.

                                       22
<PAGE>


Our increased  operating  cash flows  resulted  from changes in working  capital
offset by lower net income.

We decreased inventory by $13,502,000 during the first six months of fiscal 2007
to match current demand. Accounts payable increased by $8,500,000 related to the
timing of our  inventory  purchases,  and our accounts  receivable  increased by
$36,271,000  during the first six months of fiscal 2007  compared to fiscal 2006
primarily due to increased sales in the latter portion of the second quarter.

Capital   expenditures   for  the  first  six  months  of  fiscal  2007  totaled
approximately  $10,125,000.  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.

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 September 30, 2007, 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 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  transaction  gains were  $350,000  and  $517,000 for the three and six
months  ended  March  31,  2007,  respectively,  compared  to  foreign  currency
transaction  losses of $774,000 and  $1,095,000  during the three and six months
ended March 31, 2006, respectively.


                                       23
<PAGE>



We  maintain  50% equity  investments  in Mi-Tech  Steel,  RSDC and Kasle  Metal
Processing.  We hold 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.  These guarantees are proportionate to
the obligations of the other equity  investors in Kasle Metal  Processing.  Cash
flows from  operations and existing  credit  facilities are expected to meet the
liquidity needs of these unconsolidated affiliates.

Distributions from our  unconsolidated  affiliates are not, and are not expected
to be, a material source of liquidity for us. 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.

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 March  31,  2007,  we had
$79,000,000 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 first six months of fiscal
2007, we borrowed $28,978,000 to fund our working capital needs and we paid down
$15,395,000  of debt from  operating cash flows.  We had  outstanding  checks of
$6,204,000 as of March 31, 2007,  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.

                                       24
<PAGE>

A customer who previously filed a voluntary  petition for  reorganization  under
Chapter 11 of the U.S.  Bankruptcy Code has filed preference actions against its
suppliers  including  us. This  customer  alleges  that they made  approximately
$10,500,000  of payments 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 this  customer's  claim that
these payments meet the legal  definition of preference  payments.  We intend to
vigorously defend our position.

On February  28,  2007,  we entered  into an  Agreement  and Plan of Merger with
Mitsui & Co.  (U.S.A.),  Inc. (Mitsui USA) pursuant to which we and a subsidiary
of Mitsui USA will merge with Steel  Technologies  continuing  as the  surviving
corporation and a wholly owned subsidiary of Mitsui USA following  completion of
the merger.  Under the terms of the merger  agreement,  at the effective time of
the merger, our shareholders will be entitled to receive $30 per share,  without
interest and less any applicable  withholding taxes in an all-cash  transaction.
The Federal Trade Commission has granted early termination of the waiting period
under the Hart-Scott-Rodino  Antitrust  Improvements Act of 1976, as amended, in
connection  with the pending merger  agreement with Mitsui USA. The  transaction
remains  subject  to  the  receipt  of  shareholder  approval  as  well  as  the
satisfaction of other closing  conditions,  including  clearance by governmental
authorities  under  the  antitrust  laws of  Mexico.  A special  meeting  of our
shareholders has been scheduled on Wednesday, May 30, 2007, to consider and vote
on a proposal to ratify, adopt and approve the merger agreement.

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.

On April 27, 2007, our Board of Directors  declared a semi-annual  cash dividend
of $0.15 per share payable on May 22, 2007, to  shareholders of record as of May
7, 2007.

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

We have various  transactions  at prevailing  market prices with  unconsolidated
affiliates  (see  Note  9 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 9 of our Notes to
Condensed  Consolidated  Financial  Statements).  Our  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.


                                       25
<PAGE>

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 were effective for us
beginning January 1, 2007. We present such taxes on a net basis. Therefore,  the
adoption of EITF 06-03 did not 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. 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 our 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.


                                       26
<PAGE>

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.  Additional allowances may be required 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.  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.

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 would
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.


                                       27
<PAGE>

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 that we incur are included in cost of goods sold.

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,
we record as  reductions  to sales the maximum  potential  amount of rebate that
could be awarded.

       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 receive
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 six months ended March
31, 2007, from the  disclosures  about market risk provided in our Annual Report
on Form 10-K for the year ended September 30, 2006.


                                       28
<PAGE>

                        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  second  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
second fiscal quarter that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.

                           Part II - Other Information

                              Item 1A. Risk Factors

Reference  is made to the  factors set forth in Part I, Item 2 of this Form 10-Q
and other  risk  factors  described  in our  Annual  Report on Form 10-K for the
fiscal  year  ended  September  30,  2006,  which  are  incorporated  herein  by
reference.  There  have not  been  any  material  changes  to the  risk  factors
previously disclosed in our Annual Report on Form 10-K for the fiscal year ended
September  30,  2006 other than as set forth in Part I, Item 2 of this Form 10-Q
and below.

Our Business Could Be Adversely Affected If The Pending Merger Is Not Completed.

On February 28,  2007,  we entered  into the merger  agreement  with Mitsui USA.
There is no assurance that the merger  agreement and the merger will be approved
by our shareholders,  and there is no assurance that the other conditions to the
completion of the merger will be satisfied.  In connection  with the merger,  we
will be subject to certain risks, including the following:

     o    the  current  market  price of our common  stock may  reflect a market
          assumption  that the merger will occur,  and a failure to complete the
          merger  could  result in a decline in the  market  price of our common
          stock;

     o    certain  costs  relating  to the merger,  such as legal and  financial
          advisory  fees,  are  payable  by us  whether  or not  the  merger  is
          completed;

     o    the  restrictions  on  the  conduct  of  our  business  prior  to  the
          completion of the merger, requiring us to conduct our business only in
          the ordinary course, subject to specific limitations,  which may delay
          or prevent us from undertaking  business  opportunities that may arise
          pending completion of the merger;

     o    under certain circumstances, if the merger is not completed, we may be
          required to pay Mitsui USA a termination  fee of $13,910,759 and up to
          $1,500,000 of the costs incurred by Mitsui USA in connection  with the
          merger agreement;

     o    there may be substantial  disruption to our business and a distraction
          of our management and employees from  day-to-day  operations,  because
          matters related to the merger may require  substantial  commitments of
          their time and resources; and


                                      29

<PAGE>

     o    uncertainty  about the effect of the merger may  adversely  affect our
          relationships  with our  employees,  customers,  suppliers  and  other
          persons with whom we have business relationships.

                                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


                                       30

<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:  May 8, 2007

                                       31

<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 March 31, 2007;

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
          second 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 the 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: May 8, 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 March 31, 2007;

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
          second 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 the 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: May 8, 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 March 31, 2007:

     (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: May 8, 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 March 31, 2007:

     (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: May 8, 2007