STELCO INC.

ANNUAL INFORMATION FORM

For fiscal year ended December 31, 1997

APRIL 28, 1998

TABLE OF CONTENTS

1. INCORPORATION AND RELATED INFORMATION ......................................................................... 1

1.1 Corporate Profile...................................................................................................................... 1
1.2 Incorporation............................................................................................................................ 1
1.3 The Stelco Group of Businesses .............................................................................................. 2
2. GENERAL DEVELOPMENT OF THE BUSINESS............................................................................. 3
2.1 Five-year Overview.................................................................................................................. 3
2.2 Major Events - 1993 through 1997 ........................................................................................... 3
3. DESCRIPTION OF THE BUSINESS ................................................................................................. 9
3.1 Market Overview...................................................................................................................... 9
3.2 Products and Markets ............................................................................................................ 11
3.3 Business Strategy .................................................................................................................. 12
3.4 Business Units ....................................................................................................................... 12
3.5 Integrated Steelmaking Operations ........................................................................................ 14
3.5.1 Hilton Works................................................................................................................. 14
3.5.2 Lake Erie Steel Company Ltd. ...................................................................................... 16
3.6 Mini-Mills ............................................................................................................................... 17
3.6.1 Stelco-McMaster Lte................................................................................................... 17
3.6.2 AltaSteel Ltd................................................................................................................. 18
3.7 Manufactured Products .......................................................................................................... 18
3.7.1 Wire Businesses........................................................................................................... 18
3.7.2 Stelco Fasteners Ltd..................................................................................................... 20
3.7.3 Pipe and Tubular Businesses........................................................................................ 20
3.7.4 Other ............................................................................................................................ 22
3.8 Steel Processing .................................................................................................................... 22
3.9 Raw Materials ........................................................................................................................ 23
3.9.1 General ........................................................................................................................ 23
3.9.2 Coal Supply .................................................................................................................. 24
3.9.3 Iron Ore Supply ............................................................................................................ 24
3.9.4 Scrap Supply ................................................................................................................ 25
3.10 Employees............................................................................................................................. 25
3.11 Health, Safety & Environment................................................................................................ 26
3.12 Research and Development................................................................................................... 28
3.13 Patents and Trademarks ........................................................................................................ 29
3.14 Foreign Operations ................................................................................................................ 29
3.15 Litigation ................................................................................................................................ 29
4. SELECTED CONSOLIDATED FINANCIAL INFORMATION............................................................ 30
4.1 Five Year ............................................................................................................................... 30
4.2 Quarterly................................................................................................................................ 31
5. MANAGEMENTS DISCUSSION AND ANALYSIS .......................................................................... 32
6. MARKET FOR SECURITIES........................................................................................................... 32
7. DIRECTORS AND OFFICERS........................................................................................................ 33
7.1 Directors ................................................................................................................................ 33
7.2 Officers .................................................................................................................................. 34
8. ADDITIONAL INFORMATION ......................................................................................................... 35

ANNUAL INFORMATION FORM DATED APRIL 28, 1998

STELCO INC.

1.

INCORPORATION AND RELATED INFORMATION

1.1

Corporate Profile

Stelco Inc. (Stelco or the Corporation), through its Business Units (one Division and
eleven wholly owned subsidiaries) and jointly owned corporate entities, is in the business of
producing and marketing rolled and fabricated steel products. Stelco is Canada's largest steel
producer. Stelco owns four steel-producing Business Units: Hilton Works in Hamilton, Ontario;
Lake Erie Steel Company Ltd. in Nanticoke, Ontario; Stelco-McMaster Lte in Contrecoeur,
Quebec; and AltaSteel Ltd. in Edmonton, Alberta. Stelco also owns a number of steelfabricating businesses. Steel products supplied by Stelco businesses to the North American
market include hot rolled, cold rolled and coated sheet, plate, bars and wire rod, and
manufactured products, such as wire and wire products, and pipe and tubular products.
In 1997, the Stelco Group of Businesses produced 5.1 million tons of steel and shipped
4.8 million tons of steel products valued at $3.1 billion. Annual steelmaking capacity is
5.3 million tons.
1.2

Incorporation

Stelco was created by the amalgamation, effective January 1, 1969, of The Steel
Company of Canada, Limited; Page-Hersey Tubes, Limited; Premier Steel Mills Ltd.; and The
Canadian Drawn Steel Company, Limited. The Steel Company of Canada, Limited, one of the
predecessor corporations, was incorporated in 1910 to consolidate a number of established
corporations which were engaged in the production of iron and steel, and related products.
The Corporation was continued pursuant to the Canada Business Corporations Act by
certificate of continuance dated June 27, 1980. The Corporation's executive offices are
located at 100 King Street West, Hamilton, Ontario, Canada. The material subsidiaries of the
Corporation and their respective jurisdictions of incorporation are shown on page 2 and
described in section 3 Description of the Business.

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1.3

The Stelco Group of Businesses

The Stelco Group of Businesses with jurisdiction of incorporation or organization

are set out below as at December 31, 1997. Subsidiaries and jointly owned businesses where
the interest of Stelco is at least 50 percent are shown.

STELCO INC.
(Canada)
Executive Management
Financial
Information Services
Legal
Raw Materials & Strategic Purchasing

Wholly Owned

Partially Owned

Hilton Works*
Lake Erie Steel Company Ltd.
(Canada)
Stelco-McMaster Lte (Quebec)
AltaSteel Ltd. (Alberta)
Stelwire Ltd. (Canada)
Frost Wire Products Ltd. (Canada)
Stelco Fasteners Ltd. (Canada)**
Stelfil Lte (Quebec)
Stelpipe Ltd. (Canada)
Welland Pipe Ltd. (Canada)
CHT Steel Company Inc. (Ontario)
Stelco USA, Inc. (Delaware)
Chisholm Coal Company (Kentucky)

* A Division of Stelco Inc.

** Business was sold on January 21, 1998

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Z-Line Company
(Ontario general partnership)
Baycoat
(Ontario limited partnership)
MOLY-COP Canada
(Ontario general partnership a partnership of AltaSteel Ltd.)
Fers et Mtaux Recycls Lte
(Quebec - a corporate joint
venture of Stelco-McMaster Lte)
Torcad Limited (Ontario)

2.

GENERAL DEVELOPMENT OF THE BUSINESS

2.1

Five-year Overview

Following a severe downturn in steel consumption during the early 1990s, demand for
steel products in Canada and the U.S.A. has risen steadily over the past five years. [Note that
for the purpose of this report, Canada and U.S.A. will be referred to as North America.] Steel
consumption in Canada in 1997 was 17 million tons, a record high.
During this period of favourable economic conditions, the Corporations earnings and
operating cash flows improved substantially. The main focus of the Corporations efforts was
to take advantage of the improved operating cash flows to strengthen its financial position,
which had been weakened by strikes in 1990 and by the 19911992 economic downturn. By
1996, through an aggressive debt deleveraging programme made possible by strict limitations
on capital expenditures, disposals of some non-core assets, and stringent cost controls, the
Corporations financial position had been restored.
Having established a solid financial base, in 1996 the Corporation's strategic emphasis
shifted to enhancing shareholder value through improved financial performance. To achieve
the objective of improved financial performance, the Corporation is now focusing on
continuous improvement in operational performance, particularly in productivity, product yields
and energy usage; increasing profitability by growth in the value-added mix of products sold;
and securing access to markets through improved quality, customer service and supply
dependability. In support of these efforts, capital expenditures of approximately $450 million
have been authorized since December 1995.

2.2

Major Events - 1993 through 1997

1993
During the year, the plants comprising the Wire and Wire Products Group were
incorporated as four wholly owned companies: Stelwire Ltd., Stelfil Lte, Frost Wire Products
Ltd., and Stelco Fasteners Ltd.
In December, agreement in principle was reached to sell Stelco Technical Services
Limited to Hatch Associates Ltd. of Mississauga, Ontario; the agreement was finalized in 1994.
An agreement was also reached in 1993 to sell all of the assets and all reclamation and
environmental liabilities of the Mathies Mine in Pennsylvania.
The Canadian-based manufacturing businesses of Stelco negotiated new three-year
labour agreements with their unions, the exception being Stelco Fasteners Ltd. of Brantford,
Ontario, which concluded a one-year agreement. The labour contract at the Chisholm Mine in
Kentucky expired in February; a series of extensions of the agreement were arranged until

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January 1994 when a new collective agreement was signed with the United Mine Workers of
America. Labour agreements at Wabush Mines, Newfoundland and Quebec, and the Eveleth
Mine, Minnesota, expired during the year; unionized employees at both locations worked
without a collective agreement.
Trade rulings rendered by the U.S. Department of Commerce in June contained
dumping margins of 68.7 percent on steel plate, 16.86 percent on hot rolled sheet,
48.29 percent on cold rolled sheet and 28.27 percent on corrosion-resistant (galvanized)
sheet. Given the size of these margins, it was necessary for the Units affected, Hilton Works
and Lake Erie Works, to reposition their order books. When the U.S. International Trade
Commission handed down "no injury" findings in July for hot and cold rolled sheet products,
the Units continued normal sale of these particular products in the U.S. segment of the North
American marketplace.
During the year, Stelco, along with other Canadian steelmakers, filed unfair trade cases
against the U.S. and other selected countries covering cut-to-length plate, and hot rolled, cold
rolled and galvanized sheet. Margins of dumping were found in all cases. Injury was found in
the case of cold rolled sheet and partial injury was found in the case of plate. No injury was
found in the hot rolled sheet case. The galvanized sheet case remained in process at
year-end.
Redemption and repurchase of the Corporation's long-term debt for sinking fund
purposes totalled $52 million.
1994
Page-Hersey Works and Welland Tube Works were incorporated as wholly owned
subsidiary companiesStelpipe Ltd. and Welland Pipe Ltd.
Stelco's 50 percent ownership in M E International was sold to GS Technologies
Corporation of Missouri. The 50 percent ownerships in Jannock Steel Fabricating Company of
Oakville, Ontario, and Jannock Steel Fabricating Inc. of Kentucky were sold to Jannock Limited
of Toronto, Ontario.
Hilton Works and Mitsubishi Corporation formed a corporate venture to acquire and
finance a pulverized coal injection facility to supply energy to this Unit's blast furnaces.
Steel production at Hilton Works was adversely affected by an unplanned outage at "D"
Blast Furnace in late November that kept the facility off line until the beginning of January
1995. Lost production was largely offset by purchasing steel and drawing down inventories,
enabling this Unit to maintain shipments and provide good customer service.
In July, Stelco Fasteners Ltd. signed a three-year collective agreement, with a company
option to renew for a fourth year, with Local 3767, United Steelworkers of America. New threeyear collective agreements were ratified with United Steelworkers of America locals at the
Wabush and Eveleth Mines.

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Common Share Purchase Warrants issued in 1991 as part of a major equity financing
were exercised in 1994, resulting in 22 million Series A Convertible Common Shares being
issued for a total consideration of $125 million.
Four long-term debt issues totalling $133 million were redeemed in advance of their
normal expiry dates, and repurchase of long-term debt for sinking fund purposes totalled
$9 million. An option to reacquire the assets associated with the slab caster at Lake Erie
Works for $25 million was exercised; these assets had been sold and leased-back in 1984. In
November, the Corporation made its first semi-annual payment of $15 million on the notes
issued to finance construction of the slab and bloom caster facilities at Hilton Works in the
mid-1980s.
Regular cash dividends of $14 million were paid on all series of Preferred Shares. An
additional amount of $3 million in respect of preferred share dividend arrears was paid,
reducing the total dividend in arrears to $34 million at year-end.
1995
Surplus land and buildings in Burlington, Ontario, formerly used as a fastener shipping
facility were sold.
During the year, Hilton Works idled its tinplate production assets and withdrew from the
market for tinplate. Steel formerly sold to container manufacturers was diverted into other
markets principally in the form of cold rolled, galvanized and prepainted products.
The Pulverized Coal Injection facility at Hilton Works began operation at year-end. This
facility, which injects coal directly into the two blast furnaces, reduces operating costs by
replacing more expensive coke with pulverized coal as part of the furnace burden and
enhances environmental performance by allowing the idling of three of this Unit's older coke
oven batteries.
A debt issue of $150 million was purchased in advance of its 1998 maturity date, and
the repurchase of long-term debt for sinking fund purposes totalled $8 million. Payments on
the notes payable issued in the 1980s to finance the construction of the slab and bloom caster
facilities at Hilton Works totalled $30 million. In addition, all $9 million in outstanding long-term
debt at Eveleth and Tilden iron ore mines was discharged. During the year, both the Canadian
Bond Rating Service and the Dominion Bond Rating Service restored Stelco's senior and
subordinated debt to investment grade.
Regular quarterly cash dividends on all series of preferred shares were paid in the
amount of $14 million. In addition, all dividend arrears, totalling $34 million, were paid. The
purchase of preferred shares pursuant to share condition requirements had been suspended
as long as dividends were in arrears. During the year, purchases resumed upon declaration
and payment of all dividends in arrears.

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1996
In April, Stelco's 40 percent interest in Bliss & Laughlin Industries Inc. was sold.
New collective agreements were signed with the United Steelworkers of America locals
at nine Business Units. These agreements will run for six years at Hilton Works,
Stelco-McMaster Lte and Stelwire Ltd. (Burlington Works); for four years at Lake Erie Steel
Company Ltd. and Stelwire Ltd. (Parkdale Works); for three years at AltaSteel Ltd., Frost Wire
Products Ltd., and Stelfil Lte; and for two years at CHT Steel Company Inc.
At Stelpipe Ltd., operations halted on October 31 when this Company and Local 523,
CAW/TCA Canada were unable to reach a new labour agreement and the CAW/TCA elected
to strike. The strike was ongoing at year-end. At Welland Pipe Ltd., an agreement with
Local 523, CAW/TCA Canada to temporarily extend the labour agreement that expired
October 31 allowed this Company to continue operations.
The process of organizational restructuring continued with the conversion of Lake Erie
Works to the status of a wholly owned subsidiary known as Lake Erie Steel Company Ltd.
Lake Erie Steel successfully completed a 35-day planned shutdown when major repairs
were made at the blast furnace, coke ovens, steelmaking, and central power station.
During the year, six more of the wholly owned Business Units received ISO 9002
registration status in recognition of their ongoing commitment to improved product and service
quality. All manufacturing Units are ISO 9002 certified.
During 1996, Hilton Works participated actively in the administrative reviews by the U.S.
Department of Commerce (DOC) of 1993 rulings involving steel shipments of plate and
galvanized sheet from Canada to customers in the U.S. In March, the DOC issued its final
margins on shipments for the period ending July 31, 1994. The low rates obtained by all
Canadian producers were appealed by U.S. petitioners. In September, the DOC announced
preliminary margins of zero and 0.45 percent respectively for sales of plate and galvanized
sheet by Hilton Works for the 12 months ending July 31, 1995. In its final determination issued
April 4, 1997, the DOC confirmed the zero margin for plate but increased the margin for
galvanized to 0.55 percent, which is over the de minimis level of 0.5 percent and thus
requires duty deposits for each shipment into the U.S.
In December 1996, Hilton Works' management requested that Revenue Canada
investigate the injurious dumping of carbon steel plate from China, Mexico, Poland, Russia,
and South Africa. The action was supported by the other Canadian plate producers and
follows closely a similar complaint filed in the U.S. by producers exposed to dumped plate from
many of the same sources. In February 1997, Revenue Canada accepted the case presented
by Hilton Works.

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During the year, the Corporation announced that it was proceeding with several
projects, which will significantly upgrade production facilities:

A $23 million walking beam bloom reheat furnace to be built at the Bloom
and Billet Mill at Hilton Works to enhance billet quality and reduce
conversion costs by 30 percent when completed in 1998.

An $85 million upgrade of the Plate Mill at Hilton Works to reduce operating
costs, enhance quality, expand product range, and increase mill capacity.

At Hilton Works, a $108 million upgrade to No. 7 Coke Oven Battery to

reduce coke costs, improve output, and improve environmental
performance.

Lake Erie Steel to undertake a $105 million upgrade and expansion of its
facilities. When completed in 1998, this programme will increase capacity
by 20 percent and enhance cost, quality, and product range.

A debt issue with an outstanding balance of $20 million was repurchased in advance of
its maturity date. Payments on the notes payable issued in the 1980s to finance the
construction of the slab and bloom caster facilities at Hilton Works totalled $30 million.
An unscheduled plant-wide shutdown at Hilton Works in June, caused by an electrical
failure, halted production at this facility for 48 hours. Failure of a 6,000 hp drive motor on Lake
Erie Steel's hot strip mill interrupted strip rolling for 11 days in December.
1997
In May, Welland Pipe Ltd. entered into a new four-year labour agreement with its
hourly-rated employees, who had been working under a temporary extension to an agreement
that expired on October 31, 1996. In July, Stelpipe Ltd. successfully negotiated the resolution
of a work stoppage, which began on October 31, 1996; the new agreement expires in July
2001. Also, during the year, Chisholm Coal Company signed a new labour agreement with the
United Mine Workers of America, which will expire on December 31, 2002.
During the year, the Canadian International Trade Tribunal (CITT) upheld an antidumping complaint filed in December 1996 by Stelco and other Canadian producers
concerning plate imported from China, Mexico, Russia, and South Africa. An appeal to a
binational panel has been filed by Mexico. The CITT also initiated sunset reviews of two
existing unfair trade findings; the first relating to the May 6, 1993, finding on plate and the
second relating to a cold sheet finding of July 29, 1993. Stelco and the other Canadian
producers have filed submissions proposing that the rulings be kept in place.
In the United States, wire rod producers Co-Steel Raritan, G.S. Technologies, North
Star Steel, and Keystone Steel and Wire filed both antidumping and countervail complaints
against imports from Canada, Germany, Trinidad and Tobago, and Venezuela. The U.S.
Department of Commerce found no subsidization of Stelco shipments. In November, the U.S.
International Trade Commission (ITC) voted no injury with respect to subsidization. In

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February 1998, the U.S. Department of Commerce established a 0.91 percent margin for
Stelco in its dumping investigation, the lowest margin found against any of the corporations
included, and below the de minimis level of 2 percent for new investigations. In March 1998,
the ITC voted no injury with respect to dumping.
At year-end, the Corporation recorded an after-tax charge of $10 million, or $0.10 per
share, against its investment in Stelco Fasteners Ltd. This Unit was subsequently sold on
January 21, 1998, to Genfast Manufacturing Company.
The Corporation continued with the significant capital projects initiated in 1996. Capital
spending on these and other projects totalled $252 million in 1997. The $105 million upgrade
and expansion at Lake Erie Steel Company Ltd. was essentially completed by year-end.
Construction and commissioning of the slab caster, the major undertaking in the project, was
completed in November 1997. Installation of a second casthouse at the Blast Furnace was
completed in January 1998. The remaining projects are scheduled for completion in
1998. During 1997, the Corporation announced approval of a $12 million project for Phase 1
of a programme to upgrade cold-rolling facilities at Hilton Works.
During 1997, the Corporation received $153 million from drawdowns on previously
arranged long-term debt financing for major capital projects. Repayments of long-term debt
totalled $57 million in 1997. Debts paid down were $30 million on the notes payable issued in
the 1980s to finance the construction of slab and bloom caster facilities at Hilton Works,
$13 million on the term loan at Stelco-McMaster Lte and $14 million against amounts owing
by proportionately consolidated joint ventures.
In June 1997, the Corporation declared the first common share dividend in six years.
On February 2, 1998, the Corporation announced that it had exercised its right to redeem
about 60 percent of its outstanding preferred shares and that a plan was in place to purchase
up to 5 percent of the outstanding common shares. These steps reflect the substantial
strengthening of the balance sheet.
The United Steelworkers of America union local at Hilton Works filed a complaint with
the Ontario Labour Relations Board regarding certain pension plan payments. Refer to section
3.15 on Page 29 for more information.

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3.

DESCRIPTION OF THE BUSINESS

3.1

Market Overview

Canadian and U.S. steelmakers serve North American customers in a North American
marketplace. Steel's automotive customer and supplier base is characterized by common
ownership on both sides of the border. Purchasing decisions involve comparable products at
comparable prices with emphasis being placed upon quality, service, and supply dependability,
and not on country of origin.
The North American steel industry is also characterized by vigorous competition
amongst the resident producers. The growth in recent years in steel output from mini-mills,
which produce steel from scrap in electric-arc furnaces, and the emergence of thin-slab casting
technologies, which allow mini-mills to produce certain sheet products, has substantially
increased competitive pressures.
North American steel producers also face significant competition from foreign
producers. The intensity of such competition is affected by global steelmaking capacity,
worldwide demand for steel products, and relative currency valuations. Some foreign steel
producers are owned, controlled or subsidized by their governments; consequently, their sales
decisions may be influenced by political and economic policy decisions rather than by
prevailing market conditions. The Corporation monitors steel imports for compliance with fairtrade practices and initiates action under Canadian trade legislation where there is evidence of
unfair trade.

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The following tables set out summary information regarding producer shipments and
steel consumption in Canada and the U.S.:
Apparent Steel Consumption Canada
(Million Tons)
Gross Shipments
Less: Exports
Domestic Shipments
Imports (ex producer imports)
Apparent Consumption
Imports (%)

1997
16.0
(5.3)
10.7
6.2
17.0
37

1996
15.6
(5.3)
10.3
4.0
14.3
28

1995
14.7
(5.1)
9.6
4.1
13.7
30

1994
14.8
(4.9)
9.9
4.3
14.2
30

1993
14.7
(5.4)
9.3
2.6
11.9
22

1997
105.5
(6.0)
99.5
24.8
124.3
20

1996
100.9
(5.0)
95.8
21.6
117.4
18

1995
97.5
(7.1)
90.4
19.2
109.6
18

1994
95.1
(3.8)
91.3
22.1
113.4
19

1993
89.0
(4.0)
85.1
14.5
99.6
15

Apparent Steel Consumption U.S.

(Million Tons)
Gross Shipments
Less: Exports
Domestic Shipments
Imports (ex producer imports)
Apparent Consumption
Imports (%)

The following table sets out Stelco Inc.'s consolidated shipments and market share:
Consolidated Shipments Stelco Inc.
(Thousand Tons)
Steel Shipments
Domestic Shipments
- Percent of Apparent Canadian Consumption
Total Shipments
- Percent of Apparent Canadian and
U.S Consumption

1997
4,818

1996
4,577

1995
4,380

1994
4,460

1993
4,492

24

25

27

25

28

Over the 19931997 period, Stelco's shares of the domestic market and of the
combined Canada and U.S. markets have remained relatively stable in the 24 to 28 percent
and 3 to 4 percent ranges, respectively.

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3.2

Products and Markets

The following table provides the Corporation's total consolidated sales and a
percentage breakdown by major product group over the past five years:
Sales By Product Type
Consolidated Sales
($ millions)

1997

1996

1995

1994

1993

3,149

2,941

2,926

2,916

2,491

Hot Rolled Sheet

27%

24%

24%

23%

Cold Rolled Sheet

11

11

11

10

Coated Sheet

22

22

21

23

25

Bars & Wire Rod

16

17

18

17

17

Wire & Wire Products

Plate

23%

10

10

10

10

11

Pipe & Tubular Products

Other

Total

100%

100%

100%

100%

100%

The following table provides steel shipments from the Corporations steel-producing
Units and a percentage breakdown by principal markets:
Shipments By Market Sector
Rolled Steel Shipments
(thousand tons)

1997

1996*

1995*

1994*

1993*

4,786

4,578

4,346

4,420

4,504

Automotive

35%

36%

36%

36%

38%

Steel Service Centres

26

25

25

21

20

Pipe & Tubular Products

12

13

12

16

16

Fabrication & Manufacturing

12

12

13

12

12

Other

Subsidiaries (section 3.7)

11

12

13

13

100%

100%

100%

100%

100%

Total

*Figures for 1993 through 1996 have been reclassified.

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3.3

Business Strategy

The current focus of Stelco's business strategy is to maintain its solid financial position
and enhance shareholder value through improved financial performance. This will be
accomplished through: continuous improvement in operational performance to reduce costs
(particularly in productivity, quality, product yields and energy usage); improvement in the
value-added mix of products sold; and securing access to markets through improved quality,
customer service and supply dependability. Selective facility investment and workforce training
will be employed to equip our people with the technology and skills required to carry out this
strategy.
3.4

Business Units
An outline of the Corporation's key operating businesses is provided below:

Type of
Operation
Integrated
Steelmaking

Mini-Mill
Steelmaking

Manufactured
Products

Unit/Location

Stelco(1)
Ownership

Principal
Products

1997 Sales (2)

($ millions)

Hilton Works
Hamilton, Ontario

Division of
Stelco Inc.

Hot Rolled Sheet

Cold Rolled Sheet
Coated Sheet
Plate
Bars
Wire Rod

1951

Lake Erie Steel

Company Ltd.
Nanticoke, Ontario

100%

Hot Rolled Sheet

969

Stelco-McMaster Lte
Contrecoeur, Quebec

100%

Billets
Merchant & Special
Quality Bars

197

AltaSteel Ltd.
Edmonton, Alberta

100%

Merchant & Special

Quality Bars

124

Stelwire Ltd.
Hamilton, Ontario

100%

Wire & Wire Products

206

Frost Wire Products Ltd.

Hamilton, Ontario

100%

Wire Fence & Fabric

34

Stelfil Lte
Lachine, Quebec

100%

Wire & Wire Products

75

100%

Automotive Fasteners

65

100%

Pipe & Tubular

Products

31

Stelco Fasteners Ltd.

Brantford, Ontario
Stelpipe Ltd.
Welland, Ontario

(3)

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Type of
Operation

Unit/Location
Welland Pipe Ltd.
Welland, Ontario

Steel
Processing

Raw Materials

(1)
(2)
(3)

Stelco(1)
Ownership
100%

(2)

Principal
Products

1997 Sales
($ millions)

Large-Diameter Oil &

Gas Transmission
Pipe

92

Camrose Pipe Company

Camrose, Alberta

40%

Pipe & Tubular

Products
Large-Diameter
Oil & Gas
Transmission Pipe

184

MOLY-COP Canada
Kamloops, B.C.

50%

Grinding Balls

50
7

CHT Steel Company Inc.

Richmond Hill, Ontario

100%

Heat Treatment
of Plate

Stelco USA, Inc.

Troy, Michigan

100%

Consignment,
Processing &
Warehousing

Z-Line Company
Hamilton, Ontario

60%

Zinc Coating of
Cold Rolled Steel

62

Baycoat
Hamilton, Ontario

50%

Painting of
Cold Rolled &
Galvanized Steel

84

Torcad Limited
Toronto, Ontario

50%

Metal Plating &

Finishing

15

U.S.

U.S.

61

Chisholm Coal Company

Jamboree, Kentucky

100%

Coal

30

Wabush Mines
Newfoundland & Quebec

37.9%

Iron Ore

Hibbing Mine
Minnesota

15%

Iron Ore

U.S.

292

Eveleth Mines L.L.C.

Minnesota

15%

Iron Ore

U.S.

170

Tilden Mining Company L.C.

Michigan

15%

Iron Ore

U.S.

237

Fers et Mtaux Recycls

Lte
New Brunswick & Quebec

50%

Scrap

233

70

Direct or Indirect
Sales include inter-unit transactions at market price. For the partially owned Units, sales represent
100 percent of the business activity.
This business was sold on January 21, 1998.

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3.5

Integrated Steelmaking Operations

3.5.1

Hilton Works

The Hilton Works Business Unit is a Division of Stelco Inc. It occupies 1,100 acres,
including harbour facilities, in Hamilton. It is a fully integrated steelmaking facility and is
Stelco's largest Business Unit. Its location on Lake Ontario provides good access to raw
material sources in Canada and the U.S.A. via water-borne transportation. In addition, its
location provides ready access via water, rail, and highway transportation to steel-consuming
markets in Canada and the U.S.A.
(a) Semi-finished Steel
Facilities used in the production of semi-finished steel include two coke oven
batteries, a pulverized coal injection facility, two blast furnaces, a three-vessel
basic oxygen furnace shop, and a ladle metallurgy/continuous casting complex
with one slab caster and one combination slab/bloom caster. Semi-finished
steelmaking capacity is approximately 2,700,000 tons. In 1996, a $108 million
upgrade to No. 7 Coke Oven Battery was announced; this project will reduce coke
costs, improve output, and improve environmental performance. At year-end 1997,
work on this project was proceeding as scheduled for completion of construction in
the fourth quarter of 1998.
Steel slabs and blooms produced are used at Hilton Works in the production of
plate, sheet, and rod and bar products.
(b) Plate and Strip
Slabs for flat rolled products are hot-processed through a 148-inch plate mill or a
56-inch coilbox-equipped hot strip mill. Steel from the Hot Strip Mill is shipped as
hot rolled product or further processed through one of three pickle lines prior to
processing through one of two cold reducing mills. This 56-inch strip mill was
upgraded with the installation of an $8 million automation package completed in
1997.
The 148-inch plate milll is being modernized to a New Generation Plate Mill with
the capital expenditure of $85 million. The new upgraded unit will be a
combination discrete plate and coil plate rolling facility incorporating the Steckel Mill
Rolling Process. The mill will have lower costs and increased productivity and
capabilities to meet the quality demanded in the market place in both discrete plate
and skelp products. At year-end 1997, work on this project was proceeding toward
completion of construction in the fourth quarter of 1998.
This Division is a major supplier of plate products in the North American market;
products include commercial-grade plate, heat-treated plate produced at CHT Steel

- 14 -

Company Inc. and skelp for high-strength, large-diameter transmission pipe. The
Division's production of hot rolled strip is shipped to the Cold Rolled and Coated
Division at Hilton Works for further processing or is sold to external customers.
Principal markets for plate products in North America are steel service centres,
steel fabricators, railway car manufacturers, shipbuilders, and producers of largediameter transmission pipe for the oil and gas industry. The product is used to
make such things as pressure vessels, off-highway vehicles, and heavy
equipment. Over the past five years, approximately 13 percent of the sales of this
Division were shipped to related-party customers.
This Division's major competitors in the plate market include Algoma Steel Inc. and
Ipsco Inc. in Canada, several integrated steel producers in the U.S.A., and imports.
Major competitors in the hot rolled sheet market include Dofasco Inc. and Algoma
Steel Inc. in Canada, a number of integrated and mini-mill steel producers in the
U.S.A., and imports.
(c) Cold Roll and Coated
Hot rolled sheet which has been pickled (i.e. cleaned of rolling scale) is further
processed by cold rolling through an 80-inch 4-stand, 4-high tandem mill or a 56inch 5-stand, 4-high tandem mill. The Division's other facilities include batch
annealing and temper mills and two hot-dip galvanizing lines. The Division also
provides management and operating services to the Z-Line Company (see Z-Line
Company on Page 23).
Hilton Works is a major supplier of cold rolled and coated products to the North
American market. Products include cold rolled, galvanized and prepainted sheet.
Prepainted sheet is produced at Baycoat (see Baycoat on Page 23).
Principal markets for cold rolled and coated products in North America are the
automotive, construction, appliance, and steel service centre sectors.
The Division's principal competitors in the market for cold rolled and coated sheets
in North America include Dofasco Inc. in Canada, a number of integrated steel
producers in the U.S.A., U.S.-based speciality producers of cold rolled and/or
coated sheet, and imports.

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(d) Rod and Bar

Blooms for long products (i.e. rod and bar) are hot-processed through a bloom and
billet mill to produce billets, which are then processed through either a bar mill or
rod mill. The rod mill is also used to process billets for outside producers.
Installation of a $23 million walking beam bloom reheat furnace is under way at the
bloom and billet mill; this investment is expected to improve mill productivity and
product quality, and reduce operating costs. At year-end 1997, work on this project
was proceeding as scheduled for completion in the second quarter of 1998.
Principal markets for rod and bar products in North America are the automotive
sector, and wire and wire products producers. Over the past five years,
approximately 38 percent of the sales of this Division were shipped to related-party
customers.
This Division's principal competitors in North America include Ivaco Inc. and IspatSidbec Inc. in Canada, and a number of mini-mill and speciality producers in the
U.S.A.
3.5.2

Lake Erie Steel Company Ltd.

Lake Erie Steel Company Ltd., a wholly owned subsidiary, is situated on 4,100 acres in
Nanticoke, Ontario, on the north shore of Lake Erie approximately 40 miles from Hamilton.
This fully integrated steelmaking facility, commissioned in stages from 1980 to 1983, is Stelco's
newest plant and the most recent greenfield integrated steel complex to be built in North
America. A 2,500-acre industrial park and a woodlot preserve form a buffer zone on the north
side of this facility in a predominantly rural location. Its location provides good access to raw
material sources in the U.S.A. via water-borne transportation. Its location also provides ready
access via highway transportation to steel-consuming markets in Canada and U.S.A. In 1996,
Lake Erie Works was incorporated to become Lake Erie Steel Company Ltd.
Primary production facilities include coke ovens, one blast furnace, a two-vessel basic
oxygen furnace shop, a vacuum degasser and a twin-strand slab caster. Semi-finished
steelmaking capacity is 1.9 million tons, all in the form of slabs. Slabs produced at Lake Erie
are rolled on a coilbox-equipped 80-inch hot strip mill. In support of its position as a premier
producer of hot rolled sheets, this Unit is completing a $105 million programme to upgrade its
facilities. This programme is designed to improve productivity and product quality, and
increase capacity to 2.3 million tons to enable this Unit to meet the growing demand for highquality hot rolled sheet. At year-end 1997, this project was essentially completed; construction
and commissioning of the slab caster, the major undertaking in the project, was completed in
November 1997, and installation of a second casthouse at the Blast Furnace was completed in
January 1998.
Lake Erie Steel Company is focused on the production and sale of high-quality hot
rolled sheet. Principal markets for hot rolled sheet products in North America are the

- 16 -

automotive sector, steel service centres, and pipe and tubular products manufacturers. Over
the past five years, approximately 31 percent of the sales of this Unit were shipped to relatedparty customers.
Lake Erie Steel's major competitors in the North American market for hot rolled sheet
include Dofasco Inc. and Algoma Steel Inc. in Canada, a number of integrated and mini-mill
steel producers in the U.S.A., and imports.

3.6

Mini-Mills

3.6.1

Stelco-McMaster Lte

Stelco-McMaster Lte, a wholly owned subsidiary with its head office and plant in
Contrecoeur, Quebec, about 35 miles from Montreal, is a stand-alone mini-mill steelmaking
facility. The facility has ready access to major North American steel markets via rail and truck,
and to offshore markets via year-round shipping facilities operated by the Port of Contrecoeur,
located near the plant. Stelco-McMaster produces steel from scrap sourced in Canada and the
northeastern United States. Stelco-McMaster owns 50 percent of Fers et Mtaux Recycls
Lte, a processor of ferrous and non-ferrous scrap (see section 3.9.4 on Page 25). Through
its relationships with Fers et Mtaux and other scrap suppliers, Stelco-McMaster has access to
stable and adequate scrap supplies.
Steelmaking facilities include one 130-ton electric-arc furnace, a ladle metallurgy
station and a four-strand billet caster. Semi-finished steelmaking capacity is approximately
500,000 tons per year. Bar mill facilities include a cross-country mill equipped with four
12-inch, one 14-inch, two 18-inch and two 20-inch rolling stands and an automatic bar
packaging system. Bar rolling capacity is approximately 300,000 tons. Facilities improvement
projects completed in 1997 were: a high-output, water-cooled oxygen lance for the steelmaking
furnace; electromagnetic mould stirring; and replacement of the steelmaking furnace power
transformer.
Stelco-McMaster manufactures and sells billets, rebar, merchant quality and special
quality bars, and railway-related products.
Principal markets served by Stelco-McMaster include the automotive-related, railway,
and construction sectors, and steel service centres in North America. Efforts are under way to
expand market participation in Mexico and South America. Over the past five years,
approximately 25 percent of the sales of this Unit were shipped to related-party customers.
Stelco-McMaster's major competitors in the North American market include IspatSidbec Inc., Co-Steel Inc., Gerdau Courtice Steel Inc., Gerdau MRM Steel Inc. and Slater
Industries Inc. in Canada, and a number of mini-mill steel producers in the U.S.A.

- 17 -

3.6.2

AltaSteel Ltd.

AltaSteel Ltd., a wholly owned subsidiary with its plant and head office in Strathcona
County near Edmonton, Alberta, is a stand-alone mini-mill steelmaking facility. AltaSteel
produces steel from scrap sourced primarily from Western Canada. Scrap is purchased from
local scrap dealers and scrap-generating customers.
AltaSteel owns 50 percent of
MOLY-COP Canada, (see section 3.7.4 on Page 22), a producer of grinding balls for the
Canadian mining industry.
Steelmaking facilities consist of one 80-ton electric arc furnace, a ladle furnace, and
one 3-strand billet caster. Semi-finished steel capacity is approximately 325,000 tons per year.
The bar mill has evolved into a configuration which features two rolling outlets providing
flexibility for a wide range of products. In addition, AltaSteel operates a scrap preparation
facility, which includes an auto hulk shredder. During 1997, AltaSteel completed a $5 million
programme to install a ladle furnace that will permit more precise control of the steel refining
process which will enhance product quality and reduce costs. Start-up was on schedule in
early 1998. Other facilities improvement projects largely completed in 1997 include facilities
for automatic bundling of bars, installation of oxy-fuel wall burners on the electric furnace, and
purchase of a CNC roll-lathe.
AltaSteel manufactures and sells merchant quality and special quality bars.
Principal markets served by AltaSteel Ltd. include the mining, construction and
manufacturing industries, the automotive-related sector, the oil and gas industry, and steel
service centres. Over the past five years, approximately 40 percent of this Unit's sales were
shipped to a related party.
AltaSteel's major competitors in the markets it serves are Co-Steel Inc., Gerdau MRM
Steel Inc. and Ispat-Sidbec Inc. in Canada, and a number of mini-mill steelmakers located in
the U.S.A.
3.7

Manufactured Products

3.7.1

Wire Businesses
Stelwire Ltd.

Stelwire Ltd., a wholly owned subsidiary with its head office in Hamilton, Ontario, and
plants in Hamilton (Parkdale Works) and Burlington, Ontario (Burlington Works), is one of
North America's largest producers of steel wire and nails.
The Parkdale Works operation consists of a 621,000-square-foot production plant
located on a 51-acre site. Facilities include rod storage and handling, 2 cleaning and coating
lines, more than 40 wire drawing machines, a batch annealing shop, over 100 nail machines, a
36-strand hot-dip wire galvanizing line, 1 stabilized prestressed concrete strand manufacturing

- 18 -

line and 3 oil-temper lines. The plant also operates extensive wire and nail packaging,
inspection, testing, maintenance and shipping facilities. The Burlington Works operation
consists of a 91,000-square-foot production plant located on a 26-acre site. Facilities include a
cleaning and coating line and 2 high-capacity continuous annealing furnaces.
Products manufactured at Stelwire include cold heading wire, low carbon bright and
galvanized industrial quality wire, high carbon and alloy wire for springs and wire screens,
prestressed concrete strand, processed rod and bar, and a wide range of bright and
galvanized nails.
Stelwire services the major industrial and commercial markets of North America either
directly or through distributors. The automotive, agricultural, construction and household
sectors of the North American market make up a large portion of Stelwire's customer base.
Over the past five years, approximately 18 percent of the sales of this Unit were to relatedparty customers.
Stelwire's major competitors in the North American market are Ivaco Inc., Ispat-Sidbec
Inc., Titan Steel and Wire Co. Ltd., Tree Island Industries Ltd., Duchesne & Fils Limite and
Laurel Steel (Div. of Harris Steel Group) in Canada, a number of wire and wire products
producers based in the U.S.A., and imports.
Stelfil Lte
Stelfil Lte, a wholly owned subsidiary with its head office and plant in Lachine, Quebec
(near Montreal), produces wire and wire products.
Stelfil's operation is located in a 443,000-square-foot manufacturing facility on a
20-acre site. Facilities include rod storage and handling, a fully-automated batch cleaning and
coating line, 2 hot-dip galvanizing and 2 electro-galvanizing lines, 1 patenting line, 26 wire
drawing frames, a small batch anneal operation, and 2 tubular wire stranders. The facility is
also equipped with extensive material testing and maintenance facilities.
Products manufactured at Stelfil include low and high carbon wire, bright and
galvanized wire, and industrial and special quality wire.
Stelfil services the major industrial markets in North America either directly or through
distributors. The communication-cable, pulp-tying, electrical, and construction sectors of the
North American market make up a large portion of Stelfil's customer base. Over the past five
years, approximately 10 percent of the sales of this Unit were to related-party customers.
Stelfil's principal competitors in the North American market are Ivaco Inc. and IspatSidbec Inc. in Canada, a number of wire and wire products producers based in the U.S.A., and
imports.

- 19 -

Frost Wire Products Ltd.

Frost Wire Products Ltd., a wholly owned subsidiary with its head office and plant in
Hamilton, Ontario, is Canada's largest manufacturer of fence and welded wire products.
Frosts Hamilton operation is housed in a 320,000-square-foot facility located on a
15-acre site. Facilities include a hot-dip galvanizing line for chain link and light welded-wire
fabrics, 9 welded-fabric machines, 9 chain-link looms, 3 tightlock fence looms, 1 hingelock
loom, 2 vinyl extruders, 14 barbed wire machines, a post punch and paint line, and a number
of wire coiling and bundling machines.
Products manufactured by Frost include chain link fence, welded wire fabric, farm
fencing, barbed wire, and a range of packaged wire, fence accessories and merchant wire
products.
Frost's principal customers are in the construction, farm, residential, and industrial
sectors, primarily in Ontario and Quebec, although products are shipped coast-to-coast in
Canada and to selected U.S. markets.
Frosts competitors in Canada for construction and welded wire mesh are - Laurel Steel
(Div. of Harris Steel Group), Canadian Phoenix Ltd., Ivaco Inc., Duchesne & Fils Limite,
Fertek Inc. Frosts competitors for fence products in Canada are Tree Island Industries Ltd.,
Langley Wire Ind. Ltd., Advanced Fence and Wire Manufacturing, Clture Lasalle Lte, and
imports from manufacturers in the U.S.A.
3.7.2

Stelco Fasteners Ltd.

Stelco Fasteners Ltd., a wholly owned subsidiary of the Corporation as of

December 31, 1997, was sold on January 21, 1998, to Genfast Manufacturing Company for
net proceeds of $11 million. As a result of the sale, Stelco Inc. recorded an after-tax charge of
$10 million or $0.10 per share against its fourth quarter earnings for 1997. The Company
produces engineered and standard fasteners primarily for the automotive industry.
3.7.3

Pipe and Tubular Businesses

Stelpipe Ltd.

Stelpipe Ltd., a wholly owned subsidiary with its head office and plant in Welland,
Ontario, manufactures pipe and tubular products in diameters ranging from 0.5 to 16 inches.
Facilities at Stelpipe include one electric-resistance-weld, hot-stretch-reduction mill
(ERW/SRM), two ERW pipe mills and one cold-drawn tubing mill. Pipe-making capacity is
approximately 300,000 tons.

- 20 -

Stelpipe's product range includes oil well tubing hollows, oil well casing hollows, water
well casing, sprinkler pipe, hollow structural sections, mechanical, pressure and automotive
tubing, heating and plumbing pipe, galvanized pipe, drill rod and specialty tubing.
Stelpipe's principal markets are the North American automotive, construction,
manufacturing, fabricating, and distribution market sectors.
Stelpipe's competitors include Ispat-Sidbec Inc., Ipsco Inc., Prudential Steel Ltd.,
Copperweld Canada Ltd., and Welded Tube of Canada Limited, a large number of tubular
product producers in the U.S.A., and imports.
Operations at Stelpipe halted on October 31, 1996, when the Company and Local 523,
CAW/TCA Canada were unable to reach a new labour agreement and the CAW/TCA elected
to strike. The strike was settled on July 7, 1997. The new agreement expires on July 8, 2001.
Welland Pipe Ltd.
Welland Pipe Ltd., a wholly owned subsidiary with its head office and plant in Welland,
Ontario, produces large-diameter transmission pipe for the oil and gas industry.
Facilities include a Stelform spiral weld mill (36- to 60-inch diameter) and a U and O mill
(20- to 36-inch) diameter. Combined annual capacity of the two mills is approximately 500,000
tons.
Welland Pipe serves the oil and gas transmission industry in North America.
Welland Pipe competes with Ipsco Inc. and Camrose Pipe Company in Canada, and a
number of U.S.-based large-diameter pipe producers.
On May 14, 1997, Welland Pipe negotiated a new four-year collective agreement with
Local 523, CAW/TCA Canada, which will expire October 31, 2000.
Camrose Pipe Company
Stelco owns 40 percent of the Camrose Pipe Company (Camrose), a partnership with
Oregon Steel Mills, Inc. (Oregon Steel), of Portland, Oregon, which produces large-diameter
transmission pipe for the oil and gas industry as well as pipe ranging in diameter from 4 to 16
inches.
Camrose operates two pipe mills: an electric-resistance-weld (ERW) mill that
manufactures pipe ranging in diameter from 4 to 16 inches with an annual capacity of 140,000
tons, and a U and O mill that manufactures pipe ranging in diameter from 20 to 42 inches with
an annual capacity of 180,000 tons.
Camrose services the oil and gas distribution, and transmission and construction
markets, primarily in Western Canada and the northwestern United States.

- 21 -

Under the agreement by which Oregon Steel acquired its 60 percent interest in
Camrose from Stelco, either Stelco or Oregon Steel may initiate a buy-sell procedure pursuant
to which the initiating party establishes a price for Camrose and the other party must either sell
its interest at that price or purchase the initiating partys interest at that price.
3.7.4

Other
MOLY-COP Canada

AltaSteel Ltd. (see section 3.6.2 on Page 18) owns 50 percent of MOLY-COP Canada,
a producer of forged grinding balls for the mining and mineral industry. This partnership with
GS Industries of Charlotte, North Carolina, is located in Kamloops, B.C.
MOLY-COP's 83,000 ton-per-year plant is the largest grinding media production facility
in Canada. It produces a complete range of forged and heat treated grinding balls from 1 inch
to 5.25 inches in diameter.
MOLY-COP's products are sold principally to the Canadian mining and mineral industry.
3.8

Steel Processing
CHT Steel Company Inc.

CHT Steel Company Inc., a wholly owned subsidiary of Stelco Inc. located in Richmond
Hill, Ontario, specializes in heat treating of plate. The business is operated from a 125,000square-foot facility on 6.85 acres. The facility contains three quench and temper lines, a
normalizing/annealing line, and two shot blasters. CHT Steel provides a complete range of toll
heat treating services including annealing, stress relieving, normalizing, and quenching and
tempering. Hilton Works (see section 3.5.1 on Page 14) is CHT Steel's only significant
customer.
Stelco USA, Inc.
Stelco USA, Inc., wholly owned by Stelco through Stelco Holding Company, is located
in Troy, Michigan. Stelco USA purchases the products of Stelco's Business Units for the
purposes of consignment, further processing, and warehousing in the United States prior to
shipment to the final customer.

- 22 -

Z-Line Company
Stelco Inc. owns 60 percent of the Z-Line Company, which is located at Hilton Works
(see section 3.5.1(c) on Page 15). The Z-Line facility toll zinc coats cold rolled sheets for
Hilton Works for a wide variety of demanding applications.
Baycoat
Stelco Inc. owns 50 percent of Baycoat, which toll applies a variety of paint finishes to
flat rolled steel coils at its facility in Hamilton, Ontario. Baycoat operates three coil-coating
lines each equipped to coat cold rolled or galvanized substrates with a variety of exterior and
interior paint systems. Baycoat's customers are its owners, Stelco Inc. and Dofasco Inc.
Torcad Limited
Stelco Inc. owns 50 percent of Torcad Limited, which operates a metal plating plant
(Torcad Division) in Toronto, Ontario, and a metal finishing plant (D.C. Chrome Division) in
Stoney Creek, Ontario.
The Torcad Division provides a wide variety of metal plating services for numerous
customers in the automotive-related, manufacturing, and construction sectors.
The
D.C. Chrome Division textures and chromium plates work rolls used in cold rolling of steel for
Hilton Works (see section 3.5.1 on Page 14) as well as for other customers.
3.9

Raw Materials

3.9.1

General

The principal raw materials used in the Corporation's integrated steelmaking operations
are coal and iron ore. The Corporation obtains approximately 25 percent of its requirements of
metallurgical coal from the Chisholm Coal Company (see section 3.9.2 on Page 24), which
currently provides all of the coal required by the pulverized coal injection facility at Hilton
Works (see section 3.5.1 on Page 14). The balance of the Corporation's coal requirements
are purchased from independent coal producers at market prices; the Corporation believes the
current sources of purchased coal to be sufficiently stable and adequate for the maintenance
of operations. The Corporation's iron ore requirements are met, mostly, from iron ore mines in
which the Corporation has interests (see section 3.9.3 on Page 24).
The principal raw material used in the Corporation's mini-mill steelmaking operation is
scrap. Supply arrangements and adequacy of this commodity are discussed, with particular
reference to the appropriate operation, in sections 3.6.1 on Page 17 and 3.6.2 on Page 18 of
this Annual Information Form.
The integrated steelmaking operations also consume
considerable quantities of scrap; the Corporation believes the current sources are sufficiently
stable and adequate for the maintenance of operations.

- 23 -

The Corporation's operations consume large quantities of electricity and natural gas. In
1997, electricity costs and natural gas were approximately 2.5 percent and 3.2 percent,
respectively, of total manufacturing costs. Management believes that current sources of these
commodities are sufficiently stable and adequate for the maintenance of operations.
3.9.2

Coal Supply

Chisholm Coal Company, located in Jamboree, Kentucky, is an indirect wholly owned

subsidiary of Stelco Inc. Chisholm Mine is a producer of high-quality metallurgical coal. Coal
produced is consumed partially by the integrated steel producers, Hilton Works and Lake Erie
Steel Company, with the remainder being sold commercially. At current mining rates, coal
reserves at Chisholm are estimated to be 5 1/2 years. In 1997, Chisholm signed a new labour
agreement with the United Mine Workers which expires on December 31, 2002.
3.9.3

Iron Ore Supply

Stelco owns substantial interests in iron ore properties in North America to ensure
secure sources of iron ore. These interests include mining rights on leases and the ownership
of related production facilities. Stelco has a right to a pro-rata share, based on ownership, to
the production from each of its iron ore properties. The Corporation's mineral reserves are
estimated at capacity mining rates to contain more than 30 years' supply of iron ore.
Typically, the Corporation obtains about 75 percent of its iron ore requirements from
ownership sources. The balance is obtained under the terms of flexible long-term contracts.
The rated annual capacities for the iron ore mines referred to below represent
maximum production capabilities. Actual operation levels are adjusted annually to meet the
requirements of the participants in the mining projects.
The Corporation has a 37.9 percent direct interest, the largest interest of the several
participants, in Wabush Mines. The mine and concentrator are located in Wabush,
Newfoundland, and the pelletizing plant is located in Pointe Noire, Quebec. Rated annual
capacity is 6.0 million gross tons of iron ore pellets. Stelco's ownership interest increased to its
present level in 1995 from 34.5 percent as a result of the withdrawal of one of the partners
from the joint venture.
Through wholly owned subsidiaries, the Corporation has a 15 percent interest in Tilden
Mining Company L.C. located in Michigan. Rated annual capacity is 7.0 million gross tons of
iron ore pellets. The Tilden holding was reorganized into an interest in a limited liability
company in 1995.
Through wholly owned subsidiaries, the Corporation has a 15 percent interest in
Eveleth Mines L.L.C. located in Minnesota. Rated annual capacity is 5.2 million gross tons of
iron ore pellets. The Eveleth holding was reorganized into an interest in a limited liability
company in 1996, with Stelco's share of the new entity remaining at 15 percent.

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Through wholly owned subsidiaries and partially owned joint ventures, the Corporation
has a 15 percent interest in the Hibbing Mine located in Minnesota. Rated annual capacity is
8.3 million gross tons of iron ore pellets.
3.9.4

Scrap Supply

Stelco-McMaster Lte owns 50 percent of Fers et Mtaux Recycls Lte, a processor

of scrap derived primarily from obsolete vehicles, which operates facilities in La Prairie,
Quebec, and Scoudouc, N.B.
Fers et Mtaux operates vehicle shredding facilities at both its plants. The steel
fractions of the shredded vehicles are recovered. At the La Prairie facilities, the remainder of
the shredded scrap is separated into non-ferrous metals and residual material. The La Prairie
facility also operates a shear for processing non-automotive steel scrap. Installation of a new
heavy-duty shredder was completed in 1996. The new shredder adds capacity as well as the
ability to process a greater variety of raw materials.
Steel scrap produced by Fers et Mtaux is supplied to Stelco-McMaster for use in its
electric steelmaking furnace. Non-ferrous metals are sold to the appropriate non-ferrous
refiners or processors.
3.10

Employees

The Corporation, directly and through its wholly owned subsidiaries, employed an
average of 10,763 people in 1997. Of this total, approximately 8,150 were represented by 13
separate collective bargaining agreements, such agreements being limited to single plants.
Approximately 95 percent of the unionized employees belong to the United Steelworkers of
America with the balance holding membership in either the CAW/TCA Canada or the United
Mine Workers of America.

- 25 -

Termination dates and union affiliation of the wholly owned business units are shown
below:
Length of
Contract

Expiry Date

Hilton Works (Unit of Stelco Inc.)

6 years

July 31, 2002

Lake Erie Steel Company Ltd.

4 years

July 31, 2000

Stelco-McMaster Lte

6 years

July 31, 2002

Business Unit
United Steelworkers of America (USWA)

(wage reopener
July 31, 1999)

AltaSteel Ltd.

3 years

July 31, 1999

Stelwire Ltd. Parkdale

Stelwire Ltd. Burlington

4 years
6 years

July 31, 2000

July 31, 2002

Frost Wire Products Ltd.

3 years

July 31, 1999

Stelfil Lte

3 years

July 31, 1999

CHT Steel Company Inc.

2 years

Mar. 31, 1998

National Automobile, Aerospace and Agricultural Implement Workers' Union of Canada (CAW/TCA)

Stelpipe Ltd.

4 years

July 7, 2001

Welland Pipe

4 years

Oct. 31, 2000

International Union, United Mineworkers of America (UMWA)

Chisholm Coal Company

3.11

6 years

Dec. 15, 1999

Health, Safety & Environment

The Corporation's Group of Businesses are subject to substantial and evolving

environmental laws and regulations concerning, among other things, emissions to the air,
discharges to surface ground water, noise control, and the generation, handling, storage,
transportation, treatment and disposal of toxic and hazardous substances. These laws and
regulations vary depending on the location of the Business Unit and can involve federal,
provincial and municipal laws and regulations.
The Stelco Group of Businesses spent $64 million in 1997 on environmental
compliance programmes and operation of environmental equipment, and also spent over
$38 million in 1997 on capital improvements to equipment to meet overall corporate and
business goals and objectives, and to maintain compliance with environmental laws. The
Corporation is of the view that future costs relating to environmental compliance will not have a
material adverse effect on its financial position, but there can be no assurance that unforeseen

- 26 -

changes in the laws or enforcement policies of relevant government bodies, or the discovery of
changed conditions on the Corporation's real property or in its operations, will not result in the
occurrence of materially adverse costs.
Hilton Works is presently faced with the requirement to meet certain water emission
standards established by the Ontario Government under its Municipal/Industrial Strategy for
Abatement (MISA) with a compliance date in 1998 acceptable to the Ontario Government. The
Corporation believes that this Unit will meet the requirements of this water emission control
regulation by the appropriate date and that expenditures required will not have a material
adverse effect on the Corporations financial position.
The Corporation's Group of Businesses have engaged in a range of voluntary activities
aimed at environmental abatement, such as the Accelerated Reduction and Elimination of
Toxics (ARET) programme, the Canadian Industrial Program for Energy Conservation
(CIPEC), the Federal Environment Minister's Benzene Challenge, the Canadian Chemical
Producers' Association National Emission Reduction Masterplan and Responsible Care
Activity, the Ontario Minister of the Environment Smog Accord, Saint Laurent 2000 in Quebec,
Lake Erie Steels Community Advisory Panel, Hiltons Hamilton Air Quality Committee, and the
Remedial Action Plan for Hamilton Harbour. The Stelco Group of Businesses face varying
challenges arising from the federal government's Toxic Substances Management Plan (TSMP)
as it relates to Priority Substances Lists of toxic substances that continue to be identified,
characterized, and, in certain cases, added to the list of substances requiring management
pursuant to the TSMP. Despite the fact that this is an ongoing process, the Corporation
believes that any operating or capital expenditures that may be required to achieve compliance
with the TSMP will not have a material adverse effect on the Corporations financial position.
The Corporation also faced uncertainties arising from the Federal Governments commitments
for Canada in respect to global warming and the Kyoto Accord. Since the Canadian
government has not yet developed policies to address the requirements of the Accord, the
effect on the Corporations financial position cannot be assessed at this time.
The Corporation maintains an internal health, safety, environment, and risk audit
system, which is carried out at its wholly owned Business Units, to determine compliance with
respect to legal requirements and Stelco's corporate policies in these areas.
The Corporation is faced with a variety of health and safety legislation administered by
provincial authorities throughout Canada where facilities are located. The Corporation does
not believe that it is faced with any requirements in respect of health and safety or industrial
hygiene that will have a material adverse effect on the Corporations financial position.

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3.12

Research and Development

Stelco Inc. and its wholly owned subsidiaries spent $5 million on research-related
activities in 1997. In addition to product and process development undertaken at the individual
businesses, significant research was undertaken through industry-based consortia under the
auspices of Corporate Research and Development. These include:

UltraLight Steel Auto Body (ULSAB) Phase II this programme, sponsored by 35

of the worlds leading steel companies, is designed to demonstrate a lightweight
steel auto body structure that meets a wide range of performance targets. Phase II
Validation includes an improved economic analysis of ULSAB versus
conventional steel auto bodies; development of a final engineering design, including
crash simulation; and demonstration of ULSABs manufacturability using body-inwhite prototypes.

Formtech Phase II this programme has been undertaken by a consortium of two

Canadian steel companies, four metal stampers, and a European automaker, and is
aimed at developing advanced Computer-Aided Engineering (CAD/CAE)
programmes that incorporate metal forming science. The resulting software has the
ability to provide rapid simulation at early stages of styling, product design and tool
development. These programmes are capable of optimizing process plans and
overcoming part production problems, including identifying forming problems and
predicting key factors such as part springback and press load requirements.

Projet Bessemer Phase V of this project has continued the development of

process and product technology for the direct casting of thin (5 mm) carbon steel
strip, using a pilot caster at the Industrial Materials Institute (IMI) of the National
Research Council. This project is sponsored by a consortium of Canadian steel
companies in co-operation with IMI. During 1997, IMI successfully commissioned a
new one-ton furnace, an in-line rolling mill, a strip shear, a strip downcoiler, and roll
powder spray equipment. Also, IMI continued development of casting procedures
to produce acceptable commercial quality thin strip.

AISI Advanced Process Control this multi-project programme is sponsored by 14

member companies of the American Iron and Steel Institute, and is aimed at
developing advanced process sensors and software to maintain the competitive
advantage of North American steel producers. Significant progress was achieved in
several project areas, including Microstructural Engineering of Hot Strip Mills,
Optical Sensors and Controls for Improved Basic Oxygen Furnace Operation, and
On-Line Measurement of Mechanical Properties.

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3.13

Patents and Trademarks

The Corporation's operations are not dependent, to any significant extent, upon any
single or related patents, licenses or franchises. The Corporation's operations are also not
dependent upon any single trademark, although certain trademarks are identified with a
number of the Corporation's products and services, and are important in the sale and
marketing of such products and services.
3.14

Foreign Operations

The Corporation has owned iron ore and coal producing properties in
many years. These properties are a critical source of raw materials for
steelmaking Units. Although these properties and the operations associated
located in a foreign country, the Corporation believes that there are no
associated with them by virtue of that fact.
3.15

the U.S.A. for

the integrated
with them are
material risks

Litigation

The union local at Hilton Works filed a complaint with the Ontario Labour Relations
Board (the Board) alleging that representations were made to it in the course of bargaining
that solvency deficiency payments would be made to the bargaining unit pension plan over the
course of the six-year labour agreement reached in 1996. The union complaint seeks various
remedies including a reopening of the 1996 labour agreement or an order that solvency
deficiency payments be made. Should the Board order solvency deficiency funding to be
made to the plan on a continuing basis, the special employer contribution on account of
solvency deficiency payments would be in the range of $60 million for 1997 and $20 million for
1996. In subsequent years, such contributions would depend on a variety of factors such as
interest rates and workforce retirement age. Making such payments to the pension plan for
1996 and 1997 would be a timing consideration, affecting the Corporations cash resources but
not its pension plan expense amount. A hearing is expected in mid-1998.

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4.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

Consolidated financial results for each of the last five years and for the eight quarters
ended December 31, 1997, are summarized in the following tables:
4.1

Five Year

($ in millions except per share amounts)

Year Ended December 31

1997

1996

1995

1994(1)

1993

Net Sales
Net Income (loss)
Total Assets
Long Term Debt
Redeemable Preferred Shares
Income (loss) per Common Share Basic(2)
Fully Diluted
Dividends - Preferred Shares
Series A
Series B
Series C
Dividends - Common Shares

3,149
137
2,833
486
166
1.17
1.14

2,941
79
2,488
393
167
0.63
N/A

2,926
156
2,534
457
172
1.35
N/A

2,916
115
2,587
581
178
1.01
N/A

2,491
(36)
2,364
695
178
(0.62)
N/A

$0.22220
$1.94000
$1.94000

$1.15322
$1.94000
$1.94000

$4.60268
$6.66875
$6.66875

$1.58286
$2.42500
$2.42500

$0.37972
$0.60625
$0.60625

$0.09
$0.09

Series A
Series B(3)
(1)

(2)
(3)

Effective January 1, 1995, Accounting Standards require that corporations proportionately

consolidate all joint venture investments. This change in accounting, which does not affect net
income and retained earnings, has been applied retroactively to 1994 and has resulted in certain
changes in 1994 comparative amounts.
After prescribed Preferred Share dividends.
Paid in additional Series B Common Shares on August 1, 1997, and November 1, 1997, and
payable in cash of $0.03 per share on February 1, 1998.

Dividends are reported in the Consolidated Financial Statements on a declared basis.

Dividends on each of the above classes and series of shares are paid quarterly on the
first day of February, May, August, and November.
As of March 18, 1991, the Corporation suspended the payment of dividends on all
series of preferred shares. On December 20, 1993, dividends were declared on all series of
preferred shares as indicated in the above table. On March 20, 1995, the dividends declared
on all series of preferred shares payable May 1, 1995, included an amount equal to all arrears
of dividends on all outstanding preferred shares.

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As of March 18, 1991, the Corporation suspended the payment of dividends on all
series of common shares as part of the cash conservation initiatives instituted to strengthen its
financial position. On June 23, 1997, in a decision reflective of the substantial strengthening
of the Corporations balance sheet, cash reserves and cash flow from operations, a common
share dividend of $0.03 per share, payable August 1, 1997, was declared.

4.2

Quarterly

($ in millions except per share amounts)

Three Months
Ended

Net
Sales

Net
Income

Net Income
Attributable to
Common Shares

Earnings per
Common Share
Basic

Earnings per
Common Share
Fully Diluted

1997
December 31
September 30
June 30
March 31

$795
763
819
772

$21
41
43
32

$18
38
39
29

$0.17
0.35
0.38
0.27

$0.17
0.34
0.37
0.27

1996
December 31
September 30
June 30
March 31

$727
712
793
709

$23
5
34
17

$20
2
30
14

$0.19
0.02
0.29
0.13

N/A
N/A
N/A
N/A

The information contained in Note 7 (Proportionately consolidated joint ventures and

related commitments) of the Notes to Consolidated Financial Statements, December 31, 1997,
appearing on page 27 of the 1997 Annual Report is incorporated herein by reference.

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5.

MANAGEMENTS DISCUSSION AND ANALYSIS

The information contained under the heading Managements Discussion and Analysis
of Results of Operations and Financial Condition on pages 36 to 52 inclusive of the
Corporations Annual Report 1997 is incorporated herein by reference.

6.

MARKET FOR SECURITIES

The Series A and Series B Convertible Common Shares, and the Preferred Shares
Series C are listed on The Toronto Stock Exchange and the Montreal Exchange. The Series B
Preferred Shares are listed on The Toronto Stock Exchange.

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7.

DIRECTORS AND OFFICERS

The Corporations directors and officers as at December 31, 1997, are set out below.

7.1

Directors

Name & Municipality

of Residence

Principal Occupation(s)
Within Past Five Years

Director
Since

John N. Abell*
Marlborough, Wilts., UK

Corporate Director

1992

James C. Alfano
Ancaster, Ontario

President and Chief Executive Officer

(formerly President and Chief Operating Officer,
and Vice President and General Manager, Hilton Works)

1996

John E. Caldwell
Thornhill, Ontario

President and Chief Executive Officer

CAE Inc.

1997

William P. Cooper
Oakville, Ontario

President and Chief Executive Officer

Cooper Construction Limited

1989

Richard Drouin
Sillery, Quebec

Corporate Director
(formerly President and Chief Executive Officer,
Hydro-Qubec)

1996

George Lethbridge*
Woodstock, Ontario

Corporate Director

1993

Douglas W. Mahaffy
Toronto, Ontario

President and Chief Executive Officer

McLean Budden Limited

1993

J. Dean Muncaster*
Collingwood, Ontario

Corporate Director
(formerly President, Environmental Technologies Inc.)

1985

J. Fraser Mustard
Toronto, Ontario

Bell Canada Fellow and Founding President

The Canadian Institute for Advanced Research
The Founders Network

1986

Peter J. Nicholson*
Westmount, Quebec

Executive Vice President, Corporate Strategy

BCE Inc.

1997

Helen K. Sinclair*
Toronto, Ontario

Chief Executive Officer

BankWorks Trading Inc.
(formerly Chief Executive Officer
Canadian Bankers Association)

1995

Frederick H. Telmer
Burlington, Ontario

Chairman of the Board

1989

* Member - Audit Committee

The term of office of all Directors expires with the annual meeting of the Corporation.
The Corporation does not have an Executive Committee.

- 33 -

7.2

Officers

Frederick H. Telmer
Burlington, Ontario

Chairman of the Board

James C. Alfano
Ancaster, Ontario

President and Chief Executive Officer

R. Eric Rogan
Burlington, Ontario

Executive Vice President and Chief Financial Officer

G. Blair Cowper-Smith
Toronto, Ontario

Corporate Secretary and Special Counsel

Paul J. Paciocco
Burlington, Ontario

Vice President and General Manager Hilton Works

Brian W. Warry
Dundas, Ontario

Vice President - Purchasing, Raw Materials and Transportation

Gordon W. Rich
Burlington, Ontario

Vice President and General Manager Lake Erie Steel Company Ltd.

Karl H. Reitz
Oakville, Ontario

Vice President - Manufactured Products Group

Matti Tuvikene
Oakville, Ontario

Assistant Secretary

All of the above-named officers of Stelco have been engaged for more than five years
in their present occupations or in other positions with the Corporation, other than G. Blair
Cowper-Smith who is a partner with the law firm of McCarthy Ttrault in Toronto, Ontario, and
Paul J. Paciocco, who was appointed Vice President and General Manager - Hilton Works,
effective July 15, 1996, and had previously been employed outside the Stelco Group of
Businesses.
As at December 31, 1997, the Directors and senior officers of Stelco as a group owned,
directly or indirectly, less than one percent of the Common Shares of Stelco.

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8.

ADDITIONAL INFORMATION

(A)
Additional financial information is provided in the Corporations consolidated financial
statements for the years ended December 31, 1997 and 1996, contained in the 1997 Annual
Report, which can be obtained upon request from the Corporate Secretary, Stelco Inc.,
P.O. Box 2030, Hamilton, Ontario, L8N 3T1 (Telephone (905) 528-2511, Ext. 4985).
(B)
Additional information, including the principal holders of securities; Executive Officers
remuneration, indebtedness, and options to purchase securities; and compensation of
Directors, is contained in the most recent Management Proxy Circular of the Corporation dated
March 20, 1998, for the Annual Meeting of Shareholders to be held on April 28, 1998, which
can be obtained upon request from the Secretary of the Corporation at the address noted
in (A) above.
(C)
When the securities of the Corporation are in the course of a distribution pursuant to a
short form prospectus or when a preliminary short form prospectus has been filed in respect of
a distribution of the Corporations securities, the Corporation will provide to any person, upon
request to the Secretary of the Corporation at the address noted in (A) above, (i) one copy of
this Annual Information Form, (ii) one copy of the 1997 Annual Report of the Corporation,
(iii) one copy of any interim financial statements of the Corporation issued subsequent to
December 31, 1997, (iv) one copy of the Management Proxy Circular of the Corporation
referred to in (B) above, and (v) one copy of any other document that is incorporated by
reference into the preliminary short form prospectus or the short form prospectus.
When the securities of the Corporation are not in the course of distribution, the
Corporation will provide to any person, upon request to the Secretary of the Corporation at the
address noted in (A) above, a copy of the documents referred to in (C) (i), (ii) and (iii) above,
provided that the Corporation may require payment of a reasonable charge if the request is
made by a person who is not a security holder of the Corporation.

- 35 -