IPSCO Feels Flat Rolled Steel Prices Have Bottomed

Recovery Depends on Imports and General Economy

Lisle, Illinois, 27 March 2001, IPSCO Inc. (NYSE/TSE:IPS) said today that there is every indication that unfavorable conditions for the North American steel industry have become as bad as they will get in this cycle.

"Our industry has been hit by a slowdown in demand, particularly in steel for automotive applications, excess supply due to an unprecedented level of dumped imports, and a spike in costs due to the run up in energy prices, particularly for natural gas. The net result has been to drive a growing number of steel companies in the U.S. into bankruptcy" said Roger Phillips, President and Chief Executive Officer.

IPSCO has positioned itself in a unique fashion, he pointed out. "We do virtually no direct or indirect automotive business so we have not lost this volume although of course our prices have come under pressure as auto-dependent steel makers have attempted to enter our markets. Secondly, although our costs have inflated due to higher natural gas prices we are less dependent on that energy source than integrated steelmakers, since our principal furnaces are electric, and we have long term power contracts in place at all three of our steelworks – we also benefit from higher sales of oil and gas well tubular products as energy companies scramble to drill more wells. Going forward we will continue to see high-energy prices but we believe they have stabilized. Steel prices are at the lowest in recent history but seem to have bottomed out".

IPSCO said that in its press release of 8 February 2001 reporting on its year 2000 results it had stated that quarter-to-quarter price erosion from the fourth quarter of 2000 to the first quarter of this year would probably cause the company's basic earnings per share to fall by a third. Since that view was expressed two negative factors have intervened. “The Canadian dollar has fallen from about sixty-seven cents U.S. at the turn of the year to about sixty-three and a half cents currently rather than strengthening as had been predicted. "This lowers our earnings per share since the U.S. dollar amount of our Canadian profits shrinks with a lower exchange rate and IPSCO keeps its books in U.S. dollars" said Robert Ratliff, Vice President and Chief Financial Officer. "The second factor has been a slightly higher than predicted quarter-to-quarter price erosion. A ten dollar per ton price decrease, which would be about a 2.5 percent drop, amounts to almost nine cents per share in basic earnings. Two dollars per ton, about one half of a percent in price erosion, translates to about a two cent per share fall in earnings. While we don't think our average selling price estimates made in early February were significantly in error, the combination of the fall in the Canadian dollar and slightly lower prices suggest basic earnings per share will be more likely in the neighborhood of half those of the last quarter of 2000. Strictly mathematically that would mean twelve cents, but a mistake of just one half of a percent in our estimate of unit sales revenues either way would mean a range of ten cents to fourteen cents."

Looking to the second quarter IPSCO said that the normal seasonal downturn in Canadian drilling activity would mean a less profitable product mix than that of the first quarter. Prices for coil and plate products have bottomed out and are on the rise although the proportion of announced price increases that seem to be sticking is certainly less than originally anticipated; still, IPSCO's order book is very strong. "We expect to continue with a positive bottom line but we could be seeing another halving of our basic earnings per share. Further into the future, the second half of 2001 will undoubtedly be our best half of the year. We expect good oil country tubular sales. Spiral large diameter pipe business already booked plus commitments under a letter of intent indicate shipments of about 65,000 tons in the last half compared to about 15,000 tons in the first half. We believe that prices for both plate and coil will continue to improve but the question is by how much. Given the sensitivity of our earnings to price, as explained earlier in this press release, making precise predictions is impossible at this point. A further uncertainty is the import situation. Inaction on the part of the U.S. and Canadian governments may well be viewed as a license to crank up North American sales by offshore steelmakers – early last year imports, having shrunk to some extent, did an about face just as things began to improve for domestic producers – we risk a similar reoccurrence unless governments respond to industry suggestions," said Phillips.

This news release contains forward-looking information with respect to IPSCO’s operations and beliefs. Actual results may differ from these forward looking statements due to numerous factors, including market forces, potential markets and demand for the materials produced, domestic pricing of steel products, energy costs, drilling activity, level of potential imports, the outcome of trade actions, and currency exchange rates. These and other factors are outlined in IPSCO’s regulatory filings with the Securities and Exchange Commission, including those on IPSCO’s Annual Report for 2000, its MD&A and Form 40-F.

For Further Information Please Contact:
IPSCO Inc.
Bob Ratliff
Vice President and Chief Financial Officer
Tel. 630-810-4769
Release 01-12

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