A two-dimensional fluid simulation model is developed for STP-2, the shock- and compressional-heating screw pinch at Nagoya. The model, TOPICS, places specialemphasis on studying the effects of impurity ions and neutral atoms. To estimate the radiation losses, the impurity continuity equations, taking ionization and recombination into account, are solved simultaneously with the plasma fluid equations. The results are compared with the coronal-equilibrium model. It is found that the latter model considerably underestimates the radiation losses in the screw pinch. The present calculations including the effects of impurities and neutrals show the importance of radiation losses in the energy balance of the STP-2 plasma. If anomalous resistivity due to ion acoustic instability is assumed, the observed rapid magnetic-field penetration is explained rather satisfactorily.