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                                                                    EXHIBIT 10.3


                               QUANEX CORPORATION
                     NON-EMPLOYEE DIRECTOR RETIREMENT PLAN



     To promote the interest of Quanex Corporation (the "Company") and to
assist the Company in obtaining and retaining qualified persons to act as
directors of the Company, the Company has adopted the following Non-Employee
Director Retirement Plan (the "Plan").

     1.   Eligibility. Each person, other than full-time employees of the
Company, serving on or after the Effective Date of this Plan, as a director
subject to reelection by the holders of Common Stock of the Company, and each
person serving as a director at the request of the Board of Directors, shall be
entitled to participate in this Plan.

     2.   Retirement Benefit. Any director who is eligible to participate in
this Plan and has served on the Board of Directors of the Company (not including
time served when a full-time employee of the Company) for at least an aggregate
of ten full years shall be entitled to a retirement payment as provided herein.
Subject to Sections 3 and 4 below, the Company shall pay to the director
annually a sum (the "Retirement Amount") equal to the base annual director
retainer fee paid at the time the person is no longer a director of the Company.
The base annual director retainer fee shall not include fees paid for attendance
at meetings or other purposes. The Retirement Amount shall be paid annually on
the anniversary date of the retirement of the person as a director or at such
earlier time as the Company may select. In addition, the Company may elect to
pay the Retirement Amount in installments provided the Retirement Amount shall
be paid in full by each anniversary date.

     3.   Termination of Payment. The Company shall pay the Retirement Amount
annually for a period equal to the aggregate length of time the director served
on the Board of Directors (not including time served when a full-time employee
of the Company), such period to be rounded up to the next full year, provided
that the Company's obligation shall earlier terminate (i) upon the death of the
director, (ii) upon the termination of this Plan as to all then current and
retired directors, in which case payment shall be made to all eligible retired
directors for the year in which the termination of this Plan occurs and two
additional years, and (iii) upon a determination by the Board of Directors that
the retired director is serving as a director, officer or employee of a
competitor of the Company and the continuation of such relationship after 15
days written notice of such determination to the retired director.

     4.   Consultation. At any time payments are being made to a person
pursuant to this Plan, such person agrees to be available to consult with and
advise the Board of Directors of the Company from time to time upon reasonable
notice; provided that the Company shall pay all out of pocket expenses of such
person, such person shall not be obligated to travel and such consultations
shall not require more of such person's time than that required when serving as
a director.

     5.   Effective Date. This Plan shall be effective on February 20, 1992,
and shall remain in effect until termination by a resolution of the Board of
Directors of the Company. Except as provided in Section 3, upon termination of
this Plan, no person shall be entitled to any further benefits hereunder.

                                    Approved by the Board of Directors - 2/20/92
                                     Amended by the Board of Directors - 5/25/95