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 ending July 4, 1998

                               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 1-3834
                                
                 CONTINENTAL MATERIALS CORPORATION
     (Exact name of registrant as specified in its charter)

          Delaware                          36-2274391
(State or other jurisdiction             (I.R.S. Employer
             of                         Identification No.)
incorporation or organization)        


         225 West Wacker Drive, Chicago, Illinois  60606
             (Address of principal executive office)
                           (Zip Code)
                                
                                
                        (312) 541-7200
      (Registrant's telephone number, including area code)


             (Former name, former address and former
               year, if changed since last report)
                                
                                
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 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
                                
Number of common shares outstanding at July 30, 1998     1,072,371

                                
<PAGE>                                

                                
                                
                 PART I - FINANCIAL INFORMATION
                                
Item 1.   Financial Statements

<TABLE>
                CONTINENTAL MATERIALS CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
                JULY 4, 1998 and JANUARY 3, 1998
                           (Unaudited)
                (000's omitted except share data)
<CAPTION>                                                     
                                           JULY 4,        JANUARY 3,
                                            1998             1998
<S>                                        <C>            <C>
          ASSETS
Current assets:                                           
 Cash and cash equivalents                 $     765      $   1,524
 Receivables, net                             19,930         13,882
 Inventories:                                                
  Finished goods                               7,385          8,562
  Work in process                              1,516          1,471
  Raw materials and supplies                   5,322          4,260
 Prepaid expenses                              2,652          2,343
   Total current assets                       37,570         32,042
                                                                
Property, plant and equipment, net            19,370         19,581
Other assets:                                                     
 Investment in mining partnership                600            600
 Other                                         2,253          2,132
                                           $  59,793      $   4,355
                                                                
          LIABILITIES                                         
Current liabilities:                                            
 Bank loan payable                         $   2,500      $      --
 Current portion of long-term debt             1,900          1,900
 Accounts payable and accrued expenses        13,032         11,327
 Income taxes                                    909            222
   Total current liabilities                  18,341         13,449
                                                          
Long-term debt                                 5,450          6,400
Deferred income taxes                          1,722          1,722
Other long-term liabilities                      849            926

          SHAREHOLDERS' EQUITY                            
Common shares, $0.50 par value; authorized                
 3,000,000; issued 1,326,588                     663            663
Capital in excess of par value                 3,484          3,484
Retained earnings                             33,094         31,283
Treasury shares, 254,217, at cost             (3,810)        (3,572)
                                              33,431         31,858
                                                          
                                           $  59,793      $  54,355
</TABLE>                                
                                
                                
                     See accompanying notes
                                2
<PAGE>
<TABLE>                             
                                
                CONTINENTAL MATERIALS CORPORATION
   CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
    FOR THE THREE MONTHS ENDED JULY 4, 1998 AND JUNE 28, 1997
                           (Unaudited)
            (000's omitted except per share amounts)


<CAPTION>
                                             JULY 4,     JUNE 28,
                                              1998         1997
<S>                                          <C>         <C>                 
Net sales                                    $ 28,935    $ 27,991
                                                                
Costs and expenses:                                              
 Cost of sales (exclusive of depreciation,                      
  depletion and amortization)                  22,168      21,623
 Depreciation, depletion and amortization       1,029         876
 Selling and administrative                     3,699       3,667
                                               26,896      26,166
                                                                
                                                                
Operating income                                2,039       1,825
                                                                
Interest                                         (212)       (309)
Equity loss from mining partnership               (19)        (29)
Other income, net                                  87          85
                                                                 
Income before income taxes                      1,895       1,572
                                                                 
Provision for income taxes                        663         552 
                                                                
 Net income                                     1,232       1,020
                                                                
Retained earnings, beginning of period         31,862      28,131
                                                         
Retained earnings, end of period             $ 33,094    $ 29,151
                                                         
Basic earnings per share                     $   1.15    $    .92
                                                         
 Average shares outstanding                     1,073       1,103
                                                         
Diluted earnings per share                   $   1.12    $    .90
                                                         
 Average shares outstanding                     1,099       1,130


</TABLE>




                     See accompanying notes
                                3
<PAGE>

<TABLE>                              
                                                        
                CONTINENTAL MATERIALS CORPORATION
   CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
     FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JUNE 28, 1997
                           (Unaudited)
            (000's omitted except per share amounts)
                                
                                
<CAPTION>                                
                                             JULY 4,      JUNE 28,
                                              1998          1997
<S>                                          <C>          <C>                 
Net sales                                    $ 51,741     $ 48,896
                                                          
Costs and expenses:                                       
 Cost of sales (exclusive of depreciation,                
  depletion and amortization)                  39,446       38,073
 Depreciation, depletion and amortization       2,049        1,755
 Selling and administrative                     7,209        7,288
                                               48,704       47,116
                                                          
Operating income                                3,037        1,780
                                                          
Interest                                         (384)        (504)
Equity loss from mining partnership               (38)         (57)
Other income, net                                 171          285
                                                          
Income before income taxes                      2,786        1,504
                                                          
Provision for income taxes                        975          526
                                                          
Net income                                      1,811          978
                                                          
Retained earnings, beginning of period         31,283       28,173
                                                          
Retained earnings, end of period             $ 33,094     $ 29,151
                                                          
Basic earnings per share                     $   1.68     $    .89
                                                          
 Average shares outstanding                     1,075        1,103
                                                          
Diluted earnings per share                   $   1.65     $    .87
                                                          
 Average shares outstanding                     1,099        1,130

</TABLE>                             
                               
                                
                          
                               
                               
                                
                     See accompanying notes
                                4

<PAGE>

<TABLE>
                                
                CONTINENTAL MATERIALS CORPORATION
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
     FOR THE SIX MONTHS ENDED JULY 4, 1998 AND JUNE 28, 1997
                           (Unaudited)
                         (000's omitted)
                                
<CAPTION>
                                                JULY 4,      JUNE 28,
                                                  1998         1997
<S>                                             <C>          <C>             
Net cash used by operating activities           $   (257)    $ (5,648)
                                                                     
Investing activities:                                                 
 Capital expenditures                             (1,812)      (1,347)
 Proceeds from sale of property and equipment         36            9
 Investment in mining partnership                    (38)         (57)
Net cash used in investing activities             (1,814)      (1,395)
                                                                     
Financing activities:                                                  
 Borrowings under revolving credit facility        2,500        6,100
 Long-term borrowings                                 --        2,000
 Repayment of long-term debt                        (950)        (750)
 Payment to acquire treasury stock                  (238)          --
Net cash provided by financing activities          1,312        7,350
                                                             
Net (decrease) increase in cash                               
 and cash equivalents                               (759)         307
Cash and cash equivalents:                                   
 Beginning of year                                 1,524          379
                                                             
 End of period                                  $    765     $    686
                                                                       
                                                                       
Supplemental disclosures of cash flow items:                        
Cash paid during the six months for:                                
 Interest                                       $    378     $    555
 Income taxes                                        293          380


</TABLE>


                     See accompanying notes
                                5

<PAGE>

                CONTINENTAL MATERIALS CORPORATION
          SECURITIES AND EXCHANGE COMMISSION FORM 10-Q
    NOTES TO THE QUARTERLY CONSOLIDATED FINANCIAL STATEMENTS
                   QUARTER ENDED JULY 4, 1998
                           (Unaudited)
                                
                                
                                
1.The unaudited interim consolidated financial statements
  included herein are prepared pursuant to the rules and
  regulations for reporting on Form 10-Q.  Accordingly, certain
  information and footnote disclosures normally accompanying the
  annual financial statements have been omitted.  The interim
  financial statements and notes should be read in conjunction
  with the consolidated financial statements and notes thereto
  included in the Company's latest annual report on Form 10-K.
  In the opinion of management, the consolidated financial
  statements include all adjustments (none of which were other
  than normal recurring adjustments) necessary for a fair
  statement of the results for the interim periods.

2.The provision for income taxes is based upon the estimated
  effective tax rate for the year.

3.Operating results for the first six months of 1998 are not
  necessarily indicative of performance for the entire year.
  Historically, sales of construction materials are higher in
  the second and third quarters.  Overall, sales of heating and
  air-conditioning products have not shown strong seasonal
  fluctuations in recent years although product mix has
  historically yielded higher gross profit margins in the fourth
  quarter.  (See Note 12 of Notes to Consolidated Financial
  Statements in the Company's 1997 Annual Report.)

4.The following is a reconciliation of the calculation of
  basic and diluted earnings per share (EPS) for the three and six
  months ended July 4, 1998 and June 28, 1997.
<TABLE>
<CAPTION>
                         Three months ended              Six months ended
                                         Per-                           Per-
                                         share                          share
                    Income    Shares   earnings    Income    Shares   earnings
   July 4, 1998
   <S>              <C>       <C>      <C>         <C>       <C>      <C>
   Basic EPS        $1,232    1,073    $   1.15    $1,811    1,075    $  1.68

   Effect of                                                                
   dilutive                                                                 
   options              --       26                    --       24           

   Diluted EPS      $1,232    1,099    $   1.12    $1,811    1,099    $  1.65


<CAPTION>
 
   June 28, 1997                                                                  
   <S>              <C>       <C>      <C>         <C>       <C>     <C>    
   Basic EPS        $1,020    1,103    $    .92    $  978    1,103    $   .89

   Effect of                                                                
   dilutive                                                                 
   options              --       27                    --       27          

   Diluted EPS      $1,020    1,130    $    .90    $  978    1,130    $   .87

</TABLE>






                                6
                                
<PAGE>                                
                                
   Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operation
                                
                                
  Financial Condition (See pages 2 and 5)

  Operations for the first six months of 1998 used $257,000 of
  cash compared to $5,648,000 in 1997.  The significant use of
  cash in the first six months of 1997 was attributed to higher
  inventory balances and reduced accrued expense and payables
  balances.  The return to more normal balances in these
  categories during 1998 combined with the higher income to
  account for the improved use of cash.
  
  The Company estimates that its short-term line of credit (of
  which $2,500,000 was outstanding at July 4, 1998) will be
  adequate to meet its cash requirements for the foreseeable
  future.  Historically, the Company's borrowings against the
  short-term line peak during the second quarter and decline
  over the remainder of the year.
  
  In June 1997, the Financial Accounting Standards Board (FASB)
  issued SFAS No. 131, "Disclosures about Segments of an
  Enterprise and Related Information."  In February 1998, the
  FASB issued SFAS No. 132, "Employers' Disclosure about
  Pensions and Other Postretirement Benefits."  In June 1998,
  the FASB issued SFAS No. 133, "Accounting for Derivative
  Instruments and Hedging Activities."  The Company has not yet
  adopted these pronouncements, but does not expect that they
  will have a material impact on the Company's financial
  position or results of operations.
  
  
  Operations - Comparison of Quarter Ended July 4, 1998 to
  Quarter Ended June 28, 1997
  (See page 3)
  
  Consolidated net sales increased $944,000 (3.4%).  The
  construction materials segment reported sales up $2,884,000
  (21.2%), as construction activity along the Front Range in
  southern Colorado remains strong.  Unfavorable weather
  conditions, caused by the El Nino` effect, during the height
  of Phoenix Manufacturing's selling season were mainly
  responsible for the decline of $1,940,000 (13.5%) in the
  heating and air-conditioning segment.  Williams Furnace
  reported increased sales volume for its product lines.
  
  Consolidated cost of sales (exclusive of depreciation,
  depletion and amortization) as a percentage of sales decreased
  slightly from 77.2% to 76.6%.  The decrease was due to
  improved margins in Williams Furnace's fan coil line combined
  with increased sales in the construction materials segment.
  
  Depreciation, depletion and amortization increased 17.5%
  ($153,000) due to increased capital expenditures.
  
  Interest expense declined 31.4% ($97,000) due to lower levels
  of outstanding debt.

  
  Operations - Comparison of Six Months Ended July 4, 1998 to
  Six Months June 28, 1997(See page 4)
  
  Net sales rose $2,845,000 (5.8%).  The increase in the
  construction materials segment, $5,103,000 (21.4%) and the
  decrease in the heating and air-conditioning segment
  $2,258,000 (9.0%), were due to the reasons noted above.
  
  
                                7
  
  
<PAGE>  
  
  
  Consolidated cost of sales (exclusive of depreciation,
  depletion and amortization) as a percentage of sales decreased
  from 77.9% to 76.2% due to improved margins in Williams
  Furnace Co.'s fan coil line combined with increased sales in
  the construction materials segment.
  
  Depreciation, depletion and amortization increased 16.8%
  ($294,000) due to increased capital expenditures.
  
  Interest expense declined 23.8% ($120,000) due to the reason
  noted above.
  
  Historically, the Company has experienced operating losses
  during the first quarter.  The second quarter has historically
  improved over the first quarter's operating results.  This
  trend is expected to continue as sales of construction
  materials are generally higher in the second and third
  quarters while sales of heating and air-conditioning products,
  although not showing strong seasonality, experience product
  mix changes that yield higher gross profits in the fourth
  quarter.
  
  
                                
   PART II - Other Information


   Item 4.  Submission of Matters to a Vote of Security Holders

          (a)  The annual meeting of the stockholders of the
               Company was held on May 27, 1998.
               
          (b)  At that meeting, three individuals, all of whom
               are current directors, were nominated and elected
               to serve until the 2001 Annual Meeting by the
               following votes:


      Director           Shares         Shares         Shares
                           For          Against       Withheld
  Betsy R. Gidwitz       873,190          --           41,030
  James G. Gidwitz       873,170          --           41,050
  Joseph J. Sum          873,319          --           40,901

               There were no broker non-votes.

               The following directors' terms of office continued
               after the meeting until the Annual Meetings of the
               years as noted:

                     Directors                 Expiration of
                                                    Term
               Ralph W. Gidwitz                     1999
               William G. Shoemaker                 1999
               Theodore R. Tetzlaff                 1999
               Thomas H. Carmody                    2000
               Ronald J. Gidwitz                    2000
               Darrell M. Trent                     2000








                                8

<PAGE>





          (c)  In addition to the above election, the independent
               auditing firm of Coopers & Lybrand L.L.P. was
               appointed by the following vote:


                      For          Against        Abstain
                    909,411         1,641          3,168


               There were no broker non-votes.
               


          (d)  A shareholder proposal had been included in the
               proxy, however, it was not submitted for vote at
               the meeting.  For informational purposes, the
               matter would have been defeated by the following
               vote:

 
                    For       Against     Abstain    Non-Vote
                  200,793     586,255      4,810      122,362

          (e)  No other matters were submitted for vote.


   Item 6.  Exhibits and Reports on Form 8-K

          (a)   Exhibits:                              
                                                       
                Exhibit 27:  Financial data schedule   

          (b)   Registrant filed no reports on Form 8-K during the
                quarter ended July 4, 1998.

                                


                            SIGNATURE
                                
                                
                                
                                
Pursuant to the requirement 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.

                      CONTINENTAL MATERIALS CORPORATION




Date:      August 3, 1998        By:   /S/ Joseph J. Sum
                                      Joseph J. Sum, Vice President
                                      and Chief Financial Officer





                                9