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 October 3, 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 November 6, 1998  1,072,371

                                
                                
<PAGE>
                                
                                
                 PART I - FINANCIAL INFORMATION
Item 1.   Financial Statements
                CONTINENTAL MATERIALS CORPORATION
              CONDENSED CONSOLIDATED BALANCE SHEETS
               OCTOBER 3, 1998 and JANUARY 3, 1998
                           (Unaudited)
                (000's omitted except share data)

<TABLE>
<CAPTION>                              
                                               OCTOBER 3,     JANUARY 3,
                                                  1998           1998
<C>                                            <S>            <S>       
          ASSETS                                                       
Current assets:                                                        
 Cash and cash equivalents                     $  2,877       $  1,524
 Receivables, net                                16,705         13,882
 Inventories:                                                 
  Finished goods                                  7,213          8,562
  Work in process                                 1,452          1,471
  Raw materials and supplies                      4,475          4,260
 Prepaid expenses                                 2,590          2,343
   Total current assets                          35,312         32,042
                                                              
Property, plant and equipment, net               21,175         19,581
Other assets:                                                 
 Investment in mining partnership                   600            600
 Other                                            2,273          2,132
                                               $ 59,360       $ 54,355
                                                              
          LIABILITIES                                         
Current liabilities:                                          
 Current portion of long-term debt             $    950       $  1,900
 Accounts payable and accrued expenses           14,271         11,327
 Income taxes                                       892            222
   Total current liabilities                     16,113         13,449
                                                                     
Long-term debt                                    5,450          6,400
Deferred income taxes                             1,722          1,722
Other long-term liabilities                         959            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                                34,779         31,283
Treasury shares, 254,217 and 246,187, at cost    (3,810)        (3,572)
                                                 35,116         31,858
                                               $ 59,360       $ 54,355
                                
</TABLE>
                                
                                
                     See accompanying notes
                                2
                                
                                
<PAGE>                                
                CONTINENTAL MATERIALS CORPORATION
   CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
                           (Unaudited)
            (000's omitted except per share amounts)

<TABLE>
<CAPTION>
                                               OCTOBER 3,    SEPTEMBER 27,
                                                  1998           1997
                                                             
<S>                                            <C>           <C>                
Net sales                                      $ 29,069      $ 25,612
                                                                       
Costs and expenses:                                                     
 Cost of sales (exclusive of depreciation,                              
  depletion and amortization)                    21,642        19,677
 Depreciation, depletion and amortization         1,045           881
 Selling and administrative                       3,817         3,214
                                                 26,504        23,772
                                                                    
Operating income                                  2,565         1,840
                                                                    
Interest expense, net                              (154)         (244)
Equity loss from mining partnership                  (7)          (30)
Other income, net                                   189           209
                                                             
Income before income taxes                        2,593         1,775
                                                             
Provision for income taxes                          908           622
                                                             
 Net income                                       1,685         1,153
                                                             
Retained earnings, beginning of period           33,094        29,151
                                                             
Retained earnings, end of period               $ 34,779      $ 30,304
                                                             
Basic earnings per share                       $   1.57      $   1.05
                                                             
     Average shares outstanding                   1,072         1,103
                                                             
Diluted earnings per share                      $  1.54      $   1.03
                                                             
     Average shares outstanding                   1,097         1,122


</TABLE>


                     See accompanying notes
                                3
                                
<PAGE>                                
                                
                CONTINENTAL MATERIALS CORPORATION
   CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
                           (Unaudited)
            (000's omitted except per share amounts)
                                
                                
<TABLE>
<CAPTION>
                                               OCTOBER 3,    SEPTEMBER 27,
                                                  1998           1997
<C>                                            <S>           <S>           
Net sales                                      $ 80,810      $ 74,508
                                                                    
Costs and expenses:                                                  
 Cost of sales (exclusive of depreciation,                          
  depletion and amortization)                    61,088        57,749
 Depreciation, depletion and amortization         3,094         2,636
 Selling and administrative                      11,026        10,503
                                                 75,208        70,888
                                                                    
Operating income                                  5,602         3,620
                                                                     
Interest expense, net                              (538)         (748)
Equity loss from mining partnership                 (45)          (87)
Other income, net                                   360           494
                                                                    
Income before income taxes                        5,379         3,279
                                                                    
Provision for income taxes                        1,883         1,148
                                                                    
Net income                                        3,496         2,131
                                                                    
Retained earnings, beginning of period           31,283        28,173
                                                                    
Retained earnings, end of period               $ 34,779      $ 30,304
                                                                     
Basic earnings per share                       $   3.26      $   1.93
                                                                    
     Average shares outstanding                   1,074         1,103
                                                                    
Diluted earnings per share                     $   3.18      $   1.90
                                                                    
     Average shares outstanding                   1,098         1,122
                                
</TABLE>
                                
                                
                                
                                
                                
                                
                                
                     See accompanying notes
                                4
<PAGE>                                
                                
                CONTINENTAL MATERIALS CORPORATION
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 3, 1998 AND SEPTEMBER 27, 1997
                           (Unaudited)
                         (000's omitted)
                                
                                
<TABLE>
<CAPTION>
                                                 OCTOBER 3,    SEPTEMBER 27,
                                                   1998           1997
                                                                       
<S>                                              <C>           <C>             
Net cash provided by operating activities        $  8,135      $    848
                                                                      
Investing activities:                                                 
 Capital expenditures                              (4,636)       (2,157)
 Proceeds from sale of property and equipment          37             9
 Investment in mining partnership                     (45)          (87)
Net cash used in investing activities              (4,644)       (2,235)
                                                                       
Financing activities:                                                  
 Borrowings under revolving credit facility            --           600
 Long-term borrowings                                  --         2,000
 Repayment of long-term debt                       (1,900)         (750)
 Payment to acquire treasury stock                   (238)           --
Net cash (used) provided by financing activities   (2,138)        1,850
                                                                      
Net increase in cash and cash equivalents           1,353           463
Cash and cash equivalents:                                            
 Beginning of year                                  1,524           379
                                                                      
 End of period                                   $  2,877      $    842
                                                                      
                                                                        
                                                                       
Supplemental disclosures of cash flow items:                           
Cash paid during the nine months for:                                   
 Interest                                        $    543      $    834
 Income taxes                                       1,218           893

</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 OCTOBER 3, 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 nine 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.  The sales and gross margins  of
  the  heating and air-conditioning segment, affected by  weather
  and  a  changing  product mix, have not produced  a  consistent
  pattern   in   recent  years.   (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 nine
  months ended October 3, 1998 and September 27, 1997.
<TABLE>
<CAPTION>
                         Three months ended            Nine months ended
                                          Per-                          Per-
                                         share                         share
                      Income  Shares   earnings    Income    Shares   earnings
   <S>                <C>     <C>      <C>         <C>       <C>      <C>
   October 3, 1998                                                    
   Basic EPS          $1,685   1,072   $ 1.57      $3,496    1,074    $ 3.26
   Effect of                                                               
   dilutive options       --      25                   --       24         
   Diluted EPS        $1,685   1,097   $ 1.54      $3,496    1,098    $ 3.18
                                                                           
   September 27, 1997                                                      
   Basic EPS          $1,153   1,103   $ 1.05      $2,131    1,103    $ 1.93
   Effect of                                                                 
   dilutive options       --      19                   --       19         
   Diluted EPS        $1,153   1,122   $ 1.03      $2,131    1,122    $ 1.90

</TABLE>












                                6
<PAGE>                                
                                
   Item 2.  Management's Discussion and Analysis of Financial
               Condition and Results of Operation
                                
  The  following discussion provides information which management
  believes is relevant to an assessment and understanding of  the
  Company's  results of operation and financial  condition.   The
  discussion  should  be read in conjunction with  the  Company's
  unaudited  consolidated interim financial statements and  notes
  thereto  and  the Company's Annual Report on Form  10-K.   This
  report  contains certain statements of a forward-looking nature
  relating  to  future events or the future financial performance
  of  the  Company.  Investors are cautioned that such statements
  are  only  predictions and that actual events  or  results  may
  differ  materially.   In evaluating such statements,  investors
  should  carefully  consider the various factors  identified  in
  this  report,  which  could  cause  actual  results  to  differ
  materially  from  those  indicated  from  such  forward-looking
  statements.

  Financial Condition (See pages 2 and 5)
  Operations   for  the  first  nine  months  of  1998   provided
  $8,135,000  of cash compared to $848,000 in 1997.  A  reduction
  in  inventory  levels and an increase in payables  and  accrued
  expenses   combined  with  higher  income   to   generate   the
  significant increase in cash.

  The  Company estimates that its short-term line of credit (none
  of  which  was outstanding at October 3, 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 October  3,  1998  to
  Quarter Ended September 27, 1997 (See page 3)

  Consolidated  net  sales  increased  $3,457,000  (13.5%).   The
  construction  materials  segment  reported  sales  up  $675,000
  (4.5%),  as  construction activity along  the  Front  Range  in
  southern  Colorado  remained  strong.   The  heating  and  air-
  conditioning segment sales increased $2,782,000 (26.4%) as  hot
  July  weather in the Southwest spurred evaporative cooler sales
  making  up some revenues foregone during the adverse effect  of
  El  Nino  in  the  second  quarter.  The  fan  coil  line  also
  recorded sales gains.

  Consolidated   cost  of  sales  (exclusive   of   depreciation,
  depletion  and amortization) as a percentage of sales decreased
  from  76.8% to 74.5%.  The decrease was due to improved margins
  in   the  fan  coil  product  line  of  the  heating  and  air-
  conditioning   segment  and  an  increase  in  sales   in   the
  construction materials segment.

  Depreciation,   depletion  and  amortization  increased   18.6%
  ($164,000) due to increased capital expenditures.

  Interest  expense declined 36.9% ($90,000) due to lower  levels
  of outstanding debt.

                                7
                                
<PAGE>  
  
  Operations  - Comparison of Nine Months Ended October  3,  1998
  to Nine Months September 27, 1997 (See page 4)

  Net  sales  rose  $6,302,000  (8.5%).   The  increases  in  the
  construction  materials  segment $5,778,000  (14.9%),  and  the
  heating and air-conditioning segment $524,000 (1.5%), were  due
  to the reasons noted above.

  Consolidated   cost  of  sales  (exclusive   of   depreciation,
  depletion  and amortization) as a percentage of sales decreased
  from 77.5% to 75.6% due to the reasons noted above.

  Depreciation,   depletion  and  amortization  increased   17.4%
  ($458,000) due to increased capital expenditures.

  Interest  expense declined 28.1% ($210,000) due to  the  reason
  noted above.

  Historically,  the  Company  has experienced  operating  losses
  during  the  first  quarter  while  subsequent  quarters   have
  improved  over  the  first quarter's operating  results.   This
  historical  trend  of first quarter operating  losses  has  not
  occurred  in  the past three years due to mild  weather  and  a
  strong   construction  market  in  the  area  served   by   the
  construction  materials  segment.   The  historical  trend   is
  expected  to  resume  at  some  point  in  time  as  sales   of
  construction  materials  are generally  higher  in  the  second
  through  fourth  quarters.   Sales and  gross  margins  in  the
  heating  and air-conditioning segment, affected by weather  and
  a  changing product mix, have not produced a consistent pattern
  in recent years.

  Year 2000 Compliance
  The  Year  2000 issue relates to the way computer hardware  and
  software  define calendar dates; many use only  two  digits  to
  represent   the   year   which   could   cause   failures    or
  miscalculations.  In addition, many systems and equipment  that
  are  not  typically thought of as computer-related  (referred
  to  as non-IT) contain imbedded hardware or software that may
  include a time element.  The Year 2000 issue can arise  at  any
  point  in  the  Company's  supply,  manufacturing,  processing,
  distribution  and financial chains.  As a result,  the  Company
  is  at  risk  of  disruptions to its business  operations  from
  possible miscalculations or system failures occurring not  only
  in  its own equipment and software, but those occurring in  any
  business or governmental entity that the Company relies on  for
  goods or services.

  The  Company  has  completed a study, with  the  assistance  of
  external   consultants,  to  evaluate  the  Company's   current
  internal  information  and  financial  systems.   The   Company
  concluded  that the majority of the existing systems  were  not
  Year   2000   compliant.   We  have  therefore  undertaken   to
  implement  a  Year 2000 compliant enterprise resource  planning
  (ERP)  system to replace all non-compliant systems as  well  as
  to  modernize and integrate all of the Company's systems.   The
  majority  of  the  hardware utilized by the Company,  including
  all  that  may  be  Year  2000  non-compliant,  is  also  being
  replaced.   Work on the project began in the second quarter  of
  1998  and is expected to be completed during the second quarter
  of   1999.   The  cost  of  the  entire  project  is  currently
  estimated   at   $3,000,000   including   hardware,   software,
  consulting    fees    and    other   out-of-pocket    expenses.
  Approximately  $1,300,000 has been incurred  to  date.  Funding
  will  be furnished by a lease of approximately $1,500,000  with
  the  balance provided by operating cash flow.  The cost of  the
  project  is not expected to have a significant negative  impact
  on the Company's future financial results.

  A  review has been undertaken, or is in process, to assess  and
  correct  Year 2000 issues affecting both our products  and  the
  non-IT  systems and equipment used in our businesses.   At  the
  present  time,  the  Company has not  identified  any  products
  which  would be Year 2000 non-compliant.  One phone system  has
  been identified as Year 2000 non-compliant and a resolution  is
  being pursued.
                                8
<PAGE>  
  
  We  rely  on  third  party suppliers for raw materials,  water,
  utilities,    transportation   and    other    key    services.
  Interruption  to  any  of their operations  due  to  Year  2000
  issues  could  affect the operations of our Company.   We  have
  initiated  efforts  to ascertain the level of  preparedness  of
  this  group.  We have found some of these entities less willing
  to  provide  information concerning their state  of  readiness.
  Alternative   sources  of  raw  materials  and  certain   other
  services  have  been  identified,  where  possible,   to   help
  mitigate  any  impact due to disruptions  at  any  of  our  key
  suppliers.   While  we  believe that the steps  we  have  taken
  should  reduce the adverse effect on our Company  of  any  such
  disruptions, the interdependent nature of the Company  and  its
  suppliers,   service  providers,  utilities  and   governmental
  agencies  is  such that a disruption at one or  more  suppliers
  could have material adverse consequences.
  
  We  are  also dependent upon our customers for sales  and  cash
  flow.   Year  2000  interruptions in our customers'  operations
  could   result   in  reduced  sales,  increased  inventory   or
  receivable  levels  and  cash  flow  reductions.   While  these
  events  are  possible, we believe our customer  base  is  broad
  enough  to  minimize  the  affects to  our  Company  of  system
  disruptions  at some customers' operations.  We  are,  however,
  taking  steps to contact and monitor the status of  our  larger
  customers as a means of determining risks and alternatives.

  At  this  time, we have not learned of any potential  exposures
  from   external,   non-compliant  third  party   suppliers   or
  customers.


   PART II Other Information   -


   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 October 3, 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:     November 9, 1998       By:   /S/ Joseph J. Sum
                                     Joseph J. Sum, Vice President
                                     and Chief Financial Officer



                                9