FORM 10Q - QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10Q

(X) Quarterly Report Pursuant to Section 13 or 15(d) of  the Securities Exchange
    Act of 1934

    For the period ended                  MARCH 31, 2001
                         -------------------------------------------------------

( ) 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:                   1-8676
                           -----------------------------------------------------



                                  FANSTEEL INC.
--------------------------------------------------------------------------------
              (Exact name of registrant as specified in its charter)


     DELAWARE                                            36-1058780
--------------------------------------------------------------------------------
(State or other jurisdiction                   (IRS Employer Identification No.)
of incorporation or organization)


     NUMBER ONE TANTALUM PLACE, NORTH CHICAGO, IL                 60064
--------------------------------------------------------------------------------
     (Address of principal executive offices)                  (Zip Code)

                                 (847) 689-4900
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


                                 NOT APPLICABLE
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal 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.

                                                  (X) Yes          ( ) No

                                    8,698,858
--------------------------------------------------------------------------------
          (Number of shares of $2.50 par value common stock outstanding
                              as of April 30, 2001)


<PAGE>


                    PART 1 - FINANCIAL INFORMATION                     Form 10-Q
                      ITEM 1 - FINANCIAL STATEMENTS                       Page 2

                                  FANSTEEL INC.
                           CONSOLIDATED BALANCE SHEET
                         -----------------------------
<TABLE>
<CAPTION>
<S>                                                <C>                          <C>


                                                      March 31,                 December 31,
                                                        2001                       2000
                                                    ------------                ------------
                                                     (Unaudited)                     *

ASSETS
Current Assets
  Cash and cash equivalents                         $     38,919                $     19,793
  Accounts receivable - net                           24,746,533                  23,118,698
  Inventories
    Raw material and supplies                          4,963,766                   4,811,195
    Work-in-process                                   19,677,568                  18,789,057
    Finished goods                                     8,172,407                   7,868,894
                                                    ------------                ------------
                                                      32,813,741                  31,469,146
    Less reserve to state certain
      inventories at LIFO cost                         6,674,530                   6,674,530
                                                    ------------                ------------
                                                      26,139,211                  24,794,616
  Other assets - current
    Deferred income taxes                              1,786,514                   1,768,470
    Other                                              1,031,468                     998,776
                                                    ------------                ------------
      Total current assets                            53,742,645                  50,700,353
                                                    ------------                ------------
Net Assets of Discontinued Operations                 31,646,705                  30,198,580
                                                    ------------                ------------
Property, Plant and Equipment
  Land                                                 1,872,631                   1,872,631
  Buildings                                           13,046,957                  13,046,957
  Machinery and equipment                             60,785,139                  59,659,748
                                                    ------------                ------------
                                                      75,704,727                  74,579,336
  Less accumulated depreciation                       55,066,798                  54,500,736
                                                    ------------                ------------
                                                      20,637,929                  20,078,600
                                                    ------------                ------------
Other Assets
  Prepaid pension asset                                9,279,771                   9,007,480
  Goodwill                                             2,379,788                   2,437,364
  Other                                                   64,420                      65,551
                                                    ------------                ------------
                                                      11,723,979                  11,510,395
                                                    ------------                ------------

Total Assets                                        $117,751,258                $112,487,928
                                                    ============                ============

                 * - Derived from audited financial statements

                (See Notes to Consolidated Financial Statements)


</TABLE>

<PAGE>



                    PART 1 - FINANCIAL INFORMATION                     Form 10-Q
                      ITEM 1 - FINANCIAL STATEMENTS                       Page 3

                                  FANSTEEL INC.
                       CONSOLIDATED BALANCE SHEET (Contd.)
                       -----------------------------------

<TABLE>
<CAPTION>
<S>                                                <C>                          <C>


                                                      March 31,                 December 31,
                                                        2001                       2000
                                                    ------------                ------------
                                                     (Unaudited)                     *

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
  Accounts payable                                  $ 14,865,075                $ 13,759,578
  Accrued liabilities                                 10,224,725                  11,103,324
  Accrued income taxes                                   898,782                     841,449
  Current maturities of long-term debt                   255,215                     267,325
                                                    ------------                ------------
        Total current liabilities                     26,243,797                  25,971,676
                                                    ------------                ------------
Long-term Debt                                         7,829,222                   3,646,149
                                                    ------------                ------------
Other Liabilities
  Environmental remediation                           15,151,000                  15,151,000
  Deferred income taxes                                5,446,840                   5,191,013
                                                    ------------                ------------
                                                      20,597,840                  20,342,013
                                                    ------------                ------------

Shareholders' Equity
  Preferred stock without par value
    Authorized and unissued 1,000,000 shares
  Common stock, par value $2.50
    Authorized 12,000,000 shares
    Issued and outstanding 8,698,858 shares           21,747,145                  21,747,145
  Capital in excess of par value                         316,000                     316,000
  Unamortized cost of restricted stock awards           (155,054)                   (202,470)
  Retained earnings                                   41,172,462                  40,669,620
  Other comprehensive income
    Foreign currency translation                            (154)                     (2,205)
                                                    ------------                ------------
      Total other comprehensive income                      (154)                     (2,205)
                                                    ------------                ------------

                                                      63,080,399                  62,528,090
                                                    ------------                ------------

Total Liabilities and Shareholders' Equity          $117,751,258                $112,487,928
                                                    ============                ============

                 * - Derived from audited financial statements

                (See Notes to Consolidated Financial Statements)


</TABLE>

<PAGE>





                    PART 1 - FINANCIAL INFORMATION                     Form 10-Q
                      ITEM 1 - FINANCIAL STATEMENTS                       Page 4

                                  FANSTEEL INC.
                        CONSOLIDATED STATEMENT OF INCOME
                        ---------------------------------
                                   (UNAUDITED)

<TABLE>
<CAPTION>
<S>                                                                 <C>               <C>


                                                                     FOR THE THREE MONTHS ENDED
                                                                     --------------------------

                                                                       March 31,        March 31,
                                                                         2001             2000
                                                                     -----------      -----------
Net sales                                                            $38,600,300      $39,497,704

Costs and expenses
  Cost of products sold                                               32,293,142       31,868,076
  Selling, general and administrative                                  5,363,320        4,988,939
                                                                     -----------      -----------

                                                                      37,656,462       36,857,015
                                                                     -----------      -----------

Operating income                                                         943,838        2,640,689

Other income (expense)
  Interest expense                                                       (87,753)         (26,318)
  Other                                                                  (16,243)         (32,765)
                                                                     -----------       ----------
                                                                        (103,996)         (59,083)
                                                                     -----------       ----------


Income before income taxes                                               839,842        2,581,606

Income tax provision                                                     337,000          870,000
                                                                     -----------      -----------

Net income                                                           $   502,842      $ 1,711,606
                                                                     ===========      ===========

Weighted average number of common
  shares outstanding                                                   8,656,265        8,623,034
                                                                     ===========      ===========

Basic and diluted net income per share                                     $ .06            $ .20
                                                                           =====            =====

Dividends per common share                                                 $   -            $   -
                                                                           =====            =====


                (See Notes to Consolidated Financial Statements)



</TABLE>


<PAGE>



                    PART 1 - FINANCIAL INFORMATION                     Form 10-Q
                      ITEM 1 - FINANCIAL STATEMENTS                       Page 5

                                 FANSTEEL INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                       ------------------------------------
                                   (UNAUDITED)


<TABLE>
<CAPTION>
<S>                                                                             <C>                    <C>

FOR THE THREE MONTHS ENDED MARCH 31,                                                 2001                   2000
                                                                                ----------------       --------------

                                                                                           Increase (decrease) in
                                                                                         cash and cash equivalents

Cash flows from operating activities:

  Net income                                                                    $    502,842           $  1,711,606

  Adjustments to reconcile net income to net
    cash provided by operating activities:
      Depreciation and amortization                                                  641,238                633,427
      Amortization of unearned stock awards                                           47,416                 47,417
      Net pension (credit) charge                                                   (272,291)                69,000
      Deferred income tax charge                                                     237,783                405,988
      Gain from disposals of property, plant and
        equipment                                                                    (16,900)                     -

  Changes in assets and liabilities:
    (Increase) in accounts receivable                                             (1,627,835)            (4,466,115)
    (Increase) in inventories                                                     (1,344,595)              (227,452)
    (Increase) in other assets-current                                               (32,692)              (108,331)
    Increase in accounts payable and accruals                                        228,949              3,470,286
    Increase in income taxes payable                                                  57,333                941,409
    Decrease in other assets                                                           1,131                    881
                                                                                ------------           ------------
  Net cash (used in) provided by operating
    activities                                                                    (1,577,621)             2,478,116
                                                                                ------------           ------------


Cash flows from investing activities:
  Additions to property, plant and equipment                                      (1,160,591)              (171,872)
  Increase in net assets of discontinued
    operations-design, engineering and
    equipment for processing plant                                                (1,448,125)            (1,980,548)
  Proceeds from sale of property, plant and
    equipment                                                                         34,500                      -
                                                                                ------------           ------------
Net cash (used in) investing activities                                           (2,574,216)            (2,152,420)
                                                                                ------------           ------------

Cash flows from financing activities:
  Proceeds from long-term debt                                                     4,238,833                      -
  Payments of long-term debt                                                         (67,870)               (46,212)
                                                                                ------------           ------------
Net cash provided by (used in) financing
  activities                                                                       4,170,963                (46,212)
                                                                                ------------           ------------

Net increase in cash and cash equivalents                                             19,126                279,484

Cash and cash equivalents at beginning of
  period                                                                              19,793                 16,516
                                                                                ------------           ------------

Cash and cash equivalents at March 31                                           $     38,919           $    296,000
                                                                                ============           ============

                (See Notes to Consolidated Financial Statements)




</TABLE>


<PAGE>



                    PART 1 - FINANCIAL INFORMATION                     Form 10-Q
                      ITEM 1 - FINANCIAL STATEMENTS                       Page 6

                                  FANSTEEL INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                                   (UNAUDITED)

CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------

  The  consolidated  balance  sheet  at March  31,  2001,  and the  consolidated
statements of income for the three months ended March 31, 2001 and 2000, and the
consolidated  statements of cash flows for the three months ended March 31, 2001
and 2000, are unaudited,  but include all adjustments (consisting only of normal
and  recurring   accruals)  which  the  Company  considers  necessary  for  fair
presentation.

  The  accompanying   consolidated  financial  statements  do  not  include  all
disclosures  normally  provided in annual financial  statements and,  therefore,
should be read in conjunction with the year-end financial statements.

  The Company has a $30,000,000 unsecured revolving credit agreement expiring on
May 20, 2002 and a credit agreement for $3,000,000 expiring on June 30, 2001. As
of March 31, 2001,  $5.5 million was borrowed  from the lines of credit and $7.8
million  was being used for  letters  of credit  needed  for  funding  assurance
related to environmental issues, self-insurance policies and development loans.

 The preparation of financial  statements in conformity with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates.

 For the three months ended March 31, 2001 total comprehensive income was $2,051
more than net income due to foreign  currency  translation  gains. For the three
months ended March 31, 2000 total comprehensive  income was $1,363 less than net
income due to foreign currency translation losses.





<PAGE>


                    PART 1 - FINANCIAL INFORMATION                     Form 10-Q
                      ITEM 1 - FINANCIAL STATEMENTS                       Page 7

                                  FANSTEEL INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
               ------------------------------------------
                                   (UNAUDITED)

BUSINESS SEGMENT INFORMATION

    The Company is engaged in the manufacture of specialty metal products, which
it  classifies  into  three  business  segments:   Industrial  Tools,   Advanced
Structures  and  Industrial  Metal  Components.  Net sales and operating  income
(loss)  for the first  quarter  ended  March  31,  2001 and 2000 for each of the
Company's business segments are summarized below:

<TABLE>
<CAPTION>
<S>                                             <C>                     <C>

                                                      2001                   2000
                                                 -------------           -------------

NET SALES:

  INDUSTRIAL TOOLS
    Sales                                         $ 15,270,549          $ 14,303,930
    Intersegment sales                                  (1,984)               (1,252)
                                                  ------------          ------------
                                                    15,268,565            14,302,678
                                                  ------------          ------------

ADVANCED STRUCTURES
  Sales                                             13,279,116            13,250,442
  Intersegment sales                                         -                     -
                                                   ------------        -------------
                                                    13,279,116            13,250,442


INDUSTRIAL METAL COMPONENTS
  Sales                                             10,054,095            11,959,002
  Intersegment sales                                    (1,476)              (14,418)
                                                  ------------         -------------
                                                    10,052,619            11,944,584


TOTAL NET SALES                                   $ 38,600,300          $ 39,497,704
                                                  ============          ============

OPERATING INCOME (LOSS) :
  INDUSTRIAL TOOLS                                $    624,754          $  1,220,402
  ADVANCED STRUCTURES                                  311,350               518,881
  INDUSTRIAL METAL COMPONENTS                           15,754               918,065
  CORPORATE                                             (8,020)              (16,659)
                                                  ------------           -----------

TOTAL OPERATING INCOME (LOSS)                     $    943,838           $ 2,640,689
                                                  ============           ===========


</TABLE>


<PAGE>






             ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS              Form 10-Q
             OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             Page 8


    The following  Management's  Discussion and Analysis of Financial  Condition
and Results of  Operations  may  contain  various  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the  Securities  Exchange Act of 1934,  as amended,  which can be
identified  by the  use  of  forward-looking  terminology  such  as  "believes",
"expects", "prospects",  "estimated", "should", "may" or the negative thereof or
other  variations  thereon or comparable  terminology  indicating  the Company's
expectations or beliefs concerning future events. The Company cautions that such
statements are qualified by important factors that could cause actual results to
differ  materially  from those in the  forward-looking  statements,  a number of
which are identified in the discussion  which follows.  Other factors could also
cause actual  results to differ  materially  from expected  results  included in
these statements.

    The following discussion should be read in conjunction with the consolidated
financial  statements of the Company and the related  notes to the  consolidated
financial statements.

QUARTER ENDED MARCH 31, 2001 COMPARED WITH QUARTER ENDED MARCH 31, 2000
-----------------------------------------------------------------------

    First quarter,  2001 net sales for Fansteel were $38,600,000,  a decrease of
$897,000,  or 2.3%, compared with first quarter,  2000 net sales of $39,498,000.
The sales decline is mostly attributable to decreased demand from the automotive
and  truck  industries,  which  negatively  impacted  sales  of  powdered  metal
components and investment  castings in the Industrial Metal Components  segment.
Forging  sales in the Advanced  Structures  segment also declined due to reduced
production releases from the aircraft industry.

         The Company's operating income in the first quarter,  2001 was $944,000
compared  with first  quarter,  2000  operating  income of  $2,641,000.  Current
quarter income  declined at all three of the Company's  business  segments.  The
sales volume decrease had a negative impact on the Company's  operating  income.
In addition,  higher manufacturing costs and production  inefficiencies  further
eroded operating income for the first quarter 2001. Cost reduction  actions have
been  undertaken  by a number of Fansteel  businesses in response to the ongoing
reduced volume levels.

    Other  expenses for the Company in the first  quarter of 2001 were  $104,000
compared  with $59,000 for the first  quarter of 2000.  Interest on debt,  which
accounts for the majority of the  increase,  has risen in  correlation  with the
Company's additional borrowings related to working capital increases, investment
in machinery and equipment,  and funding of the  reclamation  plant in Muskogee,
OK.

    Net income for the quarter  ended March 31, 2001 was  $503,000,  or $.06 per
share,  compared  with  $1,712,000,  or $.20 per share,  in the first quarter of
2000.

    Sales for the Industrial  Tools business  segment were  $15,269,000  for the
first quarter of 2001, an improvement  of 6.8% compared with  $14,303,000 in the
same period of 2000.  Increased  sales of tungsten  carbide cutting tools to the
metalworking  industry  provided most of the  improvement.  Sales of coal mining
tools and accessories also provided improvement to the segment,  with the energy
situation in the United States creating more demand for coal.  Construction tool
sales have slowed due to poor  weather  conditions  in many parts of the country
and the delay of construction projects into later months.



<PAGE>


             ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS              Form 10-Q
             OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             Page 9


    Industrial Tools business segment  operating income for the first quarter of
2001  was  $625,000  compared  with  $1,220,000  for the  same  period  of 2000.
Operating  income  decreased as a result of higher material costs and production
inefficiencies  related to  equipment  utilization  and  maintenance.  Operating
income as a  percentage  of net sales fell to 4.1% in the first  quarter of 2001
compared with 8.5% in the same quarter of the prior year.

    First  quarter,  2001 net sales of $13,279,000  for the Advanced  Structures
business segment were flat compared with $13,250,000 in the first quarter, 2000.
New aerospace programs have benefited the sand casting operation,  while reduced
production  releases have slowed the  manufacturing  of forged  aircraft  parts.
Sales of  machined  aircraft  parts  have  increased,  as new  orders  have been
received from a major aircraft producer.

    Operating income for the Advanced  Structures business segment for the first
quarter of 2001 was $311,000 compared with $519,000 for the same period of 2000.
As a  percentage  of  sales,  operating  income  declined  to 2.3% for the first
quarter of 2001 compared with 3.9% in the same quarter of 2000.  The decrease in
operating  income resulted from the lower sales volume at the forging  facility.
In  addition,  the  benefits  of the  higher  sales  volume at the sand  casting
operation did not  materialize as high  maintenance  and scrap costs  negatively
impacted operating income.

    Industrial Metal Components business segment net sales for the quarter ended
March 31, 2001 were  $10,053,000,  a decrease of 15.8% from first quarter,  2000
net  sales of  $11,945,000.  Decreased  demand  from the  automotive  and  truck
industries for investment  castings and powdered metal components  accounted for
the majority of the decline. Wire formed product revenues were slightly lower in
the first  quarter of 2001, as sales of this product were impacted by a slowdown
from industrial customers in the plumbing, vending and electronic markets.

         Industrial Metal Components  business segment  operating income for the
first quarter of 2001 was $16,000  compared with $918,000 for the same period of
2000.  The lower sales volume was the primary factor for the decrease in income,
although higher  operating costs at the investment  casting facility in Addison,
IL also had a negative impact on income.  Cost reduction actions,  including the
closing of the Addison,  IL facility,  have been  undertaken  in this segment in
response to the ongoing reduced volume levels.

    The Company's  backlog of orders was  $51,293,000 at March 31, 2001 compared
with  $47,089,000  at March 31, 2000,  an increase of  $4,204,000  or 8.9%.  The
backlog  improvement  was the result of  increased  orders  from the  commercial
aircraft  manufacturers  within the Advanced  Structures  business segment.  The
Industrial Tools business  segment backlog  decreased in response to the slowing
order rate from the  metalworking  industry.  The  Industrial  Metal  Components
backlog declined due to decreased orders from the automotive,  truck,  plumbing,
vending and marine industries.

    Inflation factors did not significantly affect the overall operations of the
Company.



<PAGE>


             ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS              Form 10-Q
            OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             Page 10

OUTLOOK
-------

 A number of the Company's key markets,  such as automotive,  truck, marine, and
hardware,  experienced a softening in the fourth  quarter of 2000 that continued
into the first  quarter of 2001.  This  softening is  anticipated  to persist at
least through the second quarter of 2001. Markets,  such as aircraft and energy,
are expected to remain  strong.  The Company is also beginning to experience raw
material  price  increases  for  selected  high-use  materials  such as tungsten
carbide and titanium and it is unlikely  that these cost  increases can be fully
passed on to customers.  In response to the ongoing reduced volume levels,  cost
reduction  actions were  undertaken  in the first quarter of 2001 by a number of
Fansteel businesses.  Further  improvements in Fansteel's  performance will come
from  increasing our level of business with new and existing  customers  through
better  service  and  greater  capabilities,  improving  management  of  working
capital, and improving operating efficiencies.

  To further  reduce costs and improve  operating  efficiencies,  Fansteel  will
close its Addison,  IL investment  casting  facility by year-end and consolidate
manufacturing at its investment casting operation in Mexico. The move will allow
the  Company  to  maximize  production  at its world  class  foundry  located in
Reynosa,  Mexico  and offer  improved  service  to its  customers.  Closure  and
relocation  costs of  approximately  $1,000,000  will be  incurred  in 2001 with
approximately $800,000 of this to be recorded in the second quarter.

 Significant efforts continue in the current year to start residue processing at
the Muskogee facility,  which is part of discontinued  operations.  Discontinued
operations  are  expected  to  generate  negative  cash  flow in  2001,  as full
production  is not  anticipated  until  late  in  2001.  Uncertainties,  such as
production delays,  higher than anticipated  operating expenses,  and changes to
end-product prices could have additional negative cash flow impacts in 2001. The
Company is continuing to evaluate the economics of this  production  facility as
additional information becomes available.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

 Cash and cash  equivalents were $39,000 at March 31, 2001 compared with $20,000
at December 31, 2000.  Operating activities used cash of $1,578,000 in the first
quarter of 2001, as working capital requirements  increased $2,770,000.  As part
of management's program to expand the operations of the Company,  investments of
$1,161,000 were made in capital  equipment.  Engineering,  equipment,  and pilot
testing costs of $1,448,000  were incurred for the  processing  plant to be used
for reclamation and decommissioning purposes in Muskogee,  Oklahoma. Proceeds of
$4,239,000 from long-term debt borrowings were received, $3,850,000 of which was
borrowed from the revolving line of credit.

  In the fourth  quarter of 1995,  the Company  announced the  suspension of the
quarterly  shareholder  dividend for the purpose of conserving  cash for capital
reinvestment,  possible  future  acquisitions,  and due to potential  changes in
funding requirements for decommissioning at the Company's discontinued operation
in Muskogee, Oklahoma.


<PAGE>


             ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS              Form 10-Q
            OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             Page 11

  The  Company has $33 million in lines of credit.  As of March 31,  2001,  $5.5
million was  borrowed  from the lines of credit and $7.8  million was being used
for letters of credit  needed for  funding  assurance  related to  environmental
issues,  self-insurance policies, and development loans. The Company may further
use its line of credit during 2001 to fund the reclamation  processing  plant in
Muskogee.

 Funding  assistance  by states  and  municipalities  is  investigated  when any
significant expenditures are proposed. All of the Company's debt, other than the
$5.5  million  borrowed  from  the  revolving  line of  credit,  is  related  to
development  loans obtained from various states.  In the first quarter 2001, the
Company  received  $339,000 from GE Capital for a Pennsylvania  development loan
for equipment for the powdered metals facility. This development loan, which has
a variable  interest rate of 5.60%, is for $1.5 million,  the remainder of which
will be received after  equipment  installation in the second and third quarters
of 2001.  An  additional  $50,000  was  received  from  the  State of Iowa for a
development  loan with an interest rate of 6% for the  modernization of the sand
casting facility.


ENVIRONMENTAL REMEDIATION AND DISCONTINUED OPERATIONS
-----------------------------------------------------

 The  Company   discontinued  its  Metal  Products  business  segment  in  1989.
Environmental  reclamation  and  decommissioning  is required for the  segment's
primary plant located in Muskogee,  Oklahoma that processed certain ores subject
to regulations of several government agencies. The residues from these processed
ores were stored  on-site.  Remaining  assets  were  written  down to  estimated
realizable  value,  and  provisions  were  made  for  the  estimated  costs  for
decommissioning.  Prior to  decommissioning,  the  Company has  constructed  and
expects to operate for at least ten years a  commercial  plant to  complete  the
processing of residues  currently  contained in storage ponds at the site, which
would  materially  reduce the amount of radioactive  materials to be disposed of
during decommissioning. The processing plant is designed to extract commercially
valuable  materials  such as tantalum,  scandium,  and other rare earth and rare
metal elements from the feedstock residues. Pilot production processing began in
late  1999.   Production  problems  have  been  encountered  and  processing  at
anticipated production levels has not yet been tested.

 The   Company,   in   association   with  outside   consultants,   developed  a
decommissioning  plan  for  the  Muskogee  site  including  construction  of  an
engineered  on-site cell for containment of contaminated  soils that lie beneath
and  surround  the  storage  ponds;   consolidation  and  stabilization  of  the
contaminated  soils in the  containment  cell;  and the  performance of required
plant surveys and characterization  after residue processing ceases to determine
whether additional  contaminated soils exist which may require remediation,  and
submitted  that plan and a related  decommissioning  funding plan to the Nuclear
Regulatory  Commission ("NRC") as required by law. The NRC requested in May 1999
that the Company  change its  submittal to separate the property  (approximately
100 acres) being considered for unrestricted use from property (approximately 10
acres) being considered for the on-site  containment  cell. The unrestricted use
property plan was  submitted in June 1999 and approved in August 1999,  with the
NRC license amended  accordingly.  The plan dealing with the on-site containment
cell was  submitted in August 1999.  In September  1999,  the NRC  published its
intent to review this  submittal  for the purpose of amending  the  license.  In
response  to the  notice,  a  petition  was filed  with the NRC by the  Oklahoma
Attorney General requesting a hearing in order to dispute the appropriateness of
constructing  the on-site  containment  cell.  The  proceeding was terminated in
January 2001


<PAGE>


             ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS              Form 10-Q
            OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             Page 12


upon joint motion of the Company,  NRC, and the Oklahoma Attorney  General.  The
Company  requested  that the NRC  postpone  its review of the plan  dealing with
on-site  containment  while it investigates the possibility of off-site disposal
of the contaminated soils.

  On-site  containment of the contaminated  soils may require  preparation of an
Environmental  Impact  Statement  and, in addition to the required NRC approval,
local and other  federal  agencies may have to be satisfied  that the  Company's
disposal plan is sound.  The approval process for on-site  containment  would be
expected  to  extend  over  a  number  of  years.  Management  believes  that  a
decommissioning   plan  including   on-site   containment  would  ultimately  be
acceptable to the  appropriate  regulatory  authorities,  and would be approved,
based on current NRC  regulations  or provisions of the Nuclear Waste Policy Act
of 1982.  However,  there can be no assurance  that a plan providing for on-site
containment would ultimately receive approval.  Based on recent decreases in the
cost of off-site disposal, the Company currently is exploring the possibility of
off-site disposal of some or all of the contaminated  soils as an alternative to
on-site containment. There can be no assurance that off-site disposal would be a
cost-effective alternative, particularly considering the lengthy period required
to  complete  processing  of the  residues  and the  limited  number of licensed
disposal sites. The  implementation of a decommissioning  plan for the Company's
site that includes off-site disposal of contaminated  soils and residues may not
be financially feasible.

 The NRC decommissioning  regulations require licensees to estimate the cost for
decommissioning  and to assure in advance that adequate  funds will be available
to cover those costs.  NRC regulations  identify a number of acceptable  methods
for assuring funds for  decommissioning,  including  surety  instruments such as
letters  of  credit,  cash  deposits,  and  combinations  thereof.  The level of
assurance for decommissioning the Muskogee site,  including on-site containment,
is currently  $4,456,000 provided through letters of credit. The amount does not
include  assurance  for costs of operation of the residue  processing  facility,
even though the NRC had previously  indicated that the cost of processing should
be included  in the cost  estimate.  This level of  assurance,  however,  may be
changed  upon further  review by the NRC. In  addition,  any proposal to include
off-site  disposal in the  decommissioning  plan would be expected to change the
amount of financial assurance, possibly materially. The Company's available cash
and/or borrowing  capacity will be reduced by the amount of funding assurance as
required at any particular  time. As the  decommissioning  plan is  implemented,
deposited funds or the amount of any surety instruments may be reduced, provided
the Company can  demonstrate the sufficiency of the remaining funds or surety to
assure the completion of decommissioning.

 Due to the problems  during  pilot  production  at the  processing  plant,  the
project has  experienced  delays and  increased  costs.  Full  production is not
anticipated  until late 2001.  For the quarter ended March 31, 2001,  $1,448,000
was spent for engineering, equipment, and pilot testing.

 The Muskogee processing operation was planned and is expected to be operated as
the most economical and feasible way of reclaiming and decommissioning the site.
It is being accounted for as an  environmental  reclamation and  decommissioning
activity.  The Company  estimates on a periodic  basis the revenues that will be
generated from the estimated  amounts of rare earth and rare metals that will be
extracted and sold over


<PAGE>


             ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS              Form 10-Q
            OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS             Page 13

the life of the  operation,  and the  total  operating  costs,  including  plant
construction  costs,  over  the  life of the  operation,  and  provides  for any
estimated excess of such total costs over total revenues. The estimated value of
materials  to be  extracted  is based on  analyses  of  samples  taken  from the
residues and a valuation of such materials  using current market prices.  Market
prices for some of the  materials  have  fluctuated  significantly  during plant
construction.  There  can be no  assurance  as to the  level of  demand  for the
extracted  materials or the actual  prices that may be obtained for them,  which
could vary over time. The Company continues to estimate that aggregate  revenues
for the sale of materials to be  extracted  in the  processing  operation at the
site will approximate total operating costs, including depreciation,  related to
residue  processing  over the  processing  period.  The Company is continuing to
evaluate the  economics of the  production  facility as  additional  information
about production capacity and product quality becomes available.

 At March 31,  2001,  the Company had recorded  liabilities  of $9.0 million for
discontinued  operations,  including the  estimated net costs of reclaiming  and
decommissioning the site during and after the processing of the residues and the
Company's  estimated  share of costs at a second site which had been part of the
Metal Products business segment. The second site is regulated under the Resource
Conservation and Recovery Act. As a result of alleged  migration of contaminants
from this second site,  the Company also has been  identified  as a  potentially
responsible party under the Comprehensive  Environmental Response,  Compensation
and Liability Act (CERCLA) at a neighboring third-party site.

 In  addition  to the two sites  included in the  discontinued  operations,  the
Company  has  a  total  of  seven  sites  at  other  Company   facilities  where
environmental  remediation  is ongoing or will be  undertaken.  Certain of these
sites were  identified  as a result of  environmental  studies  conducted by the
Company  during 1997 at all of its owned  sites,  including  testing of soil and
groundwater at selected sites as indicated by the environmental studies.

 The Company has also been notified that it is a potentially  responsible  party
at seven sites owned by third parties. The Company's participation at four sites
is de minimis, and at the other three sites the Company is either being defended
by its insurance carriers or has meritorious defenses to liability.

 At March 31, 2001,  the Company had recorded  liabilities  of $7.6 million  for
estimated  environmental  investigatory  and  remediation  costs  based  upon an
evaluation of currently  available facts with respect to each  individual  site,
including the results of  environmental  studies and testing  conducted in 1997,
and considering existing technology, presently enacted laws and regulations, and
prior  experience  in  remediation  of  contaminated  sites.  Actual costs to be
incurred  in future  periods at  identified  sites may vary from the  estimates,
given the inherent uncertainties in evaluating environmental  exposures.  Future
information and  developments  will require the Company to continually  reassess
the expected impact of these environmental  matters. The Company does not expect
that  any  sums  it may  have  to pay in  connection  with  these  environmental
liabilities would have a materially adverse effect on its consolidated financial
position.







<PAGE>


                                                                       Form 10-Q
                                                                         Page 14

                           PART II - OTHER INFORMATION



         ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         --------------------------------------------------------------

            a) The Annual Meeting of Shareholders was held on April 25, 2001.

            c) The   nominations  for   Directors  of  the Company  were brought
            before  shareholders  of   the   Company  at the  Annual  Meeting of
            Shareholders.  The   votes cast  for and votes  withheld for each of
            the following nominees are as follows:

                                              Votes                     Votes
                     NOMINEE                   FOR                    WITHHELD
               --------------------        -----------               ----------

               E. P. Evans                  5,455,262                  202,548

               R. S. Evans                  5,455,262                  202,548

               T. M. Evans, Jr.             5,455,124                  202,686

               P. J. Kalis                  5,455,024                  202,786

               J. S. Petrik                 5,454,532                  203,278

               D. C. Roof                   5,455,162                  202,648

               G. L. Tessitore              5,455,144                  202,666


            The  appointment  of   Ernst & Young LLP as auditors of  the Company
            for   the   year   ending   December  31,  2001  was  placed  before
            shareholders   for    ratification   at    the  Annual   Meeting  of
            Shareholders. The appointment of Ernst & Young  LLP  as  auditors of
            the Company was ratified with  5,475,060   votes  cast  for,  48,084
            votes cast against, and 7,861 abstentions.


<PAGE>



                                                                       Form 10-Q
                                                                         Page 15
                           PART II - OTHER INFORMATION
                           ---------------------------
                                     Contd.


         ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

               b) No reports on   Form 8-K were  filed  during the quarter ended
               March 31, 2001.





<PAGE>
                                                                       Form 10-Q
                                                                         Page 16








                                   SIGNATURES



Pursuant  to the  requirements  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.


                                  FANSTEEL INC.
--------------------------------------------------------------------------------
                                   (Registrant)








Date  05/15/01                  /s/GARY L. TESSITORE
      --------  ----------------------------------------------------------------
                                   Gary L. Tessitore
                 Chairman, President and Chief Executive Officer








Date  05/15/01                /s/R. MICHAEL MCENTEE
      -------- -----------------------------------------------------------------
                                 R. Michael McEntee
                   Vice President and Chief Financial Officer