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              September 30, 1996              

( )  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 of                   (IRS Employer
       incorporation or organization)               Identification No.)


      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

                                 8,598,858                             
          (Number of shares of $2.50 par value common stock outstanding
                             as of October 31, 1996)


                       PART 1 - FINANCIAL INFORMATION               Form 10-Q
                       ITEM 1 - FINANCIAL STATEMENTS                Page 2
                                  FANSTEEL INC.
                           CONSOLIDATED BALANCE SHEET  

                                                     September 30,  December 31,
                                                         1996           1995    

   ASSETS                                             (Unaudited)        *
   Current Assets
    Cash and cash equivalents (including securities
     purchased under agreement to resell of
     $1,325,000 in 1996 and $4,796,000 in 1995)      $ 3,465,793   $ 6,838,960
    Marketable securities                              5,159,215     2,072,902
    Accounts receivable - net                         19,436,473    14,305,629
    Inventories
     Raw material and supplies                         4,769,346     3,850,864
     Work-in-process                                  12,586,114    11,610,410
     Finished goods                                    6,581,661     5,942,269
                                                      23,937,121    21,403,543
     Less reserve to state certain 
      inventories at LIFO cost                         6,888,236     6,888,236
                                                      17,048,885    14,515,307
    Other assets - current
     Deferred income taxes                             1,511,017     1,452,160
     Other                                             1,401,032     1,002,076
         Total current assets                         48,022,415    40,187,034
   Net Assets of Discontinued Operations               2,260,946     1,344,591
   Property, Plant and Equipment
    Land                                               1,421,641     1,337,641
    Buildings                                         10,539,670     9,396,838
    Machinery and equipment                           49,240,167    45,019,335
                                                      61,201,478    55,753,814
    Less accumulated depreciation                     46,883,456    45,533,604
                                                      14,318,022    10,220,210
   Other Assets
    Marketable securities                              4,987,103    13,608,993
    Prepaid pension asset                              7,698,201     7,709,808
    Deferred income taxes                                      -       227,317
    Property held for sale                             1,128,851     1,200,837
    Goodwill                                           3,416,156             -
    Other                                                 53,044        31,063
                                                      17,283,355    22,778,018

   Total Assets                                      $81,884,738   $74,529,853



                 * - Derived from audited financial statements 

                (See Notes to Consolidated Financial Statements)


                       PART 1 - FINANCIAL INFORMATION               Form 10-Q
                       ITEM 1 - FINANCIAL STATEMENTS                Page 3
                                  FANSTEEL INC.
                      CONSOLIDATED BALANCE SHEET   (Cont'd.)


                                                     September 30,  December 31,
                                                         1996           1995    
                                                      (Unaudited)        *

   LIABILITIES AND SHAREHOLDERS' EQUITY
   Current Liabilities
    Accounts payable                                 $10,437,829   $ 9,162,757
    Accrued liabilities                                9,279,244     8,391,200
    Accrued income taxes                                 676,010       694,247
    Current maturities of long-term debt                 339,831        77,207
         Total current liabilities                    20,732,914    18,325,411
   Long-term Debt                                      1,639,173       297,906
   Other Liabilities
    Discontinued operations                            3,500,000     3,500,000
    Deferred income taxes                              1,733,337     1,374,911

    Obligations under capital leases                           -         8,638
         Total other liabilities                       5,233,337     4,883,549
   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 8,598,858 shares          21,497,145    21,497,145
    Unrealized gain on marketable securities                   -        16,398
    Retained earnings                                 32,782,169    29,509,444
         Total shareholders' equity                   54,279,314    51,022,987

   Total Liabilities and Shareholders' Equity        $81,884,738   $74,529,853


                 * - Derived from audited financial statements 

                (See Notes to Consolidated Financial Statements)

                               FANSTEEL INC.                   Form 10-Q
                     CONSOLIDATED STATEMENT OF INCOME          Page 4
                                   (UNAUDITED)


                                                     For the Three Months Ended
                                                     September 30, September 30,
                                                         1996          1995    

   Net sales                                         $ 30,807,845  $ 25,631,292

   Costs and expenses
    Cost of products sold                              25,464,472    21,303,269
    Selling, general and administrative                 3,628,099     3,216,393

                                                       29,092,571    24,519,662


   Operating income                                     1,715,274     1,111,630

   Other income (expense)
    Interest income on investments                        201,375       305,558
    Interest other, net                                   (12,261)       (3,476)
    Other                                                 (37,416)      (47,035)

                                                          151,698       255,047


   Income before income taxes                           1,866,972     1,366,677


   Income tax provision                                   753,000       531,000


   Net income                                        $  1,113,972  $    835,677


   Weighted average number of common
    shares outstanding                                  8,598,858     8,598,858


   Net income per share
    (on average shares outstanding)                         $0.13         $0.10



   Dividends per common share                               $   -         $0.10







                (See Notes to Consolidated Financial Statements)


                               FANSTEEL INC.                   Form 10-Q
                     CONSOLIDATED STATEMENT OF INCOME          Page 5
                                   (UNAUDITED)


                                                      For the Nine Months Ended
                                                     September 30, September 30,
                                                         1996          1995    

   Net sales                                         $ 90,384,753  $ 77,012,461

   Costs and expenses
    Cost of products sold                              74,792,678    63,503,656
    Selling, general and administrative                10,747,264     9,974,705

                                                       85,539,942    73,478,361


   Operating income                                     4,844,811     3,534,100

   Other income (expense)
    Interest income on investments                        697,009       920,376
    Interest other, net                                   (14,282)       (6,247)
    Other                                                 (84,813)     (102,304)

                                                          597,914       811,825


   Income before income taxes                           5,442,725     4,345,925


   Income tax provision                                 2,170,000     1,714,000


   Net income                                        $  3,272,725  $  2,631,925


   Weighted average number of common
    shares outstanding                                  8,598,858     8,598,858


   Net income per share
    (on average shares outstanding)                         $0.38         $0.31



   Dividends per common share                               $   -         $0.30






                (See Notes to Consolidated Financial Statements)


                              FANSTEEL INC.                      Form 10-Q

                 CONSOLIDATED STATEMENT OF CASH FLOWS            Page 6 
                                   (UNAUDITED)


   FOR THE NINE MONTHS ENDED SEPTEMBER 30,                1996          1995    
                                                      Increase (decrease) in 
                                                     cash and cash equivalents

   Cash flows from operating activities:             
     Net income                                      $ 3,272,725   $ 2,631,925
     Adjustments to reconcile net income to net
     cash provided by (used in) operating
     activities:
       Depreciation and amortization                   1,390,361     1,490,281
       Net pension charge                                 11,607        90,715
       Deferred income tax charge                        526,905       572,355
       (Gain) from disposal of property, plant
        and equipment                                          -          (250)
       (Gain) on sale of marketable securities            (2,899)            -

       Changes in assets and liabilities:
        (Increase) in marketable securities             (131,057)     (152,920)
        (Increase) in accounts receivable             (4,310,354)   (1,273,403)
        Decrease in income tax refunds receivable              -         2,288
        (Increase) in inventories                     (2,188,215)      (20,852)
        (Increase) in other assets - current            (356,879)      (55,572)
        Increase (decrease) in accounts payable
          and accruals                                   824,244      (551,091)
        (Decrease) increase in income taxes payable      (18,237)      543,748
        Decrease in other assets                         (22,000)            -

     Net cash (used in) provided by operating
       activities                                     (1,003,799)    3,277,224

   Cash flows from investing activities:             
     Acquisition of AST:
      Accounts receivable                               (820,490)            -
      Inventory                                         (345,363)            -
      Other assets - current                             (42,077)            -
      Property, plant and equipment                   (3,884,000)            -
      Goodwill                                        (3,454,540)            -
      Accounts payable and accrued liabilities           667,761             -
      Debt                                               954,094             -
     
        Total acquisition of AST                      (6,924,615)            -
     Additions to property, plant and equipment       (1,565,789)   (2,616,433)
     Proceeds from sale of property, plant
      and equipment                                            -           250
     Proceeds from sale of assets held for sale          597,255             -
     Design and engineering for processing plant        (696,939)            -
     Proceeds from disposition of marketable
       securities                                     14,753,135       500,000
     Investment in marketable securities              (9,100,000)     (500,000)

     Net cash (used in) investing activities          (2,936,953)   (2,616,183)


                              FANSTEEL INC.                      Form 10-Q
                 CONSOLIDATED STATEMENT OF CASH FLOWS (Cont'd.)  Page 7 
                                   (UNAUDITED)



   FOR THE NINE MONTHS ENDED SEPTEMBER 30,                1996          1995    
                                                       Increase (decrease) in 
                                                     cash and cash equivalents

   Cash flows from financing activities:             
     Proceeds from long-term debt                        758,396       295,310
     Payments of long-term debt                         (108,599)      (11,388)
     Principal payments for capital leases               (82,212)      (77,313)
     Dividends paid                                            -    (2,579,658)

     Net cash provided by (used in)
      financing activities                               567,585    (2,373,049)

   Net (decrease) in cash and cash equivalents        (3,373,167)   (1,712,008)

   Cash and cash equivalents at beginning of period    6,838,960     9,429,031

   Cash and cash equivalents at September 30         $ 3,465,793   $ 7,717,023


                (See Notes to Consolidated Financial Statements)

                                FANSTEEL INC.                    Form 10-Q
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        Page 8
                                   (UNAUDITED)


Consolidated Financial Statements


  The consolidated balance sheet at September 30, 1996, the consolidated
statements of income for the three months and nine months ended September 30,
1996 and 1995, and the consolidated statements of cash flows for the nine months
ended September 30, 1996 and 1995, 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.

  Effective, January 1, 1994, the Company adopted Financial Accounting Standards
Board (FASB) Statement No. 115, "Accounting for Certain Investments in Debt and
Equity Securities."  The Company has determined its securities to be "held-to-
maturity" securities.  Marketable securities with a maturity date within one
year are classified as current, and over one year maturity date  are classified
as non-current on the balance sheet.

  Securities classified as held-to-maturity at September 30, 1996 represent U.S.
Treasury Notes with maturity dates of January 31, 1997 and April 30, 1998. 
Amortized cost and fair value of these securities at September 30, 1996 are
$9,987,000 and $9,948,000, respectively.  There was a gross unrealized loss on
these securities of $39,000 at September 30, 1996.

  On July 31, 1996, AST Acquisition Corp., a wholly-owned subsidiary of the
Company, acquired all of the assets and certain liabilities of American Sintered
Technologies, Inc. (AST) for the cash price of $6,924,615.  In addition to the
cash paid, the Company assumed $954,094 of low-interest municipal loans.  AST, a
powdered metal components manufacturer, was included in the Company's Metal
Fabrications business segment.  

  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.


                                FANSTEEL INC.                    Form 10-Q
          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)     Page 9
                                   (UNAUDITED)

Business Segment Information

  The Company is engaged in the manufacture of specialty metal products, which
it classifies into two business segments:  Industrial Tools and Metal
Fabrications.  Net sales and operating income for the third quarter and nine
months ended September 30, 1996 and 1995 for each of the Company's business
segments are summarized below:

                                Third Quarter                Nine Months       
                             1996          1995          1996          1995   

   Net Sales:                                        

 Industrial Tools -

     Sales               $13,459,358   $12,418,238   $41,949,307   $37,730,520
     Intersegment sales            -             -          (239)          (35)
                          13,459,358    12,418,238    41,949,068    37,730,485

 Metal Fabrications -

     Sales                17,352,973    13,214,660    48,454,721    39,294,551
     Intersegment sales       (4,486)       (1,606)      (19,036)      (12,575)
                          17,348,487    13,213,054    48,435,685    39,281,976

                         $30,807,845   $25,631,292   $90,384,753   $77,012,461

   Operating Income:                                 

    Industrial Tools     $   794,420   $   725,377   $ 2,413,518   $ 2,368,077

    Metal Fabrications       935,290       389,954     2,472,778     1,181,922

    Corporate                (14,436)       (3,701)      (41,485)      (15,899)

                         $ 1,715,274   $ 1,111,630   $ 4,844,811   $ 3,534,100





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


  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 represent
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.  Results actually achieved thus may differ materially from expected
results included in these statements.


Quarter Ended September 30, 1996 Compared to Quarter Ended September 30, 1995

  Net sales for the third quarter of 1996 totaled $30,808,000, an increase of
$5,177,000 or 20.2% from third quarter, 1995 net sales of $25,631,000.

  Industrial Tools business segment net sales were $13,459,000 in the three
months ended September 30, 1996, compared to $12,418,000 for the similar period
of 1995, an increase of $1,041,000 or 8.4%.  Tungsten carbide cutting tools were
primarily responsible for this increase, most notably in tungsten carbide rod
sales.  Penetration into foreign markets, along with added market share in the

western United States, have had a positive impact on rod sales.  Sales of
tungsten carbide inserts, categorized within tungsten carbide cutting tools,
were down slightly in the current quarter.  Price competition has had a negative
effect on insert sales to the aircraft industry.  Other product lines within
this business segment, including mining tools and accessories, construction
tools, and wear parts, were essentially unchanged from the same quarter of last
year.  

  Metal Fabrications business segment net sales for the third quarter of 1996
were $17,349,000 compared to $13,213,000 for the third quarter of 1995, an
increase of $4,136,000 or 31.3%.  The acquisition on July 31, 1996 of American
Sintered Technologies (AST), a powdered metal components manufacturer, added
$1,536,000 of sales in the current quarter.  Forgings product line sales,
spurred by a resurgent aircraft industry, increased 21.8% compared to the same
quarter of last year.  Sales for new commercial programs included engine mounts
for the MD-90 and Boeing 727, and wing structural components for the Boeing 777.
Sales for new military programs included structural parts for the F-22.  Price
increases to offset higher material costs also increased revenues within the
forgings product line.  Sand mold castings increased 13.2% as a result of the
improved aircraft industry.  Sales and marketing efforts have been directed at
wider market penetration with a focus on commercial programs.  Contracting with
sales agents, instead of employing direct salesmen, has allowed for greater
coverage of markets.  Shipments of aircraft structural components for new
commercial programs were a tangible result of the marketing emphasis.  Sales of
patterns for sand mold castings were up substantially in the third quarter of
1996.  New programs received for aircraft structural components, helicopters,
and aircraft engines from existing and new customers positively impacted sales
of patterns in the current period, and are an encouraging sign for sales of
castings in future periods.  Wire forming sales increased in the current quarter
with steady performance of components for outdoor products and agricultural
products, and expansion into vending machine products.  Investment casting sales
were relatively unchanged from the third quarter of 1995.


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

  Cost of goods sold for the third quarter of 1996 was $25,464,000, an increase
of $4,161,000 over the third quarter of 1995.  Production volume increases, and
the acquisition of AST, were primarily responsible for the cost of sales dollar
increase.  However, cost of sales as a percent of net sales improved in the
current quarter, from 83.1% in the third quarter of 1995 to 82.7% in the third
quarter of 1996.  Cost of sales as a percent of net sales was affected by sale
price increases in certain product lines initiated to offset the impact of raw
material price increases.  Also, fixed costs relationship to profitability was
less pronounced.

  Selling, general and administrative expenses for the three months ended
September 30, 1996 totaled $3,628,000 compared to $3,216,000 for the same period
of 1995, an increase of $412,000.  Variable expenses, most notably commissions,
and the acquisition of AST, were primarily responsible for the dollar increase. 
Selling, general and administrative expenses as a percent of net sales declined
from 12.6% for the third quarter of 1995 to 11.8% for the third quarter of 1996.
Sales volume increases more than offset increased variable selling and
administrative expenses.
   
  Other income for the quarter ended September 30, 1996 was $152,000 compared to
$255,000 for the quarter ended September 30, 1995.  This decrease is
attributable to a decline in interest earned as there was less cash available
for investment.  The acquisition of AST was the significant factor in reduced
cash available for investment.  Interest earned on investments in the current
quarter was $201,000, a decrease of $105,000 from the third quarter of 1995.

  Net income for the quarter ended September 30, 1996 was $1,114,000, or $.13
per share, compared to $836,000, or $.10 per share, for the same quarter of last

year, an increase of $278,000 or $.03 per share.


Nine Months Ended September 30, 1996 Compared to the Nine Months Ended September
30, 1995

  Net sales for the nine months ended September 30, 1996 were $90,385,000
compared to $77,012,000 for the same period of 1995, an increase of $13,373,000
or 17.4%.

  Net sales for the Industrial Tools business segment for year-to-date September
30, 1996 were $41,949,000, an increase of $4,219,000 or 11.2% from year-to-date
September 30, 1995 net sales of $37,730,000.  Tungsten carbide cutting tool
sales increases constituted much of this improvement, due almost exclusively to
tungsten carbide rod.  Tungsten carbide rod shipments improved 33.3% in good
part to a concentrated effort to improve deliveries by expanding the number of
warehouses.  The addition of new customers, particularly foreign, also helped
tungsten carbide rod sales.  Tungsten carbide inserts were negatively affected
by keen price competition, mainly in the U.S. aircraft industry.  Tantung
cutting tools declined throughout 1996 as several European woodworking customers
are switching to diamond-tipped tools.  Mining tools product line net sales
decreased in the current year as the reduced demand for high sulfur coal, due to
costly environmental constraints, caused several mines to close.  Construction
tools product line increased 26.3% in the current year due to product
improvement and new marketing strategies including consignment of product to
customers.


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

  Metal Fabrications business segment net sales for the first nine months of
1996 were $48,436,000, an improvement of $9,154,000 or 23.3% over 1995 sales of
$39,282,000.  Powdered metal components, manufactured by recent acquisition AST,
added $1,536,000 in the current year.  Forgings product line net sales increased
$4 million due to a combination of price increases and new programs.  Sale price
increases were instituted in 1996 to offset raw material price increases.  New
programs have been attracted through aggressive pursuit of new business within
our core markets, including engine mounts for the MD-90 and Boeing 727
commercial aircraft, wing structural components for the Boeing 777 commercial
aircraft, and structural parts for the F-22 military aircraft.  Additional
forging sales within the year have also been realized with a greater utilization
of steel, aluminum and nickel-based raw materials, whereas product shipped last
year was concentrated more in the use of titanium.  Sand mold castings product
line increased 26.5% with the improved aircraft industry.  Marketing and sales
efforts, specifically adding sales agents to promote wider coverage of
territories, with an emphasis on commercial programs, had a positive effect. 
Patterns for sand mold castings showed a significant increase as several new
programs were secured.  These new programs include aircraft structural
components, helicopter parts, and aircraft engines.  Wire forming product line
net sales increased in the current year with growth in most markets served and
penetration into new applications.  Investment castings product line sales
declined 15.3% as price competition was keen and caused the loss of several
contracts in the firearms, automotive, aerospace and food equipment industries. 


  Order backlog at September 30, 1996 was $43,361,000 compared to $31,703,000 at
September 30, 1995, an increase of $11,658,000 or 36.8%.  Backlog in the
Industrial Tools business segment was $6,536,000 at September 30, 1996, an
increase of $876,000 or 15.5% from September 30, 1995 backlog of $5,660,000. 
Tungsten carbide cutting tools product lines, predominantly tungsten carbide
rod, were responsible for this increase.  Tungsten carbide rod has experienced
excellent growth over the past several years, enhanced by the expansion into
foreign markets during 1996.  Tungsten carbide inserts backlog, however,
decreased due to competitive market pressures.  Mining tools product line

backlog also decreased as the reduced demand for high sulfur coal, due to costly
environmental constraints, caused several coal mines to close.  Metal
Fabrications business segment backlog at September 30, 1996 was $36,825,000
compared to $26,043,000 on the same date of 1995, an increase of $10,782,000. 
Backlog of powdered metal components product line, added with the AST
acquisition in 1996, was $1,480,000 at the end of September, 1996.  Forgings
product line backlog was up $7,829,000, a 76.3% increase from last year.  Orders
for several new commercial and military programs have been received in the last
year.  Backlog in this product line has also been increased by customers placing
orders farther in advance due to long lead times for material deliveries. 
Backlog of orders for sand mold castings increased 15.4% from September of 1995.
New programs for commercial aircraft were primarily responsible for the
increase.  Wire forming backlog is up slightly in the current year with growth
in most industries served and expansion into components used in vending
machines. Investment castings product line backlog is down 4% from the prior
year as this product offering has fallen victim to unusually intense price
competition.  However, stronger orders within the current quarter narrowed the
year over year gap.


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

  Cost of goods sold for the nine months ended September 30, 1996 was
$74,793,000 compared to $63,504,000 for the same period of 1995, an increase of
$11,289,000 or 17.8%.  Cost of sales was affected by production volume
increases.  Cost of sales as a percent of net sales at 82.7% was essentially
unchanged from the prior year at 82.5%.

  Selling, general and administrative expenses were $10,747,000 for the first
nine months of 1996, an increase of $772,000 or 7.7% from the same period of
1995.  Variable selling expenses, especially commissions, while increasing in
dollar amount, were more than offset by increased sales volume.  Selling,
general and administrative expenses as a percent of net sales were 11.9% in the
current year compared to 13.0% for 1995.  

  Other income for the nine months ended September 30, 1996 was $598,000
compared to $812,000 for the same period of 1995, due primarily to a decrease in
investment income.  Income earned on investments in the current year was
$697,000.  The acquisition of AST resulted in less cash being available for
investment into overnight and marketable securities.

  Net income for the first nine months of 1996 was $3,273,000 or $.38 per share,
compared to $2,632,000 or $.31 per share for the same period of 1995, an
increase of $641,000 or $.07 per share.


Outlook

  Improvements in the Company's production processes, new product development,
and investment in capital equipment have increased opportunities for growth,
directed primarily at commercial markets.  The Company is seeking increased
share of current markets, as well as new markets, through investment in
operating facilities and new acquisitions, such as the recent AST acquisition. 
The Company has utilized funding assistance on favorable terms from states and
municipalities for expansion of production capabilities, and will continue to do
so wherever available.  Cost control programs are active in all operations
throughout the Company.

  The formerly defense-dependent operating units are continuing to place primary
focus on becoming diversified suppliers to both military and commercial markets.
Investment in equipment has been initiated and new production techniques
employed to facilitate this transition.  The Company is beginning to realize the
benefits from these efforts with increased sales and orders. 

Liquidity and Capital Resources

  Cash and cash equivalents amounted to $3,466,000 at September 30, 1996, a
decrease of $3,373,000 from December 31, 1995.  The net cash effect of the AST
acquisition was a usage totaling $6,925,000, much of which came from the
disposition of marketable securities which had been classified as long-term
assets.  Capital expenditures totaled $1,566,000, including building expansions
at the Gulfport, MS and Washington, IA operations to service increased business
volume, and a die sinking shop at the Los Angeles, CA operation to increase
production capabilities.  Cash flows from financing activities included $109,000
in debt payments and $758,000 in proceeds from long-term debt.


                  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS        Form 10-Q
                 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS      Page 14  
                                    (Cont'd.)

  It is expected that sufficient cash will be generated from operations to cover
normal operating requirements.  If the need arises, the Company has strong,
long-term relationships with several large banking institutions.

  Funding assistance by states and municipalities is investigated when any
significant expenditures are proposed.  Loans were received in 1995 from State
of Iowa Development Programs for production improvements at our sand mold
casting and wire forming operations.  In 1996, the State of Mississippi Business
Finance Corporation provided development loans for expansion of the Company's
tungsten carbide rod producing facility in Gulfport, MS.  As part of the AST
acquisition, the Company assumed $954,000 of development loans with interest
rates ranging from 2% to 5 1/2%.

  At September 30, 1996, the Company had $5,000,000 of current marketable
securities, and $4,987,000 of non-current marketable securities, classified as
held-to-maturity, invested in U.S. Treasury Notes.  These securities had a fair
market value of $9,948,000 at September 30, 1996.  The intent of the Company is
to hold these notes to maturity.

  At September 30, 1996, the Company had established reserves of $3,927,000 for
environmental clean-up costs for discontinued operations. The Company, in
association with outside consultants, has developed a decommissioning plan for
the site involved, and has submitted that plan and a related decommissioning
funding plan to the Nuclear Regulatory Commission ("NRC") as required by law. 
Prior to decommissioning, the Company proposes to construct and operate for
approximately eight to 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.  In conjunction with construction of the processing plant, the
Company would modify the wastewater treatment plant at the site and install a
drainage system.  Decommissioning would be comprised of construction of an
engineered on-site cell for containment of contaminated soils; consolidation and
stabilization of the contaminated soils in the containment cell; and the
performance of required plant surveys and characterizations after residue
processing ceases to determine whether additional contaminated soils exist which
may require remediation.

  The Company has applied for an amendment to its current NRC license and for a
revision to its current wastewater discharge permit to allow construction and
operation of the proposed processing plant, and believes that these regulatory
authorizations will be issued in the near future. Preliminary engineering,
design and feasibility studies have been completed for the proposed processing
plant, which would extract commercially valuable materials such as tantalum,
columbium, scandium and other rare earth and rare metal elements from the
feedstock residues.  The Company engaged a process design expert to confirm the
viability of the proposed plant.  The estimated cost of construction is
approximately $10 million.  The estimated value of materials to be extracted is
based on analysis of samples taken from the residues and a valuation of such
materials using current market prices discounted to reflect possible price

decreases, including those which could result from the increased quantities of
certain of these materials made available for sale.  The estimated costs of
residue processing were developed by Company personnel and independent
consultants using evaluations based on the pilot testing performed.  Residue
processing is expected to start approximately a year after licensing approval is
received.  The provisions for discontinued operations reflect management's
belief that the current value of the extracted materials will at least equal the
estimated cost of 

                  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS        Form 10-Q
                 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS      Page 15  
                                    (Cont'd.)

construction and costs of processing, including estimated costs for disposal of
waste generated by the process.  The annual recovery revenues are estimated to
be in a range of $2,000,000 to $3,000,000.  However, there can be no assurance
as to the level of demand for certain of the extracted materials or the actual
prices which may be obtained for them, which could vary over time.

  In October 1995, the NRC advised the Company that a decommissioning funding
plan cost estimate based on construction of an on-site containment cell for
contaminated soils at the site is appropriate to consider at this time.  The NRC
cautioned the Company, however, that an on-site containment cell may require
preparation of an Environmental Impact Statement and that, in addition to the
required NRC approval, local and other federal agencies may have to be satisfied
that the Company's plan is sound.  Such approval process can be expected to
extend over a number of years.  Management believes that a decommissioning plan
including on-site containment will ultimately be acceptable to the appropriate
regulatory authorities, based on current and proposed NRC regulations and a
provision of the Nuclear Waste Policy Act of 1982 requiring the Department of
Energy to take title to certain "special sites" which may include the Company's
site; however, there is no assurance that a plan providing for on-site
containment will ultimately be approved.  Implementation of a decommissioning
plan for the Company's site which includes off-site disposal may not be
financially feasible.

  The NRC's 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 NRC's
October 1995 letter requested the Company to submit a decommissioning funding
plan contemplating on-site containment and stated that the cost of residue
processing should be included in the Company's cost estimate.  In March 1996,
the Company submitted a revised decommissioning plan and related decommissioning
funding plan.  The level of assurance for decommissioning and construction is
estimated to be at least $15 million.  This estimate assumes that the Company
will not be required to assure the operating costs of residue processing.  In
May, 1996, the NRC notified the Company that the current financial assurance
letter of credit of $750,000 must be increased by $3,706,460 based upon the
revised decommissioning plan submitted.  This initial level of assurance may be
changed upon further review by the NRC.  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.

  In August 1996, the NRC released approximately 40 acres in the northwest
section of the Muskogee, OK site from the NRC license and that portion of the
site is available for unrestricted use.  The Muskogee site contains
approximately 135 acres.  The initial application by the Company for
unrestricted use of the northwest section was made in July 1993.

  Expenditures for environmental reclamation and decommissioning were $219,000
for the first nine months of 1996.  In addition, the Company expended $697,000

for design and engineering costs for the proposed processing plant.

                  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS        Form 10-Q
                 OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS      Page 16  
                                    (Cont'd.)


  Based upon continuing assessment of the proposed decommissioning plan, taking
into consideration the most current information, existing technology and
regulations in effect, management believes that the amounts reserved at
September 30, 1996 are adequate to cover the costs of environmental clean-up for
discontinued operations and that the Company has the ability to meet the NRC's
decommissioning funding assurance requirements.

  The remaining land and buildings of the Company's former PSM operation within
the Metal Fabrications business segment are carried as Other Assets - Property
held for sale.  The cost of preparing the property for sale, principally
environmental clean-up, will be capitalized.  Management believes that proceeds
from the sale of the property will be adequate to recover all costs, including
expenditures to prepare the property for sale.  The Company believes the
reserves established for other costs associated with the close-down of PSM are
adequate.

  The Company's Escast operation, located in Addison, IL, included in the Metal
Fabrications business segment, has been named as a responsible party for the
clean-up costs of certain hazardous wastes located on-site.  A cost sharing
agreement with the former owner of Escast is in place for clean-up expenditures.
The clean-up process has begun at the site under an Illinois Environmental
Protection Agency permit with total estimated cost of approximately $1.1
million.  The Company believes the established reserves are adequate to cover
its share of the clean-up.

  Environmental matters arising at other operating units are routinely reviewed
and handled through operations. The Company believes that the ultimate
disposition of any other pending environmental matters will not have a material
adverse effect upon the consolidated financial position of the Company.
 

 


                                                                       Form 10-Q
                                                                       Page 17  

                           PART II - OTHER INFORMATION

     Item 6.    Exhibits and Reports on Form 8-K

     b)   On August 14, 1996, the Company filed a Form 8-K pertaining
          to the acquisition by its wholly-owned subsidiary AST
          Acquisition Corp. on July 31, 1996 of all of the assets and
          certain liabilities of American Sintered Technologies, Inc.
          (AST).  

          Financial statements relating to the acquisition of AST were
          filed under cover of Form 8-K/A on October 11, 1996.
          Included in the Form 8-K/A filing were audited financial
          statements of AST at December 31, 1995 and for the year
          ended December 31, 1995; unaudited financial statements of
          AST at June 30, 1996 and for the six month periods ended
          June 30, 1996 and 1995; and unaudited pro forma financial
          information for the Company at June 30, 1996 and for the
          periods ended June 30, 1996 and December 31, 1995. 


                                                                       Form 10-Q

                                                                       Page 18  







                                   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 -     11/5/96                     /s/ William D. Jarosz                
                                          William D. Jarosz
                           Chairman, President and Chief Executive Officer









Date -     11/5/96                    /s/ R. Michael McEntee                
                                        R. Michael McEntee
                             Vice President and Chief Financial Officer