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                June 30, 1997                 

( )  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 June 30, 1997)


                       PART 1 - FINANCIAL INFORMATION               Form 10-Q
                       ITEM 1 - FINANCIAL STATEMENTS                Page 2
                                  FANSTEEL INC.
                           CONSOLIDATED BALANCE SHEET  
                                                       June 30,     December 31,
                                                         1997           1996    
   ASSETS                                             (Unaudited)        *

   Current Assets                                    
    Cash and cash equivalents (including securities
     purchased under agreement to resell of
     $8,674,000 in 1997 and $1,900,000 in 1996)      $ 9,697,628   $ 3,588,290
    Marketable securities                                 42,825     5,173,804
    Accounts receivable - net                         20,023,561    18,700,927
    Inventories
     Raw material and supplies                         4,026,463     4,715,341
     Work-in-process                                  14,830,661    13,461,036
     Finished goods                                    6,892,847     6,423,995
                                                      25,749,971    24,600,372
     Less reserve to state certain 
      inventories at LIFO cost                         7,083,466     7,083,466
                                                      18,666,505    17,516,906
    Other assets - current
     Deferred income taxes                             1,623,921     1,681,398
     Other                                             1,557,548     1,370,062
         Total current assets                         51,611,988    48,031,387
   Net Assets of Discontinued Operations               2,749,276     2,532,431
   Property, Plant and Equipment
    Land                                               1,421,641     1,421,641
    Buildings                                         10,559,942    10,559,942
    Machinery and equipment                           50,080,776    49,561,052
                                                      62,062,359    61,542,635
    Less accumulated depreciation                     48,227,592    47,236,179
                                                      13,834,767    14,306,456
   Other Assets                                        
    Marketable securities                              4,993,205     4,989,159
    Prepaid pension asset                              7,626,602     7,697,238
    Deferred income taxes                                      -        30,277
    Property held for sale                             1,189,175     1,128,851
    Goodwill                                           3,243,428     3,358,580
    Other                                                 52,453        53,063
                                                      17,104,863    17,257,168

   Total Assets                                      $85,300,894   $82,127,442




                 * - 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   (Contd.)


                                                       June 30,     December 31,
                                                         1997          1996     
                                                      (Unaudited)        *

   LIABILITIES AND SHAREHOLDERS' EQUITY
   Current Liabilities
    Accounts payable                                 $ 8,775,736   $ 9,913,437
    Accrued liabilities                                9,678,951     8,650,505
    Accrued income taxes                                 669,256       590,093
    Current maturities of long-term debt                 336,329       335,522
         Total current liabilities                    19,460,272    19,489,557
   Long-term Debt                                      1,719,551     1,779,057
   Other Liabilities
    Discontinued operations                            3,500,000     3,500,000
    Deferred income taxes                              2,443,805     2,074,811

          Total other liabilities                      5,943,805     5,574,811
   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
    Retained earnings                                 36,680,121    33,786,872
         Total shareholders' equity                   58,177,266    55,284,017

   Total Liabilities and Shareholders' Equity        $85,300,894   $82,127,442


                 * - 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 
                                                    June 30,       June 30,
                                                      1997           1996    

     Net sales                                    $ 35,841,277   $ 30,637,797

     Costs and expenses
      Cost of products sold                         29,196,317     25,293,842
      Selling, general and administrative            4,218,835      3,622,364

                                                    33,415,152     28,916,206


     Operating income                                2,426,125      1,721,591

     Other income (expense)
      Interest income on investments                   171,546        242,175
      Interest expense                                 (22,283)        (1,000)
      Other                                                935        (39,305)

                                                       150,198        201,870


     Income before income taxes                      2,576,323      1,923,461


     Income tax provision                            1,018,000        765,000


     Net income                                   $  1,558,323   $  1,158,461


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


     Net income per share
      (on average shares outstanding)                    $0.18          $0.13



     Dividends per common share                          $   -          $   -




                (See Notes to Consolidated Financial Statements)


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


                                                  For the Six Months Ended  
                                                    June 30,       June 30,
                                                      1997           1996    

     Net sales                                    $ 69,555,519   $ 59,576,908

     Costs and expenses
      Cost of products sold                         56,883,651     49,328,206
      Selling, general and administrative            8,167,437      7,119,165

                                                    65,051,088     56,447,371


     Operating income                                4,504,431      3,129,537

     Other income (expense)
      Interest income on investments                   329,136        495,634
      Interest expense                                 (45,505)        (2,046)
      Other                                            (16,813)       (47,372)

                                                       266,818        446,216


     Income before income taxes                      4,771,249      3,575,753


     Income tax provision                            1,878,000      1,417,000


     Net income                                   $  2,893,249   $  2,158,753


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


     Net income per share
      (on average shares outstanding)                    $0.34          $0.25



     Dividends per common share                          $   -          $   -






                (See Notes to Consolidated Financial Statements)


                              FANSTEEL INC.                      Form 10-Q
                 CONSOLIDATED STATEMENT OF CASH FLOWS            Page 6 
                                  (UNAUDITED)  

FOR THE SIX MONTHS ENDED JUNE 30,
                                                          1997         1996     

                                                   Increase (decrease) in 
                                                  cash and cash equivalents
   Cash flows from operating activities:             
     Net income                                      $ 2,893,249   $ 2,158,753

     Adjustments to reconcile net income to net
     cash provided (used in) operating
     activities:
       Depreciation and amortization                   1,109,895       872,257
       Net pension charge                                 70,636         6,000
       Deferred income tax charge                        456,748       755,946

       
     Changes in assets and liabilities:
        Decrease (Increase) in marketable securities     126,933      (132,099)
        (Increase) in accounts receivable             (1,322,634)   (4,072,892)
        (Increase) in inventories                     (1,149,599)     (727,083)
        (Increase) in other assets - current            (187,486)     (517,335)
        (Decrease) Increase in accounts payable
          and accruals                                  (100,617)    1,722,248
        Increase (decrease) in income taxes payable       79,163      (389,483)
        (Increase) decrease in other assets              (59,714)       49,986

     Net cash provided by (used in) operating
       activities                                      1,916,574      (273,702)

   Cash flows from investing activities:
     Additions to property, plant and equipment         (523,054)     (898,003)
     Design and engineering for processing plant        (216,845)     (616,657)
     Proceeds from sale of marketable
       securities                                      5,000,000     9,100,000
     Investment in marketable securities                       -    (9,100,000)

     Net cash provided by (used in) investing      
          activities                                   4,260,101    (1,514,660)

   Cash flows from financing activities:
     Proceeds from long-term debt                        143,404             -
     Payments of long-term debt                         (202,103)      (45,828)
     Principal payments for capital leases                (8,638)      (54,386)
     Dividends paid                                            -             -

     Net cash (used in) financing activities             (67,337)     (100,214)

   Net increase (decrease) in cash and cash           
     equivalents                                      6,109,338     (1,888,576)

   Cash and cash equivalents at beginning of period    3,588,290     6,838,960

   Cash and cash equivalents at June 30              $ 9,697,628   $ 4,950,384

                (See Notes to Consolidated Financial Statements)

                                FANSTEEL INC.                    Form 10-Q
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        Page 7
                                   (UNAUDITED)


Consolidated Financial Statements

  The consolidated balance sheet at June 30, 1997, the consolidated statements
of income for the three months and six months ended June 30, 1997 and 1996, and
the consolidated statements of cash flows for the six months ended June 30, 1997

and 1996, 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 determines its securities to be "held-to-maturity" or "available-
for-sale" securities, depending upon the applicable security.  Marketable
securities with a maturity date of one year or less at time of purchase are
classified as current, and over one year maturity date at time of purchase are
classified as non-current on the balance sheet. 

  Securities classified as held-to-maturity at June 30, 1997 represent a U.S.
Treasury Note with a maturity date of April 30, 1998. Amortized cost and fair
value of this security at June 30, 1997 is $4,993,000 and $4,973,000,
respectively. 

 The Company increased its line of credit in the first quarter of 1997 by adding
a $17 million revolving credit agreement, which expires in January, 2000,  to
its existing lines of credit. The credit lines are currently being used for
letters of credit needed for funding assurance related to environmental issues
and insurance policies. Total unused lines of credit, including the revolving
credit agreement, were $13.2 million as of June 30, 1997.

  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.

  In February 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards No. 128, Earnings Per Share, and
No. 129, Disclosure of Information about Capital Structure. Statement 128, which
is applicable to public companies only, simplifies the calculation of earnings
per share (EPS) and makes it comparable to international EPS standards. 
Statement 129, which is applicable to all companies, consolidates the existing
guidance form several other pronouncements relating to an entity's capital
structure.  The Statements are effective for  financial statements for periods
ending after December 15, 1997, and are not expected to have an impact on the
Company's financial reporting.

  In June 1997, the FASB issued statements of Financial Accounting Standards No.
130, Reporting Comprehensive Income and No. 131, Disclosures about Segments of
an Enterprise and Related Information. Statement 130 establishes standards for
the reporting and display of comprehensive income and its components in a full
set of general purpose financial statements. Statement 131, which is applicable
to public companies only, changes the reporting requirements for segment
information in annual financial statements and also  
                                FANSTEEL INC.                    Form 10-Q
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        Page 8
                                   (UNAUDITED)




requires selected segment information in interim reports to shareholders. The
statements are effective for financial statements for periods beginning after
December 15, 1997.  The Company has not completed its analysis of the impact of
the statements. 


                                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 second quarter and six
months ended June 30, 1997 and 1996 for each of the Company's business segments
are summarized below:

                               Second Quarter                Six Months       
                             1997          1996          1997          1996   

   Net Sales:                                        

 Industrial Tools -

     Sales               $14,204,615   $14,429,118   $27,555,445   $28,489,949
     Intersegment sales            -             -             -          (239)
                          14,204,615    14,429,118    27,555,445    28,489,710

 Metal Fabrications -

     Sales                21,668,621    16,214,775    42,057,543    31,101,748
     Intersegment sales      (31,959)       (6,096)      (57,469)      (14,550)
                          21,636,662    16,208,679    42,000,074    31,087,198

                         $35,841,277   $30,637,797   $69,555,519   $59,576,908

   Operating Income:                                 

    Industrial Tools     $   989,400   $   841,294   $ 1,814,785   $ 1,619,098

    Metal Fabrications     1,453,184       892,262     2,717,115     1,537,488

    Corporate                (16,459)      (11,965)      (27,469)      (27,049)

                         $ 2,426,125   $ 1,721,591   $ 4,504,431   $ 3,129,537





                  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 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.


Quarter Ended June 30, 1997 Compared to Quarter Ended June 30, 1996

  Net sales for the second quarter of 1997 were $35,841,000, an increase of
$5,203,000 or 17.0% from same quarter last year net sales of $30,638,000.

  Industrial Tools business segment net sales for the second quarter of 1997
totaled $14,205,000 compared to $14,429,000 for the same period of 1996, a
decrease of $224,000 or 1.6%. Within the tungsten carbide cutting tools product
line, insert sales declined while rotary tool sales remained flat. Reduced
customer demand for standard products within the metalworking industry,
increased competition, and consolidation of some manufacturers negatively
impacted this product line. The wear part product line also decreased slightly
due to reduced demand and stiffer competition. Construction tools experienced a
decrease in sales as customer orders from foreign markets were not as strong as
last year.  These second quarter 1997 decreases were partially offset by
increased coal mining tool shipments. 

  Metal Fabrications business segment net sales for the second quarter of 1997
were $21,637,000, an increase of $5,428,000 or 33.5% from second quarter, 1996
net sales of $16,209,000. Powdered metal components, manufactured by American
Sintered Technologies, Inc. (AST), acquired on July 31, 1996, added $2,823,000
to the 1997 second quarter sales. Shipments of forgings were up 15.9% from the
prior year due to the continued strength of the commercial aircraft market. 
Growth of the forgings product line is expected for the near term as orders
booked remain strong.  Long-term prospects will depend on a steady build rate of
new aircraft and sales of spare parts for the planes now being built. Aluminum
and magnesium sand castings net sales increased 24.0% in the current quarter
compared to last year, due to the strength of the aircraft market. While
investment casting demand has been stable for engine components for the medium-
duty truck industry, revenues increased 21.3% because of greater demand from a
wider customer base in markets such as military ordnance and oil drilling.  Wire
formed product sales increased 16.9% from the same quarter last year as demand
was strong in the outdoor products market. This increase in wire formed products
sales was due not only to good economic conditions, but also to supplying a
wider variety of parts to current customers.

  Cost of sales for the quarter ended June 30, 1997 was $29,196,000, an increase
of $3,902,000 from the same quarter of 1996.  Cost of sales as a percent of net
sales, however, declined in the current quarter, from 82.6% in 1996 to 81.5% in
1997.  The cost of sales dollar increase is related to the higher sales volume.
Improvement in the cost of sales as a percentage of net sales is related to
lower material costs, primarily for tungsten carbide in the Industrial Tools
Segment. In addition, lower tooling and die costs as a percentage of sales were
attained in the Metal Fabrications segment as more parts moved from development
stage to the production cycle.

  Selling, general and administrative expenses for the current quarter were
$4,219,000, compared to $3,622,000 for the second quarter of 1996, an increase
of $597,000.  This increase was due mainly to variable expenses, such as
commissions, which increased with the larger sales volume.  Selling, general and
administrative expenses as a percent of net sales remained the same as second
quarter, 1996 at 11.8%.

  Other income for the second quarter of 1997 totaled $150,000, a decrease of
$52,000 from the same quarter of last year. Interest earned on investments in
the current quarter was $171,000 compared to $242,000 for the same period in
1996. The acquisition of AST resulted in less cash available for investment in
marketable securities in the current year.

  Net income for the quarter ended June 30, 1997 was $1,558,000 or $.18 per
share, compared to $1,159,000 or $.13 per share for the same period of 1996, an
increase of $399,000 or 34.4%. Net income as a percentage of net sales for the
second quarter of 1997 was 4.3% compared to 3.8% for the second quarter of 1996.


Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30, 1996

  Net sales for the first six months of 1997 were $69,556,000 compared to
$59,577,000 for the first six months of 1996, an increase of $9,979,000 or
16.7%.

  Net sales for the Industrial Tools business segment for year-to-date 1997 were
$27,555,000, a decrease of $935,000 or 3.3% from 1996 net sales of $28,490,000.
A number of factors have influenced the sales decrease in the tungsten carbide
cutting tools product line. Lower tungsten carbide material prices have reduced
the sales price per pound, specifically in the rotary tool market.  Competition
from foreign sources has increased. Some vertical integration has reduced the
customer base. Compared to the first half of last year, the wear parts product
line remained flat with decreased demand for die parts for the metalworking
industry offset by growth in the nozzles and drilling compacts sold to the oil
drilling industry.  Construction tools sales for road planing and trenching also
experienced a decrease as customer orders from foreign markets were not as
strong as last year. These decreases in the first half of 1997 were partially
offset by increased coal mining tool shipments. 

  Metal Fabrications business segment net sales for the first half of 1997 were
$42,000,000 compared to $31,087,000 for the first half of 1996, an increase of
$10,913,000 or 35.1%. Powdered metal components, produced by American Sintered
Technologies, Inc. (AST), added $5,279,000 to the first half of 1997.  Sales of
forgings were up 16.5% from the prior year due to the continued strength of the
commercial aircraft market and growth achieved by participation in new programs.
Strength of the forgings product line is expected for the near term due to
orders received to date.  Long-term prospects will depend on a steady build rate
of new aircraft and sales of spare parts for the planes now being built.
Aluminum and magnesium sand castings net sales increased 19.9% compared to last
year, due to the strength of the aircraft markets. Investment castings revenues
grew 23.7% with increases in the military ordnance and oil drilling markets
coupled with steady demand for engine components for the medium-duty truck
industry. Wire formed products reported its strongest ever first quarter sales
performance contributing to the strong sales for the first half of the year.
Demand was strong in most industries served, primarily in lawn and garden
equipment, home products, agricultural equipment, and vending machine parts.
This increase in wire formed products sales was due not only to good economic
conditions, but also to supplying a wider variety of parts to current customers.

  Cost of sales for the six months ended June 30, 1997 totaled $56,884,000, an
increase of $7,556,000 or 15.3% from the same period of 1996.  Cost of sales as
a percent of net sales for the first half of 1997 was 81.8% compared to 82.8%
for the like period of 1996. Raw material costs decreased in the Industrial
Tools segment. In addition, gross profit improved in the Metal Fabrication
segment due to the higher volume having a positive impact on labor and outside
processing costs per unit.

  Selling, general and administrative expenses were $8,167,000 for year-to-date
1997 compared to $7,119,000 for the same period of 1996, an increase of
$1,048,000 or 14.7%.  Variable selling expenses, including commissions, had the
major impact on the dollar increase in selling, general and administrative
expenses.  Selling, general and administrative expenses as a percent of net
sales for the first six months of 1997 were 11.7% compared to 12.0% for the
first half of 1996.  Increased sales volume, and the relationship to fixed
expenses, was the primary reason for the decrease in expenses as a percent of
net sales.

  Other income for 1997 of $267,000 decreased $179,000 from 1996 other income of
$446,000. Interest earned on investments totaled $329,000 for the first six
months of 1997, a decrease of $167,000 compared to the same period in 1996. The
1996 acquisition of AST resulted in less cash available for investment in
marketable securities.

  Net income for the six months ended June 30, 1997 was $2,893,000 or $.34 per
share.  Net income for the same period of 1996 was $2,159,000 or $.25 per share.
Net income as a percentage of net sales for the first half of 1997 was 4.2%
compared to 3.6% for the first half of 1996.

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

  Backlog of orders at June 30, 1997 totaled $52,069,000, an increase of
$13,346,000, or 34.5% from June 30, 1996, with most of the increase coming from
the aircraft market within the Metal Fabrications business segment.  Industrial
Tools business segment backlog at June 30, 1997 was $7,076,000, a decline of
5.9% from one year ago.  Tungsten carbide cutting tools backlog remained nearly
the same with slight improvement in rotary tools, which was offset by a decline
in the inserts. Wear parts product line backlog decreased due to reduced demand
from the metalworking industry as a whole. Construction tools backlog declined
due to a decrease of foreign orders in the first half of 1997 after experiencing
a significant increase in foreign orders in the first half of last year.  Metal
Fabrications business segment backlog at June 30, 1997 was $44,993,000, an
increase of $13,789,000 or 44.2% from the same date last year.  Backlog related
to the 1996 acquisition of AST, added $1,754,000.  The forgings backlog
increased $10,148,000, accounting for most of the Metal Fabrications segment
backlog increase. Orders from commercial aircraft manufacturers have increased
substantially in the first half of the year. Orders of patterns for sand
castings backlog has declined from the past year as more jobs in-house moved
from the development stage to the production stage, resulting in larger releases
for sand castings from the backlog. Wire forming backlog remains strong with
increased orders for outdoor products, agricultural equipment and parts for
vending machines.  Investment castings backlog continued to strengthen based on
heavy demand from the medium-duty truck, military ordnance, and oil drilling
industries.


Outlook

  Improvements in the Company's production processes, new product development,
and investment in capital equipment, directed primarily at commercial markets,
have increased opportunities for growth. The Company is seeking increased share
of current markets, as well as new markets, through investment in operating
units and acquisitions.  The Company has utilized, and is constantly seeking,
funding assistance on favorable terms from states and municipalities for
expansion of production capabilities.  Cost control programs remain active in
all operating plans 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.
Capital equipment investment has been emphasized and new production techniques
employed to facilitate this transition.  The Company is receiving benefits from
these efforts as increased sales and orders have materialized. 


Liquidity and Capital Resources

  Cash and cash equivalents amounted to $9,698,000 at June 30, 1997, an increase
of $6,109,000 from December 31, 1996. Investing activities provided $4,260,000
as a $5,000,000 marketable security matured and was reinvested in interest-
bearing cash equivalents.  Investments in capital equipment totaled $523,000, in
accordance with management's program to expand the operations of the Company.
Operations provided $1,917,000 with net income, depreciation and amortization
generating $2,893,000, $995,000 and $115,000 respectively. Accounts receivable
increased $1,323,000 and inventories increased $1,150,000 as working capital
needs were greater due to sales and production volume increases.  Days
outstanding and inventory turns have remained consistent with prior periods. 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.

 Cash, cash equivalents and marketable securities on hand have been sufficient
to date to meet the demands of increased working capital investments,
expenditures for machinery and equipment, environmental costs and other normal
operating requirements. However, in anticipation of Company programs to expand
current operations, possible future acquisitions, and reclamation and

decommissioning costs for the Muskogee, Oklahoma plant, the Company increased
its line of credit in the first quarter of 1997 by adding a $17 million
revolving credit agreement, which expires in January, 2000,  to its existing
lines of credit. The credit lines are currently being used for letters of credit
needed for funding assurance related to environmental issues and insurance
policies. Total unused lines of credit, including the revolving credit
agreement, were $13.2 million as of June 30, 1997.

  Funding assistance by states and municipalities is investigated when any
significant expenditures are proposed. In the first quarter of 1997, the final
reimbursements of $143,000 were received from the State of Mississippi Business
Finance Corporation for the development loans for expansion of one of the
Company's manufacturing facilities.  All debt carried on the balance sheet is
related to development loans obtained from various states.

  At June 30, 1997, the Company had $4,993,000 of non-current marketable
securities, classified as held-to-maturity, invested in a U.S. Treasury Note.
The non-current marketable securities had a fair value of $4,973,000 at June 30,
1997, and matures April 1, 1998. 

  The Company discontinued its Metal Products business segment in 1989. 
Environmental reclamation and decommissioning are required for the segment's
primary plant that processed certain ores which are 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.

  At June 30, 1997, the Company had reserves of $3.9 million 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 will construct and expects to operate for
approximately 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 intended to extract commercially
valuable materials such as tantalum, columbium, scandium, and other rare earth
and rare metal elements from the feedstock residues.  Construction of the plant
was approved by the Board of Directors in July 1997.  The estimated cost of
construction is $12 million. Construction is expected to be completed within a
year, at which time residue processing is expected to start.  In conjunction
with construction of the processing plant, the Company will modify the
wastewater treatment plant at the site and install a drainage system.  A
required amendment to the Company's NRC license and revision to its permit under
the National Pollution Discharge Elimination System (NPDES) through the State of
Oklahoma Discharge Elimination System (OKDES) were issued in March 1997.

  The reserve for discontinued operations reflects management's belief that the
revenues from the extracted materials will at least equal the ultimate cost of
construction and costs of processing, including estimated costs for disposal of
waste generated by the process.  There are a number of factors, however, that
could cause actual results to differ from management's current expectations.
Cost over-runs and/or start-up delays could occur in connection with plant
construction.  The estimated costs of residue processing were developed by
Company personnel and independent consultants using third party evaluations
based on the pilot testing performed.  Unforeseen production complications could
cause processing costs to increase from current estimates.  The annual recovery
revenues are estimated to be in a range of $7,000,000 to $8,000,000.  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.  However, there can be no assurance as to the level of
demand for the extracted materials or the actual prices which may be obtained
for them, which could vary over time.

  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. In
October, 1995 the NRC advised the Company that a decommissioning funding plan
cost estimate based upon on-site disposal of most of the radioactive wastes at
the site was appropriate to consider at that 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 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.  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 initial level of assurance
for decommissioning is $4,456,000 provided through letters of credit. The amount
does not include assurance for costs of construction or operation of the residue
processing facility. This initial level of assurance, however, 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.

  Expenditures for environmental reclamation and decommissioning at the Muskogee
site were $408,000 for the first six months of 1997.  In addition, the Company
expended $217,000 for design and engineering costs for the proposed processing
plant. Costs which are expected to be incurred within the next year are included
as plant shutdown costs in Accrued Liabilities. Costs expected to be incurred
after one year are reflected on the balance sheet in Discontinued Operations as
part of Other Liabilities.  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 June 30, 1997 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, as
long as on-site containment of radioactive wastes is ultimately acceptable to
the appropriate regulatory agencies.

  The Company is involved in environmental remediation activities at sites in
which it has been named a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act or similar state
"superfund" laws and at certain of its own plants, in addition to the Muskogee
facility.  Of the eleven additional known sites in which it is involved, the
Company's participation in at least five sites is de minimis, and at one other
site the Company is being vigorously defended by its insurance carriers.  Of the
five remaining sites, three are located at Company facilities, as to which the
extent of contamination and required remediation has not yet been determined.  

 The remaining land and buildings of the Company's former Precision Sheet Metal
(PSM) operation within the Metal Fabrications business segment are carried as
Other Assets - Property held for sale at a cost of $1,189,000 at June 30, 1997. 
The cost of preparing the property for sale, principally environmental clean-up,
will be capitalized. Conditional approval has been granted by the appropriate
agency for implementation of the environmental clean-up work plan.  The initial
stage of the work plan began in the second quarter of 1997.  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. A significant decline in real estate values in Los Angeles
and/or identification of additional contamination on-site could require the
reserves to be adjusted.

  The Company's Escast operation, located in Addison, Illinois and 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 any future
clean-up costs.  The clean-up process has begun at the site under an Illinois
Environmental Protection Agency permit with total estimated costs of
approximately $1.1 million. The Company believes the established reserves are
adequate to cover its share of the clean-up costs based on the extent of
contamination now known and the former owner meeting its obligation.

  The ultimate costs to the Company for the remediation of the sites in which
the Company is involved cannot be predicted with certainty due to the often
unknown magnitude of the pollution or the necessary cleanup, the varying costs
of alternative cleanup methods, the evolving nature of cleanup technologies and
government regulations, and the inability to determine the Company's share of
multi-party cleanups or the extent to which contribution will be available from
other parties.  The Company has established reserves for environmental
remediation costs for these sites in amounts which it believes are probable and
reasonably estimable.  Although the ultimate outcome of pending environmental
matters cannot be determined with certainty, management believes that any
resulting liability, after considering existing reserves, will not have a
material adverse effect on 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 1, 1997, the company filed a Form 8-K pertaining
          to the change in control as the result of the death of its
          principal stockholder, Thomas Mellon Evans, on 7/17/97.


                                                                       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 -     8/12/97                    /S/ William D. Jarosz                 
                                          William D. Jarosz
                           Chairman, President and Chief Executive Officer









Date -      8/12/97                 /S/ R. Michael McEntee                    
                                        R. Michael McEntee
                             Vice President and Chief Financial Officer