SECURITIES AND EXCHANGE COMMISSION
                         Washington, D.C.  20549

                                FORM 10-Q



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

     For the Quarterly period ended June 30, 1998.

[ ]  Transition Report Pursuant to Section 13 or 15(d) of the
     Securities Exchange Act 1934

     For the transition period from ___________to _____________.
     Commission file number 1-3439

                      STONE CONTAINER CORPORATION
       (Exact name of registrant as specified in its charter)

Delaware                                 36-2041256
(State or other jurisdiction of          (I.R.S. employer
 incorporation or organization)           identification no.)

150 North Michigan Avenue, Chicago, Illinois           60601
(Address of principal executive offices)            (Zip Code)

Registrant's telephone number:     312-346-6600

Indicate by check mark (X) 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 requirement for the past 90
days.
               Yes   X             No  ______
Number of common shares outstanding as of August 7, 1998:  104,977,686
<TABLE>
                    PART I.  FINANCIAL INFORMATION
                     ITEM 1.  FINANCIAL STATEMENTS
            STONE CONTAINER CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
<CAPTION>
                                                     June 30,   December 31,
(in millions)                                           1998*           1997
<S>                                                 <C>            <C>
Assets                                                                      
Current assets:                                                             
Cash and cash equivalents                         $     109.5    $     112.6
Accounts and notes receivable (less allowances          684.8          652.7
 of $28.2 and $27.8)
Inventories                                             734.0          716.0
Other                                                   137.8          114.4
     Total current assets                             1,666.1        1,595.7
Property, plant and equipment                         4,891.9        4,857.3
Accumulated depreciation and amortization           (2,577.7)      (2,479.8)
     Property, plant and equipment-net                2,314.2        2,377.5
Timberlands                                              47.6           49.6
Goodwill                                                451.0          444.0
Investment in non-consolidated affiliates               844.0          878.1
Other                                                   383.0          479.2
Total assets                                      $   5,705.9    $   5,824.1
Liabilities and stockholders' equity                                        
Current liabilities:                                                        
Accounts payable                                  $     323.5    $     327.9
Current maturities of long-term debt                    638.5          415.9
Income taxes                                             22.7           26.6
Accrued and other current liabilities                   326.0          318.6
     Total current liabilities                        1,310.7        1,089.0
Senior long-term debt                                 3,201.6        3,238.0
Subordinated debt                                       697.4          697.5
Non-recourse debt of consolidated affiliates              9.9             --
Other long-term liabilities                             339.1          306.7
Deferred taxes                                          129.5          216.0
Commitments and contingencies (Note 12)                                     
                                                                            
Stockholders' equity:                                                       
  Series E preferred stock                              115.0          115.0
  Common stock (99.9 and 99.3 shares                    974.0          966.3
   outstanding)
  Accumulated deficit                                 (705.2)        (479.5)
  Accumulated other comprehensive income              (365.9)        (324.6)
  Unamortized expense of restricted stock                (.2)           (.3)
   plan
     Total stockholders' equity                          17.7          276.9
Total liabilities and stockholders' equity        $   5,705.9    $   5,824.1

<FN>
*Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
</TABLE>

<TABLE>
            STONE CONTAINER CORPORATION AND SUBSIDIARIES
   CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<CAPTION>
                                Three months ended       Six months ended
                                     June 30,                June 30,
(in millions except per             1998        1997        1998        1997
share)
<S>                               <C>         <C>         <C>         <C>
Net sales                       $1,273.8    $1,200.2    $2,539.2    $2,381.1
Cost of products sold            1,039.3     1,016.7     2,086.5     2,003.6
Selling, general and               149.3       140.8       293.1       287.5
administrative expenses
Depreciation and                    68.1        81.0       135.9       159.6
amortization
Equity loss from affiliates         32.3        10.7        35.7        23.2
Other (income) expense-net          54.8       (6.9)        47.0       (3.8)
Loss before interest                                                        
expense, income taxes,            (70.0)      (42.1)      (59.0)      (89.0)
minority interest and
extraordinary charges
Interest expense                 (119.8)     (118.7)     (237.3)     (226.1)
Loss before income taxes,                                                   
minority interest and            (189.8)     (160.8)     (296.3)     (315.1)
Credit for income taxes             33.7        53.4        71.1       111.0
Minority interest                   (.1)          --        (.1)          --
Loss before extraordinary        (156.2)     (107.4)     (225.3)     (204.1)
Extraordinary charges from                                                  
early                                                                       
  extinguishment of debt            (.4)      (13.3)        (.4)      (13.3)
(net of
  income tax benefit)
Net loss                         (156.6)     (120.7)     (225.7)     (217.4)
Preferred stock dividends          (2.0)       (2.0)       (4.0)       (4.0)
Net loss applicable to          $(158.6)    $(122.7)    $(229.7)    $(221.4)
                                                                            
Accumulated deficit,            $(548.6)    $(150.2)    $(479.5)    $ (51.5)
Net loss                         (156.6)     (120.7)     (225.7)     (217.4)
Cash dividends on common and                                                
preferred stock                       --          --          --       (2.0)
Accumulated deficit, end of     $(705.2)    $(270.9)    $(705.2)    $(270.9)
                                                                            
Per share of common stock:                                                  
Loss before extraordinary                                                   
charges                         $ (1.59)    $ (1.10)    $ (2.30)    $ (2.10)
  - Basic/Diluted
Extraordinary charges from                                                  
early                                 --       (.13)          --       (.13)
  extinguishment of debt
Net loss -Basic/Diluted         $ (1.59)    $ (1.23)    $ (2.30)    $ (2.23)
                                                                            
Cash dividends                  $     --    $     --    $     --    $     --
Common shares outstanding                                                   
(weighted Average, in                                                       
millions)                           99.8        99.3        99.7        99.3
<FN>
Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
           STONE CONTAINER CORPORATION AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF CASH FLOWS

<CAPTION>
                                  Three months ended      Six months ended
                                       June 30,               June 30,
(in millions except per share)        1998       1997       1998         1997
<S>                                 <C>        <C>        <C>         <C>
Cash flows from operating                                                    
activities:
Net loss                          $(156.6)   $(120.7)   $(225.7)    $(217.4)
Adjustments to reconcile net                                                 
loss to net cash used in
operating activities:
   Depreciation and                   68.1       81.0      135.9        159.6
amortization
   Deferred taxes                   (39.8)     (58.4)     (83.0)      (120.8)
   Foreign currency transaction       10.0       (.9)        8.5          3.6
losses
   (gains)
   Equity loss from affiliates        32.3       10.7       35.7         23.2
   Write-off investments in           53.5         --       53.5           --
SVCPI
   Extraordinary charges from                                                
early                                   .4       13.3         .4         13.3
    Extinguishment of debt
   Other-net                          14.0       21.4       32.1         41.8
                                                                             
Changes in current assets and                                                
liabilities
  net of adjustments for an
acquisition
  and a disposition:
   (Increase) decrease in                                                    
accounts and                          16.6     (50.8)        2.3       (52.6)
     notes receivable-net
   (Increase) decrease in            (8.8)       73.2     (17.0)         31.5
inventories
   (Increase) decrease in other     (10.0)         .3     (15.7)           .2
current
     assets
   Increase (decrease) in                                                    
accounts                               3.3      (8.6)      (4.4)       (81.2)
    payable and other current
liabilities
Net cash used in operating          (17.0)     (39.5)     (77.4)      (198.8)
activities
                                                                             
Cash flows from financing                                                    
activities:
Payments made on debt               (58.7)    (420.6)     (65.0)      (431.1)
Payments by consolidated                                                     
affiliates on                           --      (9.7)         --       (12.9)
 non-recourse debt
Borrowings                           122.6      612.8      244.0        804.2
Proceeds from issuance of              2.4         --        2.4           --
common stock
Cash dividends                          --         --         --        (2.0)
Net cash provided by financing        66.3      182.5      181.4        358.2
activities
                                                                             
Cash flows from investing                                                    
activities:
Capital expenditures                (43.8)     (31.7)     (67.6)       (58.0)
Proceeds from sales of assets           .8         .5        1.4          3.1
Investments in and advances to      (12.9)      (4.6)     (48.3)        (8.9)
  affiliates, net
Other-net                              7.3     (21.8)        8.0       (27.1)
Net cash used in financing          (48.6)     (57.6)    (106.5)       (90.9)
                                                                             
Effect of exchange rate changes         .5      (1.1)       (.6)        (2.4)
on cash
Net increase (decrease) in cash                                              
and cash                               1.2       84.3      (3.1)         66.1
  equivalents
Cash and cash equivalents,           108.3       94.4      112.6        112.6
beginning of period
Cash and cash equivalents, end    $  109.5   $  178.7   $  109.5    $   178.7
of period
<FN>
See Note 11 regarding supplemental cash flow information.
Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
</TABLE?
             STONE CONTAINER CORPORATION AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   
NOTE 1:  Basis of Presentation

Pursuant  to  the rules and regulations of the Securities and  Exchange
Commission  ("SEC")  for Form 10-Q, the financial statements,  footnote
disclosures  and other information normally included in  the  financial
statements  prepared  in accordance with generally accepted  accounting
principles  have been condensed.  These financial statements,  footnote
disclosures  and  other information should be read in conjunction  with
the  financial  statements  and the notes  thereto  included  in  Stone
Container Corporation's (the "Company's") latest Annual Report on  Form
10-K, as amended by a Form 10-K/A.  In the opinion of the Company,  the
accompanying  unaudited consolidated financial statements  contain  all
normal  recurring adjustments necessary to fairly present the Company's
financial  position as of June 30, 1998 and the results  of  operations
and  cash flows for the three and six month periods ended June 30, 1998
and 1997.

NOTE 2:  Reclassifications

Certain  prior  year  amounts have been restated to  conform  with  the
current year presentation in the Consolidated Balance Sheets and in the
Statements of Operations and Accumulated Deficit.

NOTE: 3:  Pending Merger

On  May  10,  1998, the Company agreed to merge (the "Merger")  with  a
subsidiary  of Jefferson Smurfit Corporation ("JSC"), a U.S. integrated
manufacturer of paperboard, paper and packaging products.  The terms of
the  Merger  are  set  forth in an Agreement and Plan  of  Merger  (the
"Merger  Agreement"),  dated  as  of  May  10,  1998,  among  JSC,  JSC
Acquisition  Corporation, a Delaware corporation  and  a  wholly  owned
subsidiary of JSC, and the Company.  In the Merger, each share  of  the
Company's common stock will be converted into 0.99 of a share of  JSC's
common  stock, par value $0.01 per share (the "JSC Common Stock"),  and
JSC will be renamed Smurfit-Stone Container Corporation.  The Merger is
intended  to  constitute a tax-free reorganization under  the  Internal
Revenue  Code  of  1986, as amended, and will be  accounted  for  as  a
purchase.

     Consummation of the Merger, which is expected to close in the fall
of  1998,  is subject to various conditions, including (i)  receipt  of
approval  by  the  stockholders of each  of  the  Company  and  JSC  of
appropriate  matters relating to the Merger Agreement and  the  Merger;
(ii) registration of the shares of JSC Common Stock to be issued in the
Merger  under  the  Securities  Act of  1933,  as  amended;  and  (iii)
satisfaction of certain other conditions including regulatory  matters.
The  Company received the requisite regulatory approvals of the Federal
Trade  Commission, the European Commission and the Canadian Competition
Bureau in July.

      The foregoing summary of the Merger Agreement is qualified in its
entirety  by reference to the text of the Merger Agreement, a  copy  of
which is filed as Exhibit 2.1 to the Company's Current Report on Form 8-
K dated May 12, 1998 and which is incorporated herein by reference.

      The combined company is expected to have approximately $7 billion
of  debt  outstanding after the Merger (without giving  affect  to  any
divestitures prior to or upon the Merger or thereafter).  In connection
with  the  Merger,  the  Company  is  considering  various  refinancing
alternatives  which  would be intended to reduce interest  expense  and
address  the  expected liquidity requirements of the  combined  company
following the Merger.  Effectuation of the Merger is not conditioned on
consummation of any such refinancing.  There are material uncertainties
relating  to  the  consummation of any of the refinancing  alternatives
under  consideration and, as a result, the particular capital structure
that  would  result from any such alternative is subject to significant
variables.   In  addition, no assurance can be given that  any  of  the
refinancing   alternatives  and  planned  divestitures  will   generate
sufficient  funds to meet all of the combined company's needs  or  that
refinancing  or divestitures can be implemented on terms acceptable  to
the  combined  company.  Even if a refinancing and all of  the  planned
divestitures are implemented, the combined company will continue  to  a
have highly leveraged capital structure.

NOTE 4:  Subsequent Event

On July 24, 1998 MacMillan Bloedel Inc. ("MacBlo") informed the Company
that  it was exercising its compulsory buy-sell option to purchase  the
50  percent  partnership  interest owned by the  Company  in  MacMillan
Bathurst  Inc., a Canadian corrugated box company in which MacBlo  owns
the other 50 percent.  The purchase price offer was $185 million (Cdn).
On  or  before August 23, 1998, the Company will either be required  to
accept such offer or purchase MacBlo's interest in the partnership  for
the  same  price.   The closing of the transaction is  required  to  be
completed by September 4, 1998.  The Company has not yet determined its
course of action on this offer.

NOTE 5:  Write-off Investments in Non-Consolidated Affiliate

On  July 23, 1998 Stone Venepal (Celgar) Pulp, Inc. ("SVCPI"),  a  non-
consolidated  Canadian affiliate of the Company, filed  for  bankruptcy
protection.  The  Company  and its partners, after  evaluating  SVCPI's
losses  and cash flow under current market conditions, decided  to  end
their relationship with SVCPI.  As a result, the Company recorded a one-
time write-off of $54 million in the 1998 second quarter related to its
interest  in SVCPI.  The lenders to SVCPI and any other SVCPI creditors
do not have recourse against the Company.

      The  following pro forma financial information assumes  that  the
Company  ended its affiliation with SVCPI as of the beginning  of  each
period  presented.  The pro forma information does not  purport  to  be
indicative  of the future combined results of operations, or  of  those
which  would  have resulted had the identified event  occurred  at  the
beginning of each period presented.


                          Three months ended        Six months ended
                               June 30,                 June 30,
(in  millions  except        1998         1997         1998         1997
per share)
Net sales                 1,273.8      1,153.2      2,539.2      2,318.8
Net loss before                                                         
extraordinary charges        89.1         96.5        146.2        185.6
Net loss                     89.5        109.8        146.6        198.9
Net loss per share                                                      
before extraordinary          .92          .99         1.51         1.91
charges                       .92          .99         1.51         1.91
             - basic
             -
diluted
Net loss per share -          .92         1.12         1.51         2.04
basic                         .92         1.12         1.51         2.04

- diluted

NOTE 6:  Adoption of New Accounting Standards

Comprehensive Income
Effective  January 1, 1998, the Company adopted Statement of  Financial
Accounting  Standards No. 130, "Reporting Comprehensive Income"  ("SFAS
130")  which  establishes  standards  for  reporting  and  display   of
comprehensive  income  and its components in the financial  statements.
Comprehensive  income  represents the change  in  stockholders'  equity
during  a  period  resulting from transactions  and  other  events  and
circumstances  from  non-owner sources.  It  includes  all  changes  in
equity  during  a  period except those resulting  from  investments  by
owners and distributions to owners.  The Company has restated its prior
period financial statements for comparative purposes as required.   The
adoption  of  SFAS  130  had  no impact on the  Company's  consolidated
results of operations, financial position or cash flows.


                          Three months ended        Six months ended
                               June 30,                 June 30,
(in millions)                1998         1997         1998         1997
Net loss                $ (156.6)    $ (120.7)    $ (225.7)    $ (217.4)
Other comprehensive                                                     
income,
 net of tax:
  Foreign currency         (44.5)       (12.0)       (41.3)       (54.7)
translation
Comprehensive income    $ (201.1)    $ (132.7)    $ (267.0)    $ (272.1)


                       Accumulated through           Accumulated through
                          June 30, 1998                 June 30, 1997
                   Beginn    Current   Ending    Beginn    Current   Ending
                     ing     Period   Balance      ing     Period    Balance
                  Balance    Change              Balance    Change
Minimum pension                                                             
liability          $(31.3)   $    --   $(31.3)   $(42.7)   $  --   $(42.7)
Foreign currency                                                            
translation        (293.3)    (41.3)   (334.6)   (178.8)    (54.7)  (233.5)
  adjustment           
Accumulated                                                                 
other              $(324.6)  $(41.3)   $(365.9)  $(221.5) $ (54.7)  $(276.2)
  comprehensive      
income


Pensions and Other Postretirement Benefits

In February 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," which is effective for fiscal years
beginning after December 15, 1997, and requires restatement of prior
year periods presented.  The Statement does not change the measurement
or recognition of pension and other postretirement plans.  It
standardizes the disclosure requirements, requires additional
information on changes in benefit obligations and fair values of plan
assets, and eliminates certain disclosures.  The Company will adopt the
new disclosure rules in its year-end 1998 financial statements.

Start-up Costs
On April 3, 1998 Statement of Position 98-5 "Reporting on the Costs of
Start-Up Activities" ("SOP 98-5") was issued which requires that the
costs of start-up activities be expensed as incurred.  SOP 98-5 is
effective for financial statements for fiscal years beginning after
December 15, 1998.  The Company will adopt SOP 98-5 effective January
1, 1999 by recognizing a charge of approximately $8 million, net of
tax, as a cumulative effect of an accounting change.

Derivative Instruments

In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for
all fiscal quarters of fiscal years beginning after June 15, 1999.
This Statement requires that all derivatives be recorded in the balance
sheet as either assets or liabilities and be measured at fair value.
The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation.  The
Company is in the process of evaluating this standard and does
not anticipate that it will have a material effect on the Company's
financial statements.

NOTE 7:  Reconciliation of Basic and Diluted EPS


                       Three months ended             Six months ended
                      1998             1997          1998          1997
                 Income          Income          Income        Income       
In millions,     (Loss)   Shares  (Loss)  Shares (Loss) Shares (Loss) Shares
except per       
share data                         
Loss before     $(156.2)          $(107.4)        $(225.3)     $(204.1)   
extraordinary     
charges
Less:                               
Preferred        (2.0)            (2.0)           (4.0)         (4.0)  
dividends
Basic EPS                                                              
Income                                                                     
available to    (158.2)   99.8  (109.4)   99.3  (229.3)  99.7  (208.1) 99.3
common           
stockholders        
Effect of                                                              
Dilutive
Securities:
 Convertible Debt  (a)      (a)     (a)     (a)   (c)     (c)   (c)     (c)
  Exchangeable     (b)      (b)     (b)     (b)   (d)     (d)   (d)     (d)
Preferred
Stock
 Options and                (e)                           (e)              
warrants
                                                                       
Diluted EPS    $(158.2)    99.8  $(109.4)  99.3  $(229.3)  99.7 $(208.1) 99.3
Basic Earnings           $(1.59)         $(1.10)         $(2.30)      $(2.10)
Per Share                  
Amount                                                    
Diluted                 $(1.59)          $(1.10)         $(2.30)      $(2.10)
Earnings Per               
Share Amount                                             

__________________
(a)  Convertible debt effects of $1.3 million and 6.4 million shares
     are excluded from the diluted EPS computation because they are
     antidilutive.
(b)  Exchange preferred stock effects of $2.0 million and 3.4 million
     shares are excluded from the dilutive EPS computation because they are
     antidilutive.
(c)  Convertible debt effects of $2.5 million and 6.4 million shares
     are excluded from the diluted EPS computation because they are
     antidilutive.
(d)  Exchangeable preferred stock effects of $4.0 million and 3.4
     million shares are excluded from the dilutive EPS computation because
     they are antidilutive.
(e)  Options and warrants effects of .9 million shares and .4 million
     shares for the three and six months ended June 30, 1998, respectively,
     are excluded from the dilutive EPS computation because they are
     antidilutive.

NOTE 8:  Inventories

Inventories are summarized as follows:

                                  June 30,        December
                                                       31,
(in millions)                         1998            1997
Raw materials and supplies      $    251.3      $    263.5
Paperstock                           354.9           342.1
Work in process                       20.6            21.5
Finished products                    126.8           108.5
                                     753.6           735.6
Excess of current cost over                        
LIFO                                (19.6)          (19.6)
   Inventory value
Total inventories               $    734.0      $    716.0

NOTE 9:  Summarized Financial Information of Non-Consolidated
Affiliates

Combined summarized financial information for the Company's non-
consolidated affiliates that are accounted for under the equity method
of accounting is presented below:

                          Three months ended      Six months ended June
                               June 30,                    30,
(in millions)                1998         1997         1998         1997
Results of                                                              
operations:
  Net sales             $ 1,061.8   $    954.6   $  2,112.2   $  1,633.8
  Cost of products          815.4        659.2      1,640.9      1,213.6
sold                                                    
  Loss before income                                                    
taxes,                                                                  
    minority interest     (107.2)       (24.6)       (57.1)       (55.3)
and                             
     extraordinary
charges
  Net loss                 (84.2)       (20.1)       (57.5)       (45.6)

NOTE 10:  Debt

Current maturities of long-term debt at June 30, 1998 and December 31,
1997 consisted of the following:

                                  June 30,        December
                                                       31,
(in millions)                         1998            1997
11 7/8% Senior Notes due                                  
  December 1, 1998                $  239.5      $    239.7
Revolving Credit Facility                                 
 Due May 15, 1999                    216.0              --
12 5/8% Senior Notes due                                  
  July 15, 1998                      150.0           150.0
Other                                 33.0            26.2
Total current maturities of                               
 long-term debt                   $  638.5      $    415.9

     On April 3, 1998, Stone Container GMBH, a German subsidiary of the
Company, entered into a loan facility agreement with Dresdner Bank AG
for 90 million Deutsche Marks at an interest rate equal to LIBOR plus 2
percent.  The loan facility expires April 30, 2005.  The proceeds from
the facility were loaned to the Company and were applied against
amounts outstanding on the Company's term loans under its credit
agreement.

     On June 16, 1998, the Company issued a notice to redeem all of its
outstanding 8-7/8 percent Convertible Senior Subordinated Notes due
2000 (the "Notes") on July 15, 1998 at a redemption price equal to 101
percent of the principal amount of each Note, plus accrued interest.
The $58.4 million of Notes were convertible into shares of common stock
at a conversion price of $11.55 per share.  All of the Notes were
converted in July (prior to the redemption date), resulting in the
issuance of 5,060,516 shares of common stock.

     On July 15, 1998, the Company repaid its 12-5/8 percent Senior
Notes at maturity with borrowings under its revolving credit facility.

     See also the "Outlook" section of the MD&A for a discussion of the
Company's liquidity and financial condition.

NOTE 11:  Additional Cash Flow Statement Information

The Company's non-cash investing and financing activities and cash
payments (receipts) for interest and income taxes were as follows:

                          Three months ended        Six months ended
                               June 30,                 June 30,
(in millions)                1998         1997         1998         1997
Decrease in debt due                                                    
to deconsolidation of   $      --    $   538.0    $      --    $   538.0
affiliate (1)
Increase in debt due                                                    
to consolidation of          11.2        264.9         11.2        264.9
affiliate (2)
Capital lease                  --           .9           --           .9
obligation incurred
Issuance of common                                                      
 stock for                     .2           --           .2           --
 extinguishment of
 debt
                                                                        
Cash paid during the                                                    
periods for:
Interest (net of        $   114.8    $   112.5    $   218.5    $   210.9
capitalization)
Income taxes (net of          4.6          3.5         14.9        (1.6)
refunds)

__________
(1)  Decrease due to the sale of a portion of the Company's interest in
     SVCPI on June 26, 1997.  Such amount includes the $264.9 million of
     debt assumed from CITIC as discussed below.
(2)  Increase in 1997 due to the acquisition of CITIC's interest in the
Celgar Mill on April 4, 1997.

NOTE 12:  Commitments and Contingencies

On  April 6, 1998, a suit was filed against the Company in Los  Angeles
Superior Court by Chesterfield Investments and DP Investments L.P. (the
"Plaintiffs")  alleging that the Company owes them  approximately  $120
million  relating to the Company's purchase of the Plaintiffs' interest
in Stone Savannah River Pulp & Paper Corporation ("SSR").  In 1991, the
Company  purchased from Chesterfield Investment its  shares  of  common
stock  of  SSR  for approximately $6 million plus a contingent  payment
payable  in  March  1998 based upon the performance of  the  operations
which  were contained in SSR.  The Company is vigorously disputing  the
Plaintiffs' calculation of the contingent payment amount.

      In  May  1998, four putative class action complaints  were  filed
against the individual directors of the Company, the Company and JSC in
the  Court  of Chancery of the State of Delaware in and for New  Castle
County.  On June 15, 1998, the Court of Chancery signed an order  which
consolidated the four actions.  Now captioned as In re Stone  Container
Shareholders Litigation, C.A. 16375 (the "Action"), the Action alleges,
among  other  things,  that the directors of the Company  violated  the
fiduciary  duties of due care and loyalty that they owed to the  public
stockholders of the Company because, the Action contends, the directors
failed  to  undertake an appropriate evaluation of  the  Company's  net
worth as a merger/acquisition candidate, actively evaluate the proposed
transaction and engage in a meaningful auction with third parties in an
attempt  to obtain the best value for the Company's stockholders.   The
Action  further alleges that the Company's directors failed to make  an
informed decision and that the stockholders will not receive fair value
for  their  shares  of  common stock in the  Merger,  will  be  largely
divested  of  their right to share in the Company's future  growth  and
development  and  will be prevented from obtaining  fair  and  adequate
consideration  for their shares of common stock.  The  Action  requests
that the Court of Chancery, among other things, declare that the Action
is  a  proper class action and enjoin the Merger and require  that  the
directors  place  the Company up for auction and/or conduct  a  market-
check to ascertain the Company's value.

      On  August  11,  1998, the parties to the Action entered  into  a
memorandum  of  understanding setting forth the  terms  of  a  proposed
settlement  of  the Action, subject to certain conditions.   While  the
Company,  the  members  of the Company's board  of  directors  and  JSC
continue  to  deny  the allegations of the Action  or  that  they  have
breached  any duty or engaged in any wrongdoing in connection with  the
Merger,   the  defendants  have  agreed  to  enter  into  the  proposed
settlement  to  eliminate  the  burden,  expense  and  uncertainty   of
litigation.   In  connection  with the  proposed  settlement,  (a)  the
Company  and  JSC  agreed  to  provide  plaintiffs'  counsel  with   an
opportunity to review and comment upon the disclosure to be provided to
the  Company's  stockholders  in  the  joint  proxy  statement  seeking
stockholder approval of the Merger, (b) the Company agreed to obtain an
updated  opinion  as  to the fairness of the Merger  to  the  Company's
stockholders  from a financial point of view, and (c) the  Company  and
JSC  agreed,  subject  to  approval  by  their  respective  boards   of
directors, to amend the Merger Agreement to reduce the termination  fee
payable  to the Company or JSC, respectively, upon termination  of  the
Merger in certain circumstances, from $60 million to $50 million.   The
defendants  in  the Action agreed not to oppose an application  to  the
Court  of Chancery by plaintiffs' counsel for fees and expenses not  to
exceed  $650,000,  which would be paid by the  Company.   The  proposed
settlement set forth in the memorandum of understanding is subject to a
number  of  conditions,  including discovery  by  plaintiffs'  counsel,
approval  of  the  proposed settlement by the  Court  of  Chancery  and
consummation of the Merger.  If the proposed settlement is approved  by
the Court of Chancery and the other conditions are satisfied, the Court
will certify a non-opt out class of the Company's stockholders for  the
period from May 10, 1998 through the effective time of the Merger,  the
Action  will be dismissed with prejudice and the Company, the Company's
board  of  directors,  JSC  and their respective  officers,  directors,
employees and agents will receive a release for all claims that were or
could have been asserted in the Action.

Three class action complaints, General Refractories Company v. Stone
Container Corporation, Crest Meat Co, Inc. v. Stone Container
Corporation, and Albert I. Halper Corrugated Box Co., Inc. v. Stone
Container Corporation, have been filed in the United States District
Court for the Northern District of Illinois.  The suits allege that the
Company reached agreements in restraint of trade with other producers
of corrugated sheets in violation of Section 1 of the Sherman Antitrust
Act,15 U.S.C.Section 1.The Company is the only named defendant, though the
suits allege that other unnamed firms participated in the purported
restraints of trade, and specifically allege, on information and
belief, that Jefferson Smurfit Corporation also participated.  The
suits seek an unspecified amount of damages arising out of the sale of
corrugated sheets for the period October 1, 1993 through March 31,
1995.  Under the provisions of the antitrust laws, any award of actual
damages would be trebled.   The Company moved to dismiss the General
Refractories and Crest Meat Co. complaints on August 7, and intends to
move to dismiss the Halper complaint as well.  Discovery has not yet
commenced, and a trial date has not been set.  The Company believes it
has meritorious defenses to these actions, and intends to vigorously
defend itself.

      Believing the allegations to be without merit and without admitting 
liability, on  June 4, 1998 the Company entered into a consent decree (the
"Consent Agreement") with the Federal Trade Commission (the "FTC").  In
pertinent part, the Consent Agreement requires the Company to cease and
desist  from  "requesting, suggesting, urging or  advocating  that  any
manufacturer or seller of linerboard raise, fix, or stablize prices  or
price levels..." and from "entering into, or attempting to enter into...
any agreement...to fix, raise, establish, maintain or  stablize  prices  
or price levels...".

      There are no monetary fines, sanctions or damages imposed by  the
FTC  in  connection with the Consent Agreement.  However,  the  Company
will  be  required to file certain reports on an annual basis with  the
FTC to evidence its compliance with the Consent Agreement.


             STONE CONTAINER CORPORATION AND SUBSIDIARIES
      ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                  CONDITION AND RESULTS OF OPERATIONS
                                   
                                   

Results of Operations

Provided below is certain financial data for the three and six months
ended June 30, 1998 and 1997.

                          Three months ended      Six months ended June
                               June 30,                    30,
                             1998         1997         1998         1997
Net sales               $ 1,273.8    $ 1,200.2    $ 2,539.2    $ 2,381.1
Depreciation and             68.1         81.0        135.9        159.6
amortization
Interest expense            119.8        118.7        237.3        226.1
Equity loss from             32.3         10.7         35.7         23.2
affiliates
Loss before income                                                      
taxes,                                                                  
  minority interest       (189.8)      (160.8)      (296.3)      (315.1)
and                             
  extraordinary
charge
Net loss                  (156.6)      (120.7)      (225.7)      (217.4)

The Company incurred a net loss of $156.6 million for the 1998 second
quarter, or $1.59 per share of common stock, as compared with a net
loss for the 1997 second quarter of $120.7 million, or $1.23 per share
of common stock.  For the six months ended June 30, 1998, the Company
incurred a net loss of $225.7 million, or $2.30 per share of common
stock, as compared with a net loss of $217.4 million, or $2.23 per
share of common stock, for the first half of 1997.  The net loss for
the second quarter and first half of 1998 includes a one-time write-off
of the Company's interest in Stone Venepal (Celgar) Pulp, Inc.
("SVCPI") of $53.5 million.  See Note 5 to the Consolidated Financial
Statements.  The Company's share of SVCPI's net losses were $13.6
million and $25.6 million for the three and six months ended June 30,
1998.  The net loss for the second quarter and the first half of 1997
includes a non-cash extraordinary charge of $13.3 million, or $.13 per
common share, representing the Company's share of a loss from the early
extinguishment of debt incurred by Abitibi-Consolidated Inc. in
connection with the May 1997 merger of Stone-Consolidated Corporation
with Abitibi-Price Inc.

     Net sales for the three and six months ended June 30, 1998,
increased $74 million and $158 million, or 6.2% and 6.6%, respectively
over the same periods of 1997.  The increase resulted primarily from
improved selling prices for corrugated containers and containerboard
and increased corrugated container sales volumes, which more than
offset the effect of lower average market pulp selling prices and sales
volume.  Sales for the second quarter and first half of 1997 included
$47 million and $62 million of sales generated by SVCPI, which had
become a non-consolidated affiliate effective June 26, 1997.  On a pro
forma basis excluding SVCPI  in 1997, sales for the second quarter and
first half of 1998 increased 10.5% and 9.5%, respectively, over the
prior year periods. Additionally, the strengthening of the U.S. dollar
relative to the German Mark and Canadian dollar had a negative affect
on sales.  If the U.S. dollar exchange rates remained unchanged from
those of the 1997 periods, net sales for the three and six months ended
June 30, 1998 would have been higher by approximately $8 million and
$21 million, respectively.

     Cost of products sold decreased as a percent of net sales to 81.6%
and 82.2% for the second quarter and first half of 1998, respectively,
from 84.7% and 84.1% in the prior year periods.  These improvements
were mainly due to increased selling prices for most of the Company's
products over prior year levels.  Selling, general and administrative
expenses remained fairly constant as a percent of net sales during the
periods reported. Depreciation and amortization decreased 15.9% and
14.8% from the prior year second quarter and first half, respectively,
due in part to the deconsolidation of SVCPI and due to the full
depreciation of certain assets in the prior year.  The Company's share
of losses from equity affiliates increased $21.6 million and $12.5
million in the second quarter and first half, respectively, largely as
a result of approximately $21 million and $13 million of foreign
exchange transaction losses recorded by certain non-consolidated
affiliates in the current year periods.  Additionally, the Company's
1998 earnings were negatively affected by $10.0 million and $8.5
million of foreign exchange transaction losses included in Other
(income) expense for the second quarter and first half of 1998 as
compared to $.9 million of exchange gains and $3.6 million of exchange
losses recognized in the second quarter and first half of 1997,
respectively.  Interest expense was $1.1 million and $11.2 million
higher in the second quarter and first half of 1998, primarily due to
increased average borrowings.

                          Product Line Sales Data
                                                      Percentage Change
                        Three       Six months       Three      Six months
                       months          ended        months         ended
                        ended                        ended
(in millions)        1998   1997    1998   1997   Sales  Sales  Sales Sales      es
                                                  Reve    Vol   Reve    Vol
                                                  nue     ume   nue     ume
Corrugated               
containers            $677   $600   $1,337 $1,203 12.8%   6.3%  11.1%   6.6%
Paperboard and         302    257    613    542   17.5   (2.8)  13.1    (2.4)
kraft paper                                              
Industrial paper       116    117    236    231  (0.9)   (1.0)   2.2    1.8
bags and sacks                                       
Market pulp             81    150    155    238  (46.0)  (23.4) (34.9)  (6.4)
Other                   98     76    198    167   28.9     nm   18.6     nm
Total Net Sales      1,274   1,200  2,539  2,381   6.2           6.6       
Sales of SVCPI                                                             
(deconsolidated         --    (47)     --    (62)
June                           
  1997)
Proforma sales      $1,274  $1,153 $2,539  $2,319  10.5%        9.5%             
excluding SVCPI         
                                    
nm=not meaningful

     Net sales of corrugated containers increased 12.8% over the second
quarter of 1997 as a result of improved domestic selling prices and a
6.3% increase in sales volume.  Shipments of corrugated containers,
including the Company's proportionate share of the shipments by its
foreign affiliates, were 15.0 billion square feet for the second
quarter of 1998 compared with 14.0 billion square feet for the
comparable prior year period.  For the first six months of 1998
corrugated container sales increased 11.1% over the prior year period
as a result of improved selling prices and a 6.6% increase in sales
volume.  Shipments of corrugated containers were 29.2 billion square
feet for the six months of 1998 versus 27.2 billion in 1997.

     Net sales of paperboard and kraft paper increased 17.5% over the
second quarter of 1997 due to improved paperboard selling prices, which
more than offset a 2.8% decrease in sales volume.  Production of
containerboard and kraft paper was 1.36 million tons for the three
months ended June 30, 1998, compared to 1.21 million tons for the prior
year period.  Sales of paperboard and kraft paper increased 13.1% over
the first half of 1997, despite a 2.4% reduction in sales volume, as a
result of significant price improvements from 1997 levels.  Production
of containerboard and kraft paper was 2.72 million tons for the six
months ended June 30, 1998, compared to 2.59 million tons for the prior
year period.

     Sales of industrial bags and sacks were relatively flat in the
second quarter when compared to the prior year.  For the six months
ended June 30, 1998, industrial bag sales increased 2.2% over the prior
year period, primarily due to a 1.8% increase in sales volume.
Slightly higher average selling prices also contributed to the improved
sales.  Shipments of paper bags and sacks, including the Company's
proportionate share of retail bag shipments of S&G Packaging Company,
L.L.C. ("S&G"), were 126 thousand tons and 247 thousand tons for the
three and six months ended June 30, 1998, compared with 130 thousand
tons and 248 thousand tons shipped during the comparable 1997 periods.

     Sales of market pulp decreased $69 million, or 46.0%, from the
second quarter of 1997 partly due to the deconsolidation of SVCPI.
Excluding the $47 million of sales generated by SVCPI in the second
quarter of 1997, market pulp sales decreased 21.4% from the prior year
second quarter due to a 17.0% decrease in sales volume and lower
average selling prices.  Sales of market pulp for the first half of
1998 decreased $83 million, or 34.9%, from the first half of 1997.
Excluding $62 million of SVCPI's sales during the first half of 1997,
market pulp sales decreased 11.9% from the first half of 1997 due to a
6.1% decline in sales volume and lower average selling prices.

Foreign Currency Risk

A portion of the Company's operations are located outside of the United
States.  Because of this, movements in exchange rates can have an
impact on the Company's financial condition and results of operations.
The Company's significant foreign exchange exposures are the Canadian
dollar and the German Mark.  In general, a weakening of the German Mark
and Canadian dollar relative to the U.S. dollar has a negative
translation effect on the Company's financial condition and results of
operations.  Conversely, a strengthening of these currencies relative
to the U.S. dollar would have the opposite effect.

     During the first six months of 1998, the average exchange rates
for the Canadian dollar and the German Mark strengthened (weakened)
against the U.S. dollar as follows:

                           Six                 
                         months       Three months ended
                          ended
                           6-30-        6-30-        3-31-
                            98           98           98
Canadian dollar            (3.9)%       (1.2)%       (3.3)%
German mark                (4.2)%         1.4%       (4.9)%

Financial Condition and Liquidity

The Company's working capital ratio was 1.3 to 1 at June 30, 1998 and
1.5 to 1 at December 31, 1997.  The Company's long-term debt to total
capitalization ratio was 96.3 percent at June 30, 1998 and 88.8 percent
at December 31, 1997.  Capitalization, for purposes of this ratio,
includes long-term debt, deferred income taxes, minority interest and
stockholders' equity.

     The Company's primary capital requirements consist of debt service
and capital expenditures, including capital investment for compliance
with certain environmental legislation requirements and ongoing
maintenance expenditures and improvements.  The Company is highly
leveraged, and while highly leveraged, will incur substantial ongoing
interest expense.

     The Company's credit agreement contains covenants that include,
among other things, the maintenance of certain financial tests and
ratios.  On March 26, 1998, on June 5, 1998 and on July 31, 1998, the
Company and its lenders amended the Company's credit agreement to,
among other things, modify certain financial covenant requirements.  At
June 30, 1998, the Company's credit agreement, as amended, provided for
four senior secured term loans aggregating $1,001 million which mature
through October 1, 2003 and $560 million of senior secured revolving
credit facility commitments maturing May 15, 1999 (collectively, the
"Credit Agreement").

     At August 7, 1998, the Company had borrowing availability of
approximately $110 million (net of letters of credit which reduce the
amount available to be borrowed) under its revolving credit facilities.
The weighted average interest rates on outstanding term loan and
revolver borrowings under the Credit Agreement for the six months ended
June 30, 1998 were 9.0 percent and 8.6 percent, respectively.  The
weighted average rates do not include the effect of the amortization of
deferred debt issuance costs.

     The Company's various senior note indentures (the "Senior Notes
Indentures") (under which approximately $2.0 billion of debt is
outstanding) state that if the Company does not maintain a minimum
Subordinated Capital Base (as defined) of $1 billion for any two
successive quarters, then the Company will be required to semi-annually
offer to purchase 10 percent of such outstanding indebtedness at par
until the minimum Subordinated Capital Base is again attained.  In the
event that the Company's Credit Agreement does not permit the offer to
repurchase, then the Company will be required to increase the rates on
the senior notes outstanding under the Senior Note Indentures by 50
basis points per quarter up to a maximum of 200 basis points until the
minimum Subordinated Capital Base is attained.  The Company's
Subordinated Capital Base was $636.0 million at June 30, 1998, $840.0
million at March 31, 1998 and $898.6 million at December 31, 1997.  In
April 1998, the Company, as permitted by the March 1998 Credit
Agreement amendment, made a one-time offer for the repurchase of 10
percent of the senior notes issued under the Senior Note Indentures.
The offer expired on April 28, 1998 with approximately $1.3 million of
notes having been tendered and purchased at par.

     The Company's senior subordinated indenture dated March 15, 1992
(the "Senior Subordinated Indenture") (under which approximately $594
million of debt was outstanding at June 30, 1998) states that if the
Company does not maintain $500 million of Net Worth (as defined) for
any two successive quarters, the Company will be required to increase
the interest rate on each series of senior subordinated indebtedness
outstanding under the Senior Subordinated Indenture by 50 basis points
on each succeeding interest payment date up to a maximum amount of 200
basis points until the required Net Worth is attained.  The Company's
Net Worth (as defined) was $115.8 million at June 30, 1998, $319.8
million at March 31, 1998 and $378.4 million at December 31, 1997.
Effective August 15,1998 the Company will be required to increase the
interest rate on its 11 percent Senior Subordinated Debentures due
August 15, 1999 by 50 basis points.   The Company will also be required
to increase the interest rate  on its 10.75 percent Senior
Subordinated Debentures due April 1, 2002 and its Senior Subordinated
Units due April 1, 2002 effective October 1, 1998.

     There can be no assurance that the Company can achieve or maintain
the minimum Subordinated Capital Base or required Net Worth in the
future.

Operating activities:

Net cash used by operating activities was $77.4 million for the six
months ended June 30, 1998, compared with $198.8 million of cash used
by operating activities for the 1997 period.  The decrease in net cash
used by operating activities was primarily the result of improved
product pricing over 1997 levels.  The use of cash during the 1998
period primarily resulted from the first half net loss in conjunction
with cash outflows associated with working capital changes.

Financing activities:

During the first half of 1998 the Company increased its borrowings by
$196 million under its revolving credit facility, primarily to fund
operating cash needs, capital expenditures and debt service
obligations.

     On April 3, 1998, Stone Container GMBH, a German subsidiary of the
Company, entered into a loan facility agreement with Dresdner Bank AG
for 90 million Deutsche Marks at an interest rate equal to LIBOR plus 2
percent.  The loan facility expires April 30, 2005.  The proceeds from
the facility were loaned to the Company and were applied against
amounts outstanding on the Company's term loans under its Credit
Agreement.

     On June 16, 1998, the Company issued a notice to redeem all of its
outstanding 8-7/8 percent Convertible Senior Subordinated Notes due
2000 (the "Notes") on July 15, 1998 at a redemption price equal to 101
percent of the principal amount of each Note, plus accrued interest.
The $58.4 million of Notes were convertible into shares of common stock
at a conversion price of $11.55 per share.  All of the Notes were
converted in July (prior to the redemption date), resulting in the
issuance of 5,060,516 shares of common stock.

     On July 15, 1998, the Company repaid its 12-5/8 percent Senior
Notes at maturity, with borrowings under its revolving credit facility.

     The declaration of dividends by the Board of Directors is subject
to, among other things, certain restrictive provisions contained in the
Company's Credit Agreement, Senior Note Indentures and Senior
Subordinated Indenture.  Due to these restrictive provisions, the
Company cannot declare or pay dividends on its Series E Cumulative
Convertible Exchangeable Preferred Stock (the "Series E Cumulative
Preferred Stock") or common stock until the Company generates income or
issues capital stock to replenish the dividend pool under various of
its debt instruments and Net Worth (as defined) equals or exceeds $750
million.  Additionally, common stock cash dividends cannot be declared
and paid in the event accumulated preferred stock dividend arrearages
exist.  At June 30, 1998, the dividend pool under the Senior
Subordinated Indenture (which contains the most restrictive dividend
pool provision) had a deficit of approximately $522 million and Net
Worth (as defined) was $115.8 million.  In the event six quarterly
dividends remain unpaid on the Series E Cumulative Preferred Stock, the
holders of the Series E Cumulative Preferred Stock would have the right
to elect two members to the Company's Board of Directors until the
accumulated dividends on such Series E Cumulative Preferred Stock have
been declared and paid or set apart for payment.  At June 30, 1998 the
Company had accumulated dividend arrearages on the Series E Cumulative
Preferred Stock of $10 million, which represents five consecutive
quarters for which dividends have not been paid.  The Company did not
make its May 15, 1998 dividend payment and the Company will not make a
dividend payment on August 15, 1998.  Furthermore, absent an amendment
from its senior and senior subordinated note holders, is not likely to
make a dividend payment on November 15, 1998.  As a result of the
Company missing the August 15, 1998 payment, the Company will set forth
the procedures for the holders of Series E Cumulative Preferred Stock
to elect the two additional members to the Company's Board of
Directors.

Investing activities:

Capital expenditures for the six months ended June 30, 1998 totaled
approximately $68 million.

Outlook:

The Company's liquidity and financial flexibility has been adversely
impacted by the net losses and insufficient operating cash flows
generated during the past two years and in the first half of 1998.

     On October 27, 1997, the Company announced its intent to, among
other things, sell its ownership interest in Stone-Canada which at the
time of sale would have included its 25.2 percent ownership interest in
Abitibi-Consolidated, its 50 percent interest in MacMillian-Bathurst
and its wholly owned pulp mill located at Portage-du-Fort, Quebec.  The
Company still intends to sell its interest in the Abitibi-Consolidated
shares and possibly other Canadian assets which are not as yet
determined.  If completed, this transaction would provide a significant
amount of cash to the Company, which would be used to repay debt.
Additionally, the Company intends to sell or monetize certain other of
its assets (including any remaining pulp operations) with any proceeds
received therefrom to also be applied towards debt reduction.  On May
10, 1998, the Company agreed to merge (the "Merger") with a subsidiary
of Jefferson Smurfit Corporation ("JSC") pursuant to an agreement and
Plan of Merger (the "Merger Agreement") dated as of May 10, 1998 among
JSC, JSC Acquisition Corporation and the Company.  Due to the proposed
Merger, the Company is re-evaluating the previously announced
divestitures.  While the Company currently intends to sell or otherwise
divest certain non-core assets, the determination of non-core assets to
be divested and the timing of any such transactions will be dependent
on, among other things, the consummation and effective date of the
Merger, discussion with management of JSC, pending planning for
integration of divestiture and cost reduction plans for JSC and the
Company post-merger, potential refinancing plans related to the Merger
and market conditions.  While the Company currently believes that these
sales and/or monetizations may be consummated, subject, among other
things, to market conditions and market values for such assets;
however, no assurance can be given that such asset sales or
monetizations will be completed.  Currently, the Company' debt
agreements require that proceeds from asset sales be used only for debt
reduction.

     The Company's ability to incur additional indebtedness and
refinance its 1998 debt maturities is significantly limited under the
Company's debt agreements.  The Company has debt amortizations of $255
million of principal plus interest of approximately $230 million (at
debt and interest-rate levels as of June 30, 1998 excluding the 12-5/8
percent Senior Notes repaid July 15, 1998) due in the remainder of 1998
and has significant annual debt service requirements beyond 1998.  The
1998 debt amortizations include $240 million of 11-7/8 percent Senior
Notes due December 1, 1998.

     It is expected that the Company will continue to incur losses
unless prices for the Company's products substantially improve.
Without achieving significant price increases and sustaining such
levels in the future, the Company's cash resources and borrowing
availability under the existing revolving credit facilities will likely
be fully utilized, thereby reducing such sources of liquidity.  Pricing
for the Company's products has not improved significantly over the
depressed levels of 1997, and as a result the Company expects to report
a net loss for the third quarter of 1998.  The Company's primary
capital requirements consist of debt service and  capital expenditures,
including capital investment for compliance with certain environmental
legislation requirements and ongoing maintenance expenditures and
improvements.  The Company is highly leveraged and as a result incurs
substantial ongoing interest expense.  Besides the 1998 debt service
requirements previously mentioned, the Company, based upon indebtedness
outstanding at June 30, 1998, will be required to make debt principal
repayments of approximately $557 million in 1999, $472 million in 2000
and $615 million in 2001.  In the event that operating cash flows,
proceeds from any assets sales, borrowing availability under its
revolving credit facilities or from other financing sources do not
provide sufficient liquidity for the Company to meet its obligations,
including its debt service requirements, the Company will be required
to pursue other alternatives to repay indebtedness and improve
liquidity, including cost reductions, deferral of certain discretionary
capital expenditures and seeking amendments to its debt agreements.  No
assurances can be given that such measures, if required, could be
implemented or would generate the liquidity required by the Company to
operate its business and service its obligations.

     On May 10, 1998, the Company agreed to the Merger.  The terms of
the Merger are set forth in the Merger Agreement.  In the Merger, each
share of the Company's common stock will be converted into 0.99 of a
share of JSC's common stock, par value $0.01 per share (the "JSC Common
Stock"), and JSC will be renamed Smurfit-Stone Container Corporation.
The Merger is intended to constitute a tax-free reorganization under
the Internal Revenue Code of 1986, as amended, and will be accounted
for as a purchase.

     Consummation of the Merger, which is expected to close in the fall
of 1998, is subject to various conditions, including (i) receipt of
approval by the stockholders of each of the Company and JSC of
appropriate matters relating to the Merger Agreement and the Merger;
(ii) registration of the shares of JSC Common Stock to be issued in the
Merger under the Securities Act of 1933, as amended; and (iii)
satisfaction of certain other conditions including regulatory matters.
The Company received the requisite regulatory approvals of the Federal
Trade Commission, the European Commission and the Canadian Competition
Bureau in July.


     The foregoing summary of the Merger Agreement is qualified in its
entirety by reference to the text of the Merger Agreement, a copy of
which is filed as Exhibit 2.1 to the Company's Current Report on Form 8-
K dated May 12, 1998 and which is incorporated herein by reference.

      The combined company is expected to have approximately $7 billion
of  debt  outstanding after the Merger (without giving  affect  to  any
divestitures prior to or upon the Merger or thereafter).  In connection
with  the  Merger,  the  Company  is  considering  various  refinancing
alternatives  which  would be intended to reduce interest  expense  and
address  the  expected liquidity requirements of the  combined  company
following the Merger.  Effectuation of the Merger is not conditioned on
consummation of any such refinancing.  There are material uncertainties
relating  to  the  consummation of any of the refinancing  alternatives
under  consideration and, as a result, the particular capital structure
that  would  result from any such alternative is subject to significant
variables.   In  addition, no assurance can be given that  any  of  the
refinancing   alternatives  and  planned  divestitures  will   generate
sufficient  funds to meet all of the combined company's needs  or  that
refinancing  or divestitures can be implemented on terms acceptable  to
the  combined  company.  Even if a refinancing and all of  the  planned
divestitures  are  implemented, the combined company will  continue  to
have a highly leveraged capital structure.

     In May 1998, four putative class action complaints were filed
against the individual directors of the Company, the Company and JSC in
the Court of Chancery of the State of Delaware in and for New Castle
County.  On June 15, 1998, the Court of Chancery signed an order which
consolidated the four actions.  Now captioned as In re Stone Container
Shareholders Litigation, C.A. 16375 (the "Action"), the Action alleges,
among other things, that the directors of the Company violated the
fiduciary duties of due care and loyalty that they owed to the public
stockholders of the Company because, the Action contends, the directors
failed to undertake an appropriate evaluation of the Company's net
worth as a merger/acquisition candidate, actively evaluate the proposed
transaction and engage in a meaningful auction with third parties in an
attempt to obtain the best value for the Company's stockholders.  The
Action further alleges that the Company's directors failed to make an
informed decision and that the stockholders will not receive fair value
for their shares of common stock in the Merger, will be largely
divested of their right to share in the Company's future growth and
development and will be prevented from obtaining fair and adequate
consideration for their shares of common stock.  The Action requests
that the Court of Chancery, among other things, declare that the Action
is a proper class action and enjoin the Merger and require that the
directors place the Company up for auction and/or conduct a market-
check to ascertain the Company's value.

      On  August  11,  1998, the parties to the Action entered  into  a
memorandum  of  understanding setting forth the  terms  of  a  proposed
settlement  of  the Action, subject to certain conditions.   While  the
Company,  the  members  of the Company's board  of  directors  and  JSC
continue  to  deny  the allegations of the Action  or  that  they  have
breached  any duty or engaged in any wrongdoing in connection with  the
Merger,   the  defendants  have  agreed  to  enter  into  the  proposed
settlement  to  eliminate  the  burden,  expense  and  uncertainty   of
litigation.   In  connection  with the  proposed  settlement,  (a)  the
Company  and  JSC  agreed  to  provide  plaintiffs'  counsel  with   an
opportunity to review and comment upon the disclosure to be provided to
the  Company's  stockholders  in  the  joint  proxy  statement  seeking
stockholder approval of the Merger, (b) the Company agreed to obtain an
updated  opinion  as  to the fairness of the Merger  to  the  Company's
stockholders  from a financial point of view, and (c) the  Company  and
JSC  agreed,  subject  to  approval  by  their  respective  boards   of
directors, to amend the Merger Agreement to reduce the termination  fee
payable  to the Company or JSC, respectively, upon termination  of  the
Merger in certain circumstances, from $60 million to $50 million.   The
defendants  in  the Action agreed not to oppose an application  to  the
Court  of Chancery by plaintiffs' counsel for fees and expenses not  to
exceed  $650,000,  which would be paid by the  Company.   The  proposed
settlement set forth in the memorandum of understanding is subject to a
number  of  conditions,  including discovery  by  plaintiffs'  counsel,
approval  of  the  proposed settlement by the  Court  of  Chancery  and
consummation of the Merger.  If the proposed settlement is approved  by
the Court of Chancery and the other conditions are satisfied, the Court
will certify a non-opt out class of the Company's stockholders for  the
period from May 10, 1998 through the effective time of the Merger,  the
Action  will be dismissed with prejudice and the Company, the Company's
board  of  directors,  JSC  and their respective  officers,  directors,
employees and agents will receive a release for all claims that were or
could have been asserted in the Action.

                      PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings
     On April 20, 1994, Carolina Power & Light ("CP&L") commenced
     proceedings against the Company before The Federal Energy
     Regulatory Commission ("FERC") (the "Stone FERC Proceeding") and
     in the United States District Court for the Eastern District of
     North Carolina (the "Federal Court Action").  Both proceedings
     relate to the Company's electric cogeneration facility located at
     its Florence, South Carolina plant (the "Facility") and the
     Electric Power Purchase Agreement (the "Agreement") between the
     Company and CP&L.
          
     In the Stone FERC Proceeding, CP&L alleged that in August 1991
     when the Company elected to switch to a "buy-all/sell-all mode of
     operation" pursuant to the Agreement, the Facility lost its
     qualifying facility ("QF") certification under the Public Utility
     Regulatory Policy Act of 1978 thereby making it a public utility.
     In the Federal Court Action, CP&L had requested declaratory
     judgments that (i) sales of electric energy by the Company after
     August 1991 were subject to a reasonable rate determination by the
     FERC, and (ii) the Company's failure to maintain the Facility's QF
     status terminated the Agreement.  On September 20, 1994, the
     United States District Court (the "District Court") stayed the
     Federal Court Action pending the FERC's decision.
          
     On February 11, 1998, the FERC entered its order (the "FERC
     Order") denying CP&L's motion to revoke the Facility's QF status,
     and the Company may, therefore, continue to sell electric power to
     CP&L pursuant to the Agreement's buy-all/sell-all option.  The
     FERC Order was issued not only in the Stone FERC Proceeding, but
     also in two separate QF proceedings before the FERC (the "Other
     Proceedings").  While the Other Proceedings involve unrelated
     parties and different facts and circumstances, the FERC Order
     established a policy applicable to the Stone FERC Proceeding and
     the Other Proceedings.  Subsequent to the FERC Order, the District
     Court, at CP&L's request, dismissed the Federal Court Action with
     prejudice.  Certain parties in the Other Proceedings have applied
     to the FERC for rehearing of the FERC Order.  The FERC  may either
     grant or deny a rehearing and, if a rehearing is denied, the FERC
     Order would be final but also appealable to the appropriate U.S.
     Court of Appeals.  There can be no assurance that the FERC Order
     will not be revised or reversed upon any rehearing or appeal in
     connection with the Other Proceedings or what affect any such
     revision or reversal would have on the Stone FERC Proceeding.  The
     Company believes that in the Stone FERC Proceeding, where no party
     has requested rehearing, the FERC Order should be final,
     regardless of the outcome of the Other Proceedings. Moreover, the
     Company believes that the facts and policies at issue in Stone
     FERC Proceeding differ materially from those at issue in the Other
     Proceedings.
          
     On January 22, 1996, the United States of America filed a suit
     against the Company in the United States District Court for the
     District of Montana seeking injunctive relief and an unspecified
     amount in civil penalties based on the alleged failure of the
     Company to comply with certain provisions of the Clean Air Act
     ("CAA"), its implementing regulations, and the Montana State
     Implementation Plan at the Company's Missoula, Montana kraft pulp
     mill, (the "Missoula Mill").  The complaint specifically alleged
     that the Company exceeded the 20% opacity limitation for recovery
     boiler emissions; failed to properly set the span on a recovery
     boiler continuous emissions monitor; and violated limitations on
     venting of an air contaminant by improperly venting non-
     condensible gasses.  On May 19, 1998, the Company, the United
     States Department of Justice, the United States Environmental
     Protection Agency and other intervening parties entered into a
     consent decree settling this case.  In addition to, among other
     things, agreeing to certain emissions limitations and monitoring
     and reporting requirements, the Company paid a civil penalty of
     $312,500.
          
     In a related matter, on January 29, 1996 a Complaint was filed in
     the United States District Court for the District of Montana by
     the Montana Coalition for Health, Environmental and Economic
     Rights, Inc.; Cold Mountain, Cold Rivers, Inc. and Native Forest
     Network, Inc. (collectively "Plaintiffs") alleging numerous
     violations at the Missoula Mill of the provisions of the CAA, the
     Federal Water Pollution Control Act and the Emergency Planning and
     Community Right-to-Know Act.  The Complaint, as amended, sought
     declaratory and injunctive relief together with civil penalties of
     $25,000 per day for each day of alleged violation.  After
     extensive discussions with Plaintiffs, on May 19, 1998 the
     District Court entered a Consent Decree between the Company and
     Plaintiffs pursuant to which the Company has agreed to (i) the
     payment of a penalty of $50,000; (ii) the funding of $300,000 over
     five years for specified projects to be undertaken by the Missoula
     City-County Air Pollution Control Board, the Missoula Water
     Quality District Board and the Missoula County Local Emergency
     Planning Committee; (iii) the payment of specified habitat
     restoration and creation projects along the Clark Fork River
     ($100,000 over five years) and Clark Fork River Basin ($50,000
     over three years) (iv) the development and implementation of a
     Pollution Prevention Program at the Missoula Mill; and (v)
     undertake specified analyses with respect to alternative bleaching
     technologies, UCC rejects handling technologies and use of
     alternative fibers in the production process.  The Company has
     paid the $50,000 penalty and will pay the requisite portion of the
     projects funding as required.
          
     On April 6, 1998, a suit was filed against the Company in Los
     Angeles Superior Court by Chesterfield Investments and DP
     Investments L.P. alleging that the Company owes them approximately
     $120 million relating to the Company's purchase of the plaintiff's
     interest in Stone Savannah River Pulp & Paper Corporation ("SSR").
     In 1991, the Company purchased from Chesterfield Investments its
     shares of common stock of SSR for approximately $6 million plus a
     contingent payment payable in March 1998 based upon the
     performance of the operations which were contained in SSR.  The
     Company is vigorously disputing the plaintiff's calculation of the
     contingent payment amount.
     
     Believing the allegations to be without merit and without admitting
     liability, on June 4, 1998 the Company entered into a consent decree
     (the "Consent  Agreement")  with  the Federal Trade Commission (the
     "FTC").   In  pertinent part, the Consent Agreement  requires  the
     Company  to cease and desist from "requesting, suggesting,  urging
     or advocating that any manufacturer or seller of linerboard raise,
     fix, or stablize prices or price levels..." and from "entering into,
     or attempting to enter into...any  agreement...to   fix,   raise,
     establish, maintain or stablize prices or price levels...".
     
     There  are no monetary fines, sanctions or damages imposed by  the
     FTC  in  connection  with  the Consent  Agreement.   However,  the
     Company  will  be required to file certain reports  on  an  annual
     basis  with  the FTC to evidence its compliance with  the  Consent
     Agreement.

     In May 1998, four putative class action complaints were filed
     against the individual directors of the Company, the Company and
     JSC in the Court of Chancery of the State of Delaware in and for
     New Castle County.  On June 15, 1998, the Court of Chancery signed
     an order which consolidated the four actions.  Now captioned as In
     re Stone Container Shareholders Litigation, C.A. 16375 (the
     "Action"), the Action alleges, among other things, that the
     directors of the Company violated the fiduciary duties of due care
     and loyalty that they owed to the public stockholders of the
     Company because, the Action contends, the directors failed to
     undertake an appropriate evaluation of the Company's net worth as
     a merger/acquisition candidate, actively evaluate the proposed
     transaction and engage in meaningful auction with third parties in
     an attempt to obtain the best value for the Company's
     stockholders.  The Action further alleges that the Company's
     directors failed to make an informed decision and that
     stockholders will not receive fair value for their shares of
     common stock in the Merger, will be largely divested of their
     right to share in the Company's further growth and development and
     will be prevented from obtaining  fair and adequate consideration
     for their shares of common stock.  The Action requests that the
     Court of Chancery, among other things, declare that the Action is
     a proper class action and enjoin the Merger and require that the
     directors place the Company up for auction and/or conduct a market-
     check to ascertain the Company's value.
     
     On  August  11,  1998, the parties to the Action  entered  into  a
     memorandum of understanding setting forth the terms of a  proposed
     settlement  of  the Action, subject to certain conditions.   While
     the  Company, the members of the Company's board of directors  and
     JSC  continue to deny the allegations of the Action or  that  they
     have  breached any duty or engaged in any wrongdoing in connection
     with  the  Merger, the defendants have agreed to  enter  into  the
     proposed  settlement  to eliminate the burden,  expense  and
     uncertainty  of  litigation.   In  connection  with  the  proposed
     settlement,  (a) the Company and JSC agreed to provide plaintiffs'
     counsel  with  an  opportunity  to review  and  comment  upon  the
     disclosure  to  be provided to the Company's stockholders  in  the
     joint  proxy statement seeking stockholder approval of the Merger,
     (b)  the  Company agreed to obtain an updated opinion  as  to  the
     fairness  of  the  Merger  to the Company's  stockholders  from  a
     financial  point  of  view, and (c) the Company  and  JSC  agreed,
     subject  to  approval by their respective boards of directors,  to
     amend  the Merger Agreement to reduce the termination fee  payable
     to  the  Company  or  JSC, respectively, upon termination  of  the
     Merger  in certain circumstances, from $60 million to $50 million.
     The  defendants in the Action agreed not to oppose an  application
     to  the  Court  of Chancery by plaintiffs' counsel  for  fees  and
     expenses  not  to  exceed $650,000, which would  be  paid  by  the
     Company.   The proposed settlement set forth in the memorandum  of
     understanding  is  subject  to a number of  conditions,  including
     discovery  by  plaintiffs'  counsel,  approval  of  the   proposed
     settlement  by  the  Court  of Chancery and  consummation  of  the
     Merger.   If the proposed settlement is approved by the  Court  of
     Chancery  and the other conditions are satisfied, the  Court  will
     certify a non-opt out class of the Company's shareholders for  the
     period from May 10, 1998 through the effective time of the Merger,
     the  Action will be dismissed with prejudice and the Company,  the
     Company's  board of directors, JSC and their respective  officers,
     directors,  employees and agents will receive a  release  for  all
     claims that were or could have been asserted in the Action.

     Three class action complaints, General Refractories Company v.
     Stone Container Corporation, Crest Meat Co, Inc. v. Stone
     Container Corporation, and Albert I. Halper Corrugated Box Co.,
     Inc. v. Stone Container Corporation, have been filed in the United
     States District Court for the Northern District of Illinois.  The
     suits allege that the Company reached agreements in restraint of
     trade with other producers of corrugated sheets in violation of
     Section 1 of the Sherman Antitrust Act, 15 U.S.C.Section 1. The Company
     is the only named defendant, though the suits allege that other
     unnamed firms participated in the purported restraints of trade,
     and specifically allege, on information and belief, that Jefferson
     Smurfit Corporation also participated.  The suits seek an
     unspecified amount of damages arising out of the sale of
     corrugated sheets for the period October 1, 1993 through March 31,
     1995.  Under the provisions of the antitrust laws, any award of
     actual damages would be trebled.   The Company moved to dismiss
     the General Refractories and Crest Meat Co. complaints on August
     7, and intends to move to dismiss the Halper complaint as well.
     Discovery has not yet commenced, and a trial date has not been
     set.  The Company believes it has meritorious defenses to these
     actions, and intends to vigorously defend itself.

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

(a)  The Company held its Annual Meeting of Stockholders on May 12,
     1998.

(b)  The following matters were voted upon at the Annual Meeting of
     Stockholders:

     1.   The election of the nominees for Directors who will serve for a
          term to expire at the next succeeding Annual Meeting of Stockholders
          was voted on by the stockholders.  The nominees, all of whom were
          elected, are set forth below. The inspectors of election certified 
          the following vote tabulations:

                                       For    Witheld   Non-
                                                       Votes
       William F. Aldinger      88,771,106    620,692    0
       Dionisio Garza           88,774,173    617,625    0
       Richard A. Giesen        88,708,549    683,249    0
       James J. Glasser         88,713,756    678,042    0
       Jack M. Greenberg        88,771,129    620,669    0
       John D. Nichols          88,707,950    683,848    0
       Jerry K. Pearlman        88,663,973    727,825    0
       Richard J. Raskin        88,703,919    687,879    0
       Phillip B. Rooney        88,810,444    581,354    0
       Ira N. Stone             88,636,551    755,247    0
       James H. Stone           88,639,838    751,960    0
       Roger W. Stone           88,642,019    749,779    0

Item 6.   Exhibits and Reports on Form 8-K

(a)  Exhibits

     11.  Computation of Basic and Diluted Net Loss Per Common Share.

     27.  Financial Data Schedule for the six months ended June 30, 1998

(b)  Reports on Form 8-K

     1.   A Report on Form 8-K dated May 12, 1998 was filed under Item 2 -
          Acquisition or Disposition of Assets and Item 7 - Exhibits.
2.   A Report on Form 8-K dated May 13, 1998 was filed under Item 5 -
Other Events and Item 7 - Exhibits.




                              SIGNATURES
                                   


Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.




                                            STONE CONTAINER CORPORATION
                                                                       
                                                                       
                                                                       
                                              By:  THOMAS P. CUTILLETTA
                                    Thomas P. Cutilletta
                                    Senior Vice President,
                                     Administration and
                                     Corporation Controller (Principal
                                     Accounting Officer)





Date:  August 14, 1998









</TABLE>