SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
 [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                                       OR
 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ to ________

                          COMMISSION FILE NUMBER 0-1339

                        OREGON METALLURGICAL CORPORATION
               --------------------------------------------------
             (Exact name of registrant as specified in its charter)

                           Oregon                        93-0448167
          ------------------------------         -------------------------
         (State or other jurisdiction of      (IRS Employer Identification No.)
         incorporation or organization)

         530 34th Ave. S.W., Albany, OR                     97321
         -------------------------------         -------------------------
         (Address of principal executive                  (Zip Code)
          offices)

Registrant's Telephone number, including area code:  (541) 967-9000
                                                     --------------

Securities registered pursuant to Section 12 (b) of the Act:
                                                        Name of each exchange
                  Title of each class                    which is registered
                  -------------------                   ---------------------
                          None                                   None
               --------------------------             -------------------------

Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, $1.00 Par Value
                  --------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes   X   No
                                       -----    -----

Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Based on the closing sales price of the Common Stock on March 17, 1997 as
reported on the Nasdaq National Market, the aggregate market value of the voting
stock held by nonaffiliates of the registrant was $327,977,161.

The number of shares outstanding of the registrant's common stock, $1.00 par
value was 16,196,403 at March 17, 1997.

                      DOCUMENTS INCORPORATED BY REFERENCE
                      -----------------------------------

Selected sections of the Oregon Metallurgical Corporation Annual Report to
Shareholders for 1996 are incorporated by reference in Parts II and IV of Form
10-K as stated herein.

Selected sections of the Oregon Metallurgical Corporation Proxy Statement for
the Annual Meeting of Shareholders to be held April 24, 1997, are incorporated
by reference in Part III of Form 10-K as stated herein.


<PAGE>




                                                 TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                   Page
                                                              -------------------------------------------------
                                                              Year 1996         Year 1996        March 14, 1997
Item                                                          Form 10-K       Annual Report        Proxy Stmt.
----                                                          ---------       -------------      --------------
                                                      PART I

<S>                                                                  <C>            <C>                <C>
  1.    Business..............................................       2                ---               ---
               The Company....................................       2                ---               ---
               Strategy and Outlook ..........................       2                ---               ---
               Industry Overview..............................       3                ---               ---
               Production Process.............................       4                ---               ---
               Products.......................................       5                ---               ---
               Electron Beam Furnace..........................       7                ---               ---
               Raw Materials..................................       8                ---               ---
               Markets........................................       9                ---               ---
               Marketing, Distribution and Service Centers....      10                ---               ---
               International and Export Sales.................      11                ---               ---
               Backlog........................................      11                ---               ---
               Competition....................................      12                ---               ---
               Employee Relations.............................      14                ---               ---
               Research, Technical and  Product Development...      14                ---               ---
               Joint Ventures.................................      14                ---               ---
               Regulatory and Environmental Matters...........      14                ---               ---
2.      Properties............................................      16                ---               ---
3.      Legal Proceedings.....................................      16                ---               ---
4.      Submission of Matters to a Vote of Security Holders...      16                ---               ---


                                                      PART II

5.      Market for the Registrant's Common Stock
             and Related Stockholder Matters..................      17                41                ---
6.      Selected Financial Data...............................      17                53                ---
7.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations..............      17               34-40              ---
8.      Financial Statements and Supplementary Data...........      17               17-32              ---
9.      Changes In and Disagreements With Accountants on
             Accounting and Financial Disclosure..............      17                ---               ---


                                                     PART III

10.     Directors and Executive Officers of the Registrant....      18                ---               4-5
11.     Executive Compensation................................      18                ---              6-15
12.     Security Ownership of Certain Beneficial Owners
             and Management...................................      18                ---               2-3
13.     Certain Relationships and Related Transactions........      18                ---               14


                                                      PART IV

14.     Exhibits, Financial Statement Schedules, and Reports
             on Form 8-K......................................      19                ---               ---

</TABLE>



<PAGE>


ITEM 1.   BUSINESS

       THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FIVE-YEAR
SUMMARY OF SELECTED FINANCIAL DATA AND THE CONSOLIDATED FINANCIAL STATEMENTS AND
NOTES THERETO OF THE COMPANY. THE FOLLOWING INFORMATION CONTAINS FORWARD-LOOKING
STATEMENTS WHICH INVOLVE CERTAIN RISKS AND UNCERTAINTIES. ACTUAL RESULTS AND
EVENTS MAY DIFFER SIGNIFICANTLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, DEPENDENCE ON AEROSPACE, UNCERTAINTY OF EMERGING GOLF MARKET, HIGHLY
COMPETITIVE MARKET, SUBSTANTIAL EXCESS PRODUCTION CAPACITY, PLANNED SIGNIFICANT
INVESTMENT IN ELECTRON BEAM FURNACE, DEPENDENCE ON ESSENTIAL MACHINERY AND
EQUIPMENT, DEPENDENCE ON RAW MATERIALS AND SERVICES, ENVIRONMENTAL REGULATION,
AND LABOR AGREEMENTS.

THE COMPANY

       The Company is one of two U.S. integrated producers and distributors of
titanium sponge, ingot, mill products and castings for use in the aerospace,
industrial, golf and military markets. Since 1993, the Company has developed new
market opportunities for titanium, expanded its distribution network, increased
its production capacity, and improved its manufacturing efficiency. As a result,
management believes that it is well-positioned to capitalize on improving and
emerging markets in the titanium industry. In 1996, the Company reported net
sales of $236.9 million, operating income of $35.1 million and net income of
$22.3 million.

       On August 26, 1996, the Company completed an Offering (the Offering) of
4.6 million shares of its Common Stock for a price of $23.75 per share. Proceeds
from the Offering, net of underwriting fees and expenses, amounted to $103
million. The proceeds will be used to construct a new EB furnace and raw
material processing facility, expand the Company's distribution business, and
for working capital and other general corporate purposes.

       On September 20, 1994, the Company completed the acquisition of the net
assets and subsidiaries of the Titanium Industries Distribution Group from
Kamyr, Inc. The acquired business is being operated under the name of Titanium
Industries, Inc., an 80% owned subsidiary of OREMET. TI operates full-line
titanium metal service centers in the U.S., U.K., Germany and Canada, and it
produces small diameter titanium bar, weld wire and fine wire. The acquisition
was accounted for as a purchase, with the results of TI included in the
Company's financial statements from the acquisition date.

       The Company was incorporated in Oregon in 1955 and began operations in
1956. The Company funded its growth internally and through investments by
corporate partners. In December 1987, the Company repurchased its Common Stock
from its major corporate partner and immediately sold shares of its Common Stock
to the ESOP. Initially, the ESOP owned approximately 67% of the Common Stock and
at December 31, 1996, the ESOP's ownership interest was approximately 5%.

STRATEGY AND OUTLOOK

       Beginning in 1993, several members of the Company's current executive
management team, including Carlos E. Aguirre, the President and Chief Executive
Officer, joined the Company from other companies within the titanium industry.
The Company's management team intends to continue to focus on the following
strategic objectives to further improve its competitive position:

       o   MAINTAIN LEADERSHIP IN NEW MARKET APPLICATIONS AND PRODUCTS

           OREMET has developed many new and improved applications for titanium
           with or for its customers. Sales for non-aerospace applications have
           increased from $12.7 million in 1993 to $135.1 million in 1996. In
           addition to the golf market, OREMET has established a major presence
           in new markets such as armor for sale to the military and high purity
           sponge for the electronics industry. For the aerospace industry,
           OREMET has developed a unique production process for titanium
           aluminides. As a result of these efforts, the Company has diversified
           its revenue base while maintaining the flexibility to respond to
           changing market conditions.





                                       2
<PAGE>


       o   BENEFIT FROM VERTICAL INTEGRATION AND SCRAP HANDLING CAPABILITIES

           OREMET is one of only two companies in North America which are
           vertically integrated in the production of sponge and mill products.
           The Company is a large producer of titanium sponge and a large
           purchaser and processor of titanium scrap, two key materials used in
           the manufacture of mill products. The ability to both produce and
           purchase sponge or scrap allows the Company considerable flexibility
           in optimizing its mix of raw material purchases and reduces the
           Company's exposure to raw material price fluctuations. As a result of
           this flexibility, the Company is well positioned to control the costs
           of producing titanium ingot and mill products.

       o   EXPAND SERVICE CENTER BUSINESS

           The Company's distribution strategy is to establish new titanium
           metal service centers in growth markets throughout the world. The
           Company's and TI's nine full-line titanium metal service centers
           located in the U.S., U.K., France, Germany and Canada significantly
           enhance OREMET's distribution capabilities. Historically, TI's
           service centers have reported results that are more stable and less
           cyclical than the Company's core manufacturing business. These
           service centers also provide OREMET with timely feedback from a wide
           range of customers which is useful in determining new market
           applications and product development.

       o   INVEST IN A NEW ELECTRON BEAM FURNACE

           The Company intends to use a portion of the net proceeds from the
           Offering to build a 20 million pound capacity EB furnace. In addition
           to the increased melt capacity, the Company believes that the EB
           furnace will replace some of its less efficient melting capacity,
           lower production costs, improve flexibility in using various raw
           materials and provide a broader range of products. The Company
           estimates that the EB furnace will be partially operational during
           the first half of 1998 and fully operational in 2000.

INDUSTRY OVERVIEW

       Titanium was first commercially produced in the 1950s. Titanium's
superior strength-to-weight ratio, stability at high temperatures and corrosion
resistance make it well suited for the aerospace and jet engine market.
Historically, approximately 70% to 80% of U.S. titanium consumption has been for
aerospace applications both in the commercial and military sectors.

       The aerospace industry has historically been characterized by severe
cyclicality, which has had a significant impact on the sales and profitability
of titanium producers, including OREMET. The last peak in the titanium industry
cycle occurred in the 1988-1990 period when domestic industry mill product
shipments averaged over 50 million pounds per year. In 1991, U.S. titanium
industry shipments declined by approximately 35% to 34 million pounds. This
decline was primarily due to lower demand resulting from a slump in the
commercial aerospace industry and the curtailment or cancellation of military
programs resulting from the end of the Cold War. Data reported by the U.S.
Geological Survey ("USGS") indicate that domestic industry mill product
shipments increased by approximately one million pounds per year in 1992 and
1993, while they dropped to approximately 35 million pounds in 1994. The USGS
reported that U.S. industry shipments of titanium mill products increased 30% to
57 million pounds in 1996, compared to 44 million pounds in 1995. The
improvement in industry shipments is the result of increased demand from the
commercial aerospace industry and from the producers of golf clubheads.

       Beginning in 1995, demand for titanium significantly strengthened due
primarily to increased demand from the aerospace market. Historically,
commercial airlines have tended to place new aircraft orders when their
operating profits were improving. In 1995, the domestic commercial airline
industry reported significantly higher operating profits than the prior year,
and in the second half of 1995 aircraft manufacturers began to increase aircraft
build rates. Newer wide body planes, such as the Boeing 777 and the Airbus A-330
and A-340, use a higher percentage of titanium in their airframes, engines and
parts (as measured by total fly weight) than narrow body planes. "Fly weight" is
the empty weight of a finished


                                       3
<PAGE>


aircraft with engines but without fuel or passengers. The Boeing 777, for
example, utilizes titanium for approximately 9% of total fly weight, compared to
between 2% and 3% on the older 737, 747 and 767 models.

       The following table reflects aircraft orders (number of planes) for the
three major aircraft producers (based on company reports):

<TABLE>
<CAPTION>
                       MAJOR COMMERCIAL AIRCRAFT PRODUCERS
                     ---------------------------------------

                       Aircraft Orders (Number of Planes)
                       ----------------------------------
                                          1996    1995    1994    1993    1992
                                          ----    ----    ----    ----    ----

<S>                                      <C>     <C>     <C>     <C>     <C>
Boeing ...............................     717     346     119     247     243
McDonnell Douglas ....................      47     110       9      10      36
Airbus ...............................     484     106     136      38     118
                                         -----   -----   -----   -----   -----
     Total ...........................   1,248     562     264     295     397
                                         =====   =====   =====   =====   =====
</TABLE>

       Aerospace industry-related sales represented approximately 43% of the
Company's net sales for 1996. The aerospace industry is expected to remain the
largest source of demand for titanium products. However, many opportunities
exist in the non-aerospace markets where the characteristics of titanium metal
provide advantages over competing materials, such as aluminum, nickel and
stainless steel. Golf clubhead manufacturers are using titanium because of its
strength and low weight which enables production of clubs with larger heads.
Titanium's resistance to the effects of atmospheric conditions and a variety of
chemicals and acids make it an attractive metal for marine and other industrial
applications where corrosion is of critical concern. As a result, titanium is
used increasingly in pollution control equipment, offshore oil installations,
mining operations and waste storage facilities. Its favorable strength-to-weight
ratio and biocompatibility also make it an increasingly popular metal for
biomedical products such as medical implants, and consumer products such as
eyeglass frames and bicycles.

PRODUCTION PROCESS

       Since it began operations in 1956, OREMET has been innovative in
developing process technologies for the production of titanium. The production
of titanium requires several raw materials, including titanium tetrachloride (a
liquid derivative of rutile ore, coke and chlorine gas), magnesium, titanium
scrap and master alloys, such as vanadium-aluminum. See "Business - Raw
Materials."

The flow of the Company's titanium production process is illustrated below:


                       OREMET TITANIUM PRODUCTION PROCESS


[Description of Graphic:

     The remainder of this page contains a flow chart, with directional
     arrows, demonstrating the Company's titanium production process,
     beginning with the input of titanium tetrachloride and magnesium
     to produce titanium sponge.  The flow chart shows that the
     titanium sponge is then either sold to non-integrated producers
     or used internally, along with master alloys and titanium scrap,
     to produce ingot. In addition, the flow chart shows that ingot
     is then either used to produce mill products, which are sold to
     aerospace, golf product and industrial parts manufacturers, used
     to produce castings, which are sold to industrial and marine
     product manufacturers, or used by forgers and mill product
     manufacturers.]

                                       4
<PAGE>



       The Company's manufacturing processes are dependent on the reliable
operation of its machinery and equipment. The Company has certain critical
pieces of machinery and equipment which may require significant lead times to
complete necessary repairs or replacements and the functions of which may not be
easily replaced by an outside converter. Additionally, given the Company's
belief that all other titanium manufacturers are currently operating at or near
production capacity, there can be no assurance that the Company could locate an
outside converter that has sufficient available capacity to enable the Company
to meet its production demands in a timely manner, or that an agreement could be
reached with any such outside converter on commercially acceptable terms. Any
such event could result in a disruption in the Company's production or
distribution which could have a material adverse effect on the Company, its
financial condition or its prospects. Additionally, although the Company
maintains business interruption insurance to reduce the potential effect of any
such loss, a natural disaster or other catastrophic event occurring at its
Albany manufacturing facilities could have a material adverse effect on the
Company, its financial condition or its prospects.

PRODUCTS

       Titanium products is the Company's single business segment. A full range
of titanium products is produced for applications in both the aerospace and
non-aerospace markets. The principal product forms are titanium sponge, titanium
ingots, titanium mill products and castings.

       The amount of the Company's consolidated sales and the percentage of
consolidated sales represented by each class of product during the three years
ended December 31, 1996, were as follows:

<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                        ------------------------------------------------------
                                                                          1996                   1995                   1994
                                                                        --------               --------               --------
                                                                                                  (in thousands)

<S>                                                              <C>             <C>    <C>             <C>    <C>             <C>
Net Sales:
Sponge .......................................................   $ 16,866          7%   $ 10,558          7%   $ 12,360         18%
Ingot ........................................................     45,087         19      22,315         15      14,992         21
Mill Products ................................................     88,552         37      46,839         32      22,752         32
Castings .....................................................      9,995          4       7,225          5       6,442          9
Distribution .................................................     70,898         30      54,455         37      11,517         16
Other ........................................................      5,519          3       5,461          4       3,103          4
                                                                 --------   --------    --------   --------    --------   --------
     Total Net Sales .........................................   $236,917        100%   $146,853        100%   $ 71,166        100%
                                                                 ========   ========    ========   ========    ========   ========
</TABLE>

       SPONGE. Titanium sponge is the commercially pure, elemental form of
titanium metal. Titanium sponge is produced by OREMET at its facility in Albany,
Oregon by reducing titanium tetrachloride using magnesium as the reduction
agent. OREMET produces titanium sponge in 15,000 pound batches by using a
modified Kroll process developed by OREMET engineers. Titanium tetrachloride and
magnesium are combined in a horizontal retort and swept with heated helium in
one of the Company's eight sponge reduction furnaces, producing titanium sponge
and magnesium chloride. The magnesium chloride is separated electrolytically
into magnesium and chlorine in OREMET's magnesium recovery facility. The
recovered magnesium is recycled for use in the Company's titanium sponge
manufacturing facility. The chlorine by-product is sold, but does not produce
material revenues for the Company.

       OREMET began producing titanium sponge for internal use in 1970 and began
selling it in 1987. The Company sells sponge principally to domestic
non-integrated titanium producers who use the sponge to produce ingot and mill
products. During 1996, the sponge plant operated at near its practical annual
capacity of 13.5 million pounds. The Company supplements its sponge needs by
purchasing from third parties. See "Business - Raw Materials" and "Business
Competition."

       The Company has a contract to supply titanium sponge and certain other
titanium products to RMI Titanium Company ("RMI") through 2003. Under this
contract, RMI may require that the Company supply it with up to seven million
pounds of titanium sponge per year (approximately 52% of the sponge plant's
capacity). RMI has notified the Company that it will take approximately 80% of
the maximum amount of sponge at specified prices per pound during 1997.
Thereafter, through 2003, the price of the sponge supplied will at RMI's option
be at either U.S. market prices or the prices in effect under the contract for


                                       5
<PAGE>



1996 plus adjustments for changes in certain of the Company's costs, such as
labor, electricity and materials, but in any event, the price charged will not
be below the Company's cost. The Company's agreement to supply titanium sponge
has not had and is not likely to have a material adverse effect on the Company,
its financial condition or its prospects. Sales to RMI accounted for
approximately 5% of OREMET's net sales in 1996 and 1995, and 13% in 1994. No
other customer accounted for more than 10% of OREMET's net sales in any of these
periods.

       INGOT. Titanium ingots are cylinders with a weight of up to 20,000 pounds
and a diameter of up to 36 inches. Titanium ingots are made by OREMET at its
facility in Albany, Oregon by melting sponge or titanium scrap, or a combination
of the two, with certain other elements to form titanium alloys. Prior to
melting, the materials are measured by a computerized weighing system to meet
customer specifications and compacted into briquettes that are welded together
to form an electrode. An electrode can also be formed by melting the materials
in the Company's plasma furnace, which allows the Company to combine a larger
percentage and more varied types of titanium scrap. An electrode is then melted
in one of the Company's vertical, water-cooled vacuum arc furnaces. Melting may
be repeated once or twice to produce standard and premium grades of titanium
ingot. The melting process is monitored through computer-operated sensors,
controls and video displays to maintain high levels of quality and consistency.
After melting, samples from finished ingots are analyzed in the Company's
laboratory to ensure proper chemical content and quality. Ingots are converted
in a forge, either by OREMET or by its customers, into semi-finished shapes and
then into finished mill products. The Company produces ingots in a variety of
sizes and grades to meet the customer's specifications. During 1996, the ingot
plant operated at near its estimated annual capacity of 22 million pounds. In
addition to its own ingot production, the Company contracts to have melting done
by other domestic and international suppliers. In order to meet long-term needs,
the Company plans to expand its capacity to produce ingot and mill products by
increasing its melt capacity with an investment in EB technology. The Company
expects to continue to utilize such suppliers until the EB furnace is
operational. See "Business - Electron Beam Furnace."

       MILL PRODUCTS. Titanium mill products result from the forging, rolling,
drawing and/or extruding of titanium ingots or slabs. OREMET produces titanium
billet, bar, rod, wire, plate and sheet. OREMET sells its mill products to
manufacturers of products for: aircraft and jet engines; and vessels and piping
for chemical plants, prosthetic and orthopedic implants, armor, golf clubheads
and other consumer goods. OREMET produces mill products at its plants in Albany,
Oregon and Frackville, Pennsylvania. During 1996, the mill products facility in
Albany, Oregon operated at approximately 65% of its estimated annual capacity of
15 million pounds and is currently operating at approximately 70% of its
capacity.

       The Company is dependent on the services of outside processors to perform
certain important processing functions. For some of its products, OREMET is
dependent on the services provided by THT, an outside processor which is
wholly-owned by one of the Company's principal competitors. THT owns and
operates an EB furnace which the Company utilizes for melting titanium slab,
that is further processed into titanium plate and sheet for non-aerospace
applications, and titanium electrodes for aerospace applications. OREMET has not
experienced any delays or problems associated with the competitor's ownership of
THT. Other than for those provided by THT, the services performed by the outside
processors are typically available from multiple sources. Services are provided
by THT in accordance with a one-year agreement ending December 31, 1997, and
various specific project agreements which have been negotiated on an as-needed
basis. Should the THT services agreements not be renewed, OREMET would attempt
to obtain these services from another competitor which has a cold hearth melting
furnace. OREMET believes that the loss of the services provided by THT would
result in production delays and have an adverse effect on the Company, its
financial condition or its prospects. In order to address its long-term melting
requirements, the Company intends to construct a new EB furnace. See "Business
Electron Beam Furnace."

       The Company maintains a process engineering staff which continually
evaluates and identifies potential improvements in the manufacturing process.
OREMET's quality control group tests products for compliance with customer
specifications, including detailed metallurgical and chemical analyses, sonic
tests and mechanical capability and property tests. The results of these tests
are certified for conformity to specifications and then recorded for future
traceability.



                                       6
<PAGE>



       CASTINGS. In 1957, OREMET completed construction of a titanium and
zirconium casting foundry and began producing components in commercial
quantities. Since then, the foundry has continued to develop new technology and
make process improvements. OREMET produces titanium and zirconium castings for
customers primarily for the non-aerospace industry. Castings are made by melting
metal which is then poured under vacuum into graphite molds. Castings generally
weigh from one pound to 2,000 pounds. OREMET's castings are made at its Albany,
Oregon plant to customer specifications and are used in marine and other
industrial applications where corrosion is of critical concern. Titanium and
zirconium castings are used in a diversity of applications including offshore
oil production, chemical processing, mining, armor, aerospace, power generation,
pulp and paper manufacturing and marine products. Both titanium and zirconium
are recognized as cost-effective materials for construction because of their
light weight, excellent corrosion resistance, low maintenance, high quality and
long life cycle. As new applications for titanium continue to grow, the Company
expects the demand for castings to follow. To address this increasing demand,
the OREMET foundry is in the process of increasing its production capacity by
approximately 30%.

       OTHER PRODUCTS. OREMET provides services to other titanium producers and
sells by-products of its titanium production process. Non-integrated producers
of titanium ingot and mill products contract with OREMET to melt sponge or
titanium scrap into ingot or to convert ingot into mill products. OREMET also
sells titanium scrap for use as an alloy addition in the production of other
metals such as steel and aluminum.

ELECTRON BEAM FURNACE

       The Company intends to expand its melting capabilities by constructing a
new EB furnace. This technology offers cost advantages over the existing
production practices and is required to meet the requirements of certain
critical aerospace applications. EB technology offers the advantage of directly
casting semi-finished shapes, thereby reducing the amount and cost of subsequent
conversion operations and processing required prior to shipping the completed
product. In addition, the EB technology will allow the use of different types
and greater amounts of scrap input materials, thus allowing for cost savings and
improved inventory utilization. The EB furnace is expected to enhance the
Company's capacity to produce ingot and mill products.

       The Company estimates that the cost to construct an EB furnace facility
with an annual melting capacity of 20 million pounds, together with a related
raw materials processing facility, will total approximately $32 million. The
Company is currently working with engineers and equipment suppliers on the
construction of the EB furnace. The Company estimates that the facility will be
in operation during the first half of 1998 and will be capable of producing 5
million pounds in 1998, 11 million pounds in 1999 and at near capacity in 2000.
The Company expects that the EB furnace will replace some of the Company's less
efficient existing melting capacity. The Company anticipates that it will have
an immediate need for a substantial portion of the production of the EB furnace
and that it will be able to obtain long-term commitments from others for the
furnace capacity which is not utilized by the Company. While the Company
currently intends to construct its own EB furnace, the Company, as an
alternative, may evaluate an investment in a joint venture to obtain enhanced
access to EB technology. The Company will only consider a joint venture if such
an arrangement can be structured with a suitable partner, on favorable terms and
in a timely manner to allow for production using EB technology in accordance
with the Company's schedule.

       All North American EB furnaces producing titanium in commercial
quantities are owned by THT. The Company believes that these furnaces are
running at near capacity. In addition to the Company's plans to invest in EB
furnace technology, additional EB furnaces may be built and may result in excess
capacity. The Company may experience design and start-up difficulties, such as
cost overruns, operational difficulties, and significant delays. If the Company
implements new technology, there is no assurance that such technology will work
or will not result in delays or difficulties. Such events could have a material
adverse effect on the Company, its financial condition or its prospects.



                                       7
<PAGE>



RAW MATERIALS

       The primary raw materials used by the Company are titanium tetrachloride,
magnesium, titanium scrap and certain combinations of primary metals that form
master alloys. Titanium tetrachloride and magnesium are the principal materials
used in the production of titanium sponge. The principal materials used in the
production of titanium ingot are sponge, titanium scrap and alloying elements.

       OREMET purchases its titanium tetrachloride requirements under a
long-term contract that expires in 2001. While the Company believes it could
obtain commercial quantities of sufficiently pure titanium tetrachloride from
other sources, but at a potentially higher cost, any extended disruption in the
supply could have a material adverse effect on OREMET's ability to produce
titanium sponge and could have a material adverse effect on the Company, its
financial condition or its prospects. Magnesium is generally available from a
number of suppliers.

       While the Company is one of seven major worldwide producers of titanium
sponge, a basic raw material in the production of titanium ingot and mill
products, under current market conditions it cannot supply all of its needs for
titanium sponge internally and is dependent, therefore, on third parties for a
portion of its titanium sponge needs. Since 1993, the Company has purchased
sponge from third parties to take advantage of lower-priced materials and to
supplement that which it produces. The Company purchased approximately 30% of
its sponge requirements from third parties during 1996. The Company obtains
sponge from domestic and foreign producers of sponge, both on a spot purchase
basis and pursuant to short-term sponge contracts. The Company's purchases of
imported sponge, in pounds, compared to total purchases and production of sponge
were 30%, 12%, and 7% for the years ended December 31, 1996, 1995, and 1994,
respectively. There can be no assurance that the Company will not experience
interruptions in its sponge supplies, which could have a material adverse effect
on the Company, its financial condition or its prospects.

       Titanium scrap is typically available from many sources. The Company is a
major recycler of titanium scrap. Where possible, the Company utilizes titanium
scrap as a cost-effective alternative to titanium sponge; both materials are
used as primary ingredients in the manufacture of ingots. Much of the titanium
scrap which is purchased by the Company originates from within the Former Soviet
Union ("FSU") as the availability of attractively priced domestic scrap in
sufficient quantities varies due to fluctuations in the U.S. titanium market and
demands from other purchasers, including steel and aluminum producers. Certain
of the primary metal compounds used to form master alloys are produced by a
limited number of suppliers. During January 1996, in response to rapidly
increasing scrap costs, the Company added raw material surcharges to its product
prices to offset the higher costs it was experiencing.

       The Company has historically obtained approximately 50% of its feedstock
for producing titanium ingot from sponge and the other 50% from scrap. The
Company believes it will continue to be able to obtain sufficient quantities of
sponge and scrap to enable it to meet its production needs.

       When available at attractive prices, the Company has purchased titanium
sponge and scrap from various countries, including the FSU. The Company's
purchases of imported sponge and scrap, in pounds, compared to total purchases
and production of sponge and scrap were 41%, 11%, and 6% for the years ended
December 31, 1996, 1995, and 1994, respectively. Continued availability of these
materials at attractive prices from the FSU cannot be assured due to the
uncertainties concerning the manufacturing capabilities of the FSU titanium
producers and the potential for political and economic instability within the
FSU.

       Historically, the Company has sought to recover increases in titanium
scrap and sponge prices through price increases of its products. The Company has
added raw material surcharges to its contracts in order to more directly link
changes in raw material costs to its sales prices. Generally, the Company does
not incur import tariffs and anti-dumping duties on purchases of FSU sponge as
it is ultimately exported in the form of finished goods. If such tariffs and
duties were incurred, the Company would adjust the price or surcharge
accordingly. There is no import tariffs or duties on scrap. Any increases in
titanium scrap and sponge prices which are not offset by increases in the
Company's sales prices could have a material adverse effect on the Company, its
financial condition or its prospects.




                                       8
<PAGE>



MARKETS

       AEROSPACE. The Company sells its titanium products to non-integrated
producers and fabricators which process the material for use by the aerospace
industry. While the percentage of its sales to the aerospace industry accounted
for approximately 43% and 46% in 1996 and 1995, respectively, compared to 61% in
1994 and 77% in 1993, aggregate sales to the aerospace industry increased from
$42.6 million in 1993 to $101.8 million in 1996. The Company has also expanded
its capability to include more complex alloys and mill products used by the
aerospace industry. The Company anticipates that future aerospace industry sales
will vary from 40% to 60% of total net sales depending upon demand and
profitability. The Company's main route of supply is to provide products to
numerous forging houses, machine shops and other mill product producers who in
turn supply components to the major air frame and jet engine manufacturers.
Since 1994 the Company has been supplying products direct to Airbus Industries
for the fabrication of engine pylons. OREMET's commercial aerospace product
sales are dependent upon the production rates of major airplane manufacturers
both as a direct and as an indirect supplier. The Company has historically
experienced a high level of order cancellation and deferrals in periods of
industry downturn. The cyclicality of the commercial and military aerospace
industry has had and may continue to have a material adverse effect on the
Company, its financial condition or its prospects. See "Business Industry
Overview" and "Business - Products." The Company can give no assurance as to the
extent or duration of any recovery in the aerospace market or the extent to
which such recovery will result in increases in demand for titanium products.

       GOLF. The titanium golf clubhead market evolved in 1988 when a few
investment casting houses started producing clubheads for export to markets in
the Far East. At the same time, some companies in Japan started to produce
clubheads by casting and forging. By 1993, the technology and manufacturing
processes were well developed and major U.S. club producers became interested in
producing heads with a larger hitting surface. Since 1993, most of the major
golf club manufacturers have started their own lines of titanium head drivers.
The Company estimates that the use of titanium has grown from 1.5 million pounds
in 1994 to approximately 10 million pounds in 1996. The Company estimates that
due to a 3 million pound titanium reserve in 1996, the golf market will buy 4.5
million pounds in 1997 and approximately 8 million pounds in 1998. Golf club
manufacturers are starting to produce titanium fairway woods, irons and putters.
The Company believes that it is the market share leader in shipments to the golf
industry, with shipments of 5.5 million pounds in 1996.

       The Company believes that the market for golf clubheads has grown to be
the second largest consumer of titanium, after the commercial aerospace market.
The market for the Company's products sold to golf clubhead producers has only
recently begun to emerge as a significant component of the Company's net sales,
and there can be no assurance that demand for titanium products used in the golf
industry or the Company's products in particular, will continue or that this
market will expand as the Company anticipates. In addition, the Company's major
competitors in the titanium industry have begun to supply the golf clubhead
market and there is no assurance that the Company will be able to maintain its
leading market share. The Company estimates that titanium producers located in
the FSU are supplying up to 25% of the titanium shipments to the golf club
industry.

       ARMOR. Titanium has been studied by the defense industry as a ballistic
protection material. In the mid 1970s, titanium was designed into the A-10
military airplane to provide protection for the pilots performing close-in
ground support missions. As a result of the deficiencies with aluminum
protection systems experienced during the Faulkland's War, titanium was studied
as a replacement material for protecting strategic areas aboard naval fighting
ships.

       In order to deploy forces more rapidly, certain military forces turned to
titanium to reduce the weight of vehicles while assuring good ballistic
protection. Since 1992, hatch covers on the Bradley fighting vehicle have been
made with titanium. In 1994 and 1995, OREMET supplied over 300,000 pounds of
titanium plate for ballistic protection on a new French aircraft carrier, the
CHARLES DEGAULLE. OREMET is supplying titanium parts for construction of the
Swedish Leopard II tank and the U.S. M1A2 tank. Military engineers continue to
search for other armor applications that can take advantage of titanium's light
weight and ballistic protection characteristics. Research efforts for armor
applications continue to be a high priority for OREMET. The Company believes
that titanium usage on tanks and on various types of personnel carriers will
increase.




                                       9
<PAGE>


       In an effort to lessen the titanium industry's dependence on the
aerospace industry and to increase participation in other markets, the Company,
its competitors and certain end-users of titanium are devoting significant
efforts and resources to developing new markets and applications for titanium,
certain of which are still in the preliminary stages. Developing these emerging
applications involves substantial risk and uncertainties due to the fact that
titanium must compete with less expensive materials in these potential
applications. There can be no assurance that the Company will be able to develop
new markets and applications for its products, or as to the time required for
such development, or as to the extent to which it will face competition in this
regard. If the Company is unable to develop these markets to a substantial
degree, management expects that the Company's business would be largely
dependent on the cyclical aerospace industry and the emerging golf market.

MARKETING, DISTRIBUTION AND SERVICE CENTERS

       OREMET markets primarily to manufacturers of titanium metal end products.
The Company also sells its products to non-integrated titanium producers,
regional value-added distributors and other mill product consumers. The majority
of sales are made through the Company's internal sales force. OREMET also uses
independent sales representatives for the sale of products outside of North
America.

       Shipments to customers may be made directly from one of the Company's
mills in Albany, Oregon or Frackville, Pennsylvania; from an outside processor;
or from one of the Company's service centers in North America and Europe. The
Company's service centers maintain a large inventory of titanium mill products
available for rapid delivery to points around the globe. A complete line of
first stage processing equipment is available and outside machining can be
arranged by the service centers to meet the needs of their customers.

       For nearly 25 years, TI, including its predecessor company, has been
supplying and developing titanium applications for industrial and commercial
customers. TI maintains a network of service centers established to satisfy the
titanium needs of the non-aerospace industry. TI opened its first service center
during 1972 in Fairfield, New Jersey. In response to the increasing demands of
its customers and in order to provide improved response times, TI established
additional service centers throughout North America. In 1988, TI established a
service center in Birmingham, U.K. and in 1992, expanded its position in the
European market by acquiring an existing service center distribution business,
also in Birmingham. During 1996, TI opened service centers in Dusseldorf,
Germany, and Windsor, CT. To support the increasing demands for titanium in
diverse commercial, consumer, aerospace and industrial markets, the Company
intends to continue to expand its distribution business geographically. In
addition to pursuing growth opportunities through the establishment of
additional service centers, TI intends to grow through acquisitions of existing
service centers and through the expansion of its participation in the aerospace
market. The Company estimates that approximately 25% of TI's shipments are to
the aerospace market, primarily in Europe. TI is currently evaluating service
center opportunities in the Pacific Rim, Southern Europe and Western United
States.




                                       10
<PAGE>



       The Company and TI maintain titanium sales offices and service centers
(which also include sales personnel) in the following locations:

                           Location          Established         Function
                           --------          -----------         --------

         United States     Albany, OR            1956            Sales Office
                           Parsippany, NJ        1972            Service Center
                           Chicago, IL           1986            Service Center
                           Jacksonville, FL      1986            Service Center
                           Los Angeles, CA       1987            Service Center
                           Dallas, TX            1989            Sales Office
                           Pittsburgh, PA        1994            Sales Office
                           Windsor, CT           1996            Service Center

         Canada            Montreal, Quebec      1973            Service Center
                           Vancouver, B.C.       1989            Sales Office

         Europe            Birmingham, U.K.      1988            Service Center
                           Paris, France         1994            Service Center
                           Dusseldorf, Germany   1996            Service Center

INTERNATIONAL AND EXPORT SALES

       International and export sales, primarily in Europe and Asia, totaled
approximately 19%, 20% and 14% of OREMET's net sales in 1996, 1995 and 1994,
respectively. In May 1994, OREMET signed a three-year contract with
Aerospatiale, Societe Nationale Industrielle for engine pylon parts for the
Airbus aircraft, and in the second half of 1994 began supplying product under
the contract. The acquisition of TI provided the Company with a service center
located in the U.K. with an established operation. In 1996, TI opened a service
center in Germany. The Company intends to utilize these facilities to meet its
customers' needs in Europe and Asia. See Note 14 to the Company's Consolidated
Financial Statements.

BACKLOG

       The Company's twelve-month sales order backlog was $183 million at
December 31, 1996, compared to $105 million at December 31, 1995 and $44 million
at December 31, 1994. OREMET produces titanium ingot, mill products and castings
in response to specific customer orders. Production times vary among products
and can be several months or more. The Company includes in its backlog only
those firm purchase orders scheduled for delivery during the subsequent
twelve-month period (which are generally subject to cancellation by the
customer). The Company has historically experienced a high level of order
cancellations and deferrals in periods of industry downturn.

<TABLE>
<CAPTION>
                                                            Twelve-Month Sales Order Backlog
                                                                As of the Quarter Ended
                                               --------------------------------------------------------------
                                               March 31       June 30        September 30         December 31
                                               --------       -------        ------------         -----------
                                                                   (in millions)

          <S>                                    <C>            <C>              <C>                 <C>
          1996 .............................     $134           $141             $160                $183
          1995 .............................       48             64               65                 105
          1994 .............................       28             29               37                  44
          1993 .............................       27             25               19                  18
</TABLE>

         During the second half of 1995 and continuing through 1996, the Company
experienced a significant increase in the volume of incoming orders at increased
prices. The Company has not opened its 1998 order book, pending assessment of
future raw material costs. The increase in demand has been driven primarily by
the recovery in the commercial aerospace market and the emergence of the golf
clubhead market. As capacity utilization in the titanium industry continues to
grow and lead times lengthen, the Company expects prices on new orders to
continue to strengthen.



                                       11
<PAGE>


COMPETITION

       Although OREMET's sales are predominately to the domestic market, the
titanium industry is competitive on a worldwide basis as a result of many
factors, particularly the presence of excess capacity, which has intensified
competition for available business. The Company is one of two integrated
producers in the U.S. and one of four in the world (the Company considers an
integrated producer one that produces at least titanium sponge and ingot).
OREMET's principal competitors are other integrated and non-integrated producers
of titanium located primarily in the U.S., Europe, Japan, China and the FSU.
There are also a number of non-integrated producers that produce mill products
from purchased sponge, scrap or ingot. In each of the Company's major product
lines, OREMET competes primarily on the basis of price, quality, delivery time
and customer service. The principal methods of competition in the titanium
industry and for all of the Company's products are product quality and
qualifications to supply products. Many of the Company's products (sponge,
ingot, mill products and castings) are qualified for both aerospace and
non-aerospace applications. The Company competes by maintaining strict quality
standards. In addition, as one of two integrated producers in the U.S., the
Company is positioned to control quality and the costs of producing sponge,
ingot, mill products, and castings.

       Availability of material and lead time to produce are competitive factors
with respect to mill products, castings and distribution sales. The Company
maintains an inventory of finished and intermediate inventory to meet customer
delivery requirements. The Company also works on cycle time reduction to be more
responsive to customer needs. In addition, the Company provides engineered
products to customer specifications.

       In the U.S. market, the increasing presence of non-U.S. participants has
become a significant competitive factor. Until 1993, imports of foreign titanium
products into the U.S. had not been significant due to relatively favorable
currency exchange rates, tariffs, and with respect to Japan and Russia, existing
and prior duties (including anti-dumping duties). However, imports of titanium
sponge, scrap, and other products, principally from the FSU, have increased in
recent years and have had a significant competitive impact on the U.S. titanium
industry. To the extent the Company has been able to take advantage of this
situation by purchasing such sponge, scrap or intermediate mill products for use
in its own operations during the last three years, the negative effect of these
imports on the Company has been somewhat diminished. Given the current political
and economic uncertainties in some of the countries of the FSU, there can be no
assurance that this supply of titanium products will continue to be available to
the Company without interruption or at attractive prices. See "Business - Raw
Materials."

       The Company estimates that its share of U.S. sponge capacity is
approximately 30% and that its share of world capacity is about 5%. While
approximately 20% of the world's sponge production capacity is located within
the U.S., up to one half is located within the FSU (which sponge capacity was
primarily developed to serve the needs of the Soviet military, principally the
aerospace and submarine services, both of which have been sharply curtailed).
The Company believes that the FSU production capacity may be limited as a result
of deferred plant maintenance and a general lack of financing. As a result,
significant unused production capacity, beyond that which is now supplying the
FSU's export markets (including sales to the Company), may exist in this region.
If exports of titanium products from the FSU were to increase significantly,
this additional supply could adversely affect the demand for the Company's
products. After the end of the Cold War, sponge produced in the FSU became
available and has been imported into the U.S. at low prices. USGS estimates that
in 1996, approximately 9.5 million pounds of sponge was imported from the FSU,
compared to approximately 12.2 million pounds during 1995. Based on data
supplied from the USGS, 1996 sponge imports from the FSU represents
approximately 15% of 1996 sponge consumption by U.S. producers. The excess
capacity of sponge in the FSU is beneficial, at this time, to different sectors
of the industry as it provides additional raw material to meet the increasing
raw material needs of ingot producers. In the event such sponge is qualified for
aerospace applications and large quantities were introduced into the market,
especially in a market downturn, such effect would be adverse to the existing
sponge producers, including the Company.




                                       12
<PAGE>



       As the participation of non-U.S. companies increases, the competitive
environment for the Company may become more difficult, especially as existing
tariffs are eased and certain market participants are no longer subject to
anti-dumping duties. Currently, imports of titanium sponge, ingot and mill
products from countries that receive most favored nation (MFN) tariff rate are
subject to a 15% tariff. The tariff rate applicable to imports from countries
that do not receive MFN treatment is 25% for sponge and ingot and 45% for mill
products. The U.S. Department of Commerce announced that pursuant to the
Generalized System Preferences, certain mill products imported directly from
Russia between October 1, 1996 and May 31, 1997 are not subject to duty. In
addition to regular tariffs, imports of titanium sponge from certain countries
in the FSU (Russia, Kazakhstan and Ukraine) are subject to anti-dumping duties
of 83.96%, except as follows:

       The U.S. Department of Commerce, International Trade Administration (ITA)
       published final results of an anti-dumping review for imports of titanium
       sponge from Russia. The review covered imports from Berezniki
       Titanium-Magnesium Works (AVISMA), Interlink Metals and Chemicals, Inc.,
       and Cometals, Inc., during the period August 1, 1994, through July 31,
       1995. Under the review, the ITA concluded that AVISMA, a producer of
       titanium sponge would continue to be subject to the Russia-wide 83.96%
       anti-dumping margin. However, the ITA determined the margin for the two
       trading companies, Interlink and Cometals, would be revised to 0% and
       28.31%, respectively.

       As a result of the easing of the anti-dumping duties, substantial
additional capacity could enter the market, and if the demand for the industry's
products is less than its capacity, the profitability of the industry, including
the Company, could be adversely affected.

       USGS reported the following information regarding the importation and
consumption of titanium products:

<TABLE>
<CAPTION>
                      U.S. IMPORTATION AND CONSUMPTION OF SELECTED TITANIUM PRODUCTS
                      --------------------------------------------------------------
                                        (As compiled by USGS)
                                         (Pounds in Millions)

                               1996                                   1995
               ------------------------------------    ------------------------------------
                                        Imports as                              Imports as
Titanium       U.S.      U.S.           a % of         U.S.      U.S.           a % of
Product        Imports   Consumption    Consumption    Imports   Consumption    Consumption
--------       -------   -----------    -----------    -------   -----------    -----------

<S>              <C>          <C>            <C>        <C>          <C>            <C>
Sponge:
    Japan         8.5                                    2.5
    FSU           9.5                                   12.2
    Other         2.3                                    2.0
                 ----                                   ----
       Total     20.3         62.6           32%        16.7         47.4           35%
                 ====         ====           ===        ====         ====           ===

Waste and Scrap:
    Japan         5.3                                    4.0
    FSU          11.6                                    8.4
    UK            7.5                                    5.2
    Other         9.1                                    6.9
                 ----         ----           ---        ----         ----           ---
       Total     33.5         58.0           58%        24.5         45.4           54%
                 ====         ====           ===        ====         ====           ===
Ingot and Billet:
    FSU           3.0                                    2.0
    Other         1.9                                    2.1
                 ----         ----           ---        ----         ----           ----
       Total      4.9         84.4            6%         4.1         67.5             6%
                 ====         ====           ===        ====         ====           ====

Mill Products*   12.0         57.1           21%         3.5         43.7             8%
                 ====         ====           ===        ====         ====           ====
</TABLE>

    * The country of export is not available.  The Company believes that the
      majority of mill products imports to the U.S. originate from the FSU.

                                       13
<PAGE>

       It is believed that FSU producers have the largest titanium mill products
production capacity in the world. Continued expansion into the U.S. market by
FSU producers could materially affect the operations of the Company and the
industry to the extent that the worldwide supply of product exceeds market
demand and prices are reduced.

EMPLOYEE RELATIONS

       As of December 31, 1996, the Company employed 731 employees, of which
approximately 50 were employed outside of the U.S. All of the hourly production
and maintenance workers (approximately 400) at the Albany, Oregon and
Frackville, Pennsylvania manufacturing facilities are represented by labor
unions. In August 1994, the Company and the union representing the Albany,
Oregon employees agreed upon a new labor contract which will continue through
July 2000. This contract can be re-opened after three years to address economic
issues. The contract covering the Frackville, Pennsylvania employees was
negotiated in September 1994, and will continue for three years. Since 1974, the
Company has not experienced a strike or labor disruption. OREMET considers its
relations with its employees and the union to be good.

RESEARCH, TECHNICAL AND PRODUCT DEVELOPMENT  ("RT&D")

       OREMET's RT&D efforts are focused on improving production processes and
developing new applications and markets for titanium. Production process
improvements have included improving sponge production efficiencies, making
technical improvements to scrap processes, revising vacuum arc melting
techniques, enhancing forging practices and improving overall yield. In
addition, the Company strives to reduce costs by shortening cycle times, by
implementing synchronous manufacturing principles and by eliminating product
rejections.

       OREMET's focus on product development has resulted in the development of
high purity sponge for use by the electronics industry, consistent production of
titanium aluminides for aerospace applications and new alloys for armor and golf
applications.

       In order to keep abreast of new developments, the Company maintains
contact with university and research facilities, as well as with major end users
of titanium products. These groups assess new applications for titanium and the
need for new or alternative alloys and titanium compositions. OREMET then
develops alloy systems, processes and procedures for the manufacture of new
products.

JOINT VENTURES

       OREMET is involved in several joint ventures which, like its RT&D
efforts, utilize shared investment as a means to access technology or
capabilities.

       OREMET is a 50% partner with Precision Castparts Corporation in a joint
venture which owns a plasma furnace operated by OREMET in Albany, Oregon. The
plasma furnace produces remelt electrodes for both parties' consumption. The
venture started in 1983 and is producing in excess of 2 million pounds of
electrode per year.

       OREMET is a 33% member in MZI, L.L.C., which owns an advanced ultrasonic
inspection system for testing of certain aerospace products. The other members
are Titanium Metals Corporation and Teledyne Allvac. This venture is in its
second year of operations.

REGULATORY AND ENVIRONMENTAL MATTERS

       The Company is subject to federal, state and local statutes and
regulations concerning environmental matters and land use. Although the Company
believes it is in material compliance with these laws, they are frequently
modified to be more restrictive and it is impossible to predict accurately the
future effect that changes in these laws may have on the Company. There can be
no assurance that the Company will not face costs and liabilities as a result of
environmental regulation which could have a material adverse effect on the
Company, its financial position, results of operations and liquidity.




                                       14
<PAGE>



       The Company's operations pose continuing risk of environmental impacts.
The Company uses and produces substantial quantities of substances, chemicals
and compounds that have been identified as hazardous or toxic under federal,
state and local environmental and worker safety and health laws and regulations.
Consequently, the Company is subject to various environmental laws that impose
compliance obligations and can create liability for historical releases of
hazardous substances. While the Company takes environmental, safety, and health
precautions appropriate for the industry, the Company's operations pose an
ongoing risk of accidental releases of, and worker exposure to, hazardous or
toxic substances. The Company conducts its operations at industrial sites where
hazardous materials have been managed for many years in connection with its
operations, including periods before careful management of these materials was
generally believed to be necessary.

       The Company entered into a consent order in August 1994 with the Oregon
Department of Environmental Quality ("ODEQ") pursuant to which the Company is
conducting an investigation of hazardous substances in portions of the soil and
groundwater at its plant site in Albany, Oregon. The Company anticipates that
its investigation will result in a determination that at least some remedial
action is necessary, for which an accrual has been made. A neighboring property
owner also is investigating groundwater contamination at its property that has
migrated to the Company's property and for which OREMET may have legal claims to
recover a portion of its investigation costs. The Company anticipates that a
number of its production wells will have to be reconstructed in response to
concerns about migration of groundwater contamination. The Company also has
claims against its drilling contractor with respect to the construction of the
wells.

       In February 1995, the ODEQ modified the Company's wastewater discharge
permit for its Albany facility. The new permit imposes more stringent discharge
limits, and the Company has entered into a Mutual Agreement and Order with the
ODEQ under which the Company will achieve the more stringent units according to
a specified schedule. The Company has identified several alternatives for
meeting the new limits, the most expensive of which would require capital
expenditures of approximately $0.7 million. The Company is working with ODEQ to
explore less expensive alternatives.

       Over the past several years, the Company has voluntarily undertaken
extensive testing of the air emissions from its Albany plant. This testing
indicates that emissions from some units may be greater than previously
recognized. The Company entered into a memorandum of understanding with ODEQ on
July 19, 1996, under which the Company will conduct certain air quality impact
analyses and may potentially install additional emissions control equipment. In
the course of this work, the Company has determined that the matter can be
better resolved through an aggressive emissions reduction and control program
that will also accommodate expansion plans. The Company is engaged in
discussions with ODEQ to amend the memorandum to incorporate this emissions
reduction program. The Company has estimated that the capital cost of the
emissions controls will be $1.5 million in 1997. The Company believes this
matter will be resolved by the end of 1997.

       Based upon its engineering studies regarding the above matters, the
Company made provisions for environmental expenses in 1995, 1994, and 1993 of
$0, $0.2 million, and $1.0 million, respectively, of which approximately $0.9
million remains at December 31, 1996. These amounts are in addition to recurring
environmental costs which are expensed as incurred and are included in cost of
sales. At the present time, management cannot reasonably predict when all of
these environmental issues will be resolved. Additionally, it is reasonably
possible that a change in the estimate will occur in the near term.

       Commencing in 1991, the Pennsylvania Department of Environmental
Regulation and the Environmental Protection Agency ("EPA") have performed
periodic site inspections, including soil and water sampling, at TI's site in
Frackville, Pennsylvania, in connection with a regional groundwater
investigation of the Frackville, Pennsylvania area. While this investigation is
ongoing, the Company has not been informed by either agency of any pending or
potentially required actions which may arise from this investigation.

       In conjunction with the Company's purchase of TI, Kamyr, Inc. has agreed
to undertake specified cleanup activities. In addition, Kamyr, Inc. has agreed
to a limited indemnification of the Company in the event damages arise that
result from conditions which were not in compliance with environmental laws and
regulations as they existed at the time the Company purchased TI.




                                       15
<PAGE>


ITEM 2.    PROPERTIES

       The Company's principal executive office and production facilities are
located in Albany, Oregon on 210 acres of property owned (in fee without any
major encumbrances) by the Company. The Company occupies approximately 461,000
square feet in six buildings and uses approximately 65 acres on the site. The
facilities include plants for the production of titanium sponge, ingot, mill
products and castings. The Company also maintains separate facilities for
recovering magnesium and processing titanium scrap. TI's executive offices are
located in Fairfield, New Jersey and it owns (in fee without any major
encumbrances) and operates a production facility in Frackville, Pennsylvania.
The Company believes that the plants are adequate and suitable in conjunction
with the Company's access to outside processing vendors, for its current
operating needs. Other than the facility in Birmingham, U.K., the service
centers and sales offices which the Company utilizes are leased. See "Business
Products" for a discussion of productive capacity and extent of utilization.

ITEM 3.    LEGAL PROCEEDINGS

       From time to time, the Company is a party to claims, disputes, legal
actions and other proceedings involving contracts, employment and various other
matters. In the opinion of management, the outcome of these matters should not
have a material adverse effect on the consolidated financial condition of the
Company.

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

       No matters were submitted to a vote of the security holders during the
fourth quarter of 1996.



                                       16
<PAGE>



                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

        (a)  MARKET INFORMATION:  Registrant's Common Stock is traded over the
             counter,  and its Nasdaq symbol is OREM.  Registrant's stock
             commenced trading on the Nasdaq National Market on March 5, 1985.

             Information concerning the market price of Registrant's Common
             Stock is incorporated by reference to the Quarterly Stock Data
             Section on Page 41 of the 1996 Annual Report to Shareholders.

        (b)  HOLDERS: At March 7, 1997, there were 2,038 holders of Registrant's
             Common Stock, based on the holders of record as certified by the
             Transfer Agent. The Company believes that there are an additional 9
             to 10 thousand shareholders who maintain their ownership in "street
             name". The Company estimates that there are 11 to 12 thousand
             beneficial owners of its Common Stock.

        (c)  DIVIDENDS: There were no dividends declared in either 1996 or 1995,
             except as described in Note 17 to the Company's Consolidated
             Financial Statements on Page 32 of the 1996 Annual Report to
             Shareholders. Limitations on dividends are discussed in Note 9 to
             the Company's Consolidated Financial Statements on Page 26 of the
             1996 Annual Report to Shareholders. Both notes are incorporated
             herein by reference.

ITEM 6. SELECTED FINANCIAL DATA

        The information required by this item is contained in the Five-Year
Summary of Selected Financial Data Section on Page 33 of the 1996 Annual Report
to Shareholders, and is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        Changes in Accounting Principles: In February 1997, The Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
128, earnings per share ("FAS128"). FAS 128 specifies the computation,
presentation, and disclosure requirements for earnings per share. FAS 128 is
effective for financial statements issued for periods ending after December 15,
1997, including interim periods. Earlier application of FAS 128 is not
permitted. The effect of implementing FAS 128 on the Company's earnings per
share computations has not been determined.

        The remaining information required by this item is contained in the
Management's Discussion and Analysis Section on Pages 34 through 40 of the 1996
Annual Report to Shareholders, and is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The information required by this item is contained on Pages 17 through
32 in the 1996 Annual Report to Shareholders, and is incorporated by reference
herein as listed in Item 14 hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        None



                                       17
<PAGE>



                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          The information required by this item is contained in the Proxy
Statement of Registrant for the Annual Shareholders Meeting to be held April 24,
1997 ("Proxy Statement"), in the sections titled "Directors", "Executive
Officers", and "Section 16(a) Beneficial Ownership Reporting Compliance". The
Proxy Statement was filed with the Securities and Exchange Commission within 120
days after the end of the fiscal year covered by this Report, and the sections
specified in the preceding sentence are incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

          The information required by this item is contained on Pages 6-15 of
the Proxy Statement, and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

          The information required by this item is contained in the Proxy
Statement, in the section titled "Security Ownership of Certain Beneficial
Owners and Management", and the section specified is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          The information required by this item is contained in the Proxy
Statement, in the section titled "Related Party Transactions", and the section
is incorporated herein by reference.



                                       18
<PAGE>



                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K

          (a)   The following documents are filed as a part of this Report:

               1.  FINANCIAL STATEMENTS:  The following Financial Statements of
                   Oregon Metallurgical Corporation and Report of Independent
                   Accountants are incorporated by reference from Pages 17
                   through 32 of the Registrant's 1996 Annual Report to
                   Shareholders:

                   Report of Independent Accountants.

                   Consolidated Statements of Operations - For The Years Ended
                   December 31, 1996, 1995, and 1994.

                   Consolidated Balance Sheets - December 31, 1996 and 1995.

                   Consolidated Statements of Shareholders' Equity - For The
                   Years Ended December 31, 1996, 1995, and 1994.

                   Consolidated Statements of Cash Flows - For The Years Ended
                   December 31, 1996, 1995, and 1994.

                   Notes to Consolidated Financial Statements.

               2.  FINANCIAL STATEMENT SCHEDULES: The following financial
                   statement schedule of Oregon Metallurgical Corporation for
                   the years ended December 31, 1996, 1995, and 1994 is filed as
                   part of this Report, and should be read in conjunction with
                   the Consolidated Financial Statements of Oregon Metallurgical
                   Corporation:

                                                                           Page
                                                                           ----

                     Report of Independent Accounts on Financial
                     Statements Schedules.................................. S-1
                     Schedule II:  Valuation and Qualifying Accounts....... S-2

                   Schedules not listed above have been omitted because they are
                   not applicable, or are not required, or the information
                   required to be set forth therein is included in the
                   Consolidated Financial Statements or Notes thereto.

               3.  EXHIBITS:  The Exhibit Index of this Annual Report on Form
                   10-K lists the exhibits that are filed as part of this
                   Report.

          (b)  Reports on Form 8-K:

               No reports on Form 8-K were filed by the Company during the
               fourth quarter ended December 31, 1996.




                                       19
<PAGE>

                       [Letterhead of Coopers & Lybrand L.L.P.]



REPORT OF INDEPENDENT ACCOUNTANTS ON
   FINANCIAL STATEMENT SCHEDULE





Our report on the consolidated financial statements of Oregon Metallurgical
Corporation and subsidiaries has been incorporated by reference in this Form
10-K from the 1996 Annual Report to Shareholders of Oregon Metallurgical
Corporation and subsidiaries. In connection with our audits of such financial
statements, we have also audited the related financial statement schedule listed
in item 14(a) of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information required to be
included therein.


                            COOPERS & LYBRAND L.L.P.



Eugene, Oregon
February 4, 1997


                                      S-1

<PAGE>



                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                        OREGON METALLURGICAL CORPORATION

                                 (In Thousands)

<TABLE>
<CAPTION>
                                                       ADDITIONS
                                     BALANCE AT        CHARGED TO                    BALANCE
                                     BEGINNING         COSTS AND                     AT END
DESCRIPTION                          OF YEAR           EXPENSES       DEDUCTIONS     OF YEAR
-----------                          ----------        ----------     ----------     -------

<S>                                    <C>             <C>            <C>            <C>
Allowance for Doubtful Accounts:

Year Ended
December 31, 1996                      $1,257          $  227         $(990)(a)      $  494
                                       ------          ------         ------         ------

Year Ended
December 31, 1995                      $1,024          $  237         $  (4)(a)      $1,257
                                       ------          ------         ------         ------

Year Ended
December 31, 1994                      $  117          $  962         $ (55)(a)      $1,024
                                       ------          ------         ------         ------
<FN>
<F-A>  Amounts written off, less recoveries
</FN>
</TABLE>


                                      S-2

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                         OREGON METALLURGICAL CORPORATION


Date:  March 19, 1997                   /s/ Carlos E. Aguirre
                                         ---------------------------------
                                         Carlos E. Aguirre, President and
                                         Chief Executive Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated effective on March 19, 1997.

                                         PRINCIPAL FINANCIAL OFFICER,
                                         AND PRINCIPAL ACCOUNTING OFFICER

                                         /s/ Dennis P. Kelly
                                         ---------------------------------
                                         Dennis P. Kelly, Vice President,
                                         Finance and Treasurer

                                         PRINCIPAL EXECUTIVE OFFICER


                                         /s/ Carlos E. Aguirre
                                         ---------------------------------
                                         Carlos E. Aguirre, President,
                                         Chief Executive Officer and
                                         Director

                                         BOARD OF DIRECTORS

                                         /s/ Howard T. Cusic*
                                         ---------------------------------
                                         Howard T. Cusic, Chairman of the Board

                                         /s/ Gilbert E. Bezar*
                                         ---------------------------------
                                         Gilbert E. Bezar, Director

                                         /s/ Thomas B. Boklund*
                                         ---------------------------------
                                         Thomas B. Boklund, Director

                                         /s/ Roger V. Carter*
                                         ---------------------------------
                                         Roger V. Carter, Director

                                         /s/ Nicholas P. Collins*
                                         ---------------------------------
                                         Nicholas P. Collins, Director

                                         /s/ David H. Leonard*
                                         ---------------------------------
                                         David H. Leonard, Director

                                         /s/ James S. Paddock*
                                         ---------------------------------
                                         James S. Paddock, Director

                                         /s/ James R. Pate*
                                         ---------------------------------
                                         James R. Pate, Director

*  /s/ Dennis P. Kelly
   -------------------------------------
   By: Dennis P. Kelly, Attorney-In-Fact

<PAGE>

                                  EXHIBIT LIST
EXHIBIT
  NO.         DESCRIPTION

2.1           Stock and Asset Purchase Agreement between Kamyr, Inc. and New TI,
              Inc.  (Filed as exhibit 2.1 to Form 8-K dated September 20, 1994)

3.1           Restated Articles of Incorporation.  (Filed as exhibit 3.1 to Form
              10-K for the year ended December 31, 1993)

3.2           Restated Bylaws.  (Filed as exhibit 3.2 to Form 10-K for the year
              ended December 31, 1994)

3.3           Amendment to Restated Articles of Incorporation, dated April 28,
              1995.  (Filed as exhibit 3.1 to Form 10-Q for the quarter ended
              June 30, 1995)

4.1           Specimen Common Stock Certificate.  (Previously filed)

4.2           Warrant Agreement (Nontransferable Warrant) between James S.
              Paddock and the Company, dated September 19, 1994.  (Filed as
              exhibit 4.1 to Form 8-K/A-2 dated September 20, 1994)

10.1          Employee Stock Ownership Plan of the Company.  (Filed as exhibit
              4.3 to Form S-8 Registration Statement 33-18650) *

10.2          Amendment to Employee Stock Ownership Plan of the Company. (Filed
              as exhibit 10.1 to Form 10-Q for the quarter ended March 31,
              1996) *

10.3          Trust Agreement under Oregon Metallurgical Corporation Employee
              Stock Ownership Plan.  (Filed as exhibit 10.2 to Form 10-K for the
              year ended December 31, 1995) *

10.4          Employment Agreement dated July 1, 1996  between the Company and
              Carlos E. Aguirre. *

10.5          Employment Agreement dated October 11, 1993 between the Company
              and Dennis P. Kelly.  (Filed as exhibit 10.4 to Form 10-K for the
              year ended December 31, 1994) *

10.6          Employment Agreement dated October 8, 1993 between the Company and
              Steven H. Reichman.  (Filed as exhibit 10.5 to Form 10-K for the
              year ended December 31, 1994) *

10.7          Employment Agreement dated February 20, 1995 between the Company
              and John P. Byrne.  (Filed as exhibit 10.6 to Form 10-K for the
              year ended December 31, 1994) *

10.8          Sales Agreement between RMI Titanium Company and the Company.
              (Filed as exhibit 10 to Form 10-Q/A-2 for the quarter ended
              September 30, 1994) (Confidential Treatment Requested)

10.9          Corporate Organization and Shareholders Agreement Among James S.
              Paddock, the Company and New TI, Inc., dated September 19, 1994.
              (Filed as exhibit 10.1 to the Form 8-K/A-2 dated September 20,
              1994) *

10.10         OREMET Employment Agreement between James S. Paddock and the
              Company, dated September 19, 1994. (Filed as exhibit 10.2 to the
              Form 8-K/A-2 dated September 20, 1994) *

10.11         Employment Agreement between James S. Paddock and New TI, Inc.,
              dated September 19, 1994.  (Filed as exhibit 10.3 to the Form
              8-K/A-2 dated September 20, 1994) *

10.12         Titanium Tetrachloride Agreement between SCM Chemicals, Inc. and
              the Company, dated August 11, 1990. (Filed as exhibit 10.14 to
              Form 10-K for the year ended December 31, 1994)
<PAGE>

10.13         Subordinated promissory note between New TI, Inc. and the former
              Titanium Industries, Inc., dated September 19, 1994.  (Filed as
              exhibit 10.15 to Form 10-K for the year ended December 31, 1994)

10.14         Employment Agreement between the Company and David G. Floyd, dated
              December 18, 1995.  (Filed as exhibit 10.16 to Form 10-K for the
              year ended December 31, 1995) *

10.15         Oregon Metallurgical Corporation Long Term Incentive Compensation
              Stock Appreciation Rights Plan. (Filed as exhibit 10.17 to Form
              10-K for the year ended December 31, 1995) *

10.16         Oregon Metallurgical Corporation Savings Plan. (Filed as exhibit
              10.18 to Form 10-K for the year ended December 31, 1995) *

10.17         Amendment to Oregon Metallurgical Corporation Savings Plan. (Filed
              as exhibit 10.1 to Form 10-Q for the period ended September 30,
              1996) *

10.18         Trust Agreement Under Oregon Metallurgical Corporation Savings
              Plan. (Filed as exhibit 10.19 to Form 10-K for the year ended
              December 31, 1995) *

10.19         Loan and Security Agreement dated as of September 19, 1994 among
              the Company, New TI, Inc. and Bank of America Illinois.  (Filed as
              exhibit 10.7 to Form 10-K for the year ended December 31, 1994)

10.20         Amendment No. 1 dated as of March 17, 1995, to Loan and Security
              Agreement with Oregon Metallurgical Corporation and Titanium
              Industries, Inc., dated as of September 19, 1994.  (Filed as
              exhibit 10.16 to the Form 10-Q for the quarter ended March 31,
              1995)

10.21         Amendment No. 2 dated as of June 30, 1995, to Loan and Security
              Agreement with Oregon Metallurgical Corporation and Titanium
              Industries, Inc., dated as of September 19, 1994.  (Filed as
              exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 1995)

10.22         Amendment No. 3 dated as of March 14, 1996, to Loan and Security
              Agreement with Oregon Metallurgical Corporation and Titanium
              Industries, Inc., dated as of September 19, 1994.  (Filed as
              exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 1996)

10.23         Amendment No. 4 dated as of May 1, 1996, to Loan and Security
              Agreement with Oregon Metallurgical Corporation and Titanium
              Industries, Inc., dated as of September 19, 1994.  (Filed as
              exhibit 10.1 to the Form 10-Q for the quarter ended June 30, 1996)

11.1          Statement re:  Computation of Per Share Earnings.

13.1          Portions of the 1996 Annual Report to Shareholders which have been
              incorporated by reference into this Form 10-K. Except for such
              portions expressly incorporated by reference, the 1996 Annual
              Report to Shareholders is not deemed to be filed as part of this
              Form 10-K.

21.1          Subsidiaries of the Company.

23.1          Consent of Independent Accountants.

24.1          Power of Attorney.

27            Financial Data Schedule.

*  Management contract or compensatory plan.