FORM 10-Q


	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C.  20549


(Mark One)
  X    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

For the quarterly period ended            March 27, 1999                 
 

	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 No.  0-22416 

	KENTUCKY ELECTRIC STEEL, INC.
	(Exact name of Registrant as specified in its charter)

            Delaware                                    61-1244541    
(State or other jurisdiction of                      (I.R.S. Employer  
incorporation or organization)                         Identification 
                                                           Number)

	   P. O. Box 3500, Ashland, Kentucky 41105-3500  
	(Address of principal executive office, Zip Code)

	                (606) 929-1222                   


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       

The number of shares outstanding of each of the issuer's classes of common 
stock, as of May 11, 1999, is as follows:					

4,062,085 shares of voting common stock, par value $.01 per share.

<PAGE


	KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY


	TABLE OF CONTENTS



                                                                         
 Page

PART I.  FINANCIAL INFORMATION 

   Item 1 - Financial Statements 

 	      Condensed Consolidated Balance Sheets .............          3
           
            Condensed Consolidated Statements of Operations ...          4
         
            Condensed Consolidated Statements of Cash Flows ...          5
          
            Notes to Condensed Consolidated Financial Statements       6-8 
       

   Item 2 - Management's Discussion and Analysis of Financial
              Condition and Results of Operations .............       9-12

   Item 3 - Quantitative and Qualitative Disclosure About Market
	        Risk ............................................         12

 PART II.    OTHER INFORMATION 

   Item 4 - Submission of Matters to a Vote of Seciruty-Holders..       14

   Item 6 - Exhibits and Reports on Form 8-K .................         14


            SIGNATURES  ......................................         15

<PAGE

<TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
                                   

                 Mar. 27,   Sept. 26,
                                                       1999       1998   
 
   <S>                                               <C>         <C>
                       ASSETS
   CURRENT ASSETS
     Cash and cash equivalents                       $    136   $    150
     Accounts receivable, less allowance for doubtful
       accounts and claims of $405 at March 27, 1999   
       and $460 at September 26, 1998                  13,438     12,037
     Inventories                                       17,958     20,363
     Operating supplies and other current assets        5,409      5,206
     Deferred tax assets                                  607        648 

       Total current assets                            37,548     38,404

   PROPERTY, PLANT AND EQUIPMENT
     Land and buildings                                 4,607      4,532
     Machinery and equipment                           42,871     42,004
     Construction in progress                           4,033      3,031
     Less - accumulated depreciation                  (16,499)   (14,772)
                                                                 
          Net property, plant and equipment            35,012     34,795

   DEFERRED TAX ASSETS                                  6,383      5,990

   OTHER ASSETS                                         1,174      1,062

          Total assets                               $ 80,117   $ 80,251

        LIABILITIES AND SHAREHOLDERS' EQUITY
   CURRENT LIABILITIES
     Advances on line of credit                      $ 13,966   $ 11,397
     Accounts payable                                   6,685      7,056
     Capital expenditures payable                         515        857
     Accrued liabilities                                3,108      3,834
     Environmental liabilities                            957        982
     Current portion of long-term debt                    125        125
                                                              
          Total current liabilities                    25,356     24,251
                                                          
   LONG-TERM DEBT                                      20,000     20,000
                                                              
   OTHER LIABILITIES                                      951        808

          Total liabilities                            46,307     45,059
                                     
   SHAREHOLDERS' EQUITY
     Preferred stock, $.01 par value, 1,000,000
       shares authorized, no shares issued               -          -
     Common stock, $.01 par value, 15,000,000       
       shares authorized 4,994,666 and 4,985,937                         
   
       share issued, respectively                          50         50
     Additional paid-in capital                        15,701     15,671
     Less treasury stock - 932,581 and 526,996    
       shares at cost, respectively                    (4,272)    (3,254)
     Deferred compensation                                (52)       (73)
     Retained earnings                                 22,383     22,798

          Total shareholders' equity                   33,810     35,192

          Total liabilities and shareholders' equity $ 80,117   $ 80,251 
 

<FN>
See notes to condensed consolidated financial statements

</TABLE>
<TABLE

KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)


                               Three Months Ended      Six Months Ended  
                               Mar. 27,   Mar. 28,    Mar. 27,   Mar. 28,
                                 1999       1998        1999       1998  
 [S]                            [C]        [C]         [C]        [C]    
                      
NET SALES                    $  25,952   $  29,610   $ 51,576   $ 55,630 
COST OF GOODS SOLD              23,991      26,187     47,540     49,867 
 
  Gross profit                   1,961       3,423      4,036      5,763 
 
SELLING AND ADMINISTRATIVE 
  EXPENSES                       1,944       1,901      3,633      3,589 
 
  Operating income                  17       1,522        403      2,174 
 

INTEREST INCOME AND OTHER           25          14         50         24 
INTEREST EXPENSE                  (567)       (627)    (1,120)    (1,222)

  Income (loss) before 
     income taxes                 (525)        909       (667)       976 
 
                                
PROVISION (CREDIT) FOR 
  INCOME TAXES                    (198)        346       (252)       372

  Net income (loss)           $   (327)   $    563   $   (415)  $    604
                          
NET INCOME (LOSS) PER COMMON 
  SHARE - BASIC AND DILUTED   $   (.08)   $    .12   $   (.10)  $    .13

WEIGHTED AVERAGE SHARES 
  OUTSTANDING - BASIC        4,060,355   4,626,033  4,103,766  4,626,208

WEIGHTED AVERAGE SHARES 
  OUTSTANDING - DILUTED      4,060,355   4,630,520  4,103,766  4,631,502














[FN]
See notes to condensed consolidated financial statements

[/TABLE]

<TABLE>
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)
           

                                                      Six Months Ended   
                                                    Mar. 27,     Mar. 28,
                                                      1999         1998  
<S>                                                 <C>            <C>
Cash Flows From Operating Activities:
  Net income (loss)                                 $   (415)   $    604 
  Adjustments to reconcile net income (loss) to 
    net cash flows from operating activities:
      Depreciation and amortization                    1,778       1,832
      Change in deferred taxes                          (393)        687 
      Change in other                                      1        (113)
      Change in current assets and current
        liabilities:
          Accounts receivable                         (1,401)     (3,422)
          Inventories                                  2,405      (2,498) 
          Operating supplies and other                             
            current assets                              (203)       (690)
          Refundable income taxes                       -            900 
          Deferred tax assets                             41         (95)
          Accounts payable                              (371)       (215)
          Accrued liabilities                           (726)       (255)
          Environmental liabilities                      (25)       -    

          Net cash flows from operating activities       691      (3,265)

Cash Flows From Investing Activities:
  Capital expenditures                                (1,944)     (1,852)
  Change in capital expenditures payable                (342)        364

          Net cash flows from investing activities    (2,286)     (1,488)

Cash Flows From Financing Activities:
  Net advances on line of credit                       2,569       4,758 
  Purchases of treasury stock                         (1,018)        (25)
  Issuance of common stock                                30          21 

          Net cash flows from financing activities     1,581       4,754

          Net increase (decrease) in           
            cash and cash equivalents                    (14)          1 

Cash and Cash Equivalents at Beginning of Period         150         127

Cash and Cash Equivalents at End of Period          $    136    $    128

Interest Paid, net of amount capitalized            $  1,117    $  1,194

Income Taxes Paid                                   $    100    $   -    





<FN>
            See notes to condensed consolidated financial statement

</TABLE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY


(1)  Basis of Presentation

The accompanying unaudited condensed consolidated financial 
statements represent Kentucky Electric Steel, Inc. and its wholly-
owned subsidiary, KESI Finance Company, (collectively the Company). 
All significant intercompany accounts and transactions have been 
eliminated. These statements have been prepared in accordance with 
generally accepted accounting principles for interim financial 
information and the instructions to Form 10-Q and Article 10 of 
Regulation S-X.  Accordingly, they do not include all of the 
information and footnotes required by generally accepted accounting 
principles for complete financial statements.  In the opinion of 
management, all adjustments (consisting of normal recurring 
adjustments) considered necessary for a fair presentation have been 
included.  Operating results for the three-month and six-month 
periods ended March 27, 1999, are not necessarily indicative of the 
results that may be expected for the year ending September 25, 1999. 
 For further information, refer to the financial statements and 
footnotes thereto included in the Company's annual report on Form 10-
K for the year ended September 26, 1998.

(2)  Accounting Policies

     Fiscal Year End
The Company's fiscal year ends on the last Saturday of 
September.  
     
     Property, Plant, Equipment and Depreciation
     Property, plant and equipment is recorded at cost, less 
accumulated depreciation. For financial reporting purposes, 
depreciation is provided on the straight-line method over the 
estimated useful lives of the assets, generally 3 to 12 years for 
machinery and equipment and 15 to 30 years for buildings and 
improvements.  Depreciation for income tax purposes is computed using 
accelerated methods.  Expenditures for maintenance and repairs are 
charged to expense as incurred.  Expenditures for equipment renewals 
which extend the useful life of any asset are capitalized.  

	Comprehensive Income
	In June 1997, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 130 (SFAS No. 130), 
"Reporting Comprehensive Income", which established standards for 
reporting and display of comprehensive income and its components 
(revenues, expenses, gains and losses) in a full set of general-
purpose financial statements.  The Company adopted SFAS No. 130 in 
the quarter ended December 26, 1998.  For the periods disclosed, 
comprehensive income is equal to net income reported.

(3)  Inventories

	Inventories at March 27, 1999 and September 26, 1998 consist of 
the following ($000's): 
                                            Mar. 27,      Sept. 26, 
                                         1999          1998   
 
      Raw materials                         $  2,402      $  1,984 
      Semi-finished and finished goods        15,556        18,379
           Total inventories                   $ 17,958      $ 20,363 


(4)	Earnings Per Share

		Statement of Financial Accounting Standards No. 128 (SFAS No. 
128) related to earnings per share requires dual presentation of 
basic and diluted E.P.S. on the face of the income statement for all 
entities with 
complex capital structures.  The Company adopted SFAS No. 128 during 
the first quarter of fiscal 1998. The following is the reconciliation 
of the numerators and denominators of the basic and diluted earnings 
per share computations.
<TABLE>
                                 For the Three                For the Three
                                 Months Ended                 Months Ended  
                                March 27, 1999                March 28, 1998        
                                               Per                            Per   
                          Income              Share     Income               Share 
                          (Loss)     Shares   Amount    (Loss)    Shares     Amount
<S>                       <C>        <C>      <C>       <C>       <C>        <C>
Amounts for Basic        
    Earnings Per Share    $(327)   4,060,355  $(.08)    $   563   4,626,033  $.12 

Effect of Dilutive 
    Securities Options       -          -        -        -           4,487    -    
  
Amounts for Diluted       
    Earnings Per Share    $(327)   4,060,355  $(.08)   $   563    4,630,520  $.12



                               For the Six                    For the Six
                               Months Ended                   Months Ended  
                               March 27, 1999                 March 28, 1998        
                                               Per                             Per
                         Income               Share      Income               Share 
                         (Loss)     Shares    Amount     (Loss)     Shares    Amount
<S>                      <C>        <C>       <C>       <C>         <C>      <C>
Amounts for Basic       
     Earnings Per Share  $(415)   4,103,766  $(.10)     $   604    4,626,208  $ .13 

Effect of Dilutive 
     Securities Options     -          -        -          -           5,294     -  
  
Amounts for Diluted
    Earnings Per Share   $(415)   4,103,766  $(.10)     $   604    4,631,502  $ .13

</TABLE>
		The following options were not included in the computation of 
diluted earnings per share because to do so would have been 
antidilutive for the applicable period:

	                                  March 27, 1999     March 28, 1998
		Transition stock options             89,343           141,081 
		Employee stock options              469,860           305,476 



(5)  Environmental Liabilities

The Company's melt shop operations were shut down for twelve 
days during the third quarter of fiscal 1997 in order to 
decontaminate its baghouse facilities after detection of a 
radioactive substance in the baghouse dust, a by-product of the 
melting process.

The $1.0 million in environmental liabilities recorded as a 
current liability on the balance sheet represents final payment due 
an environmental services company for treatment and disposal of the 
contaminated baghouse dust. Payment for the disposal will occur 
within the next twelve months.  Although it is possible that the 
ultimate disposal costs may change from current estimates, the effect 
of the change, if any, is not expected to be material to the 
financial statements due to the Company having applicable insurance 
coverage.


(6)  Commitments and Contingencies

The Company has various commitments for the purchase of 
materials, supplies and energy arising in the ordinary course of 
business.

The Company is subject to various claims, lawsuits and 
administrative proceedings arising in the ordinary course of business 
with respect to commercial, product liability and other matters, 
which seek remedies or damages. The Company believes that any 
liability that may ultimately be determined will not have a material 
effect on its financial position or results of operations.

The Company generates both hazardous wastes and non-hazardous 
wastes which are subject to various governmental regulations.  
Estimated costs to be incurred in connection with environmental 
matters are accrued when the prospect of incurring costs for testing 
or remedial action is deemed probable.  The Company is not aware of 
any material asserted or unasserted environmental claims against the 
Company and no accruals for such matters have been recorded in the 
accompanying balance sheets except as disclosed in Note 5.  However, 
discovery of unknown conditions could result in the recording of 
accruals in the periods in which they become known.



KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS


General.  The Company manufactures special bar quality alloy and 
carbon steel bar flats to precise customer specifications for sale in 
a variety of niche markets.  Its primary markets are manufacturers of 
leaf-spring suspensions, cold drawn bar converters, flat bed truck 
trailer manufacturers and steel service centers.

Net Sales.  Net sales decreased $3.6 million (12.4%) in the 
second quarter of fiscal 1999 to $26.0 million, as compared to $29.6 
million for the second quarter of fiscal 1998. Net sales for the six 
months ended March 27, 1999 decreased $4.0 million (7.3%) to $51.6 
million, as compared to $55.6 million for the six months ended March 
28, 1998. The decrease in sales is attributed to a decrease in 
shipments and a decrease in average selling price. Tons shipped 
decreased 7.9% and 4.8% in the second quarter and first six months of 
fiscal 1999, respectively, as compared to the second quarter and 
first six months of fiscal 1998. The average selling price per ton 
was down 4.8% and 2.6% for the second quarter and first six months of 
fiscal 1999, respectively.  The decrease in shipments resulted from 
lower production due to the scheduled 10-day maintenance outage taken 
in late December and early January. The decrease in average selling 
price for the second quarter and first six months is primarily 
attributed to market price reductions.

Cost of Goods Sold.  Cost of  goods  sold decreased $2.2 million 
(8.4%) in the second quarter of fiscal 1999 to $24.0 million, as 
compared to $26.2 million for the second quarter of fiscal 1998.  As 
a percentage of net sales, cost of goods sold increased from 88.4% 
for the second quarter of fiscal 1998 to 92.4% for the second quarter 
of fiscal 1999. Cost of goods sold for the six months ended March 27, 
1999 decreased $2.3 million (4.7%) to $47.6 million as compared to 
$49.9 million for the six months ended March 28, 1998. As a 
percentage of net sales, cost of goods sold increased from 89.6% for 
the six months ended March 28, 1998 to 92.2% for the six months ended 
March 27, 1999.  The decrease in cost of goods sold for the second 
quarter and first six months of fiscal 1999 from the comparable 
periods in fiscal 1998 is primarily due to the decrease in shipments 
(as discussed above).  The per ton cost of tons shipped was 
approximately the same in 1998 and 1999 with lower scrap costs being 
offset by higher conversion costs.  The increase in conversion costs 
is primarily attributed to lower production due to the 10-day 
maintenance outage in late December and early January and higher 
repair and maintenance expenses.  The increase in cost of goods sold 
as a percentage of net sales is primarily attributed to lower selling 
prices and lower shipments.

Gross Profit (Loss).  As a result of the above, the second 
quarter of fiscal 1999 reflected a gross profit of $2.0 million as 
compared to a gross profit of $3.4 million for the second quarter of 
fiscal 1998.  As a percentage of net sales, gross profit decreased 
from 11.6% for the second quarter of fiscal 1998 to 7.6% for the 
second quarter of fiscal 1999.  

		Similarly, the six months ended March 27, 1999 reflected a gross 
profit of $4.0 million as compared to a gross profit of $5.8 million 
for the six months ended March 28, 1998. As a percentage of net 
sales, gross profit decreased from 10.4% for the first six months of 
fiscal 1998 to 7.8% for the first six months of fiscal 1999.

Selling and Administrative Expenses.  Selling and administrative 
expenses include salaries and benefits, corporate overhead, 
insurance, sales commissions and other expenses incurred in the 
executive, sales and 
marketing, shipping, personnel, and other administrative departments. 
Selling and administrative expenses increased slightly by 
approximately $43,000 and $44,000 for the three months and six months 
ended March 27, 1999, as compared to the same periods in fiscal 1998. 
As a percentage of net sales, such expenses increased from 6.4% for 
the second quarter of fiscal 1998 to 7.5% for the second quarter of 
fiscal 1999. As a percentage of net sales, such expenses increased 
from 6.5% for the six months ended March 28, 1998 to 7.0% for the six 
months ended March 27, 1999.  The increase, as a percentage of sales, 
is primarily the result of the decrease in net sales (as discussed 
above) for the quarter and six months ended March 27, 1999. 

Operating Income (Loss).  For the reasons described above, the 
second quarter of fiscal 1999 reflected operating income of $17,000 
as compared to an operating income of $1.5 million for the second 
quarter of fiscal 1998. As a percentage of net sales, operating 
income decreased from 5.1% in the second quarter of 1998 to .1% in 
the second quarter of 1999.


		Similarly, the six months ended March 27, 1999 reflected an 
operating income of $.4 million as compared to operating income of 
$2.2 million for the six months ended March 28, 1998. As a percentage 
of net sales, operating income decreased from 3.9% for the six months 
ended March 28, 1998 to .8% for the six months ended March 27, 1999.

Interest Expense.  Interest expense decreased by $60,000 for the 
three months ended March 27, 1999 from $627,000 for the second 
quarter of fiscal 1998 to $ 567,000 for the second quarter of fiscal 
1999. Interest expense decreased by $102,000 for the six months ended 
March 27, 1999 from $1.2 million for the six months ended March 28, 
1998 to $1.1 million for the six months ended March 27, 1999.  The 
decrease in interest expense for the second quarter and first six 
months of fiscal 1999 is due to a decrease in the average amount 
outstanding and a slight decline in the interest rate on the 
Company's line of credit.

Net Income.  As a result of the above, the second quarter of 
fiscal 1999 reflected a net loss of $.3 million as compared to net 
income of $.6 million for the second quarter of fiscal 1998. 

Similarly, the six months ended March 27, 1999 reflected a net 
loss of $.4 million as compared to net income of $.6 million for the 
six months ended March 28, 1998.

Liquidity and Capital Resources

		The cash flows provided by operating activities were $.7 million 
for the first six months of fiscal 1999 as compared to cash flows 
used of $3.3 million for the first six months of fiscal 1998.  The 
first six months of fiscal 1999 reflect the decrease in inventories 
offset somewhat by an increase in accounts receivable.  The cash 
flows used by operating activities for the first six months of fiscal 
1998 reflect the increases in accounts receivable and inventories 
(due primarily to the increased level of sales and production).

		The cash flows used by investing activities were $2.3 million 
for the first six months of fiscal 1999 as compared to $1.5 million 
for the first six months of fiscal 1998.  The cash flows used by 
investing activities for the first six months of fiscal 1999 consist 
of $2.0 million in capital expenditures and a reduction in capital 
expenditures payable of $.3 million.  The cash flows used by 
investing activities for the first six months of fiscal 1998 consist 
of capital expenditures of $1.9 million offset somewhat by an 
increase in capital expenditures payable of $.4 million.


		The cash flows provided from financing activities were $1.6 
million for the first six months of fiscal 1999 as compared to $4.8 
million for the first six months of fiscal 1998.  The cash flows 
provided from financing activities for the first six months of fiscal 
1999 reflect net advances of $2.6 million on the Company's line of 
credit which were used primarily for capital expenditures as 
discussed above and $1.0 million used for the purchase of treasury 
stock.  The cash flows provided from financing activities for the 
first six months of fiscal 1998 reflect net advances of $4.8 million 
on the Company's line of credit which were used primarily for working 
capital needs and capital expenditures.          


Working capital at March 27, 1999 was $12.2 million as compared 
to $14.2 million at September 26, 1998, and the current ratio was 1.5 
to 1.0 as compared to 1.6 to 1.0. 

The Company's primary ongoing cash requirements are for current 
capital expenditures.  The two sources for the Company's liquidity 
are internally generated funds and its bank credit facility.  The 
Company has $14.0 million in borrowings outstanding on its line of 
credit as of March 27, 1999.  The Company believes that the unused 
portion of its $24.5 million bank credit facility and internally 
generated funds will be sufficient to fund its ongoing cash needs.


Year 2000 Compliance

The following Year 2000 discussion is provided in response to the 
Securities and Exchange Commission's recent interpretative statement 
expressing its view that public companies should include detailed 
discussion of Year 2000 issues in their MD&A.

The Company is currently assessing the issues confronting it related 
to the "Year 2000 problem", which is the result of the inability of many 
computer systems and electronic equipment to distinguish the Year 2000 
from the Year 1900.  The Company is following an organized program to 
assure the Company's information technology systems and related 
infrastructure will be Year 2000 compliant.  The Company has divided its 
Year 2000 issues into three areas including: computer hardware and 
software business systems, manufacturing process control devices and 
related systems, and facility support systems.  The Company's Year 2000 
program include three phases: (1) an audit and assessment phase designed 
to identify Year 2000 issues; (2) a modification phase designed to 
correct Year 2000 issues (this phase includes testing of individual 
modifications as they are installed); and (3) a testing phase to test 
entire systems for Year 2000 compliance after individual modifications 
have been installed and tested.

The Company has completed the audit and assessment phase for the 
computer hardware and software business systems and the facility support 
systems.  The audit and assessment phase for the manufacturing process 
control devices and related systems is substantially completed.

The Company has completed the modification and testing phases for 
its computer hardware and software business systems. Modifications and 
final testing of the facility support systems are expected to be 
completed by June 30, 1999.

The Company currently expects to complete the modification phase for 
its manufacturing process control devices and related systems during the 
second calendar quarter of 1999. After all modifications have been made, 
appropriate testing of the system is expected to be performed prior to 
July 31, 1999.


Management has estimated that the cost for correction of Year 2000 
issues, including any software and hardware changes and the cost of 
personnel involved in working on the project, will be approximately 
$300,000.  The Company estimates that 40% of the total cost has been 
spent to date.  The Year 2000 updates are being funded out of funds 
generated from operations and account for less than 30% of the Company's 
information technology budget.

The Company's Year 2000 program includes investigation of the Year 
2000 readiness status of our major vendors and customers.  The Company 
is using letters, questionnaires and protocols to determine its vendors' 
and customers' 2000 readiness.  The Company has contacted all major 
vendors including energy and scrap suppliers and external service 
providers including banks, insurance companies and phone service 
providers to determine their Year 2000 compliance status.  If any such 
vendor indicates that they will not be Year 2000 compliant, the Company 
will develop contingency plans to address the issue, which may include 
identifying and developing other vendors.  The Company has also 
contacted significant customers to determine their progress towards Year 
2000 compliance and to identify issues, if any, which might develop if 
a customer is unable to become year 2000 compliant on a timely basis. 
 If any issues are identified, the Company expects to develop procedures 
to permit the Company to continue to supply the customer despite Year 
2000 issues.

The Company does not have a contingency plan to operate in the event 
that its business systems are not Year 2000 compliant.  As our work 
progresses, if the results of our testing suggest that there is a 
significant risk that the business systems might not be Year 2000 
compliant, a contingency plan will be developed.


Outlook

Management continues to see positive results from the major 
maintenance outage with significant increases in productivity in March 
and April.  During the second quarter, both electric arc furnaces were 
overhauled, the new wall burner operation was improved, and several 
other capital and major maintenance projects were completed.  Pricing in 
the Company's markets is stable and the Company's current booking and 
shipping levels increased in late March and April.  Management is 
optimistic that the improvements in productivity combined with 
increasing shipment levels and stable prices will improve profitability 
in the third fiscal quarter.


Quantitative and Qualitative Disclosure About Market Risk

Management does not believe that there is any material market risk 
exposure with respect to derivative or other financial instruments that 
would require disclosure under this item.


Forward-Looking Statements

The matters discussed or incorporated by reference in this Report 
on Form 10-Q that are forward-looking statements (as defined in the 
Private Securities Litigation Reform Act of 1995) involve risks and 
uncertainities. These risks and uncertainities include, but are not 
limited to, the reliance on truck and utility vehicle industry; excess 
industry capacity; product demand and industry pricing; volatility of 
raw material costs, especially steel scrap; intense foreign and domestic 
competition; management's estimate of niche market data; the cyclical 
and capital intensive nature of the industry; and cost of compliance 
with environmental regulations.  These risks 
and uncertainities could cause actual results of the Company to differ 
materially from those projected or implied by such forward-looking 
statements.

  Without limiting the foregoing, various statements in the previous 
discussion of Year 2000 are likewise forward-looking statements.  These 
statements include statements of the Company's expectations, statements 
with regard to schedules and expected completion dates and statements 
regarding expected Year 2000 compliance.  These forward-looking 
statements are subject to various risk factors which may materially 
affect the Company's efforts to achieve Year 2000 compliance.  These 
risk factors include the inability of the Company to complete the plans 
and modifications that it has identified, the failure of software 
vendors to deliver the upgrades and repairs to which they have 
committed, the wide variety of information technology systems and 
components, both hardware and software, that must be evaluated and the 
large number of vendors and customers with which the Company interacts. 
 The Company's assessments of the effects of Year 2000 on the Company 
are based, in part, upon information received from third parties and the 
Company's reasonable reliance on that information. Therefore, the risk 
that inaccurate information is supplied by third parties upon which the 
Company reasonably relied must be considered as a risk factor that might 
affect the Company's Year 2000 efforts.  The Company is attempting to 
reduce the risks by utilizing an organized approach, extensive testing, 
and allowance of ample contingency time to address issues identified by 
tests.
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	PART II. - OTHER INFORMATION

   

ITEM 4.     Submission of Matters to a Vote of Security-Holders
		
The annual meeting of shareholders was held on February 
2, 1999.  In connection with the meeting, proxies were 
solicited pursuant to the Securities Exchange Act.  The 
following are the voting results on proposals considered 
and voted upon at the meeting, all of which were 
described in the proxy statement.

1. The nominees  for director were elected.  The vote 
was as
	             follows:
                                                              Term
	                                          For     Withheld  Expires

                 Clifford R. Borland     3,825,847   147,303    2002
                 David C. Struve         3,825,954   147,196    2002
	
               2. The proposal to adopt the Kentucky Electric Steel, 
Inc. 1998 Employee Stock Option/Restricted Stock 
Plan was approved.  (For 1,544,825; Against 
1,385,781; Abstain 37,163; Non-Vote 1,005,381) 
	
               3. The  proposal to  ratify the Board of Directors'    
                  appointment of  Arthur   Andersen  LLP  as  the     
                  Company's independent public  accountants  for the  
                  fiscal year ending September 27, 1999. (For 3,938,700; 
                  Against 7,735; Abstain 26,715)
        
ITEM 6.     Exhibits and Reports on Form 8-K                    

A)  Exhibits  

                3.1   - Certificate of Incorporation of Kentucky   
                         Electric Steel, Inc., filed as Exhibit 3.1 
                         to Registrant's Registration Statement on 
                         Form S-1 (No. 33-67140), and incorporated by 
                         reference herein.

                3.2   - By-Laws of Kentucky Electric Steel, Inc.,  
                        filed as Exhibit 3.2 to Registrant's       
                        Registration Statement on Form S-1 (No. 33- 
                        67140), and incorporated by reference herein.
    
                27    - Financial Data Schedule

B)  Reports on Form 8-K - None.


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SIGNATURES

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




DATED:  May 11, 1999                KENTUCKY ELECTRIC STEEL, INC.  
                                             (Registrant) 

                                        William J. Jessie          
                                  William J. Jessie, Vice President,
                                    Secretary, Treasurer, and
                                    Principal Financial Officer

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