10-Q

	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            December 27, 1997                

	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 February 9, 1998, is as follows:

4,625,361 shares of voting common stock, par value $.01 per share.




	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 .................     9-10


PART II.    OTHER INFORMATION 

   Item 6 - Exhibits and Reports on Form 8-K ......................       11


            SIGNATURES  ...........................................       12




KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
                              CONDENSED CONSOLIDATED BALANCE SHEETS
                                       (Dollars in Thousands)
                                             (Unaudited)
                                                              Dec. 27,      Sept. 27,
                                                               1997            1997   
                                                                      
                       ASSETS
   CURRENT ASSETS
     Cash and cash equivalents                               $    126        $    127
     Accounts receivable, less allowance for doubtful
       accounts and claims of $435 at December 27, 1997
       and $470 at September 27, 1997                          13,178          11,577
     Insurance claim receivable                                   900             900
     Inventories                                               19,486          16,538
     Operating supplies and other current assets                5,670           4,802
     Refundable income taxes                                      900             900
     Deferred tax assets                                          418             457
                                                              -------         ------- 
       Total current assets                                    40,678          35,301
                                                              -------         -------
   PROPERTY, PLANT AND EQUIPMENT
     Land and buildings                                         4,448           4,448
     Machinery and equipment                                   40,723          40,301
     Construction in progress                                   2,376           2,012
     Less - accumulated depreciation                          (12,099)        (11,229)
                                                              -------         -------
          Net property, plant and equipment                    35,448          35,532
                                                              -------         -------
   DEFERRED TAX ASSETS                                          7,172           7,159
                                                              -------         -------
   OTHER ASSETS                                                   827             778
                                                              -------         -------
          Total assets                                       $ 84,125        $ 78,770
        LIABILITIES AND SHAREHOLDERS' EQUITY
   CURRENT LIABILITIES
     Advances on line of credit                              $ 14,730        $ 10,635
     Accounts payable                                          10,114           7,977
     Capital expenditures payable                                 821             547
     Accrued liabilities                                        2,423           3,700
     Environmental liabilities                                    982             982
     Current portion of long-term debt                            125             125
                                                              -------         -------
          Total current liabilities                            29,195          23,966 
                                                              -------         -------
   LONG-TERM DEBT                                              20,000          20,000
                                                              -------         -------
   OTHER LIABILITIES                                              647             593
                                                              -------         -------
          Total liabilities                                    49,842          44,559
                                                              -------         -------
   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, 4,979,905 and 4,977,988                          
       share issued, respectively                                  50              50
     Additional paid-in capital                                15,679          15,665
     Less treasury stock - 354,544 and 350,976    
       shares at cost, respectively                            (2,663)         (2,638)
     Deferred compensation                                       (128)           (170)
     Retained earnings                                         21,345          21,304
                                                              -------         -------
          Total shareholders' equity                           34,283          34,211
                                                              -------         -------
          Total liabilities and shareholders' equity         $ 84,125        $ 78,770
    
	See notes to condensed consolidated financial statements

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


                                                             Three Months Ended             
                                                          Dec. 27,        Dec. 28,
                                                            1997            1996                 
            
                                                                      
NET SALES                                                $  26,020       $  23,382
COST OF GOODS SOLD                                          23,680          23,396
                                                           -------         -------        
       Gross profit (loss)                                   2,340             (14)

SELLING AND ADMINISTRATIVE EXPENSES                          1,688           1,725
                                                           -------         -------          
       Operating income (loss)                                 652          (1,739)

INTEREST INCOME AND OTHER                                       10               5          
INTEREST EXPENSE                                              (595)           (494)         
                                                           -------         -------        
       Income (loss) before income taxes                        67          (2,228)
                                
PROVISION (CREDIT) FOR INCOME TAXES                             26            (844)        
                                                           -------         -------        
       Net income (loss)                                  $     41        $ (1,384)
                          
NET INCOME (LOSS) PER COMMON SHARE -
  BASIC AND DILUTED                                       $    .01        $   (.30)

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC              4,626,383       4,658,691

WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED            4,643,073       4,658,691

              See notes to condensed consolidated financial statements



	KENTUCKY ELECTRIC STEEL, INC. AND SUBSIDIARY
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	(Dollars in Thousands)
	(Unaudited)
           
                                                                Three Months Ended               
                                                           Dec. 27,           Dec. 28,
                                                             1997               1996  
                                                                        
Cash Flows From Operating Activities:
  Net income (loss)                                       $     41           $ (1,384)
  Adjustments to reconcile net income to net
    cash flows from operating activities:
      Depreciation and amortization                            917                894
      Change in deferred taxes                                 (13)            (1,248)
      Change in other                                         -                   (20)
      Change in current assets and current
        liabilities:
          Accounts receivable                               (1,601)             1,404 
          Inventories                                       (2,948)               931  
          Operating supplies and other                             
            current assets                                    (868)              (366)
          Deferred tax assets                                   39                404
          Accounts payable                                   2,137                294 
          Accrued liabilities                               (1,277)            (1,135)
                                                           -------            -------
          Net cash flows from operating activities          (3,573)              (226)
                                                           -------            -------
Cash Flows From Investing Activities:
  Capital expenditures                                        (786)              (920)
  Change in capital expenditures payable                       274               (514)
                                                           -------            -------
          Net cash flows from investing activities            (512)            (1,434)
                                                           -------            -------
Cash Flows From Financing Activities:
  Net advances on line of credit                             4,095              2,106 
  Purchases of treasury stock                                  (25)              (443)
  Issuance of common stock                                      14               - 
                                                           -------            -------
          Net cash flows from financing activities           4,084              1,663
                                                           -------            -------
          Net increase (decrease) in cash and             
            cash equivalents                                    (1)                 3 

Cash and Cash Equivalents at Beginning of Period               127                124
                                                           -------            -------
Cash and Cash Equivalents at End of Period                $    126           $    127

Interest Paid, net of amount capitalized                  $    957           $    870

Income Taxes Paid                                         $   -              $    -   

	See notes to condensed consolidated financial statements



             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, (the Company).  KESI Finance Company 
was formed in October 1996 to finance the Ladle Metallurgy Project.  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 period ended December 27, 1997, are not necessarily indicative of 
the results that may be expected for the year ending September 26, 1998. 
 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 27, 1997.


(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.

The Company capitalizes interest costs as part of the historical 
cost of constructing major capital assets.  Interest cost of $7,834 was 
capitalized for the quarter ended December 28, 1996. 


(3)  Inventories

Inventories at December 27, 1997 and September 27, 1997 consist of 
the following ($000's): 
                                            Dec.  27,       Sept. 27, 
                                          1997           1997   
 
      Raw materials                         $  3,147        $  3,280 
      Semi-finished and finished goods        16,339          13,258
        Total inventories                   $ 19,486        $ 16,538 

 
(4)  Long-Term Debt

The Company bank credit facility was amended effective December 19, 1997. 
This amendment increased the bank credit facility from $17.5 million to $24.5 
million and extended the maturity date to January 31, 2001.


(5)	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.

                            For the Three             For the Three 
                            Months Ended              Months Ended  
                           December 27, 1997         December 28, 1996     
                                       Per                        Per
                       Income             Share  Income              Share 
                       (Loss)   Shares    Amount (Loss)    Shares    Amount

Basic Earnings Per Share
  Income (loss) available
  to common stockholders $ 41   4,626,383   $.01 $(1,384)  4,658,691 $(.30)
Effect of Dilutive Securities 
  Options                   -      16,690           -           -    
Diluted Earnings Per Share
  Income (loss) available to
    common stockholders plus
    assumed conversions  $ 41   4,643,073   $.01 $(1,384)  4,658,691 $(.30)


	The Company had transition stock options of 147,184 and 168,821 as of 
December 27, 1997 and December 28, 1996, respectively.  The options have 
exercise prices ranging from $8.76 to $20.86 per share which exceeded the 
average market price as of December 27, 1997 and as of December 28, 1996 and 
therefore weren't included in the computation of diluted earnings per share. 
These options expire beginning July 14, 1998 through February 18, 2003.

	The Company also had options of 315,976 and 327,976 as of December 27, 
1997 and December 28, 1996, respectively.  These options have exercise prices 
ranging from $7.63 to $12.31 per share which exceeded the average market price 
as of December 27, 1997 and December 28, 1996 and therefore weren't included 
in the computation of diluted earnings per share.  These options expire 
beginning October 6, 2003 through May 8, 2006.    


(6)  Insurance Claim Receivable and 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 financial statements include a 
receivable of $.9 million which represents the estimated balance due from the 
insurance carrier on the total projected reimbursement of $6.7 million, which 
reimburses the costs incurred in the radiation contamination clean-up, the 
disposal cost, and business interruption.  To date, the Company has received 
$5.8 million from the insurance carrier for payment of costs incurred.

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.


(7)  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 6.  However, 
discovery of unknown conditions could result in the recording of accruals in 
the periods in which they become known.




	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:  February 9, 1998                  KENTUCKY ELECTRIC STEEL, INC.  
                                                   (Registrant) 

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

EX-27

 

<ARTICLE>		5
<LEGEND>
This schedule contains summary financial information extracted from Kentucky 
Electric Steel, Inc.'s condensed consolidated financial statements as of and 
for the three month period ended December 27, 1997 included in this Company's 
quarterly report on Form 10-Q and is qualified in its entirety by reference 
to such condensed consolidated financial statements.

<CIK>			0000910394
<NAME>			KENTUCKY ELECTRIC STEEL, INC.
<MULTIPLIER>		1,000
<CURRENCY>	     	U.S. DOLLARS
       
				        
<PERIOD-TYPE>			   3-MOS
<FISCAL-YEAR-END>	        SEP-26-1998 
<PERIOD-START>	        SEP-28-1997
<PERIOD-END>	        DEC-27-1997
<EXCHANGE-RATE>	                  1        
<CASH>		                  0
<SECURITIES>	                126        
<RECEIVABLES>	             13,613   
<ALLOWANCES>	                435    
<INVENTORY>		             19,486     
<CURRENT-ASSETS>	             40,678
<PP&E>		             47,547
<DEPRECIATION>	             12,099
<TOTAL-ASSETS>	             84,125
<CURRENT-LIABILITIES>	             29,195
<BONDS>		             20,000
<COMMON>		                 50
<PREFERRED-MANDATORY>	                  0
<PREFERRED>		                  0
<OTHER-SE>		             34,233
<TOTAL-LIABILITY-AND-EQUITY>         84,125
<SALES>		             26,020
<TOTAL-REVENUES>	             26,020
<CGS>		             23,680
<TOTAL-COSTS>	             23,680
<OTHER-EXPENSES>	                  0
<LOSS-PROVISION>	                  0
<INTEREST-EXPENSE>	                595 
<INCOME-PRETAX>	                 67 
<INCOME-TAX>	                 26 
<INCOME-CONTINUING>	                 41 
<DISCONTINUED>	                  0
<EXTRAORDINARY>	                  0
<CHANGES>		                  0
<NET-INCOME>	                 41 
<EPS-PRIMARY>	                .01 
<EPS-DILUTED>	                .01 

 

EX-4.6

	AMENDMENT NO. 2 
	TO AMENDED AND RESTATED LOAN AGREEMENT

THIS AMENDMENT NO. 2 TO AMENDED AND RESTATED LOAN AGREEMENT (the "Second 
Amendment"), is made and entered into as of the 19th day of December, 1997, 
by and between (i) KENTUCKY ELECTRIC STEEL, INC., a Delaware corporation with 
principal office and place of business in Boyd County, Kentucky (the 
"Borrower"), and (ii) NATIONAL CITY BANK OF KENTUCKY, formerly known as 
National City Bank, Kentucky, a national banking association with principal 
office and place of business in Louisville, Kentucky (the "Bank").  

PRELIMINARY STATEMENT: 

A.	Pursuant to that certain Amended and Restated Loan Agreement dated 
as of November 1, 1995, between the Borrower and Bank, as amended pursuant to 
that certain Amendment No. 1 to  Amended and Restated Loan Agreement dated as 
of December 28, 1996, between the Borrower and Bank (the "First Amendment") 
and, together with the Amended and Restated Loan Agreement, (the "Amended and 
Restated Loan Agreement"), the Bank has established in favor of the Borrower 
a revolving line of credit in the current principal amount of Sixteen Million 
Dollars ($16,000,000.00) (the "Working Capital Line of Credit"), which was 
reduced from the original principal amount of Twenty-Three Million Dollars 
($23,000,000.00) pursuant to the First Amendment.                      

B.	The Borrower has now requested that the Bank (a) increase the 
principal amount of the Working Capital Line of Credit from Sixteen Million 
Dollars ($16,000,000.00) to Twenty-Three Million Dollars ($23,000,000.00), and 
(b) amend certain of the terms and provisions of the Amended and Restated Loan 
Agreement, all of which the Bank is willing to do upon the terms and 
conditions set forth in this Second Amendment.

NOW, THEREFORE, in consideration of the foregoing premises and the 
mutual covenants and agreements set forth herein and in the Amended and 
Restated Loan Agreement, and for other good and valuable consideration, the 
mutuality, receipt and sufficiency of which are hereby acknowledged, the 
parties hereto hereby agree as follows:

1.	Each capitalized term used herein, unless otherwise expressly 
defined herein, shall have the meaning set forth in the Amended and Restated 
Loan Agreement.


2.	The Bank hereby increases the principal amount of the Working 
Capital Line of Credit from Sixteen Million Dollars ($16,000,000.00) to 
Twenty-Three Million Dollars ($23,000,000.00), effective as of the date of 
this Second Amendment, and the Bank hereby extends the term of the Working 
Capital Line of Credit from January 31, 1998 to January 31, 2001.  All 
references to the principal amount of the Working Capital Line of Credit shall 
hereafter constitute a reference to Twenty-Three Million Dollars 
($23,000,000.00).  In furtherance of the provisions of this Section 2, the 
following defined terms set forth in the Amended and Restated Loan Agreement 
are hereby redefined as follows:

(a)	The term "Amended and Restated Working Capital Line of 
Credit Note", as defined in Section 1.4 of the Amended and Restated Loan 
Agreement, is hereby redefined to mean that certain Amended and Restated 
Revolving Promissory Note dated November 1, 1995, made by the Borrower, 
payable to the order of the Bank, and in the original face principal amount 
of Twenty-Three Million Dollars ($23,000,000.00) as amended pursuant to (i) 
that certain Agreement to Extend Maturity Date dated August 28, 1996, between 
the Borrower and the Bank, and (ii) that certain First Amendment to  Amended 
and Restated Revolving Promissory Note dated as of December 19, 1997, between 
the Borrower and the Bank, together with all future amendments, modifications, 
restatements, renewals and/or replacements thereof from time to time.

(b)	The term "Working Capital Line of Credit", as defined in 
Section 1.107 under the Amended and Restated Loan Agreement, is hereby 
redefined to mean the revolving line of credit in the principal amount of 
Twenty-Three Million Dollars ($23,000,000.00) established by the Bank in favor 
of the Borrower pursuant to the Amended and Restated Loan Agreement.

(c)	 The term "Working Capital Line of Credit Termination Date", 
as defined in Section 1.108 of the Amended and Restated Loan Agreement, is 
hereby redefined to mean the Working Capital Line of Credit Termination Date 
then in effect, which shall be the earliest of (i) January 31, 2001, subject 
to extension thereof as provided in Section 2.1B of the Amended and Restated 
Amended and Restated Loan Agreement, (ii) the date as of which the Obligations 
shall become immediately due and payable pursuant to Section 8 of the Amended 
and Restated Amended and Restated Loan Agreement, and (iii) the date on which 
all of the Obligations are payable in full to the Bank (including, without 
limitation, the repayment, expiration, termination or cash collateralization 
of Letters of Credit pursuant to the Amended and Restated Amended and Restated 
Loan Agreement) and the Working Capital Commitment is terminated by the 
Borrower.


3.	Section 2.1 of the First Amendment, adding Section 6.12 to the 
Amended and Restated Amended and Restated Loan Agreement, is hereby deleted in 
its entirety.

4.	Notwithstanding that the Working Capital Line of Credit is not 
secured by a security interest in any assets of the Borrower, including, 
without limitation, its accounts receivable and inventory, the aggregate 
principal amount of the Working Capital Loans from time to time outstanding 
shall not exceed the lesser of (a) Twenty-Three Million Dollars 
($23,000,000.00), or (b) the Borrowing Base.  Further, the Borrower shall 
continue to be obligated to deliver to the Bank pursuant to Section 2.1G of the 
Amended and Restated Loan Agreement, the Borrowing Base Report within twenty 
(20) days after the end of each month.  In furtherance of the provisions of 
this Section 4, the term "Borrowing Base", is defined in Section 1.12 of the 
Amended and Restated Loan Agreement, is hereby redefined to mean, as of each 
date of determination thereof, the sum of (a) eighty percent (80%) of the Net 
Outstanding Amount of Eligible Accounts, and (b) the lesser of Fourteen Million 
Dollars ($14,000,000.00) or the sum of (i) fifty percent (50%) of the Net 
Security Value of Eligible Scrap Inventory, (ii) forty percent (40%) of the Net 
Security Value of Eligible Billet Inventory, and (iii) sixty percent (60%) of 
the Net Security Value of Eligible Finished Goods Inventory.

5.	The term "Floating Rate", is defined in Section 1.49 of the Amended 
and Restated Amended and Restated Loan Agreement, is hereby redefined to mean 
the Prime Rate less one-half of one percent (1/2 of 1%) per annum.

6.	Section 5.2 of the Loan Agreement is hereby amended to reflect that 
the Borrower has, since the date of the Loan Agreement, formed an additional 
Subsidiary, which is KESI Finance Company, a Kentucky corporation.

7.	Section 6.3(d) of the Loan Agreement is hereby amended to provide 
that the Borrower shall hereafter deliver the Compliance Certificate to the 
Bank on a quarterly basis within thirty (30) days after the end of each Fiscal 
Quarter of the Borrower, commencing with its Fiscal Quarter ending December 27, 
1997.

8.	In consideration of the execution and delivery of this Second 
Amendment by the Bank, the Borrower covenants and agrees to pay to the Bank a 
modification fee equal to one-half of one percent (1/2 of 1%) or One Hundred 
Fifteen Thousand Dollars ($115,000.00).


9.	Conditions to Effectiveness.  This Second Amendment shall become 
effective as of December 19, 1997, provided that the Bank shall receive this 
Second Amendment and the First Amendment to the  Amended and Restated Working 
Capital Note duly executed and delivered by the Borrower.

10.	Effect on the Amended and Restated Amended and Restated Loan 
Agreement.

(a)	Each reference in the Amended and Restated Amended and 
Restated Loan Agreement to "this Agreement", "hereunder", "hereof", "herein", 
or words of like import shall mean and be a reference to the Amended and 
Restated Amended and Restated Loan Agreement as amended pursuant to this 
Second Amendment.

(b)	Except as specifically amended herein, the Borrower and the 
Bank hereby ratify and reaffirm their respective covenants, agreements, 
representations and warranties set forth in the Amended and Restated Amended 
and Restated Loan Agreement and the other Loan Instruments.

IN WITNESS WHEREOF, the Borrower and the Bank have caused this Amendment 
No. 2 to Amended and Restated Amended and Restated Loan Agreement to be duly 
executed as of the day and year first above written.


KENTUCKY ELECTRIC STEEL, INC.
By:__________________________
Title: ______________________	
   (the "Borrower")		

NATIONAL CITY BANK OF KENTUCKY, formerly 
known as National City Bank, Kentucky
By:__________________________
Title: ______________________
    (the "Bank")
0111687.03

EX-4.7

	AMENDMENT NO. 1 
	TO AMENDED AND RESTATED EXPORT FINANCING AGREEMENT

THIS AMENDMENT NO. 1 TO AMENDED AND RESTATED EXPORT FINANCING 
AGREEMENT (the "First Amendment"), is made and entered into as of the 19th 
day of December, 1997, by and between (i) KENTUCKY ELECTRIC STEEL, INC., a 
Delaware corporation with principal office and place of business in Boyd 
County, Kentucky (the "Borrower"), and (ii) NATIONAL CITY BANK OF KENTUCKY, 
formerly known as National City Bank, Kentucky, a national banking 
association with principal office and place of business in Louisville, 
Kentucky (the "Bank").  

PRELIMINARY STATEMENT: 

A.	Pursuant to that certain Amended and Restated Export Financing 
Agreement dated as of November 1, 1995, between the Borrower and Bank (the 
"Amended and Restated Financing Agreement"), the Bank has established a 
revolving line of credit in the principal sum of One Million Five Hundred 
Thousand Dollars ($1,500,000.00) in favor of the Borrower (the "Line of 
Credit") in order to finance certain Export Accounts Receivable, as such 
term is defined in the Amended and Restated Financing Agreement, of the 
Borrower.                       

B.	The current stated maturity date of the Line of Credit and the 
Amended and Restated Export Line of Credit Note, as such term is defined in 
the Amended and Restated Financing Agreement, is January 31, 1998.

C.	The Borrower and the Bank have agreed to extend the stated 
maturity date of the Line of Credit and the Amended and Restated Export 
Line of Credit Note from January 31, 1998 to January 31, 2001.

NOW, THEREFORE, in consideration of the foregoing premises and the 
mutual covenants set forth herein and in the Amended and Restated Financing 
Agreement, and for other good and valuable consideration, the mutuality, 
receipt and sufficiency of which are hereby acknowledged, the Borrower and 
the Bank hereby agree as follows:

1. The Borrower and the Bank hereby agree to extend the stated 
maturity date of the Line of Credit and the Amended and Restated Export 
Line of Credit Note from January 31, 1998 to January 31, 2001, subject to 
further extension or renewal thereof in accordance with the provisions of 
the Amended and Restated Financing Agreement.


2. Section 7.3(d) of the Amended and Restated Financing Agreement 
is hereby amended to provide that the Borrower shall hereafter deliver the 
compliance certificate referred to therein to the Bank on a quarterly basis 
within thirty (30) days after the end of each Fiscal Quarter of the 
Borrower, commencing with its Fiscal Quarter ending December 27, 1997.

3. Except to the extent expressly amended or modified hereby, the 
Borrower hereby ratifies all of its covenants and obligations set forth in 
the Amended and Restated Financing Agreement and the Amended and Restated 
Export Line of Credit Note.

4. This First Amendment shall be governed by and construed in 
accordance with the laws of the Commonwealth of Kentucky.

5. This First Amendment shall be binding upon the Borrower and its 
successors and assigns and shall inure to the benefit of the Bank and its 
successors and assigns.

WITNESS the signatures of the Borrower and the Bank as of the day and 
year first above written.

KENTUCKY ELECTRIC STEEL, INC.
By:__________________________
Title: ______________________	
(the "Borrower")		

NATIONAL CITY BANK OF KENTUCKY, 
formerly known as National City Bank, 
Kentucky
By: _________________________
Title: ______________________
(the "Bank"

0111926.01