THIRD AMENDMENT OF LEASE


     THIS THIRD  AMENDMENT OF LEASE is written and made in duplicate on the 29th
day of May, 1996, by and between SCHNITZER INVESTMENT CORP. (the "Landlord") and
SCHNITZER  STEEL  INDUSTRIES,  INC.,  Successor in Interest to  Schnitzer  Steel
Products  Co.  (the  "Tenant").  Each may be  referred to from time to time as a
"Party" and collectively as the "Parties".

                                    RECITALS

     WHEREAS,  under a certain  indenture of Lease (the "Lease") dated March 24,
1980, as amended by the Extension of Lease dated April 19, 1985, an Amendment to
Lease dated June 4, 1987,  a Second  Extension  of Lease dated April 15, 1988, a
Third  Extension  of Lease dated  September 1, 1988,  and a Fourth  Extension of
Lease dated August 27, 1993,  which are,  with the Lease,  incorporated  by this
reference,  the Landlord  leased  certain  real  property to Tenant in Portland,
Multnomah County, Oregon, as described in the Lease to the Tenant, and;

     WHEREAS,  the Parties now wish to amend the Lease to provide for  increased
square  footage  effective  May 15,  1996,  and it is the  purpose of this Third
Amendment of Lease to set forth all of the terms and  conditions of the Parties'
agreement.

                                    AGREEMENT

     NOW,  THEREFORE,  in  consideration  of the mutual covenants and conditions
contained in this Third  Amendment of Lease,  the Parties  covenant and agree as
follows:

1.   Premises:  Effective  May 15, 1996,  Paragraph 1.  Premises of the Lease is
     amended to provide for 5,654 square feet of leased office space.

2.   Basic  Rent:  Effective  May 15,  1996,  Paragraph  3. Rent of the Lease is
     amended to provide for equal monthly installments of $5,476.67 each.

3.   Operating Expenses: Effective May 15, 1996, Tenant's proportionate share of
     operating  expense  increases  as set forth under  Paragraph 6 of the Lease
     shall increase to 34%.

4.   Other  Terms:  Except as they may be  modified by this Third  Amendment  of
     Lease, all the other terms and conditions of the Lease shall remain in full
     force and effect.

     IN  WITNESS  WHEREOF,  the  Landlord  and  Tenant  have  signed  this Third
Amendment of Lease as of the date first hereinabove written.



Landlord:                               Tenant:

SCHNITZER INVESTMENT CORP.              SCHNITZER STEEL INDUSTRIES,
                                        INC., Successor in Interest to
                                        Schnitzer Steel Products Co.


By  /s/Linda M. Wakefield               By /s/L. Conner  /s/James W. Cruckshank
    ---------------------                  ------------------------------------
Title  Vice President                   Title Dir. MIS  / Corporate Controller
       ------------------                     --------------------------------




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