S stars are transition objects at the top of the AGB between M-and C-stars. The third dredge-up in thermally pulsating AGB-stars transports freshly synthesised carbon from the He burning zone into the stellar atmosphere. If the carbon and oxygen abundance are about equal the star is classified as being of spectral type S. Stars at the top of the AGB are subject to large mass-loss caused by a strong stellar wind. At some distance from the star the temperature of the gas drops below the condensation temperature of some mineral compounds and soot. This results in optically thick dust shells which are sources of an intense IR-radiation from warm dust. The composition of the dust formed in the stellar outflow critically depends on the C/O-ratio. For the standard element mixture characteristic for main sequence stars one has C/O<1 (M-stars) and the O not bound in CO forms a mineral assemblage which is dominated by Mg-Fe-silicates and metallic Fe. For C/O>1 (C-stars) the dust mixture is dominated by solid carbon and some SiC. The element mixture of S stars is characterised by the non-availability of sufficient quantities of O or C to form the standard condensates. We have investigated the condensation processes for the peculiar element mixture at the M-S-C transition on the AGB. From thermodynamic equilibrium calculations we find that the most likely solids to be formed are solid FeSi, metallic iron and small quantities of forsterite and SiC. Nucleation of dust may be triggered by TiC, ZrC or TiO2. For these substances, non-equilibrium dust condensation in the outflow is calculated for a simple stationary wind model for a sample of C/O-ratios. The results of our calculation show that iron and FeSi dust condensates in the circumstellar shells of S stars.