Here we seek to identify the conditions for the collapse of the molten metal layer surrounding a keyhole filled with vapor and liquid particles during high power density laser and electron beam welding processes. Investigating the collapse of the liquid layer is essential for a fundamental understanding of pore formation in the keyhole mode welding. We treat the collapse of the keyhole as similar to a transition between the slug and annular two-phase flows in a vertical pipe of varying cross-section. A quasi-steady, one-dimensional model for two-phase flow is developed and solved assuming that the mixture in the core is homogenous. Ignoring friction within the liquid layer and considering supersonic flow in the keyhole, the two phase flow regimes can be divided into four regions characterized by entrainment and deposition of liquid particles. Keyhole collapse occurs from entrainment, whereas the keyhole exhibits wavy shape from deposition. A condition for the formation of macro-porosity based on a fundamental understanding of annular two-phase flow is presented.