Mittal Steel, on the verge of buying Arcelor to become the world's biggest steelmaker, posted lower second-quarter profit as steel prices dropped.
Net income fell 6.4 per cent to $1.02 billion from $1.09 billion last year, the Rotterdam-based company said on Wednesday.
"Costs are higher and prices are not quite as high as the second quarter of last year," an analyst at BNP Paribas in Paris, said in an interview before the earnings.
Billionaire Lakshmi Mittal, the steelmaker's founder and controlling shareholder, is buying Luxembourg's Arcelor for $38.3 billion as he seeks to improve bargaining power with customers and reduce dependency on iron supplies from other companies.
Steel consumers such as carmakers are using up inventory after prices rose to a record last year. The benchmark price for supplies of iron ore, a key ingredient for blast furnaces, increased 19 per cent this year.
Shares of Mittal closed on Tuesday in New York at $34.34. They have risen 30 per cent this year, valuing the company at $47.3 billion.
Lakshmi Mittal owns about 87 per cent of the company's stock, making him the world's fifth-richest person, according to Forbes magazine. His stake in the new company will fall to less than 50 per cent after the Arcelor acquisition completed.
Steel prices have declined from a record in early 2005 as China, the largest producer and consumer of steel, becomes more self-sufficient and cut imports.
The average price of hot-rolled coil steel, used in washing machines and cars, fell 10 per cent to $465 a metric ton in Europe in the second quarter, compared with $520 a year earlier, according to London-based publisher Metal Bulletin.
Still, Mittal is making more of the alloy. The company in November acquired Ukrainian steelmaker Kryvorizhstal, boosting its capacity of steel slab, an intermediate product used to make finished steel, and iron ore.