Mittal says consolidation means it can withstand lower prices

An 11% fall in sales prices in July-September ate into operating income, which fell to $765m (£440m) from $1.9bn in the same period of 2004.

A two-year surge in global steel prices ended this year, prices having fallen about 30% in the past six months.

Mittal said consolidation had made the industry more efficient and meant the downturn would not hit it so hard.

Chinese slowdown

Mittal, which has headquarters in Rotterdam and London, saw its sales boosted by its acquisition of US firm International Steel Group in April.

Revenues rose 11% to $7bn in the three months to the end of September as total shipments were 18% higher than last year.

We have experienced highly challenging global market conditions Lakshmi Mittal, Mittal Steel Company

But operating income fell sharply as achieved sale prices - excluding sales from International Steel Group - dipped 8% from last year.

Steelmakers prospered for several years as China's economic boom and the recovery of other Asian economies forced up prices.

Yet, prices have slipped in the past six months as consumer demand slowed in China and many European economies remained weak.

Mittal and other steelmakers have also had to absorb a near 70% rise in iron ore prices.

In response, Mittal has reduced output in an effort to cut inventory levels.

'Solid' results

Mittal said its performance was "solid" given the less favourable market conditions.

"We have experienced highly challenging global market conditions in the past quarter with significant steel price decline in all regions," said Lakshmi Mittal, Mittal Steel's chief executive.

But he added: "Steel industry fundamentals remain positive going forward and we are beginning to see the benefits of global consolidation."

Mittal Steel has moved to increase its presence in fast-growing steel markets in recent months.

It bought a 36% stake in Chinese firm Hunan Valin Steel Tube & Wire for $338m and signed an agreement to explore potential steel development in the Indian state of Jharkand.