British-based tycoon Lakshmi Mittal announced a dip in profits for the world's largest steelmaker yesterday after prices softened and raw material costs rose.
Mittal Steel, which took the number one spot after acquiring US-based ISG in April, unveiled net income of £610 million for the three months to June 30.
This compared with £643.6 million in the previous quarter and £716.4 million a year ago.
Following the £4.5 billion acquisition of ISG, the enlarged company - 88 per cent owned by the Mittal family - held steel-making facilities in 14 countries and employed around 180,000 people.
Indian-born Mr Mittal, who founded the business - formerly LNM Group - in 1976, said oversupply in the industry had affected demand and prices.
This followed a cooling in the rapid growth of emerging countries such as China.
As a result, the Rotterdam-based company reduced production in the third quarter to September 30, following a similar-sized cut in the previous quarter.
Mr Mittal said current trading conditions remained tough, with third quarter selling prices expected to be "significantly" lower as customers work through excess stocks.
Despite the downturn, Mr Mittal said indicators forecast an eventual pick-up in prices as steel demand starts to improve.
He added: "We believe that the basic fundamentals for the steel industry remain positive and that Mittal Steel is well positioned to further build on its global position."
Steel prices, after surging for three years on the back of strong demand from China, have fallen by as much as 30 per cent for some products following a step up in production, particularly from China itself.
However some analysts believe there will be a price recovery by 2006 as the steel market restocks.
With a personal fortune estimated at £14.8 billion, Mr Mittal is thought to be the richest man in the UK and the world's third-richest man behind Bill Gates and Warren Buffet.
He awarded himself a £1.1 billion bonus and is thought to have become Britain's best paid boss after merging his two steel companies, LNM and Ispat, in October.
He recently donated £2 million to the Labour party.
He said he was making the donation as he supported the Government's "long-term investment plans to further improve education, health, employment, skills and technology".
With the additional business of Ohio-based ISG, Mittal Steel is expected to generate annual sales of more than £16.79 billion.
Higher raw material costs meant the cost of goods sold per tonne during the quarter rose by 14 per cent on the previous three months.
Chief finance officer Aditya Mittal, son of Mr Mittal, said the firm expected further consolidation in the steel industry, which is still fragmented compared with its suppliers such as mining groups and its customers including the car industry, largely because many steelmakers remain in state hands.
"We are obviously ready to continue to grow. We are participating in privatisations in Turkey and in Ukraine," he said.
He said the Mittal family would consider reducing its stake, either by selling stock or using shares to make an acquisition, in order to meet investor calls for greater liquidity.
But the family had not set a time frame for this, he added.