TAKING THE PULSE: European steel producers are broadly set to post higher profits for the quarter ending June 30 due to higher volume sales and steel prices as demand and cost inputs continue to rise, analyst say.

Steelmakers such as ArcelorMittal (MT), the world's largest steelmaker, ThyssenKrupp AG (TKA.XE), the world's 14th largest, and German steelmaker Salzgitter AG (SZG.XE) are expected to report that selling prices have caught up with a significant rise in raw material costs in earlier quarters.

Rebounding industrial demand, particularly in the automotive and machinery sectors, are due to boost sales volume even though construction markets in developed countries such as the U.S. and the European Union remain a challenge due to weak demand.

Looking ahead, steelmakers are likely to be cautious about earnings performance in the third quarter when summer holidays in the northern hemisphere result in lower demand. U.S. Steel Corp (X), the world's eighth largest steelmaker, Monday reported a return to net profit after nine consecutive quarters of losses but said it expects this quarter's earnings to be lower than the previous quarter. More specifically, U.S. steel expects its European segment's third quarter performance to be in line with its second quarter performance.

"Although we expect an overall decline in average realized prices, we expect seasonal effects to result in increased demand late in the quarter. Raw materials costs are expected to be in line with the second quarter," the company added.

Alessandro Abate, equity analyst at JP Morgan expects EU prices to pick up from the middle of the third quarter as global demand rises. "In our view, [there is] headroom for European steelmakers price uplift from mid-third quarter onwards."

COMPANIES TO WATCH:

ArcelorMittal (MT) - reports July 27

MARKET EXPECTATIONS: Average second-quarter Ebitda is forecast to rise 16% on year to $3.31 billion while net profit attributable to shareholders is forecast to drop 18% to $1.4 billion, according to a Dow Jones Newswires poll of five analysts. Third quarter Ebitda guidance is forecast to be $2.61 billion, according to the analysts.

MAIN FOCUS: Analysts expect ArcelorMittal to announce higher Ebitda due to a rise in volume sales and prices. The mining division will be a key earnings driver due to higher raw material prices while flat products in the Americas and Europe should also deliver higher profitability due to a rise in automotive demand. Net profit however is forecast to fall due to higher tax and financial expenses versus the same quarter a year ago when both were very low. Analysts will focus on the company's global view about supply and demand in coming quarters and its third quarter Ebitda guidance. They will also seek updates on the company's M&A strategy following a string of raw material acquisitions, including a bid for Macarthur Coal Ltd. (MCC.AU).

Salzgitter AG (SZG.XE) - reports Aug. 11

MARKET EXPECTATIONS: Second quarter sales are forecast to rise about 17% to EUR2.46 billion while pretax profit is forecast to rise more than four fold to EUR56.6 million, according to a Factset and Dow Jones Newswires poll of four analysts.

MAIN FOCUS: The sales rise is largely pinned on a strong performance from its steel business, which is expected to offset a decrease in earnings from its trading division that benefited from windfall profits in the same quarter last year when prices surged. Analysts will be keen to hear whether the company plans to increase its full-year guidance based on this quarter's results and will seek an update on the start up of its second electric arc furnace in light of weak construction demand.

ThyssenKrupp AG (TKA.XE) - reports Aug. 12

MARKET EXPECTATIONS: Third fiscal quarter sales for the three months ending June 30 are forecast to rise 10% to EUR12.85 billion while Ebitda is forecast to rise nearly 22% to EUR1.03 billion, according to a Factset and Dow Jones poll of four analysts. Net profit attributable to shareholders is forecast to rise 7% to EUR320 million.

MAIN FOCUS: ThyssenKrupp's positive earnings growth will hinge on strong performance at its European steel division, where sales prices and volumes have increased, and improved performance at its components technology division which benefits from higher sales to automotive and wind turbine customers, equity analyst Hermann Reith of BHF Bank said. Stainless steel is forecast to fall due to lower volume sales and prices while the Americas steel division is expected to perform poorly as it continues to ramp up production. Analysts are seeking an update on the company's progress in restoring its credit rating following several downgrades stemming from spiraling U.S. and Brazilian steel project costs. ThyssenKrupp is also looking to sell businesses that generate around EUR10 billion in annual revenue and employ some 35,000 people.

-By Alex MacDonald, Dow Jones Newswires; +44 207 842 9328; alex.macdonald@dowjones.com