ArcelorMittal, the world’s largest steel manufacturer, on Wednesday reported a net profit of $1.7 billion for the second quarter ended June 30, 2010, against a net loss of $792 million in the corresponding quarter last year.

The company’s sales increased to $21.65 billion during the quarter from $15.17 billion in the year-ago period, up by 43%.

?The improved performance in the second quarter is in line with our expectations and reflects the continued slow and progressive recovery,? said ArcelorMittal chairman & CEO Lakshmi N Mittal during a conference call on Wednesday. For the third quarter ending September 2010, the steel major forecast its volumes and profits to fall from the prior three months as China?s economy slows, costs rise and demand weakens during the European summer.

?Third quarter 2010 Ebitda is expected to be approximately $2.1-$2.5 billion. Shipments are expected to be lower and capacity utilisation may decline to approximately 70% due to seasonal slowdown. Average selling prices are expected to remain stable and operating costs are expected to increase as compared to the second quarter of 2010 largely due to higher raw material prices,? Mittal said. During the second quarter, ArcelorMittal’s overall steel shipments rose to 22.8 million metric tonne from 17 million metric tonne in Q2 2010.

?Although the third quarter will be impacted by a combination of seasonal factors and the effects of the economic slowdown in China, underlying demand continues to show improvement. The challenge for the second half of the year will be to pass on the full extent of cost increases to our customers,? Mittal adds. ArcelorMittal said it will cut steel production in the third-quarter because of a seasonal slowdown. The company expects to use 70% of its capacity in the quarter compared with 78% in the previous three months. It forecast that prices would remain stable.

Meanwhile, the steel major also said it is making steady progress in its India expansion in Karnataka, Jharkhand and Orissa and said they should reach ground breaking in one of the projects soon.