Net profit in the July to September period dropped 51% from a year earlier to 70 million euros ($74 million).

Softer demand in Europe this year due to economic uncertainty and higher interest rates has weighed on steelmakers' earnings, which had hit record levels in 2021 and 2022.

Acerinox said the market downturn likely means its fourth quarter earnings before interest, tax, depreciation and amortisation (EBITDA) will be slightly lower than the 146 million euros booked in the third quarter.

"When there is little visibility, buyers always react by reducing inventories, that's why the second half of the year is weaker than the first," CEO Bernardo Velazquez said in an interview with Reuters.

As the world economy slows and with particular pressure on manufacturing, steel supply has exceeded demand in recent months with prices falling and clients reducing inventories.

Apparent consumption in the year through September decreased 26% in Europe, with the United States following a similar trend until August, the company said.

The European Steel Association, Eurofer, on Monday downgraded its outlook for the steel market, saying demand in the European Union was set to tumble 5.3% this year.

"(Customers) will keep the current stocks levels or they will try to lower them a little more as consumption is not expected to increase until the end of the year," Velazquez added, after the company said inventories in the United States and Europe had normalised.

The U.S. market, which accounts for half of Acerinox's revenue, weakened in the third quarter, although recovery expectations are slightly better than in Europe, Velazquez said.

Steel prices are currently higher in the U.S. due to tighter control of imports compared to Europe, and with the Federal Reserve starting to hike interest rates earlier than the European Central Bank, the CEO said.

The company's shares reversed an opening fall to trade 2.4% higher on the day at 1313 GMT.

($1 = 0.9408 euros)

(Reporting by Matteo Allievi and Natalia Siniawski; Editing by Inti Landauro and Mark Potter, Kirsten Donovan)

By Matteo Allievi and Natalia Siniawski