ArcelorMittal, the world’s biggest steelmaker, posted higher earnings in the first quarter and predicted further improvement in coming months.

Underlying earnings before interest, tax, depreciation and amortisation (Ebitda) came in at $1.57 billion, up 0.5% from the final quarter of 2012, but still 26% lower year-on-year.

The company expects to push earnings up again in the second quarter, but chairman and ceo Lakshmi Mittal said market conditions remained “challenging”.

Profitability will be helped this year by an anticipated 2% annual increase in steel shipments, and a 20% rise in iron ore sales volumes, the company said. ArcelorMittal’s mining division now accounts for more than a quarter of its Ebitda.

While the company boosted sales volumes for a third straight quarter, average earnings per tonne were lower as steel prices shifted downwards in the company’s important but struggling European market.

The European flat products business continued to shed cash, posting an operating loss of $59 million in its seventh loss-making quarter in a row.