(Reuters) - Spanish steelmaker Acerinox said on Thursday it expects earnings before interest, taxes, depreciation and amortization (EBITDA) to improve only slightly in the second quarter due to the weak European market and the prolonged strike at its Spanish mill.

The company said that there is no guarantee that the labour dispute at its Spanish steel mill Cadiz will be resolved in the short term.

Workers have been on strike for three months due to discrepancies with several points of the proposed agreement including salaries and flexible hours.

Its European business reported an EBITDA loss of 31 million euros ($33.22 million) in the first quarter due to the industrial action and poor market.

European steelmakers have struggled with softer demand amid a fragile economic environment and stiff competition from cheaper Asian rivals.

"The European market continues to be weak and has not experienced the expected recovery...even with the reduction in supply," the company said.

Steel demand in Europe, which has been challenged by high inflation and tighter monetary policy, is expected to show very modest growth this year before a 5.3% projected gain in 2025, the World Steel Association said earlier this month.

Meanwhile, steel prices in America, where around half of the group sales come from, remained robust, CEO Bernardo Velazquez said in a conference call, reflecting the divergence between a lagging European industry and a more resilient US manufacturing.

Acerinox also said it will stop production at its factory in Malaysia's Bahru in the second quarter.

First-quarter group EBITDA fell 51% to 111 million euros compared to the same period one year earlier.

That was slightly better than the 109.5 million euros expected by analysts in an LSEG poll.

The steelmaker's net profit also more than halved over the period to 53 million euros from one year ago.

Shares were up 1.7% at 0938 GMT, supported by a 31% net debt reduction to 234 million euros from the previous quarter, analysts pointed out.

($1 = 0.9330 euros)