UPDATE 2-ArcelorMittal extends European output cuts into Q2

* Says inventory not fallen as fast as expected in Europe

* Says production cuts are temporary

(Adds comments from management board member, changes dateline)

LUXEMBOURG, April 8 - ArcelorMittal, the world's largest steelmaker, extended its production cuts in Europe into the second quarter because inventory levels had not fallen as quickly there as envisaged.

"What we see today is that the reduction in real consumption in Europe is so strong that the reduction of stocks has not materialised as anticipated," ArcelorMittal management board member Michel Wurth told reporters.

"That is particularly bad in southern Europe, for instance in Spain where the building market has collapsed," he continued.

ArcelorMittal would suspend production of blast furnaces in Liege, Belgium, and at Florange, France, Wurth said. One of the two furnaces at each site had already been shut down. One in Ghent, Belgium, would also halt output.

This would mean only 11 of 25 flat carbon blast furnaces in Europe would be operational.

The company insisted all the cuts were temporary and that production would be restarted as swiftly as possible when market conditions improved.

ArcelorMittal shares were down 1.7 percent at 17.55 euros at 1415 GMT, compared with a 0.9 percent drop of the DJ Stoxx European basic resources index.

Wurth said any upswing in Europe appeared to be slower than in other regions of the world. Indeed, high stock levels ruled it out for the second quarter. The third quarter would then be affected by many customers being on holiday, Wurth said.

"Hence the necessity to organise ourselves in Europe in such a way that we can produce in an optimal way in this situation of austerity," he said.

ArcelorMittal has previously said the first quarter would mark a low point for the company before improved shipments in the second quarter and a gradual recovery continuing into 2010.

A London-based analyst said rationalising production made sense in a market that would not clear inventories until the end of the second quarter.

ArcelorMittal has cut production globally by up to 45 percent in a bid to accelerate inventory reduction. The sector has been hard hit by the slump in its key auto and construction markets.

The company said the cut of around 45 percent was being maintained. Optimisation of production could mean output at some sites being increased.

The announcement followed a meeting between senior management and the European works council in Luxembourg.

One union official present at the meeting said ArcelorMittal actually had plans to halt production af four of its flat carbon blast furnaces in Europe.

"It's a catastrophe," he said, adding the other furnace affected was at Fos-sur-Mer in France.

The company did not confirm this.