Egypt's top steel producer Ezz Steel said Egyptian demand for reinforcing steel bars would grow to 7.4 million tonnes in 2010 from 7.2 million last year, fuelled by the need for housing.

Marketing director George Matta also said a slowdown in Europe on the back of the euro zone debt crisis would be countered by growing demand from Middle East and US markets.

"We expect rebar consumption (in Egypt) to grow to 7.4 million tonnes in 2010, up from 7.2 million tonnes last year," he told Reuters.

Rebars, used in the construction industry, represented three quarters of Ezz Steel's sales in the first quarter, with flat steel accounting for most of the rest.

Ezz Steel last week posted a 78 percent year-on-year jump in first-quarter net profit to 105 million Egyptian pounds ($19 million) as strong domestic demand and a recovery in global flat steel prices boosted margins.

"There will be negative effects on exports because of the slowdown in Europe but demand in the US and the Mena (Middle East and North Africa) region will continue to grow," Matta said.

Asked about a report late last month that the Algerian authorities would freeze Ezz Steel's planned $750 million investment in Algeria, he said the company had still not received any notification.

"We have not heard anything from the government that indicates that anything will happen to our project," he said on the sidelines of a conference, without commenting further.

An Algerian official said on May 27 that his country had frozen the deal signed in 2007 with Ezz Steel and was in talks with other investors including ArcelorMittal to replace the Egyptian firm.

The plant, earmarked for the eastern Algerian region of Jijel, still exists only on paper.

Ezz Steel said that strong domestic demand and a recovery in global flat steel prices would continue to boost margins in 2010, reversing a decline in 2009.

"Improving steel prices are basically behind the market recovery," Matta said. "We will have to follow the global price hikes. As producers, we have to pass on these price increases to the market."

Analysts expect steel prices to increase in 2010 on rising raw material costs as global demand improves.

Steel prices rallied strongly in the first quarter of this year, mainly driven by the rising prices of key ingredients such as iron ore, coking coal and scrap. – Reuters