Demand pressures for major commodities in China will ease during the second quarter of this year as supplies grow, a report by the Ministry of Commerce has indicated.

Domestic output and imports of steel will increase rapidly by the end of the second quarter.

And, fertilizers will see a steady growth in production and imports but a dramatic drop in exports, and are expected to be enough to meet the needs of agriculture, the ministry was quoted as saying by Xinhua News Agency.

The country will manage to balance oil supply and demand through expanding oil exploitation, growing imports and increased output of oil products, the report said.

According to the report, cotton and edible oil imports will continue rising and grain reserves will fall at first but will be held steady during the second quarter.

The output of coal will continue to increase, and falling exports will help alleviate growing domestic demand.

Among the 600 categories of commodities the Ministry monitored, 138, or 23 percent, have reached a balance between supply and demand, 8.5 percentage points higher than at the same time last year, the report said.

The supply of 462 categories of commodities exceeds demand, accounting for 77 percent of the total, 8.5 percentage points lower than at the same time a year earlier.

While their is fear that the economy is overheating, signs of relief are showing up as investment in some overheated industries such as real estate has slowed down, according to the report.

But the shortage of electricity will become more intense as the summer draws nearer, the report said.

This casts a shadow on the country's already difficult situation in power supply and demand.

The problems of haphazard investment and low-level expansion in some industries have been blamed on excessive energy consumption and environmental pollution.

"Overheated investment in some industries such as steel, aluminium and cement are the key forces behind energy shortages,'' Chen Tonghai, president of Sinopec, said at the Boao Forum for Asia late last month.

State statistics show that about 500,000 to 700,000 tons of additional fuel products have to be used per month to ease the tension.

The country is reportedly facing the worst energy shortage in more than a decade. Industrial regions in coastal areas were the first to face shortages, which have now spread to 21 provinces, covering two-thirds of China.

The power shortage was also listed by the Ministry of Commerce as one of the major problems in China's market development.

In its report released on Tuesday, the ministry pointed out that the problems in power shortage, transportation services and raw material supply were not fundamentally solved in the first quarter of this year.

The other problems are slower growth in consumption than in investment, the expanding gap between consumption in urban and rural areas, the unsatisfactory quality of some commodities and inflationary pressures.

(China Daily May 8, 2004)