Sales of production materials in China are expected to exceed 17 trillion yuan (2.12 trillion U.S. dollars) in 2006, up 16 percent year on year and with the general price level climbing by around three percent, according to a report by the Ministry of Commerce.

The report said supply and demand of production materials would generally remain balanced in the second half of the year with prices staying high.

There would be a huge demand for energy resources, especially refined oil, as well as non-ferrous metals and some ferrous metals in the second half year, while the markets for construction materials, automobiles and light industry would be more balanced in terms of supply and demand.

Demand for copper would be kept in check as the price surged with consumption predicted to edge up three percent to four million tons in 2006 and the price would fluctuate markedly.

The report said national demand for steel over the year was expected to jump 16 percent to 440 million tons while the price would stay low,reflecting production overcapacity and excess supply.

The continued heating of the economy would slow as the government adopted a raft of macro-economic measures, including raising the reserve requirement ratio and interest rates on savings and loans, the regulation of the real estate market and the control of new projects.

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