THE holding company of Tianjin Bohai Chemical Industry (Group) Co plans to merge with two salt plants. Xu Zongjian, executive director of the listed firm, said the Tianjin city government had agreed to the merger of Tianjin Bohai Corp with the neighbouring Tanggu and Hangu plants. 'In the past, we had arguments with them over salt pricing, and there were lots of conflicts. After the merger, we can strengthen mutual co-ordination and complement each other's business,' he said. The deal was expected to be finalised by early next year. Mr Xu said Tianjin Bohai, as China's largest marine chemicals manufacturer, consumed 70 per cent of the production of the two salt plants. As the government planned to lift price control on salt next year, he expected prices to drop. The company reported a 3.2 per cent rise in net profits for the first six months, depressed by an 11 per cent jump in costs and non-operating expenses. Turnover rose 18 per cent. Mr Xu said costs were not expected to rise in the second half, because prices of raw materials would remain stable. There would be a small increase in wages. He said the margin would also be helped by a lower effective income tax rate for the full year and an absence of losses from selling obsolete raw materials. After notching up a peak in the first half, Mr Xu said polyvinyl chloride (PVC) prices had begun to fall after September. Its ex-factory price fell to 6,800 yuan (about HK$6,324) a tonne this month from an average 7,100 yuan between January and September. 'For some individual products, the prices have fallen to 6,700 yuan,' Mr Xu said. PVC prices had soared since the second half of last year, because middlemen hoarded the chemical products for profiteering. They began to reduce inventories after the international prices dropped in the second quarter. Mr Xu did not expect PVC prices to drop further. They are 100 to 200 yuan higher than the previous corresponding period. Caustic soda prices are now about 13,800 yuan a tonne, compared with an average 13,500 yuan between January and September. Mr Xu said the price of soda ash was higher than the first half's average, after hitting bottom in April, but it was steady from last year. 'In general, the market and prices for the major products have fared better than those of last year,' he said. The company will produce 630,000 tonnes of soda ash, 310,000 tonnes of caustic soda and 130,000 tonnes of PVC this year. Mr Xu said interest earned by the finance company would contribute to group earnings. With about 300 million yuan of unused listing proceeds in Chinese banks, the deposits received an annual interest of 10 per cent.