Fertiliser and chemicals producer China BlueChemical expects product prices to stay high for the remainder of the year. Yang Yexin, chief executive of the sister company of offshore oil and gas producer CNOOC, which supplies long-term cheap natural gas as feedstock to China BlueChem, said in an interview that second-half prices will probably hover at high levels similar to those seen in the first half. 'High coal and gas prices are driving up feedstock and production costs, and international prices are also very high,' said Yang, adding that strong global grain prices have pushed up fertiliser demand at a time when Beijing's long-term incentives for agriculture have increased output and helped lift demand. The average ex-factory price of urea, a nitrogenous fertiliser, hovered at around 1,900 yuan ($HK2,310) a tonne in the first quarter, and surged to a high of 2,300 yuan in June before easing to 2,150 last month. But Yang said exports are expected to be weak this year, since Beijing has raised the export tariff for urea priced above 2,100 yuan, to 38 per cent compared with 7 per cent last year, so as to keep more supply for domestic consumption. China BlueChem last week posted a 93 per cent year-on-year jump in first-half net profit to 1.03 billion yuan, on sales that grew 61 per cent to 4.76 billion yuan. This was due mainly to a doubling in methanol output; a 19.6 per cent jump in the average selling price of urea; a 27.8 per cent rise in phosphate fertiliser prices; and a 17.3 per cent rise in methanol prices. Methanol is an industrial chemical as well as a clean fuel that can be mixed with traditional petroleum fuel. Mirae Asset Securities analyst Dennis Ho wrote in a research report that the urea price rose 3.0 per cent in the last week of August, helped by a US corn futures' rise to a new high, which 'sends a clear signal for larger food production'. As cheap gas is hard to come by in China, BlueChem is building a 1.04-million-tonne-a-year urea plant in Shanxi using coal as feedstock. After a year's delay over obtaining mining rights, first production has been delayed to early 2014 from the mid-2013 indicated last April, due to longer-than-expected government approval procedures, Yang said. The commercial start-up of another urea project in Heilongjiang province, with a 520,000-tonne annual output capacity, is also now expected in early-2014 instead of mid-2013. It is also building a 500,000 tonne-a-year phosphate fertiliser plant in Hubei that will come on stream next year. In Guizhou, it is constructing a phosphate fertiliser and chemicals project that is slated to come on stream in 2014 or 2015. In this year's first half, China BlueChem produced nearly one million tonnes of urea and 212,000 tonnes of phosphate fertiliser. The firm has still not been able to proceed with a planned acquisition of its parent China National Offshore Oil Corp's 40 per cent stake in composite fertiliser joint venture Sino-Arab Chemical Fertilisers, located in Qinhuangdao, northern China. The balance is held by state-owned Tunisian firm Societe Industrielle d'Acide Phosphorique et d'Engrais. Composite fertiliser is a mixture of urea, phosphate and potassium fertilisers. Before the acquisition can be finalised, some shareholding restructuring is necessary, which requires approval from Tunis. Distractions caused by an upcoming election in Tunisia next month had helped to delay progress, Yang said, adding that two rounds of talks have been held on the restructuring. The acquisition plan was first made public in March 2009.