China, Brazil eye coal rail, ports in Colombia

Sat Oct 23, 2010 7:13pm EDT

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* China eyes $2.7 bln coal railway project - Santos

* Thermal coal exports to Asia increase

BOGOTA Oct 23 (Reuters) - Colombian President Juan Manuel Santos said on Saturday that China and Brazil were eyeing investments in the Andean nation's coal infrastructure to gain more access to the material.

Colombia, the world's No. 5 coal exporter, has seen a five-fold increase in foreign investment, especially in oil and mining, since 2002 due to the country's U.S.-backed offensive that pushed leftist rebels to remote jungle hide-outs.

"(China's Development Bank and China Railways (0390.HK) (601390.SS)) gave me a list of where they want to invest. They want to invest in a 250-kilometer (155-mile) railway uniting the Pacific and the Atlantic. The cost of that would be $2.7 billion, and also in the Carare railway," Santos said.

"The Brazilians have told me they want to make not only a railway but also a port in Carare because they're very interested in our metallurgical coal ... the Chinese are also interested in our metallurgical coal," he said in a statement.

Metallurgical coal is used in steel production.

Colombia is looking at doubling output of high-quality coal over the next nine years, although infrastructure issues are still hobbling the sector, coal industry officials said.

The Carare railway project would link central producers of metallurgical coal with coastal ports.

Colombian thermal coal exports to Asia have increased this year, particularly to China, due to a demand slump from Europe, Colombia's major market. Colombia has shipped nearly 2.7 million tonnes to China this year, up from 14 tonnes in 2009, Chinese trade data showed. Thermal coal is used mainly by utilities.

The coal market closely monitors China's huge external demand for the material.

Colombia's major coal producers ship the material from their own ports on the Atlantic coast. Metallurgical coal is mainly in the center of the nation, and analysts say that lack of access to rail and ports is hindering exports.

Coal production is dominated by big thermal producers with their own port and rail facilities like Glencore, Drummond and Cerrejon, a joint venture owned by BHP Billiton (BLT.L), Anglo American (AAL.L) and Xstrata XTA.L. (Reporting by Jack Kimball; Editing by Peter Cooney)

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