Kyrgyzstan sets sights on Xinjiang coal market

Kyrgyzstan is aiming to become a major coking coal supplier to the Xinjiang Uygur autonomous region. But the goal will only be realised if a railway is built to link China to the landlocked and mountainous nation in Central Asia to allow low-cost transport of bulk commodities.

State-owned China Road and Bridge Corporation was completing a feasibility study on a railway that would link China’s far-western rail terminus at Kashgar in Xinjiang to the Kyrgyz-Uzbek border town of Kara-Suu, said Kyrgyzstan’s Economy Minister, Temir Sariev.

He said one proposed route of 300 kilometres would traverse rugged terrain and cost about US$2.5 billion, while a 390-kilometre alternative would cross valleys and villages and cost over US$4 billion.

The project may be financed by a consortium of state companies from China, Kyrgyzstan and Uzbekistan, or it may be entirely funded and built by China Road and Bridge before being handed over to Kyrgyzstan for operation.

Sariev said the second option was the more likely scenario, and the route would be closer to proposed coal and iron ore mine sites and hence more beneficial to Kyrgyzstan’s economy. But it remains uncertain whether the construction cost of this option will be repaid via a resources-for-infrastructure scheme or other means such as long-term loan repayment. Kyrgyzstan, whose gross domestic output amounted to US$13 billion in 2011, does not have the financial muscle to fund the project by itself.

“We hope all the questions will be settled by the end of the year, and that we can start implementing the project next year,” Sariev said on the sidelines of the Mines and Money conference last week.

He added that construction would take three to four years. He said the proposed line would make much of Kyrgyzstan’s stranded minerals economic, and together with freer intra-regional trade, could raise the annual trade volume between China and Kyrgyzstan – estimated at some US$10 billion – by 30 to 40 per cent.

Sariev said the proposed railway had a capacity to move 15 million tonnes of bulk commodities a year, and that much of it could be used by Australian-listed Celsius Coal, which has a coking coal project in Kyrgyzstan. Celsius chairman Alex Molyneux said the firm planned to begin mining coal used to smelt steel on a commercial scale in 2015, with annual output of one to two million tonnes.

It would be trucked to Xinjiang, where annual steel output was projected to rise to 35 million tonnes in 2015 from 12 million tonnes last year, he said, adding that although Xinjiang is coal-rich, it lacks high-quality coking coal used in steel-smelting. Existing supply comes mainly from distant Shanxi province.

If the proposed railway is completed in late 2016, Celsius plans to expand the mine’s output to between five and eight million tonnes a year from 2017.