Shenhua Group Corp. Ltd., China's largest coal producer by volume, plans to invest RMB 10 billion ($1.58 billion) to build six coal railway transportation lines within Inner Mongolia Autonomous Region, the regional government announced on July 22.
Shenhua Group has agreed to participate in the funding and the construction of the six routes, said the regional government. No other information was given.
"Inner Mongolia is China's largest coal producing region but due to severe railway transportation bottlenecks about 1/3 of the coal sold to other regions has to be moved out by road, which is costlier and pollutes more,' Liu Hongbo, a researcher from the China Coal Transportation and Distribution Association, a semi-governmental industry body, said on Monday.
The high number of trucks being used to haul coal has caused massive traffic jams on the highways between Inner Mongolia and Hebei Province and Beijing Municipality in the past few years. Large coal firms like state-owned Shenhua Group have the economic incentives and access to capital to build coal railway lines to the region, noted Liu.
Land-locked Inner Mongolia sold 605 million tons of coal to other parts of China in 2011, of which 400 million tons were shipped by rail and 205 million tons by road, according to the regional arm of the National Development and Reform Commission.
Founded in 1995, Shenhua Group's coal output reached 407 million tons in 2011, accounting for 12.5% of China's total 3.52 billion tons. The company transported 320 million tons of coal last year on railways it owns and operates, according to its website.
Shenhua Group recorded sales revenue of $43.4 billion last year with net profit of $5.7 billion, earning it the No. 234 spot on the 2011 Fortune 500 Largest Global Firms list.
At the end of last year Shenhua Group said that it wanted to more than double the total length of the railways it operates from 1,446 kilometers to 3,358 kilometers by the end of 2015