China moves to enter Canadian rail market with $2bn “Ring of Fire” line

A team of Chinese engineers has proposed a 340km rail line to northern Ontario to get access to a rare metal, and has suggested that the project would enable Chinese companies to penetrate Canada’s infrastructure market.

The scheme under consideration would connect a planned chromite mining and smelting complex known as the "Ring of Fire" with the existing rail network at Nakina in the south of the province.

Zhu Lizheng, the vice-president of China Railway First Design Survey Institute, a subsidiary of state-owned China Railway Construction Corporation, talked about the $2bn plan in an interview with Canadian newspaper the Globe and Mail.

"Our company thinks this project has very good potential. It’s a very good project," he said.

The only way to get it out efficiently is to build a railroad– Frank Smeenk, KWG

Zhu gave the interview while in Ottawa to talk to Canadian MPs about the rail line, which is being sponsored by a mining company called KWG Resources. He had earlier made a helicopter tour of the Ring of Fire with other Chinese engineers and concluded there were no serious problems with the terrain.

According to the Globe and Mail, the engineers expect to complete a detailed feasibility study on the rail project within four months that would then be presented to Chinese financial institutions.

As is almost always the case with large-scale Chinese infrastructure projects, the bulk of the funding will come from China’s state-owned banks, who will accordingly have to approve the scheme. Agreement would also have to be reached with the Canadian federal government, the Ontario provincial government and area’s First Nations.

David Paul Achneepineskum, the chief executive of Matawa First Nation Management, which represents nine First Nation communities in the region, said his members were generally supportive of development, provided that the environment was protected and communities benefited from jobs and infrastructure.

"Overall, they see the Ring of Fire as an opportunity, once it’s developed, to advance their standings in their own communities," he said. "But they also want to be assured that there is minimal impact to the environment, to the water and to the land that they are living in."

As well as undertaking the railway construction, China is likely to benefit from the increase in competition in the global chromium market. China is the world’s largest importer of the metal, 80% of which comes from only four countries: South Africa, Kazakhstan, Turkey and India.

Frank Smeenk, the president of KWG, told Bloomberg TV Canada that the mine would be in operation for a century or more. He said: "You have to take the whole rock for processing and the only way to get it out efficiently is to build a railroad. That’s the kind of asset that will last as long as the mine."

He added: "China is in a position to export capital as well as expertise, and the capital is one of the key drivers here. We may see at the end of the day that the entire project gets financed by Chinese banks."

In addition to chromium, the Ring of Fire also contains vanadium, copper, zinc, nickel and gold.

If the scheme goes ahead, it would by China’s first foray into Canadian rail. Chinese companies have already entered the US market with a planned high-speed rail line between Las Vegas and California.

In Canada, the Ontario government is currently studying how to deliver on a pledge to bring high-speed rail to the Toronto-Windsor corridor.

Photograph: The Sand Ridge area in northern Ontario earmarked for the rail corridor (KWG Resources)