May 3 (Bloomberg) -- Australian Rail Track Corp., a government-owned company managing rail tracks in four states, will almost double spending to upgrade the network serving the world's largest coal export port as demand for the fuel surges.

Australian Rail Track will raise its investment in the Hunter Valley railway network, which serves Newcastle Port in New South Wales state, to A$270 million ($210 million), from A$153 million, the company said in an e-mailed statement today. It will build signaling works, duplicate tracks and construct a flyover.

Surging coal demand driven by China has caused congestion at ports and on railways in Australia, the world's biggest exporter of the fuel. Xstrata Plc., Rio Tinto Group and other miners will export as much as 140 million tons of coal by 2009, compared with 85 million tons this year, Australian Rail Track said.

``Over the next five years, our infrastructure investment will see the network more than meet demand growth,'' said David Marchant, chief executive officer of Australian Rail Track, in the statement.

Rio Tinto Group, the world's third largest mining company, on April 11 said it's delaying expansion plans at its Mt. Pleasant mine in New South Wales due to constraints in the transport network.

Miners from the Hunter Valley export mainly thermal coal which is burned by power producers. Annual benchmark prices for the fuel increased by as much as 20 percent starting April. Prices may stay at such levels for up to 18 months, London-based Rio Tinto said.

`Bottlenecks'

``This is exactly what is needed to address the long- standing bottlenecks that have plagued this coal chain for years,'' said Peter Coates, chief executive officer of Xstrata Coal in an e-mailed statement.

The rail investment comes after Port Waratah Coal Services Ltd. on April 21 announced a A$170 million investment to expand one of coal terminals at Newcastle Port.

It expects to increase capacity to 102 million tons a year from 89 million tons, and is studying further expansion to 120 million tons. Port Waratah last year imposed a quota system for Hunter Valley miners as shipping queues formed. Shipments from the port rose 5 percent last year, and reached a monthly record of 7.5 million tons in January.

BHP Billiton, the world's biggest mining company, and five other miners are competing with Port Waratah to build a A$500 million new coal loader at Newcastle. Other miners include Excel Coal Ltd. and Centennial Coal Co.

To contact the reporter on this story: Tan Hwee Ann in Melbourne at hatan@bloomberg.net

Last Updated: May 3, 2005 01:00 EDT