How China’s fishing ban is hitting profits for Asia’s diesel fuel traders

On top of stricter emission controls and a move toward electric vehicles, Asia’s diesel traders now have to worry about a million Chinese fishermen staying idle.

A Chinese move to protect endangered marine creatures such as the sea cucumber with a fishing ban contributed to a drop in the so-called crack spread in Asia for diesel, a measure of returns from producing the fuel, to a nine-month low. That is because thousands of the country’s fishing trawlers that will be idle between May and September will not require the fuel at a time when supplies are usually ample as refineries return from maintenance work.

This is not the first time the traders have been rattled by policy changes in China, the world’s biggest energy consumer. The country raised its fuel standards for vehicles in January, leading its refiners to boost premium diesel production, in turn reducing the price spread between cleaner and dirtier grades in Asia.

The fishing ban, slower economic growth, and a move away from heavy industries in the nation could cloud the outlook for the fuel further, according to Fitch Group’s BMI Research.

“A nationwide fishing ban imposed in May will further hit diesel consumption by China’s sizeable boat fleet,” BMI said in a May 25 report. “With the Chinese economy set to slow down further in the second half of 2017, demand for refined fuels could see added pressure in the coming months.”

Overfishing coupled with rising demand for seafood have exhausted fish resources in China’s major rivers and seas, said Liu Xiaoqiang, an official at the Ministry of Agriculture’s fishery department. Among those in need of protection are the sea cucumber, hairtail and yellow croaker. Sea cucumbers, a revered luxury food item, have been harvested at an unsustainable rate, according to WorldFish, a non-profit research organisation.