JAKARTA (Reuters) –Consumption of diesel by Indonesian miners has picked up for the first time in four years as coal producers in the country ramped up output to meet Chinese demand, offering a glimmer of hope to Asian traders grappling with multi-year low fuel margins.
Once Asia’s top buyer of diesel, Indonesia’s imports of the fuel slowed to a fraction of what it used to be with a plunge in coal prices over the past four years curbing mining activities. But this year, thermal coal prices have rallied amid a supply squeeze in top consumer China.
“Coal prices are getting higher so the miners are trying to speed up production,” boosting demand for the fuel needed to power mining machinery, said a trader, who supplies diesel to mining companies in Indonesia.
Monthly diesel use in Indonesia’s mining sector rose by at least five to 10 percent over July to September, traders said.
Benchmark Australian thermal coal prices rose to $74.30 a ton last Friday, the highest in 28 months and up almost 47 percent this year. Prices in Indonesia have been rising since May.
Indonesia ‒ the world’s biggest thermal coal exporter ‒ shipped out 3.71 million tons to China in August, up 55.8 percent from a year ago.
“It has also been a wet summer so the water level is very good in the rivers in Kalimantan, which makes it easier and faster for ships to flow in and unload cargoes,” said the trader, who did not want to be named.
Demand for diesel could rise further next year, a second trader supplying diesel to mines said, as thermal coal miners overcome logistical and debt constraints.
The rise in the use of diesel by Indonesia’s mining sector should help support Asian fuel margins that are currently languishing near six-year lows.
AKR Corporindo, one of the largest suppliers of diesel to miners in Indonesia, imports about 800,000 to one million barrels a month, while oil major BP Plc. brings in about 275,000 to 330,000 barrels a month, the first trader said.
It is difficult to track the exact volumes of diesel imported into Indonesia as there are nearly 200 small companies with a license to import the fuel, he added.
However, the traders cautioned that Indonesia’s total diesel imports would still remain lower than in previous years with a hike in domestic retail prices and a higher local biodiesel mandate keeping a lid on demand. Diesel is used both in the industrial and transport sectors of Indonesia.
State energy firm PT Pertamina has imported 600,000 barrels of diesel so far this year, according to a company official, compared to its peak of about four million to 4.5 million barrels a month before 2012.