Major Asian liquefied natural gas (LNG) importers Japan and South Korea ramped up coal-fired power generation in April and into early May, market data showed, as the Iran war disrupted supplies of the super-chilled fuel and boosted prices.
Japan’s gas-fired power supply hit two-year lows in April and South Korea’s dropped to six-month lows, according to data from the Japanese Electricity Market Data Hub and Korea Power Exchange (KPX). The switch underscores how the conflict is reshaping power generation patterns after Iranian retaliation to U.S.-Israeli attacks knocked out 17% of LNG export capacity in No. 2 global supplier Qatar.
“The longer this war continues, the more switching we will see,” Andre Lambine, a power analyst at S&P Global Energy, told a recent industry event.
In April, coal-fired power supply in Japan surged 11.1%, the fastest pace in at least a year, as gas-fired power plunged 12.9% to 16,447 gigawatt-hours (GWh), statistics from the Japanese Electricity Market Data Hub showed.
Japan and South Korea typically use LNG to offset nuclear maintenance shutdowns before demand starts rising in June.
“Japan’s rising coal power output displaced roughly 4 LNG cargoes in April – already about half the annual imports the government expected to avoid by using more coal,” said Fei Xu, senior gas analyst at ICIS.
“This has helped maintain end-April LNG inventories near 5-year averages.”
South Korea’s coal-fired power supply rose 39.7% annually to 10,733 GWh in April – the sharpest rise since August 2019, while gas-fired power fell 6.4%, data from KPX showed.
COAL IMPORTS RISE AS UTILITIES RUSH TO SECURE POWER SUPPLY
Nuclear supply fell 2.7% annually in Japan and 14.6% in South Korea in April and continued declining in the first 10 days of May, the data showed.
That was offset by an 18.3% annual increase in coal-fired supply in Japan and 14.7% in South Korea in May, as gas-fired power plunged 23.4% and 12.2% respectively. S&P’s Lambine said South Korea could use more coal as its coal-fired power plants remained underutilised, while ICIS’ Xu said Japan’s ability to switch from gas to coal may be larger and faster than expected.
Elsewhere, a heatwave across Southeast Asia drove a 12.3% surge in Vietnam’s coal-fired output to a record 17,864 GWh last month, pushing coal’s share in its power mix to the highest since March 2024, government data showed.
The war-induced LNG supply crisis and hot weather also drove a surge in Asian thermal coal shipments in May outside China and India – the top global coal users, with imports by countries set to rise 9.4% annually to 31 million metric tons, according to London-based DBX Commodities.
Vietnam’s electricity-grade coal imports surged to a record 5.4 million tons in April, Kpler data showed.
In May, coal imports by South Korea and Japan are on track for annual rises of more than 50% and 20% respectively, the data showed.
Asian spot LNG prices have surged 62% since the start of the war, dwarfing a 13% rise in the Newcastle coal benchmark. Coal’s supply chain to Asian markets is unaffected by the war.
“Coal’s value is increasingly being defined by security rather than economics,” said DBX Commodities CEO Alexandre Claude.
(Reporting by Sudarshan Varadhan; additional reporting by Florence Tan Editing by Keith Weir)