Asian nations pivot to coal as LNG prices surge

Asian nations are increasingly turning to coal to mitigate the impact of rising liquefied natural gas (LNG) prices ahead of the winter season. High spot prices, driven by disruptions in Middle Eastern energy supplies and the closure of the Strait of Hormuz, have made LNG significantly more expensive.

In South Korea, officials are actively rethinking reliance on the LNG market to avoid the massive financial losses experienced following the invasion of Ukraine. Japan is also implementing structural changes and utilizing coal capacity to provide flexibility and relieve price pressure on its electricity markets.

Despite the cost increases, LNG imports in Asia are expected to reach a three-month high in October. China, the world’s largest importer, is increasing its purchases to meet winter demand, even as spot prices for North Asia have risen to nearly triple the levels seen prior to recent Middle Eastern conflicts. Meanwhile, Japan’s imports are projected to decline slightly due to high existing inventories.