Soaring LNG costs drive coal comeback in Asia

Asian utilities are increasingly shifting toward coal-fired power generation to reduce costs and protect energy security, as disruptions linked to the US-Israeli war on Iran push liquefied natural gas (LNG) prices sharply higher and constrain supply, according to a report by Japan Today.

Spot LNG prices in Asia have doubled to three-year highs amid a second major supply shock in four years. Shipping through the Strait of Hormuz has nearly come to a halt, while Qatar—the world’s second-largest LNG exporter—has suspended shipments.

In response, several Asian countries are increasing coal use. Bangladesh is expanding coal-fired generation and imports, while Pakistan is boosting reliance on domestic energy sources. Power Minister Awais Leghari said locally mined coal plants will increase output, particularly during off-peak hours, as LNG generation declines.

In Southeast Asia, the Philippines and Vietnam are raising coal-fired output, and Thailand is increasing generation at its largest coal plant to conserve LNG supplies. South Korea is considering lifting limits on coal generation and expanding nuclear output, while Japan’s largest power producer, JERA, plans to maintain high coal utilisation rates.

Analysts warn that prolonged high LNG prices could reduce demand across Asia. Consultancy Wood Mackenzie has already lowered its 2026 LNG import forecast significantly. Rising costs are also putting pressure on developing economies, with Bangladesh’s Summit Group warning that higher energy prices are difficult to pass on to consumers.

Although coal prices have risen, the increase remains smaller compared to LNG. Major importers such as China, India, Japan, and South Korea are relying on stockpiles and long-term contracts to stabilise supply.

Experts say the crisis may accelerate the shift toward renewable energy, as continued volatility highlights the risks of dependence on imported fossil fuels.

By Tamilla Hasanova