Coal Shipments Jump 27% as the Iran War Forces Asia and Europe Back to the Cheapest Fuel

Coal Shipments Jump 27% as the Iran War Forces Asia and Europe Back to the Cheapest Fuel With a fifth of LNG trade trapped behind Hormuz and Qatari output halted, importers are restarting coal and delaying retirements rather than pay doubled spot gas. Coal shipments to South Korea, Japan and the European Union jumped 27% year on year last month, according to BIMCO, the world's largest shipowners' association.² The buyers are scrambling for an alternative to Middle East gas, much of it either trapped behind the Strait of Hormuz or no longer produced at all after Qatar halted LNG output as early as March 2.² That matters because it reverses, at speed, a retirement schedule that took a decade to build. Global coal imports are on track to reach their third-highest monthly level on record, with shipments accelerating in recent weeks as the disruption deepens.² Energy security has become the organising principle, and Wood Mackenzie analysts say it is shifting policy, lifting coal use across key Asian and European markets and delaying coal plant retirements.² The trigger is a gas market that has seized up. Asia is exposed because it relies on imported fuel, much of it routed through Hormuz, a chokepoint for about a fifth of the world's LNG.⁶ Spot LNG prices have roughly doubled while Asian LNG imports have fallen sharply, the biggest drop in years, pushing the region's top importers back toward coal to keep the lights on.⁵ Japan has moved at the policy level. In late March 2026 the Ministry of Economy, Trade and Industry suspended for one year, through March 2027, the 50% capacity-factor cap on inefficient coal plants running below 42% design efficiency.⁵ That single change lets the country's least efficient units run harder precisely when gas is scarcest, a direct admission that security now outranks the efficiency rules written for calmer markets. The pivot carries a bill that arrives later. Analysts say the shift will impose substantial environmental and public health costs, in the words of Dinita Setyawati, senior energy analyst at Ember.¹ Some argue the crisis could ultimately accelerate the region's move toward renewables, on the logic that the cheapest path to energy independence is domestic generation rather than imported fuel of any kind.¹ For now the near-term response is more coal, not more wind. China complicates the simple story. Its coal imports fell 6% year on year in March 2025 to 38.73 million tonnes, down from 41.38 million a year earlier, and first-quarter imports slipped 0.9% even after record January-February volumes.⁴ Read alone, that looks bearish for seaborne coal. It is not. The decline is substitution, not demand destruction. Domestic production boomed in late 2024, with daily dispatch averaging 11.66 million tonnes as mines ramped up, and a price gap between cheap local supply and imports has pushed Chinese buyers toward their own mines.⁴ Thermal power hit a record 6.34 trillion kWh in 2024, up 1.5% on the year, as solar and wind ran into intermittency limits.⁴ China is burning more coal than ever; it is simply digging it itself. That self-sufficiency is now a bellwether. Chinese demand for imported coal dropped from a record 47.6 million tonnes in September 2024 to a 26% year-on-year fall by June 2025, while domestic output rose 5% to record levels.³ The country has effectively walled off its own market from the price spike hitting Japan, Korea and Europe, leaving the import surge concentrated among buyers without that domestic cushion. The split shows up in power curves. While seaborne coal demand from import-dependent buyers is firmly bid, one contrarian read sees German baseload front-month leaning bearish on supply, a reminder that more coal burn does not translate uniformly into higher power prices everywhere.² Where domestic coal and renewables can cover load, the security premium fades. The open question is durability. If Hormuz reopens and Qatari cargoes return, the 27% shipment surge could unwind as fast as it built, leaving importers with restarted plants and suspended efficiency caps they no longer need.^2,5 If the disruption drags on, the retirements that Wood Mackenzie says are being delayed start to look like reversals, and the watch item becomes whether Japan extends its capacity-factor suspension past March 2027.^2,5