Japan Turns to Coal as Iran War Kills LNG Imports It Had Planned to Cut

Japan Turns to Coal as Iran War Kills LNG Imports It Had Planned to Cut With spot LNG prices roughly doubled and Qatar export capacity slashed, Asia's biggest buyers are burning coal they had promised to phase out. Japan's gas-fired electricity generation fell to its lowest level in two years in April, market data show, as the Iran war choked off the LNG cargoes the country depends on to keep the lights on. The shift marks one of the sharpest fuel-switching events in Asia since Fukushima forced utilities to improvise in 2011.^3,6 The proximate cause is the effective closure of the Strait of Hormuz, which has disrupted roughly 17% of LNG export capacity in Qatar, the world's second-largest LNG supplier. Spot LNG prices have roughly doubled as a result, according to market data cited by Reuters, making gas-fired generation prohibitively expensive for utilities already squeezed by summer load planning.^5,6 Coal has filled the gap. Japanese coal consumption rose 11.1% year-on-year in April, according to Reuters. South Korea's swing was more dramatic: coal-based electricity jumped 39.7% to 10,733 GWh over the same period. Vietnam, hit simultaneously by a heatwave, pushed coal-fired output 12.3% higher to a record 17,864 GWh in April, with electric coal imports reaching a record 5.4 million tons according to Kpler data. DBX Commodities puts Asian thermal coal imports in May — excluding China and India — at 31 million metric tons, up 9.4% on the month.^3,4 Fei Xu, senior gas analyst at ICIS, said Japan's coal ramp displaced roughly four LNG cargoes in April alone — about half the annual reduction in gas imports that Tokyo had budgeted for under greater coal usage. In other words, a single month of war-induced disruption erased half a year of planned decarbonisation.⁶ The crisis is a live test of Japan's structural exposure. Roughly 90% of its crude oil is sourced from the Middle East, and the country has already released around 80 million barrels from its strategic petroleum reserves — equivalent to about 26 days of domestic demand — to stabilise the immediate fuel balance, OilPrice.com reported. That buffer exists for oil. For LNG, there is no equivalent reserve to draw down, which is why utilities fell back on coal instead.¹ Into this context comes the restart of the Kashiwazaki-Kariwa plant, the world's largest nuclear facility by installed capacity, after years of post-Fukushima shutdown. The Economist noted this week that restarting KK will not resolve Japan's deeper energy dilemma. Before Fukushima, Japan ran 54 operational reactors providing roughly 25% of its electricity, with government plans to push that toward 50% by 2030. Those plans collapsed; nuclear's share is a fraction of what it was.² Tokyo's latest energy plan targets renewables at between 40% and 50% of electricity generation by 2040, up from around 25% today. Researchers from the Lawrence Berkeley National Laboratory estimate renewables could reliably supply 70% by 2035 if Japan pushed harder. Neither scenario helps much this summer. KK's restart adds capacity at the margin, but the country's near-total import dependence — on LNG, coal and oil — means every geopolitical disruption in the Middle East translates almost directly into a domestic energy price shock.² Andre Lambine, an electricity analyst at S&P Global Energy, put it plainly to Kyodo: "The longer this war continues, the more shifts we will see." Analysts added that the switch to coal is partly structural rather than purely tactical — several Asian utilities had already moved plants into maintenance ahead of summer, and LNG disruption arrived before that capacity came back online.^3,4 The bearish signal in JKM spot — with confidence readings flagging weakening demand despite the price shock — reflects the substitution already underway. If Asian buyers have locked in coal tonnage or are drawing down inventory rather than spot-buying LNG, the demand signal for JKM will stay muted even as the supply shock persists. That creates a two-sided market: LNG prices elevated by supply fear, but actual spot buying suppressed by coal economics and conservation.⁵ The next thing to watch is duration. If the Strait of Hormuz remains effectively closed through the summer cooling season — peak power demand across Japan, South Korea and Vietnam — the coal switch deepens from an April emergency measure into a multi-quarter structural trade. Pre-summer nuclear maintenance in Japan will keep baseload tight. And whatever KK adds to the grid does not substitute for the 17% of Qatari export capacity that has gone offline.^6,2