Japan and South Korea Lift Coal Plant Caps as Indonesia Tightens Export Controls
Indonesian export controls and a 62% LNG price surge since the Iran conflict have pushed Japan and South Korea to lift coal plant limits and ramp imports.
Newcastle thermal coal, the Asia-Pacific physical benchmark, was at $138.25 per tonne as of September 6 (2026-09-06). That price reflects a market reshaped by two overlapping shocks. LNG supplies were disrupted by the Iran conflict, driving Asian buyers back to coal. Then in June (2026-06-08), Indonesia announced tighter commodity export controls that sent benchmark Asian coal prices to the highest in nearly two years, according to Investing.com.4
Asian seaborne thermal coal imports are projected to reach 73.16 million tonnes in July (2026-07), up from 70.31 million tonnes in June, according to data reported July 29 (2026-07-29). Japan and South Korea together account for a projected 19 million tonnes of that total — Japan at 10.46 million tonnes and South Korea at 8.54 million tonnes.6
Those volumes have been building since spring. From April through early May (2026-04 to 2026-05), both countries had been ramping coal-fired generation as LNG prices surged. The JKM Asian LNG benchmark recorded $24.02 per MMBtu on September 6 (2026-09-06), but had climbed roughly 62% since the Iran conflict began, according to reporting from May (2026-05-19). Analysts said the cost surge pushed utilities toward coal, particularly during nuclear plant maintenance that reduced available baseload capacity.1,2
Coal consumption rose 11.1% year-on-year in Japan and 39.7% in South Korea in April (2026-04), according to Reuters. Import volumes followed. Japan was forecast to receive 7.59 million tonnes of thermal coal in May (2026-05), up from 6.63 million tonnes in April (2026-04). South Korea was on track for 6.73 million tonnes in May — the most since January and up sharply from 4.79 million tonnes in April — according to data reported in late May (2026-05-25/26).1,3,5
Japan cleared the regulatory path for higher coal burn in late March (2026-03), when the Ministry of Economy, Trade and Industry announced a one-year suspension — April 2026 through March 2027 — of the rule capping plants with design efficiency below 42% at a 50% capacity factor. Coal already accounted for roughly 29% of Japan's power mix before the change. METI estimated the suspension would displace around 0.7 billion cubic metres of LNG demand over the period.2
South Korea took parallel steps. Seoul lifted the 80% capacity ceiling on coal-fired plants and deferred the retirement of three units totalling 1.5 gigawatts. Both decisions signal that coal's role in each country's grid will not shrink on its original schedule while LNG remains expensive.2
Indonesia's new export controls compound the supply picture. The rules are designed partly to curb under-invoicing and raise government revenue. But reporting in late May (2026-05-25/26) noted that trade flows could be disrupted while uncertainty persists over how the new clearance system operates in practice. Indonesia is the world's largest thermal coal exporter, so operational friction in its export pipeline is a direct problem for Japanese and South Korean procurement teams.4,3,5
China adds demand pressure from another direction. Domestic coal production in China fell 9.7% year-on-year in June (2026-06) after intensified mine safety inspections, according to data reported July 29 (2026-07-29). China is projected to take 28.14 million tonnes in July (2026-07) — the highest monthly level this year — placing it in direct competition with Japan and South Korea for available seaborne tonnes.6
If Indonesian export clearances return to normal pace quickly, the pressure on alternative supply channels eases. If they do not, both countries face tighter spot markets during a period when nuclear maintenance in Japan and South Korea adds further generation pressure. The capacity rule suspensions in both countries have locked in elevated coal burn through at least early 2027, setting a floor under import demand regardless of how the Indonesian situation resolves.1,2,6