Hormuz-Driven LNG Costs Push Developing Asia Back to Coal
QatarEnergy spent $1 billion in emergency US spot cargoes after the strait closed, but price-sensitive Asian buyers are switching to coal as JKM Asian LNG holds above $26/MMBtu.
JKM Asian LNG spot was near $26.75 per MMBtu in Friday (2026-09-18) trade, and for utilities across South and Southeast Asia that lost access to contracted Qatari volumes when the Strait of Hormuz was disrupted in late February, that price has made coal look cheap. Bangladesh has raised coal-fired generation and is importing coal-based electricity, according to government data cited by australiannews.net.2,7
The cause was abrupt. US-Israeli strikes began disrupting the strait from late February, stripping roughly 20% of global LNG supply from the market since early March, oilprice.com reported. Qatar normally directs around 80% of its LNG exports to Asian buyers, so the supply shock landed hardest on the region's power sectors and industrial consumers.3,6
QatarEnergy moved quickly. The state producer bought roughly 33 US LNG cargoes valued at about $1 billion in emergency spot purchases to keep Asian customers supplied after the disruption, ibtimes.com reported on July 30 (2026-07-30). Kpler shipping data showed 28 of the 33 cargoes had already reached their destinations, with the rest still en route to buyers in South Korea, Taiwan and India. QatarEnergy had bought only four spot cargoes in all of 2025.6
Emergency buying bought time but not a solution for the region's most price-sensitive importers. "The conflict will significantly reduce Asian LNG demand growth in 2026," Lucas Schmitt, an analyst at Wood Mackenzie, told australiannews.net. High prices and supply uncertainty are expected to curb regional demand growth broadly, shifting fuel choices back toward the cheapest available alternative.2
The supply chain detour also adds carbon cost. Japan's resales of US LNG across nine Asian markets generate greenhouse gas emissions equivalent to about 17 coal plants running for a year, according to a report cited by asian-power.com on June 16 (2026-06-16). Even before utilities begin direct coal switching, the rerouting of cargoes deepens the region's emissions exposure.4
Europe is pulling the other way. Germany's LNG share of total gas supply rose to 12% in the first half of the year, up from 10% a year earlier, oilprice.com reported on July 6 (2026-07-06). Global LNG liquefaction volumes had edged above prior-year levels by May 2026, reaching about 1.59 billion cubic meters per day against 1.56 billion in the comparable period — incremental supply, but not enough to break the price.5
European and Asian buyers are now competing for the same Atlantic Basin cargoes. ICE Endex TTF front-month touched €76.27 per MWh in Friday (2026-09-18) European morning trade, and with the EU racing to refill gas storage following Hormuz-related disruptions, euronews.com reported on August 20 (2026-08-20), cargoes that might have moved to South or Southeast Asia are being pulled westward. South Asian importers without the balance sheets to match European bids are left exposed.7,5
China is approaching the same market from a position of more leverage. Russian President Vladimir Putin arrived in Beijing on Wednesday (2026-05-20) to meet Xi Jinping with the long-stalled Power of Siberia 2 pipeline back on the table, allusanewshub.com reported. The proposed 2,600-kilometre pipeline would carry 50 billion cubic meters annually from Russia's Yamal fields, supplementing the Power of Siberia 1 system that delivered approximately 38 billion cubic meters to China in 2025.1
China's LNG imports fell by 10 billion cubic meters in 2025 versus 2024 even as Beijing retained its position as the world's largest LNG importer, turkiyetoday.com reported on August 31 (2026-08-31). Chinese oil imports from Russia meanwhile jumped 35% year-on-year in the first quarter of 2026, according to official customs data. Beijing is shifting toward locked-in overland routes and away from spot LNG exposure — a structural hedge unavailable to Bangladesh or Pakistan.8,1
But Power of Siberia 2 remains unsigned. China sought pricing terms near Russia's domestic rate of around $120-130 per 1,000 cubic meters; Moscow has pushed for terms closer to the Power of Siberia 1 contract, according to allusanewshub.com. Kremlin foreign policy aide Yuri Ushakov said ahead of the May summit that the pipeline "will be discussed in great detail," and no agreement was announced after the leaders met.1
QatarEnergy's expansion plan, targeting growth from 77 million tonnes per year to 142 million tonnes annually by end-decade, would eventually add material supply. That capacity arrives years too late for utilities currently choosing between spot LNG and Newcastle coal at $138.65 per tonne on Friday (2026-09-18). Schmitt's demand-growth warning is already materialising, and in Bangladesh, the coal switch is a matter of government record.6,2