Asian Coal Imports Hit Records as Iran War Keeps LNG Prices Elevated
A 62% surge in spot LNG prices since the Iran conflict is driving Japan, South Korea and Vietnam to burn more coal, with Asian thermal imports excluding China and India up 9.4% in May.
Six weeks after Asian LNG spot prices surged roughly 62% in the wake of Iranian strikes on Gulf export infrastructure, utilities in Japan and South Korea have not switched back to gas. JKM front-month was at $15.52 as of Sunday (2026-06-28), high enough to sustain the economic incentive for coal-fired dispatch that reshaped Asia's power mix through April and May.2
The data on that shift is now detailed enough to size. South Korea's coal-based electricity generation rose 39.7% year-on-year in April to 10,733 gigawatt-hours, while Japan's coal consumption climbed 11.1% against the same month in 2025, according to Reuters. Both governments moved quickly to enable the substitution. Japan's Ministry of Economy, Trade and Industry announced in late March 2026 a one-year suspension of the 50% capacity-factor cap on its least-efficient coal plants, those below 42% design efficiency, covering April 2026 through March 2027.2,3
The suspension matters because coal already supplied about 29% of Japan's power generation before the conflict. The regulatory change freed utilities to run older units at higher load factors, accelerating a fuel switch that market economics alone would have produced more slowly.3
Vietnam's trajectory was more acute. A heatwave pushed coal-fired electricity production to a record 17,864 gigawatt-hours in April, up 12.3% year-on-year, while electric coal imports hit 5.4 million tons in the same month, also a record, according to Kpler.1
The aggregate signal from DBX Commodities covers the full breadth of Asian buying: thermal coal imports in May, excluding China and India, rose 9.4% to 31 million metric tons. That figure leaves out two of the region's largest coal consumers, which makes the headline number a floor on the total demand shift.1
China's posture added a counterpoint. After a record-breaking first quarter of coal imports, Chinese buying fell in April as weak domestic demand and unfavorable import economics made seaborne purchases less attractive. Chinese utilities have greater flexibility to source from domestic mines than their Japanese or Korean counterparts, and higher international prices reduced the cost advantage of imports.4
The source of the LNG supply shock was the Strait of Hormuz. Iranian retaliation to U.S.-Israeli military strikes disrupted roughly 17% of Qatar's LNG export capacity. Qatar is the world's second-largest LNG supplier; the loss of even a fraction of its output rerouted spot cargoes, compressed delivered supply to Northeast Asia, and lifted JKM to levels that made coal the cheaper dispatch option across most of the affected region.5
Fei Xu, senior gas analyst at ICIS, estimated that Japan's increased coal dispatch in April displaced approximately four LNG cargoes, roughly half the annual reduction in imports the government had expected from greater coal-plant retirement.5 The comparison shows how quickly a supply shock can erode years of transition progress when the fallback fuel is available and regulators are willing to grant the permits to run it.
"The longer this war continues, the more shifts we will see," said Andre Lambine, an electricity analyst at S&P Global Energy.1 At current JKM levels, the economics support that view. Japan's regulatory exemption for inefficient coal plants runs through March 2027 regardless of when spot LNG prices normalize, which means utilities building dispatch schedules around that window will not immediately reverse course even if the conflict de-escalates.
Newcastle coal physical was at $125.80 as of Sunday (2026-06-28). At that level, relative to current JKM pricing, the coal-over-gas switching premium remains intact in Japan and South Korea. What changes the calculus: a durable ceasefire that restores Qatari export volumes, lower summer cooling demand than seasonal signals currently suggest, or Chinese buying recovering enough to lift seaborne coal prices to levels that squeeze dispatch margins. None of those triggers appear imminent.2