Asian Hydropower Output Drops 13 GW in June as Dry Weather Pushes Coal and LNG Demand Higher
S&P Global data shows a sharp regional hydro shortfall, adding new pressure to Asian power markets already stretched by constrained LNG supply.
Hydropower output across seven Asian markets fell by around 13 average gigawatts year-on-year in June, as El Niño-related weather patterns reduced reservoir inflows and forced grid operators to lean more heavily on coal and gas, according to a report by S&P Global published on Tuesday (2026-07-07).6
India and Vietnam together accounted for more than 80% of the regional shortfall, with both markets relying on thermal generation to maintain grid stability through the month.6 The decline arrives as Asian LNG supply remains constrained by Middle East disruption, with JKM front-month sitting at $16.06 per million British thermal units as of Tuesday (2026-07-07).6,4
Thermal alternatives are not cheap. Asian LNG prices have risen by around 62% since the conflict involving Iran disrupted supply routes, according to market data. The disruption cut forecast Asian LNG imports to around five million metric tons, from an earlier estimate of 12.4 million tons, assuming a two-month interruption to Middle East supply.1 Analysts at Wood Mackenzie said the conflict will significantly reduce Asian LNG demand growth in 2026, with high prices and supply uncertainty already curtailing appetite across the region.1
Japan has moved to shore up its power supply. In late March 2026, the Ministry of Economy, Trade and Industry announced a one-year suspension, running from April 2026 through March 2027, of the 50% capacity-factor cap that applied to coal plants with design efficiency below 42%.4 The policy gives Japanese utilities access to older plant capacity that was previously restricted, and coal already accounts for around 29% of Japan's power mix. The government estimated the suspension would save around 0.7 billion cubic metres of LNG while providing reliable baseload power.4
Japan's coal consumption had already risen 11.1% year-on-year in April, according to Reuters data, before the June hydropower shortfall added a further layer of demand.3 South Korea moved similarly, lifting the 80% capacity cap on coal plants and postponing the retirement of three coal units totalling 1.5 gigawatts.4 South Korean coal consumption surged 39.7% year-on-year in April.3
Vietnam's position is particularly acute. A heatwave pushed coal-fired electricity generation up 12.3% in April to a record 17,864 gigawatt-hours, according to government figures.5 With India and Vietnam the largest contributors to June's hydropower decline, grid operators in both markets face the same arithmetic: hydro out, thermal in, at elevated fuel cost.
India, which relies on coal for close to 75% of its power generation, has asked coal plants to run at maximum capacity and avoid planned outages.2 In Bangladesh, coal-fired generation and imports of coal-based electricity have both increased, according to government data.1,2
Taiwan also moved to expand its coal fleet, restarting two coal-fired units at the Mailiao Power Plant and preparing the 2.1-gigawatt Hsinta backup plant for at least three months, with extensions possible.4 The combination of policy-driven coal capacity expansions and the hydro shortfall has pushed regional coal demand well above year-earlier levels.
Not every market signal points the same way. JKM front-month was trading at $16.06 as of Tuesday (2026-07-07), and some supply-side positioning remains bearish, reflecting the possibility that LNG markets could partially rebalance if Middle East disruption resolves sooner than the two-month assumption embedded in current import forecasts. Should supply routes reopen faster than expected, buyers could return to LNG more quickly, reducing coal burn.3
The immediate variable is rainfall. If monsoon underperformance continues into July and August, the hydropower shortfall reported for June may extend through the summer, further tilting Asian power markets toward coal and, where prices permit, LNG. Asia's grid operators have already deployed the available policy levers — older coal plants are running, retirements have been deferred. The next test is whether reservoir levels recover fast enough to ease the thermal load before fuel costs become a harder constraint.