Coal switching accelerates in Asia as LNG markets tighten

Coal switching is accelerating across Asia as LNG supply disruptions force countries to adjust power generation and gas demand. With reduced LNG flows linked to the Iran conflict, countries across the region are turning to coal as the primary short-term response.

Limited fuel-switching options for oil products and the availability of existing coal-fired capacity are driving a rapid increase in coal generation.

Governments are lifting operational constraints on coal plants, delaying retirements, and reactivating mothballed units to maintain power supply.

Japan and Korea are easing capacity limits, while India is pushing coal plants to run at full capacity and avoid outages during peak demand periods.

At the same time, competition for LNG has intensified. Despite high prices, Asian buyers are actively seeking spot cargoes, diverting supply from Europe.

Markets heavily dependent on LNG imports, including Japan, Korea, and Taiwan, are particularly exposed to reduced flows through the Strait of Hormuz.

Industrial demand is increasingly being curtailed in price-sensitive markets. In countries such as India, Pakistan, and Bangladesh, gas supplies are being prioritised toward essential sectors, forcing reductions in industrial activity and, in some cases, plant shutdowns.

The impact remains uneven across the region. China appears relatively insulated due to strong domestic gas production, pipeline imports, and greater flexibility to switch from gas to coal, allowing it to manage the shock more effectively than other markets.

Overall, the response underlines the continued role of coal as a critical fallback in periods of gas supply disruption, while highlighting the structural dependence of Asian markets on LNG and the limits of short-term fuel substitution.

Source: Anne-Sophie Corbeau, Center on Global Energy Policy at Columbia University SIPA