Japan last month reduced gas-fired generation in favor of coal as the price of liquefied natural gas remained elevated despite multiple reports of energy flows out of the Strait of Hormuz improving.
The country generated 17.3 terawatt-hours from gas-fired power plants in June, Bloomberg reported, which was down by 16% on June 2025. Coal-fired generation, meanwhile, went up by 4.6%, according to data from the nine largest Japanese power utilities.
Japan has been burning more coal and less gas for power generation since the war in the Middle East started, and it is not the only one. All Asian countries have made the switch from gas to coal on affordability and availability grounds.
The shift in generation comes amid LNG prices that are 70% higher on the spot market in Asia than they were before the U.S. and Israel first launched missile attacks on Iran. This has considerably dampened appetite for natural gas in the largest market for the fuel, even though buying has continued, for lack of alternatives.
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Reuters reported earlier this week that the Asian benchmark price for gas on the spot market averaged $17.33 per million British thermal units in June. This compared with an average gas price of $13.19 per mmBtu in Europe. This diverted more U.S. cargoes of liquefied gas to Asia, which for the first time in two years became the destination for more than 50% of U.S. LNG shipments.
Japan is the world’s second-largest buyer of liquefied natural gas after China but it has had to reduce these purchases because of the price issue. In the quarter to June, Japan’s imports of LNG were down 7% on the year, Bloomberg noted in its report, citing cargo-tracking data.
Coal prices have also increased considerably amid the stronger demand, with the Australian benchmark hitting the highest since 2023 in early June. Since then, prices have retreated by 15%.
By Irina Slav for Oilprice.com
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