Key facts
- Japan's gas-fired power generation decreased by 16% in June.
- Coal-fired generation in Japan rose by 4.6% in June.
- Asian LNG spot prices are 70% higher than pre-Middle East conflict levels.
- Japan's LNG imports declined by 7% in the quarter ending June.
- Australian benchmark coal prices reached their highest point since 2023 in early June.
Japan has significantly reduced its reliance on liquefied natural gas (LNG) for power generation, opting instead for cheaper coal, as elevated prices persist amid ongoing geopolitical tensions. In June, gas-fired power plants generated 17.3 terawatt-hours, a 16% decrease year-on-year, while coal-fired generation saw a 4.6% increase, according to data from the country's largest power utilities.
This shift reflects a broader trend in Asia, where countries are prioritizing affordability and availability by switching from gas to coal. The decision comes as Asian spot market LNG prices remain approximately 70% higher than before the recent escalation of Middle East conflicts. Despite this, demand for natural gas continues due to a lack of viable alternatives.
The average Asian benchmark price for gas on the spot market was $17.33 per million British thermal units (mmBtu) in June, compared to $13.19 per mmBtu in Europe. This price disparity has redirected a substantial portion of U.S. LNG shipments to Asia, which now receives over 50% of these exports for the first time in two years.
As the world's second-largest LNG buyer after China, Japan has been compelled to curb its purchases. In the quarter ending June, the country's LNG imports fell by 7% compared to the same period last year, according to cargo-tracking data. While coal prices have also risen due to increased demand, reaching their highest point since 2023 in early June, they have since retreated by 15%, making them a more attractive option than LNG.