Key facts
- Global coal demand is projected to reach an all-time high this year, according to the IEA.
- LNG flows from the Persian Gulf are over 75% lower than before February 28th.
- Coal is approximately 80% cheaper than LNG.
- Asian spot market LNG prices topped European prices, drawing cargoes eastward.
- In September, only 21 LNG cargoes exited the Strait of Hormuz, down from over 60 pre-war.
- Europe's June coal imports rose 43% year-on-year.
Global coal demand is surging to an all-time high, driven by a severe shortage of liquefied natural gas (LNG) and escalating geopolitical tensions in the Middle East that have disrupted energy trade. Heating demand is rising ahead of winter, while LNG flows from the Persian Gulf remain significantly depressed.
The November natural gas benchmark contract in Europe is trading above 81 euros per megawatt-hour, and spot LNG prices in Asia have surpassed European levels, redirecting cargoes eastward. In this environment, coal has emerged as a significantly more affordable alternative, trading at an 80% discount to LNG.
Despite its high carbon emissions, coal's affordability, availability, and reliability have kept it central to the global energy system. While regulations have aimed to curb its use, the ongoing conflict, reportedly involving attacks on vessels in the Persian Gulf, has wreaked havoc on gas trade. This has led major energy importers like Japan, South Korea, and China to increase their coal imports substantially. In the third quarter alone, these three nations collectively imported 122 million tons of coal.
Even Europe, which has been actively reducing its reliance on fossil fuels, has seen a strong rise in coal imports, with June figures up 43% year-on-year, largely due to high gas prices and reduced supplier options following the ban on Russian energy imports. However, potential production quotas and policy changes in Indonesia, a major coal exporter, could impact future supply and prices.