Hormuz Strait Disruption Pushes Up LNG Prices, Japan Shifts to More Coal-Fired Power
N.R. Finch
Shipping disruptions in the Strait of Hormuz have pushed Asian LNG spot prices roughly 70% above pre-conflict levels; Japan's gas-fired power output fell 16% year-on-year in June while coal-fired generation rose 4.6% — the world's second-largest LNG buyer is already substituting coal for gas.
What changed in Japan's power mix?
Data from Japan's nine major utilities show gas-fired generation fell to roughly 17.3 TWh in June, down 16% year-on-year.
Coal-fired output rose 4.6% over the same period — the exact opposite direction.
This means → Japan is actively back-filling the gas gap with coal. The fuel switch is already under way.
Why has LNG suddenly become uneconomical?
The Strait of Hormuz carries roughly one-fifth of global LNG exports; the Middle East conflict has choked that corridor.
Asian LNG spot prices now sit about 70% above pre-war levels, sharply raising fuel costs for utilities.
In plain terms = generating the same kilowatt-hour costs far more with gas than with coal, so utilities are choosing the cheaper fuel.
How much LNG has Japan cut?
Ship-tracking data show Japanese LNG imports from March through June fell roughly 7% year-on-year.
The trend began right after the conflict erupted in late February and has held for four months.
This reflects Japan's weight as the world's second-largest LNG buyer — its purchasing shifts ripple across the entire Asian supply-demand balance.
Where are coal prices headed — and what does the market expect?
Rising coal demand pushed the Australian benchmark to its highest level since 2023 in early June.
Futures have since pulled back roughly 15% from that peak.
This means → the rally-then-retreat signals the market is split on whether demand will last — the next move hinges on whether the Hormuz situation eases and LNG supply recovers.
Content is for reference only, not financial advice.