Japan and South Korea have significantly increased their reliance on coal-fired power plants in recent weeks. This move is a direct response to a major disruption in the global Liquefied Natural Gas (LNG) market, where supply fears and soaring prices have forced these nations to prioritize energy security above all else.
The core of the problem lies in the escalating conflict in the Middle East. First, in late February 2026, major shipping companies suspended transit through the Strait of Hormuz, a critical chokepoint for global energy trade. This immediately introduced a significant risk premium on LNG cargoes destined for Asia. Second, the situation worsened dramatically on March 19, when Iranian strikes damaged Qatar's Ras Laffan LNG export facilities. This single event knocked out about 17% of Qatar's export capacity—equivalent to over 3% of the world's total LNG supply—with repairs expected to take several years.
Consequently, the market reaction was swift and severe. The Asian spot LNG price benchmark, the JKM, surged by over 80% from its pre-war levels, climbing above $19/MMBtu. In contrast, the price of thermal coal, sourced from stable regions like Australia and Indonesia, rose much more modestly. This widening price gap made coal the far more economical option for power generation.
Faced with this crisis, both governments acted decisively. Japan relaxed environmental regulations to allow for greater coal use, while South Korea lifted caps on coal power plant operations. These were framed as temporary, emergency measures to conserve their limited and now very expensive LNG inventories for the peak summer demand season. This pivot underscores a critical reality in energy markets: when supply is threatened, the certainty of keeping the lights on can temporarily override both economic preferences and long-term climate goals.
- JKM (Japan-Korea Marker): A benchmark price assessment for spot LNG cargoes delivered to Japan and South Korea, representing the Asian market price.
- LNG (Liquefied Natural Gas): Natural gas that has been cooled down to liquid form for ease and safety of non-pressurized storage or transport.
- Merit Order: The ranking of available sources of electricity generation based on their marginal cost. Plants with the lowest costs are dispatched first.