Japan Cuts Gas in Favor of Coal as Hormuz Disruption Chokes LNG

(Bloomberg) -- Japan sharply reduced natural gas-fired power generation last month, instead relying more on coal, as disruptions around the Strait of Hormuz tightened supplies of the cleaner-burning fuel.

The country produced about 17.3 terawatt hours of electricity with gas in June, down 16% from last year, according to data compiled by Japan’s nine largest utilities. Coal generation rose by 4.6%, the data shows.

The move highlights how Asian countries are continuing to turn to alternatives, like coal, to reduce dependence on liquefied natural gas — as the conflict in the Middle East chokes about a fifth of global exports. Asian LNG spot prices are about 70% higher than pre-war levels, making the fuel less attractive to Japanese utilities.

Japan — the world’s second largest LNG buyer — has cut back imports since the war started in late-February. March to June imports are down about 7% compared to the same period last year, ship-tracking data shows. 

While higher demand from Northeast Asian countries pushed Australian benchmark coal prices to the highest since 2023 in early June, futures have since dropped around 15%.

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