Sky-high natural gas prices have Japan scrambling for coal

Japan’s coal imports are poised to jump to the highest level in at least two years as the nation’s utilities turn to the dirtiest fossil fuel as a replacement for expensive liquefied natural gas.

More than 17.3 million tons of coal will be delivered to the country this month, said Edwin Toh, a dry bulk manager at energy intelligence firm Kpler. That would be the highest since December 2019, and about 5% above the five-year seasonal average, according to Japanese customs data.

More coal is coming from the Americas after Indonesia banned exports in January for a month, Kpler data showed. Shipments from the U.S. may have doubled from December levels while Colombian volumes are 250% higher. Canada and Australia also raised exports.

“Essentially, these cargoes were imported with a view toward meeting Japan’s increase in coal demand and replacing the supply disruption from Indonesia,” said Toh.  

Snowy winter weather has boosted Japan’s power demand and curbed output from renewable sources, triggering a jump in coal-fired power generation. While spot prices are near a record high, coal is still cheaper than prompt shipments of cleaner-burning LNG.

From Tokyo to Boston, the world is being forced to depend more on coal amid a global natural gas supply crunch—a worrying development just months after the COP26 climate summit in Glasgow. Efforts to curb emissions are challenging governments that also don’t want to disrupt economic growth.