SINGAPORE/KARACHI: Asian utilities are increasingly turning to coal-fired power to manage rising energy costs and secure supply, as the war involving Iran disrupts liquefied natural gas (LNG) shipments and drives prices sharply higher, industry officials said.

The conflict has choked key supply routes, with shipping through the Strait of Hormuz largely halted and Qatar, the world's second-largest LNG exporter, suspending shipments. As a result, spot LNG prices in Asia have doubled to three-year highs, marking the second major supply shock in four years.

In response, several countries across Asia are ramping up coal usage to reduce reliance on expensive LNG. In South Asia, Bangladesh has increased coal-fired generation and imports of coal-based electricity this month, according to government data.

Pakistan is also seeking to expand domestic power generation to reduce exposure to volatile LNG markets. Power Minister Awais Leghari said the country aims to rely more on locally sourced energy following recent solar capacity additions. "With a reduction in LNG generation, plants running on locally mined coal will be able to produce more during off-peak hours," Leghari told Reuters.

Shift Away From LNG

In Southeast Asia, the Philippines is boosting coal-fired output while cutting back on LNG-based generation. Vietnam's state utility EVN is negotiating coal supply deals, and Thailand is increasing production from its largest coal plant to conserve LNG.

In Northeast Asia, South Korea plans to lift limits on coal-fired generation and expand nuclear output. Japan's largest power generator, JERA, said it will continue operating coal plants at high utilisation rates.

Natural gas has already been losing ground in Asia's power mix for nearly a decade, with renewable energy gaining share, according to data from Ember. The current disruption is expected to accelerate that trend.

Analysts say high prices and supply uncertainty are likely to curb LNG demand growth across the region. "The conflict will significantly reduce Asian LNG demand growth in 2026," said Lucas Schmitt, an analyst at consultancy Wood Mackenzie.

The firm has cut its forecast for Asian LNG imports to about five million metric tons from 12.4 million tons, assuming a two-month disruption to Middle East supply.

Since most LNG contracts are linked to oil prices with a three-month lag, buyers in Asia are expected to face even higher costs from June.

Pressure on Developing Economies

The surge in energy prices is placing particular strain on developing economies. High LNG costs following Russia's invasion of Ukraine in 2022 had already led to delays or cancellations of LNG import projects in South Asia. According to Global Energy Monitor, around US$107 billion in planned infrastructure investments in the region could be at risk.

Aziz Khan, chairman of Bangladesh's Summit Group, which operates an LNG regasification unit, said passing on higher electricity costs to consumers is difficult. "You're breaking the backbone of the economies of poorer countries," he said.

Coal Gains, but Renewables Still in Focus

Coal prices have risen as well, with the benchmark for Asian thermal coal up 13.2 percent this month. However, the increase remains modest compared with the surge in LNG prices. Analysts said coal imports may remain relatively subdued in the near term as major consumers such as China, India, Japan, and South Korea rely on existing stockpiles and long-term supply contracts.

At the same time, rising fuel costs are strengthening the case for renewable energy. "Recent shocks once again refute the case for relying on imported fossil fuels in energy sector development plans, potentially creating more opportunities for renewables," said Sam Reynolds, LNG research lead at energy think tank IEEFA.