Caleb HamiltonCoal is having an unexpected moment in Asia as spot LNG prices have surged 70% to three year highs following a Middle East conflict that knocked out roughly 20% of global LNG flows. With Qatar halting production at its massive Ras Laffan complex and the Strait of Hormuz effectively closed to tanker traffic, buyers across China, India, South Korea, Japan and South Asia are leaning on coal stockpiles they built up over recent years precisely for this kind of shock.
Key Takeaways
- Qatar halted LNG production at Ras Laffan and issued force majeure notices after the Strait of Hormuz became inaccessible to tankers.
- Spot LNG prices in Asia jumped 70% to three year highs, while thermal coal prices rose a comparatively modest 14%.
- South Asia is most exposed: Qatar and the UAE supply about 53% of India's LNG imports, 72% of Bangladesh's and 99% of Pakistan's.
- China and Japan have limited direct exposure to Qatari gas, at 6% and 5% of their supply mix respectively.
- Wood Mackenzie expects LNG demand destruction of 4 to 5 million tons in Northeast Asia and 2 to 3 million tons in South Asia through the third quarter of 2026 if disruptions persist.
Why Asia's Coal Bet Is Paying Off Now
For years, energy analysts and climate advocates criticized China, India and their neighbors for holding onto coal rather than accelerating a shift to cleaner gas. That caution now looks prescient. When Qatar, the region's key term LNG supplier, shut in exports, Asian utilities and industrial users had a fallback that Europe largely does not: idle coal capacity and stockpiled inventories built specifically to hedge against energy security shocks.
Coal cannot substitute one for one with lost gas volumes, but it is cushioning the blow during what analysts are calling one of the largest supply disruptions energy markets have faced. Thermal coal prices have climbed about 14% since the conflict began, a fraction of the 70% spike in spot LNG. That price gap alone is pushing power generators toward coal wherever their infrastructure allows it.
Who Gets Hurt Most by the Qatar Shutoff
Exposure to the disruption varies sharply by country. Kpler's LNG and natural gas insight manager Laura Page noted that Qatar and the UAE supplied around 53% of India's LNG imports in 2025, 72% of Bangladesh's and an extraordinary 99% of Pakistan's. Vortexa LNG analyst Ken Lee puts South Asia's overall exposure to Qatari gas at 20% of the region's total gas supply mix, with individual countries drawing 45% to 99% of their LNG from the emirate.
China and Japan, despite being the world's two largest LNG importers, face comparatively light direct exposure at just 6% and 5% of their gas supply mix. South Korea, Taiwan and Singapore sit in a riskier middle ground: gas makes up at least a quarter of their power generation, and Lee expects their reliance on the volatile spot market to grow substantially if Qatari flows do not resume soon.
The likely response differs by wealth and flexibility. Page argues that if the disruption drags on, the adjustment in Pakistan and Bangladesh will come through demand destruction rather than replacement buying, since neither country can justify spot LNG purchases at current prices. India, she said, is becoming increasingly price sensitive as well, even as it retains more purchasing power than its smaller neighbors.
Coal Buffers and the Limits of Fuel Switching
Not every country can swap gas for coal with equal ease. Deepali Bhargava, ING's regional head of research for Asia Pacific, said China and India, the world's largest coal buyers and users, have a meaningful substitution buffer that can blunt some of the impact from oil and gas price spikes. Smaller, gas dependent economies without that coal infrastructure have fewer options.
Wood Mackenzie's outlook underscores the scale of the shift. The consultancy expects Northeast Asia's LNG demand to fall by 4 to 5 million tons through the third quarter of 2026 if the disruption lasts about two months, a reversal from its earlier forecast of 2.2% demand growth in the region for 2026. South Asia's LNG demand is projected to run 2 to 3 million tons below pre crisis expectations over the same period. Research director Miaoru Huang said higher spot prices will drive greater coal use in the power sector while also curbing industrial gas consumption in some markets.
On the ground, the response looks different country by country. India is curtailing industrial gas use, Pakistan is combining demand curtailment, fuel switching and expanded renewable generation to keep its power system balanced, and Bangladesh has already moved to ration gas supply because the spike in spot LNG prices has become unaffordable for its import bill.
Can Coal Keep Filling the Gap If the Standoff Drags On
The immediate question is how long Qatari supply stays offline and whether the Strait of Hormuz reopens to tanker traffic in the near term. Every additional week of disruption pushes more of Asia's gas demand into permanent destruction rather than temporary substitution, particularly in Pakistan and Bangladesh, where spot prices already sit out of reach. China and India have room to lean further on coal, but smaller economies with thinner buffers may simply have to use less energy altogether until the situation stabilizes.
