Taiwan is looking to increase thermal coal inventories to prepare for any potential shortfall in LNG supplies because of conflict-related disruptions in the Middle East, while other Asia-Pacific utilities may also look to coal as an alternative if tight LNG supplies cause prices to rise.
State-owned Taiwanese utility Taipower's combined 2.1GW units 1-4 at the Hsinta coal-fired plant could be restarted, the country's ministry of economic affairs (MOEA) said on 3 March. The MOEA is working towards avoiding a potential supply shortfall in LNG. Taiwan only has enough secure LNG supplies to meet demand up until the end of March, Taipower said on 3 March.
The Hsinta coal-fired power plant was retired in 2023-25 and converted into back-up units that can be restarted for emergency purposes. Taipower's coal burn is likely to rise if these units are restarted.
Taipower has already begun stockpiling coal for the Hsinta power plant but resuming coal-fired generation at the plant remains a last resort for the country, a Taipower source told Argus on 4 March. The utility is likely to issue more tenders to increase the plant's coal inventories but is currently reviewing the volumes that would be needed, the source added.
Taipower had sought around 960,000t of thermal coal to be delivered in January-March, and another 1.52mn t to be delivered from March-August via tenders issued since October 2025. Taiwan imported 52mn t of thermal coal in 2025, down by 9.4pc compared with 2024, with the decline driven by a drop in coal burn which hit a 24-year low in 2025.
Taiwan likely has LNG supplies to meet demand up to the end of March and the MOEA is considering options such as moving up term LNG cargoes and increasing procurement of spot cargoes.
Gas-fired output will likely be prioritised before Taiwan will consider restarting the Hsinta power plant. The plant's units may only be dispatched when the country's operating reserve margin falls below 8pc.
Any prolonged spike in spot LNG prices could push other utilities in Asia-Pacific to seek alternatives such as coal, although northeast Asia is entering the spring shoulder season when electricity demand typically falls. This could help mitigate the impact the escalating Middle East conflict has on LNG supplies.
The northeast Asian shoulder season could provide some time and flexibility for utilities to procure more LNG without having to utilise backup coal-fired units. Taiwan's thermal power output usually weakens during the spring and starts to rise in the summer.
Meanwhile, a spike in northeast Asian spot LNG prices is likely to support coal's competitiveness within South Korea's power mix, market participants told Argus on 3 March. South Korea is also entering the spring shoulder season, when overall electricity demand typically eases. But coal-fired output has remained firm on the escalation of geopolitical tensions in the Middle East. Coal-fired output averaged 20.7GW on 3 March, up by 4.8GW from a year earlier, data from Korea Power Exchange show.
Softer seasonal demand may limit the immediate effect of higher LNG prices in South Korea, and any shift in coal-fired generation will depend on broader factors, including renewable output and total power demand, market participants said.
Japan is also entering the shoulder season for electricity demand at a time when the country's main power utilities are also holding relatively ample LNG stocks, which are above the long-term average for this time of year. LNG inventories at Japan's main utilities stood at 2.19mn t as of 1 March, up by 9.5pc from 2mn t a week earlier, according to a weekly survey by the trade and industry ministry Meti. This represents about 20 days of consumption.
Asia-Pacific coal supplies already tight
Prolonged disruption to the strait of Hormuz — through which around 20pc of global LNG supply passes — would curb LNG imports to Asia-Pacific and may support coal-fired generation to offset reduced gas-fired output, at a time when Asia-Pacific coal prices have already been driven to multi-month highs because of tight supplies.
Argus last assessed Indonesian GAR 5,000 kcal/kg coal at $69.60/t fob Kalimantan on 27 February, up by $1.89/t on the week and the highest since early January 2025. The Indonesian GAR 4,200 kcal/kg market for cargoes shipped on Supramax vessels was assessed at $54.31/t fob Kalimantan on 27 February, the highest since June 2024. Australian NAR 5,500 kcal/kg prices were last assessed by Argus at $85.97/t fob Newcastle on 27 February, down slightly on the week, but still higher than $70.62/t at the start of 2026.
Coal prices have been driven higher by tight supplies. Producers in Indonesia, the world's largest thermal coal exporter, have faced a series of policy changes in recent months aimed at giving country's energy ministry tighter control over output and prices, which had faced a prolonged downturn since 2022.
Jakarta in October 2025 revised the validity period for RKAB output quotas back to one year from three years previously. The changes to the RKAB and delays to producers' receiving their 2026 output quotas, along with weather-related supply disruptions, has tightened supply and pushed up prices.
Other recent measures include withholding coal export sales proceeds in onshore bank accounts and tweaking the domestic HBA coal reference price. Jakarta also previously announced plans to introduce a coal export tax. The country's energy ministry initially said 2026 output could be slashed to around 600mn t, sharply lower than the 790mn t it produced in 2025, but later said the final output target has yet to be finalised.
The lack of clarity on Indonesian supply this year has led to rising prices and limited offers of coal. Taiwan's power plants depend on Indonesian coal for its low sulphur and ash content that makes it suitable for blending.
