Japan’s average power prices jumped by over 25 percent at the start of this week from the previous week amid soaring LNG and higher coal prices, OilPrice reported on Monday, citing Bloomberg reporting of Japan Electric Power Exchange data. The nationwide power price rose to 0.19 dollars, or 31.15 Japanese yen, per kilowatt hour. Power prices in Japan have also risen this month because of scheduled maintenance at some generating facilities ahead of winter.
Japan, one of the world’s biggest LNG importers, reduced gas fired generation this summer in favour of coal as the price of liquefied natural gas remained elevated, and it has been burning more coal and less gas for power generation since the war in the Middle East started, a switch Asian countries have broadly made on affordability and availability grounds. LNG prices in Asia have surged to a four year high as very few cargoes manage to exit the Strait of Hormuz while competition with Europe for winter supply intensifies. The average spot LNG price for delivery into north east Asia in December was assessed at 29.30 dollars per million British thermal units at the end of last week, the highest since December 2022 and sharply higher than 26.50 dollars the previous week. As a result, Japan’s gas fuelled power generation is the most expensive in years.
The coal alternative has repriced as well. Increased demand in Asia amid reduced supply from Indonesia, the top thermal coal exporter, is driving up coal prices, and the global benchmark Newcastle futures have jumped by 30 percent compared with pre war levels. Surging oil prices have also increased Japan’s import bill for oil and LNG. The result is a power market squeezed from both fuel directions at once, entering the winter maintenance and demand season with no cheap marginal fuel left to switch into.