The views expressed here are those of the author, a columnist for Reuters.

By Clyde Russell

LAUNCESTON, Australia, June 25 (Reuters) - Asia's imports of seaborne thermal coal are rebounding as China boosts purchases to compensate for soft domestic output and Japan and South Korea seek energy security amid the fallout from the U.S.-Israeli war on Iran.

The top-energy-consuming region's imports are on track to reach 77.37 million metric tons in June, the most in six months and up from May's 68.39 million, according to data compiled by commodity analysts Kpler.

The June figure is also up a robust 22.3% from the 63.24 million tons in the year-earlier period.

The strength was driven by gains in Japan and South Korea, the two developed economies most able to switch between coal and liquefied natural gas (LNG).

The spot price of LNG surged after the U.S. and Israel attacked Iran on February 28, after which Tehran effectively closed the Strait of Hormuz, stranding the 20% of global supply produced by Qatar.

Spot LNG for delivery to North Asia LNG-AS jumped 143% from the $10.40 per million British thermal units (mmBtu) in the week to February 27 to a high of $25.30 by March 20.

It has since eased back to $15.30 per mmBtu in the week to June 19, but remains 47% above its pre-war level.

Seaborne thermal coal prices also jumped, with the price of high-grade Australian coal at Newcastle Port CO-FOBNWC-AU rising 30% from $115.96 a ton when the conflict started to a high of $150.25 in mid-June.

The grade, which is sought by utilities in Japan and South Korea, was assessed at $134.09 a ton on Wednesday by globalCOAL, which is 15.7% above the pre-war level.

The pricing shows that thermal coal has been relatively cheaper than LNG since the Iran war started and this dynamic is reflected in the flows.

Japan, the world's third-largest coal importer, is forecast to record arrivals of 7.82 million tons of thermal coal in June, rising for a third straight month and up 33% from the 5.89 million in the same month a year earlier, according to Kpler.

South Korea's imports of thermal coal are expected at 7.30 million tons in June, the most since January and 41% higher than the 5.16 million from the same month in 2025.

CHINA TURNS TO IMPORTS

China, the world's top coal importer, is also buying more, with June seaborne thermal coal arrivals forecast by Kpler to reach 27.65 million tons, a six-month high and up 48% from the 18.62 million from June 2025.

Rather than being related to the Iran conflict, China's higher imports reflect domestic market dynamics, where stronger demand for thermal electricity generation has collided with softer coal production.

China's thermal power generation, which overwhelmingly is from coal with a small amount of natural gas, rose 2.1% in May, taking the gain for the first five months of the year to 3.4%, according to official data.

Meanwhile, coal output dropped 1.7% in May from a year earlier to 397.22 million tons and it was down 0.3% to 1.98 billion tons in the first five months of the year.

A deadly mine accident that killed 82 people triggered widespread safety inspections in China, which in turn led to lower output and higher domestic prices.

Thermal coal at Qinhuangdao SH-QHA-TRMCOAL, as assessed by consultants SteelHome, rose to 860 yuan ($126.28) a ton this week, the highest level since October 2024.

At this price, both lower-quality Indonesian coal and mid-grade Australian coal are competitive against Chinese domestic supplies, thereby encouraging utilities to increase seaborne imports.

One major coal importer that hasn't been buying more is India, the world's second-biggest importer.

Seaborne arrivals of thermal coal are forecast at 12.32 million tons in June, level with May's 12.27 million but down from the 14.14 million recorded a year earlier.

Higher prices are likely to have deterred Indian power generators from buying more coal, even though domestic production has struggled to rise so far this year.

Instead, India is drawing on coal inventories as well as boosting renewable electricity generation, which rose 29.3% in May from the same month in 2025 to reach a record 17.9% of the country's total generation.

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The views expressed here are those of the author, a columnist for Reuters.