Taiwan’s coal demand to rise as gas-to-coal switching economics turn favourable

• Taipower coal consumption shows strongest trend since early 2025
• Rising LNG costs may begin shifting generation economics back toward coal

Taiwan’s thermal coal market is showing early signs of stabilisation, as shifting power generation economics begin to favour coal over LNG. Coal consumption at state utility Taiwan Power Company (Taipower) has improved in recent weeks, with the year-on-year decline narrowing to its lowest level since January 2025.

The change reflects a gradual adjustment in fuel economics rather than a sharp recovery in demand. Taiwan remains heavily dependent on imported LNG for power generation, leaving it exposed to volatility in global gas markets. Recent disruptions linked to the Strait of Hormuz and broader LNG supply uncertainty have increased fuel cost risks, prompting a reassessment of generation economics.

LNG economics weaken, improving coal competitiveness

Gas-fired generation is becoming less competitive as LNG prices remain elevated and volatile. Although prices have eased marginally following successful tanker movements, market participants continue to expect uncertainty through the summer period.

This has begun to shift the marginal cost curve in favour of coal, particularly for baseload generation. The shift is not yet structural, but it is sufficient to support incremental coal burn where dispatch flexibility allows.

Coal consumption stabilising, but recovery uneven

Coal consumption at Taipower has improved steadily, with the pace of year-on-year decline narrowing sharply. This indicates that coal burn is approaching a stabilisation point after a prolonged period of contraction.

However, the recovery remains uneven. While state-led consumption has strengthened, private power producers continue to show weak demand, limiting the pace of overall market improvement. As a result, the current trend reflects stabilisation rather than expansion, with any demand recovery likely to be gradual.

Taiwan remains a key buyer of high-calorific-value thermal coal, sourcing primarily from Australia, Indonesia, and, when viable, Russia’s Far East. Given its preference for premium grades, even a modest increase in Taiwanese demand can tighten supply in the Pacific basin, particularly for high-CV material. This makes Taiwan a marginal but influential buyer in regional coal trade flows.

Outlook

Taiwan’s coal market is entering a transitional phase, driven by shifts in LNG pricing and fuel cost uncertainty. In the near term, coal demand is likely to stabilise, supported by improving fuel economics. However, the extent of any sustained recovery will depend on LNG price direction, summer power demand, renewable generation, and government fuel policy.

If LNG prices remain elevated and supply risks persist, coal imports could strengthen in H2 2026. However, in the absence of a sustained shift in gas economics, the pace of recovery is likely to remain gradual.