South Korea eases sulphur limits in thermal coal amid LNG shortages

• South Korea floats tender for 160,000-t of 4,200 kcal/kg coal
  
  
• Northeast Asian coal demand rises as fuel switching accelerates
  
  

With LNG supplies still tight and gas prices volatile, South Korea has relaxed sulphur rules and returned to the spot thermal coal market. Consequently, Korean Midland Power Company has entered the market for 160,000 tonnes (t) of coal with a calorific value of 4,200 kcal per kilogram. Delivery is scheduled from the second half of May through June. Importantly, coal from origins under US sanctions is not allowed, which rules out Russian and Iranian material.

Why South Korea is buying

The reason for this tender is clear. Demand from South Korea is firm. The country is seeking multiple grades and has relaxed sulphur restrictions to meet heightened needs amid a crunch in natural gas supply. This is a significant policy shift. South Korea has traditionally maintained strict environmental limits on coal imports. The fact that it is relaxing them shows how serious the LNG situation has become.

The LNG supply picture

The LNG context is critical. Exports of LNG from the Persian Gulf are picking up, with 220,000 t moving on a recent day. However, this is still below the average of 250,000 t since the start of 2025. More importantly, these are largely vessels that were fully loaded and ready to go before the conflict. An estimated 800 vessels carrying all types of cargo, with 20,000 seafarers, remain blocked. The key question is whether LNG flows can be sustained given the severe damage inflicted on Qatari gas facilities.

The spot LNG contract delivered to Northeast Asia has fallen from its war peaks but remains elevated by historical standards. For South Korean utilities, the economics of coal compared to gas remain favourable.

Regional demand is broader

South Korea is not alone. Taiwan and Japan are also requesting early shipments, both under term and spot contracts, because of LNG tightness and the need to meet power demand. Freight rates softening across major coal transportation regions are making these shipments more feasible.

What this means for suppliers

For Indonesian and Australian producers, this is welcome news. It offsets, at least partially, the weakness in demand from China and India. For traders, the Korean tender is a test of whether North Asian buyers are willing to pay up for spot coal in a market that is otherwise showing signs of softening. The answer will come in the bidding and offer levels over the coming days.