You are here: Home » International » News » Economy
Business Standard

Keeping Europe warm this winter will come down to Asia's weather amid war

The Asian countries, among the world's biggest importers of liquefied natural gas and seaborne coal, all share a peak heating demand season during the winter with Europe

Europe | Oil imports | oil trade

Dan Murtaugh | Bloomberg 

International competition for fuel has increased since Russia’s invasion of Ukraine upended global trade flows, helping push prices of coal and natural gas to records. (Photo: Bloomberg)

As it weans itself off Russian fuel and races to secure enough and coal, Europe’s quest to stay warm this winter will depend heavily on three nations on the other side of the world: Japan, and .

The Asian countries, among the world’s biggest importers of liquefied and seaborne coal, all share a peak heating demand season during the natural gwinter with . It’s still too early for meteorologists to make accurate predictions for winter weather patterns, but any forecast for steep dips in temperatures in the three nations could spark a more intense tussle for cargoes.

competition for fuel has increased since Russia’s invasion of Ukraine upended flows, helping push prices of and to records. In Europe, the squeeze is just about to get tighter. The will implement a full ban on Russian beginning next week, while Gazprom PJSC has slashed pipeline gas flows to . Russia has historically been the European Union’s biggest gas supplier, covering about 40% of demand.

“Weather is of course a wild card especially for and Korea,” said Abhishek Rohatgi, a BloombergNEF analyst. “A colder-than-normal winter could spike prices if Russian supplies to stay low, as it will be very difficult to find additional spot cargoes.”


European nations are racing to prepare for the winter, cutting gas consumption and boosting LNG imports to fill storage caverns, and also restarting mothballed power plants.

They’ve received a helping hand from Asia so far: has slashed imports of coal and LNG after boosting domestic output, and is also suffering an economic slowdown due to virus lockdowns.

All three Asian countries have produced more energy from renewable sources. and set records for solar power in May, while burned less coal over the first half of the year as clean sources like hydro power surged.


Even still, the additional purchases from Europe have boosted costs of spot LNG and coal to records this year. Developing nations such as Bangladesh and Pakistan are already suffering from daily blackouts because they can’t afford to pay for cargoes that could keep the lights on.

The competition could get even more fierce heading into winter. Once and start building their gas stockpiles, the spot LNG market may see more buying from those countries, according to BloombergNEF. Japanese coal inventories are also extremely low, and the two nations will need to boost purchases of the power plant fuel toward the end of the year.

“Coal cargoes -- especially the high energy content coal ones which Japan and Korea use -- are in high demand and mostly contracted out,” BloombergNEF analyst Ali Asghar said. “Japan and Korea will be battling with Europe for most spot cargoes.”

China is in a more comfortable position. Record coal production combined with subdued power demand left inventories at the highest level ever for the mid-point of the year. And even as Russia cuts piped gas supplies to Europe, it’s increasing flows on a new line to eastern China, helping keep inventories ample despite the drop in LNG imports.

“Should there be a very cold winter, Japan and South Korea will likely need additional spot cargoes, in which case they can probably compete with European buyers,” said Xizhou Zhou, head of global power and renewables at IHS Markit. “China, on the other hand, would likely resort to more domestic coal.”

competition for fuel has increased since Russia’s invasion of Ukraine upended flows, helping push prices of coal and natural gas to records

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Fri, August 05 2022. 06:50 IST