Japanese thermal coal importers are shifting their focus from traditional supplier Australia to low-sulfur alternatives, particularly Indonesian coal, in response to growing environmental pressures, international sanctions, and volatile market conditions. In recent years, Japan has not only sought to diversify its sources but has also been exploring new markets in South Africa and Colombia due to a decrease in the availability of high-calorific coal and tightening environmental regulations.
According to S&P Global Commodities at Sea, Japan’s coal imports from Australia fell to 74 million metric tons in 2024, down from 82.6 million metric tons in 2021. Conversely, imports from Indonesia increased significantly to 25.8 million metric tons, compared to 20.6 million metric tons the previous year.
Meanwhile, imports from Russia drastically declined to just 800,000 metric tons in 2024, a sharp drop from 10.5 million metric tons in 2021, following sanctions imposed due to the invasion of Ukraine. Industry experts, such as Michiyo Miyamoto from the Institute for Energy Economics and Financial Analysis, highlight that Japan’s reliance on high-grade coal from Australia is dwindling due to both a decline in upstream investment and tighter environmental regulations.
In light of these developments, the Japanese government is encouraging companies to find new procurement channels, particularly in South Africa and Colombia. An emerging trend among Japanese buyers is a preference for low-ash Indonesian coal over high-ash Australian varieties, as the latter has become harder to market due to reduced industrial activity in Japan and South Korea.
Furthermore, Japanese traders are seeking significant discounts on Indonesian coal prices amid rising freight costs and currency depreciation, complicating the country’s energy landscape. Additionally, as Japan aims to balance its energy mix, projections indicate that thermal power generation will decrease significantly by 2040-41, from 68.6% to an anticipated 30-40%.
Despite these goals, technical uncertainties persist regarding new energy technologies, raising questions about Japan’s ability to meet its renewable energy targets effectively.