South Korea—New energy policy good for Australian LNG but not coal  

Korea’s new environmentally friendly energy policy will benefit Australian LNG exports at the expense of thermal coal producers. President Moon-Jae has promised a shift away from thermal coal and nuclear energy toward gas and renewables in a bid to clean up air pollution in major cities. Specifically, the President has announced a temporary and eventual shut down of ten aging coal-fired power plants, which account for around 4% of Korea’s generating capacity. He also increased the import tax on coal and has pledged to stop construction of any new coal fired power plants. Korea is the third largest importer of coal globally and accounted for 16% of Australia’s thermal coal shipments in 2016.

Coal and nuclear energy make up 70% of Korea’s electricity capacity, while gas and renewables account for 26%. Under the new government policy, the share of coal and nuclear will likely fall to 45% of generation, with gas and renewables making up closer to 50%, by 2030. This bodes well for Australian LNG producers. While currently forecast to account for a third of Korea’s LNG imports, these projections could rise if Australia is able to fill stronger Korean demand. A greater global shift to LNG would help offset concerns the strong surge in LNG supply could create a glut over the next five years.