South Korea's liquified natural gas (LNG) demand stayed muted in June but is expected to rebound sharply in the July-August summer peak, according to an analysis by Independent Commodity Intelligence Services (ICIS).

Near-term spot purchasing is restrained by weak gas economics, robust coal power output and sufficient LNG stockpiles, while delayed nuclear restarts and impending hot weather will drive stronger gas burn amid climbing cooling demand.

Escalating LNG prices stemming from lingering Middle East geopolitical tensions squeezed profits of local power utilities. To stabilize the power market, South Korea's Ministry of Climate, Energy and Environment is considering introducing an LNG price cap system.

The policy aims to prevent surging import costs from triggering household electricity bill hikes and massive deficits at Korea Electric Power Corp (KEPCO), avoiding the severe price turbulence witnessed during the Russia-Ukraine conflict.

Coal remains the dominant cost-effective marginal power fuel for June. Since early 2026, gas-fired power generation has been far less competitive than a year earlier. The government has optimized the power mix by raising nuclear utilization rates and delaying coal plant retirements to curb unnecessary gas consumption.

Widening fuel price spreads have strongly favored coal dispatch, enabling coal power to fill the supply gap caused by underperforming nuclear facilities.

Official KEPCO data verifies this fuel-switching trend. In the first quarter of 2026, South Korea's nuclear power output plunged 23.1% year on year, while coal generation surged 26.6% and gas generation saw a modest 2.2% increase.

Gas retained its position as the largest power source at 46.85 TWh, accounting for 31.4% of total generation, yet coal posted the most substantial growth, reaching 42.90 TWh with a 28.8% market share.

So far, coal has acted as the primary replacement for lost nuclear baseload capacity, while LNG only serves as a flexible peak-regulation fuel without triggering structural demand growth.

Rising gas prices further limit June gas power generation. The Korea Gas Corporation (KOGAS) data shows power-use gas tariffs rose 16.0% from April to June 2026 to 826.81 won ($0.53) per normal cubic meter, up 7.1% year on year, further undermining the profitability of gas-fired power plants.

Coal's incremental substitution capacity will shrink notably in the mid-to-late summer. Coal units already operated at high utilization during the 2025 summer peak and ran aggressively in early 2026 to offset nuclear outages, leaving minimal room for further output expansion.

By contrast, South Korea boasts abundant flexible LNG-fired capacity of 46.28 GW as of June 2026, accounting for 29.1% of total installed capacity and outpacing coal, solar and nuclear capacity, providing ample adjustable power reserves for tight market conditions.

Persistent nuclear operational delays are a core bullish factor for summer LNG demand. The prolonged outage of Korea Hydro & Nuclear Power's Wolsong Units 2-4, with a total baseload capacity of 2.1 GW, will tighten the national power balance.

ICIS estimates that offsetting the nuclear shortfall from June to August will require around eight additional spot LNG cargoes, even with partial offsets from higher coal and renewable power output.

Ample inventories weaken near-term buying willingness. South Korea's end-May LNG inventory stood at 42% of full capacity, matching the five-year average and enough for 24 days of domestic consumption. Sufficient stockpiles, easing geopolitical concerns and expectations of nuclear supply improvements in the second half of 2026 have reduced urgent pre-summer restocking needs.

South Korea is also accelerating LNG supply diversification to defuse geopolitical risks. Its reliance on Middle Eastern LNG is set to fall below 18% in 2026, down from 45% in 2022 and 24% in 2025.

KOGAS has secured long-term supplies via overseas investments and multi-year contracts, including annual 700,000-tonne supplies from LNG Canada and BP, and 3.3 million tonnes per annum from the U.S. starting in 2028.

Overall, South Korea's summer LNG market shows divergent trends. June demand is capped by coal's cost advantage and adequate inventories, but shrinking coal potential, ongoing nuclear delays and rising peak power demand will lift LNG consumption in July and August, turning South Korea into an active spot LNG buyer in the summer peak season.