Geopolitics, regulatory conditions, the infrastructure in Sweden and the needs of the local communities are important external factors that govern LKAB’s operations.
Geopolitical uncertainty has accelerated in the world during 2024. Increased protectionism and regionalisation may result in changing conditions for global supply chains. Europe’s ambition to reduce dependence on imports and increase self-sufficiency is creating new opportunities. With LKAB’s mineral resources and long-term strategy for innovation, increased product value and local production with growth, we are consolidating our position. This will provide the conditions for a transition to lower carbon emissions and stable value chains through partnerships with customers. LKAB has a key role as a supplier of iron ore to the steel industry in LKAB’s home markets.
Energy prices in Europe, which have risen sharply since Russia’s invasion of Ukraine, continue to affect both the mining industry and steel-consuming industries. The
iron and steel industry must transition its processes to reduce emissions, and competitive energy solutions are needed as the steel industry moves from a global price for energy via coal to regional prices. LKAB has a good starting position given the advantage of lower electricity prices and access to fossil-free energy in northern
Sweden.
The European steel industry is on the threshold of a radical transformation, aimed at reducing its climate footprint while also ensuring competitiveness. However, the change is taking place in a challenging economic environment, with stagnating growth, high costs, uncertainty about energy solutions and how the future market will develop. This affects the pace of the transition. LKAB’s flexible production and delivery model aims to be able to follow customers’ needs from traditional blast furnace processes to direct reduction combined with electric arc furnaces.
Europe needs to reduce its import dependence for critical minerals. Rare earth elements are needed for fossil-free energy and electrification. Phosphorus is a crucial input for mineral fertiliser, which is necessary for sustainable food production. By extracting critical minerals from the material we have already mined, LKAB can contribute to a circular and sustainable value chain. This will strengthen both Sweden’s and the EU’s security of supply.
The EU’s climate goals are to reduce carbon emissions by 55 percent by 2030 and to reach net zero emissions no later than 2050. Tools such as the EU Emissions Trading System (EU-ETS) and the Carbon Border Adjustment Mechanism (CBAM) – a climate tariff on imported goods – are increasing incentives for companies to reduce their carbon footprint as the cost of carbon emissions increases. Technical and economic conditions may lead to delayed action, but action must be taken to achieve the climate goals by 2050. LKAB’s products have a low climate footprint in a global comparison, but the ambition is to achieve carbon-free processes and products by 2045.
For the steel industry, the EU’s climate goals mean major changes. The transition from using coal in steelmaking to alternatives that reduce greenhouse gas emissions has begun. The transition increases the need for fossil-free electricity production. However, challenges such as limited access to fossil-free energy at a competitive price, a lack of infrastructure and long permitting processes may slow down development. Temporarily poorer economic development in Europe could dampen demand for fossil-free energy in the short term, but the long-term trend remains.
From 2026 onwards, the free allocation of emission allowances within EU-ETS will begin to be phased out. It will be replaced with climate tariffs. The phasing out of free emission allowances is a major change for energy-intensive industries such as the mining and steel sectors, and creates a stronger incentive for investment in fossil-free technologies. With LKAB’s iron ore pellets as input material, steel companies can cut back on the production of sinter – which reduces emissions of greenhouse gases – and at the same time reduce energy consumption in blast furnaces.
The permitting processes in Sweden are crucial for enabling both industrial investments to be made and mining projects to be implemented. The processes are often long and unpredictable, with many steps and actors involved. More efficient permitting processes are essential for meeting future demands for a sustainable mining industry. LKAB is navigating the complex regulatory framework using its own expertise and in collaboration with other actors. The company is actively contributing to highlighting and promoting the regulatory changes that are necessary in order for Sweden and Europe to transition.
The Iron Ore Line is crucial for LKAB’s production and deliveries, but capacity shortages and lack of maintenance are creating major challenges. Nearly half of Sweden’s freight – calculated in tonnes – is transported on this railway, which is already undersized. With future increased transport needs, the lack of capacity risks hampering value creation. LKAB is calling for long-term investments and a coordinated approach to meet current and future needs.
Fossil-free energy and a stable electricity grid are prerequisites for LKAB’s transformation and expansion. More efficient permitting processes, expanded power infrastructure and capacity to meet the growing demand for electricity are pivotal for enabling a successful transition to carbon-free processes and products.
The ports of Luleå and Narvik are important for LKAB’s transport to international markets. They are critical parts of LKAB’s logistics chain and act as hubs. It is important that capacity is increased to meet future expansion needs.
LKAB’s operations generate major changes in the local communities, especially in Kiruna and Gällivare (Malmberget). Through dialogue with the local community,
new homes, workplaces and infrastructure are planned to facilitate the transition for those affected. We are working with municipalities, the region and other actors to create attractive communities that offer housing, important public services and infrastructure.
LKAB works actively to balance its interests with local interests, including the needs of reindeer husbandry. Cooperation and early dialogue are conducted with the Sámi communities affected and are essential for the mining industry and reindeer herding to continue to be conducted and developed. The cooperation agreements that exist have been developed together with the Sámi communities. They are built on mutuality and respect, and aim to put everyone in a better situation to reach agreement and find solutions on different issues.
LKAB also collaborates with local authorities, organisations and residents in its operating locations. Through dialogue, consultation and exchange of information, conditions are provided for understanding and for enabling adaptation and measures to reduce negative impacts and to benefit actors in society.
