The crisis on the Malmbanan – LKAB is forced to reduce production
Despite the fact that traffic was able to resume after the winter’s major derailments on the Malmbanan, stocks of iron ore products have not decreased. Soon the period with track works will also begin, which means even lower capacity on the railway. – We are forced to reduce production. In a first phase, we are now reducing by around one million tonnes per year. But the situation is so serious that if we can’t run more ore trains, we have to stop even more operations and notify staff, says LKAB CEO Jan Moström.
The derailments in December and February caused a total of 76 24-hour stoppages in traffic towards the port of Narvik, with lost revenue of SEK 100 million a day. Now iron ore products equivalent to more than 600 full trains are in piles in Kiruna and Svappavaara, and it is unclear when they can be delivered to customers.
– It is not the stocks themselves that are the biggest problem, but that the delivery capacity is lower than our production going forward. Without action, we see that our stocks would continue to grow strongly in the coming years. The planned maintenance work on the Malmbanan reduces capacity even more because traffic is then stopped for long periods. If we cannot, together with the Swedish Transport Administration and Norwegian BaneNor, seriously increase the capacity within the existing system, we will be forced to take even more drastic measures. Then a pellet plant with associated enrichment plant and mining production must be closed. In such cases, this means notification by staff, says Jan Moström.
Risk of loss of revenue of 30 billion
LKAB is reviewing closure in either Kiruna or Svappavaara based on what would mean the least damage to the company. Talks have also started with the unions regarding possible measures. The financial consequences of limiting production further would, at today’s prices, mean a loss of revenue of around SEK 5 billion per year, or around SEK 30 billion until 2030.
– We are already forced to limit raw material transport between Svappavaara and Malmberget and thereby reduce production in Malmberget by one million tonnes per year, corresponding to revenues of just over one billion kroner at today’s prices. We will also, among other things, reduce the amount of external labor and transfer more work to our own staff. It’s about reducing costs when production volumes drop and retaining as much of our own expertise as possible if we are forced to close operations. If we end up there, it is important to be able to get started as quickly as the transport capacity allows.
Secured supplies and stable income are important in the coming years for investments in continued deeper mining, conversion to carbon dioxide-free production of sponge iron and extraction of critical minerals such as phosphorus and rare earth metals. For the past 20 years, LKAB has pointed out the risks of the railway’s lack of capacity, the need for extended maintenance of the existing system and the need for double track, which would also benefit other parts of society.
– We have recently invested close to a billion to strengthen our own ability to handle the growing disruptions connected to the Malmbanan. These include more ore wagons, a brand new additional locomotive workshop and an investment to maintain wheel maintenance in Norrbotten.
Hard work to avoid notice
The assessment made in the Swedish Transport Administration’s capacity analyzes is that, despite the measures planned until 2030, the capacity on the line will deteriorate between 2022 and 2030, when other traffic is expected to increase even more.
– This is not a situation that can be solved with any minor changes. We will do everything in our power not to have to close a pellet plant and notify staff. Together with the Swedish Transport Administration and other actors, we will try to increase train traffic so that we can begin to graze the warehouse or at least not build more. If it is to be possible, it will be necessary to turn over every stone, says Jan Moström.
Hopes are high for the work that the Swedish Transport Administration has started to make track maintenance and planning more efficient. From LKAB’s side, we are prepared to help ensure that the flow of goods on the Malmbanan is optimized based on the conditions that exist and would like to see other operators and maintenance providers involved in that work.
– Clear political decisions are now also needed for the expansion of capacity both in the near term and in the long term, in addition to what is in the plan, in order to create the capacity required on the track. Having to reduce production even though customers are clamoring for our products and we make good money, it’s bitter, says Jan Moström.
Contact: Anders Lindberg, Press Manager LKAB, Tel: 46 (0)72 717 83 55. E-mail: [email protected]
LKAB is an international mining and mineral group that offers sustainable iron ore, mineral and special products. We are leading the transformation of the iron and steel industry and our plan is to develop carbon dioxide-free processes and products until the year 2045. Since 1890, we have developed through unique innovations and technology solutions and are driven forward by nearly 5,200 employees in 12 countries. The LKAB Group had a turnover of approximately SEK 43 billion in 2023. nlkab.com
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Published: 2024-04-10 Last updated: 2024-04-11
