Sweden’s mining giant LKAB recorded a significant decline in its half yearly profits. The financial downturn is a result of persistent problems on the crucial Iron Ore Line, or Malmbanan in Swedish. The company relies on the railway to export its products.
LKAB reported an operating profit of approximately four billion Swedish crowns (440 million euros) for the first half year of 2024. During the same period of 2023, the company recorded an operating profit of 7,4 billion Swedish crowns (around 800 million euros).
The company refers to the problems on the Iron Ore Line, which connects the northern Swedish mines with the rest of the world, as the culprit behind the disappointing results. Infrastructure problems and derailments have significantly worsened capacity on the line throughout the past months. LKAB missed out on deliveries due to the rail downtime.
LKAB cuts production due to rail problems
“The problems associated with the Iron Ore Line and the need to ensure delivery capacity remain”, LKAB says. “During the quarter we were reminded of the sensitivity of the track when track buckling or ‘sun kinks’ occurred, which meant that traffic between Kiruna and Narvik was stopped for another ten days.” Moreover, damage following derailments closed the line for weeks between December and March.
Consequently, LKAB was forced to cut back on production as its storage was filled to the brink. “In view of the limited capacity on the Iron Ore Line, during the quarter LKAB decided to cut back production of finished products by around a million tonnes on an annual basis. As part of optimising mine production in the operating locations it was also announced that production in Konsuln, which is adjacent to the Kiruna mine, is being mothballed.”
“Delivery capacity on the Iron Ore Line going forward continues to be crucial for the business both in the short term and over time”, LKAB’s CEO Jan Moström says. “We are working at all levels together with the Swedish Transport Administration and other actors to manage the operational challenges in the short term. But political decisions and pace are required for the additional investments in the Iron Ore Line that are needed over time.”
Spotlight on the Iron Ore Line
The Iron Ore Line runs between the northern coast of Sweden and the Norwegian port town of Narvik. It is crucial for the export capacity of some of Europe’s largest mines, but with Sweden’s entry into NATO it has also acquired growing military significance. Three derailments with suspicions of sabotage, the above mentioned “sun kinks” and capacity limitations have recently put the spotlight on the line. It is logistically vital, but is in high need of improvements.
The Swedish government decided to speed up the upgrade of the Malmbanan, as the line needs to be functional at all times for mining and military purposes. Currently, Trafikverket is working on prioritising and preparing the upgrades along the Iron Ore Line. Most of them should focus on facilitating the traffic of trains with an axle load of 32,5 tonnes compared to the current 30.