Lower Results for LKAB in the Third Quarter
The Swedish mining company LKAB operates several iron ore mines in Norrbotten, Northern Sweden, and is one of Europe's iron ore producer. The company also plans to extract large amounts of rare earth elements. (Photo: Arne O. Holm / High North News).
The Swedish mining company LKAB reports production challenges in this year's third quarter. High inventory levels for pellets following the Iron Ore Line derailments meant that the weak production did not limit the capacity to deliver, however.
LKAB's third quarter was marked by major production disruptions and several lengthy production shutdowns, writes the company in a press release.
The Swedish mining company operates several iron ore mines in Norrbotten, Northern Sweden and produces about 80 percent of Europe's iron ore.
Decreased results
Net sales for the third quarter amounted to SEK 8,3 billion. The third quarter net sales in 2023 amounted to SEK 10,8 billion. Operating profit amounted to SEK 2 billion, while the number for last year was approximately 5 billion.
The company notes that the decrease in profit is due to weak production, lower deliveries and falling market prices.
High inventory levels after derailment
As known, LKAB has been impacted by the two recent derailemnts on the Iron Ore Line, which stretches to Narvik, Northern Norway. The railway line is crucial for the mining company as most of its iron ore is shipped to customers from the port in Narvik. As High North News has previously reported, the stoppages on the Iron Ore Line resulted in major amounts of iron ore products in storage.
The high inventory levels for pellets following the stoppages on the Iron Ore Line meant that the weak production did not limit the capacity to deliver, states the press release.
"During the quarter, the delivery volume was affected by seasonal maintenance work on the Iron Ore Line and also by deliveries being canceled due to production cutbacks by customers as well as one-off events at some of our customers," reads the statement.
The delivery volume for the quarter amounted to 5.9 Mt. The number for the same quarter last year was 6.3 Mt.
The iron ore trains transport large amounts of iron ore to the Port of Narvik in Northern Norway. The railway line, also known as the Ofoten Line in Norwegian, stretches between Norway and Sweden in the North. (Photo: LKAB)
Production disruptions
Jan Moström, President and CEO of LKAB. (Photo: Fredric Alm / Alm & ME).
In the third quarter, the production volume amounted to 4.9 Mt (down from 7 Mt in the third quarter of 2023).
Production disruptions limited the volume for the quarter as a result of stoppages and several longer production pauses to fix the affected facilities. LKAB informs that the measures will continue for the next months and will thereby limit production in the fourth quarter as well.
“We are seeing a continuation of the production disruptions that had already started in the second quarter and which, together with further stoppages in production during the quarter, have had a considerable effect on the production volume and will continue to have an impact in the coming months as well. It is of the utmost importance that we implement the extensive measures that have been started if we are to achieve the production stability that provides a basis for our profitability,” says Jan Moström, President and CEO of LKAB.
Lower iron ore prices
Furthermore, the average global spot price for iron ore products was lower than in the same period last year and amounted in the quarter to USD 100 per tonne. The number for the third quarter last year was 114 USD per tonne.
"Despite a weaker market, demand for LKAB’s highly upgraded iron ore products has been stable, but the market is volatile and there is considerable uncertainty concerning global economic development and its impact on the iron ore industry," reads the statement.
Environmental permit application in Gällivare
The company highlights other events from the quarter such as the company's permit application from May 2023 for existing, expanded, and transformed production in Malmberget.
LKAB has long operated iron ore production in Malmberget in Gällivare municipality in Northern Sweden. In addition to continued mining and processing activities, the application covers – among other things – the establishment of a first demonstration plant for producing fossil-free sponge iron using the HYBRIT technology and an apatite plant for extracting phosphorus and rare earth elements from current waste streams.
During the quarter, the Swedish Land and Environmental Court published the environmental permit application. The court's plan for processing the matter points toward a final decision in 2025, writes the company.
At the same time, LKAB announces an investment decision to establish a research and development center and a demonstration plant to process phosphorus and rare earth elements in Luleå. According to the company, the decision marks an important step in LKAB’s ongoing transformation and initiative to extract critical minerals.
