Swedish LKAB Postpones Fossil-Free Sponge Iron Production in Arctic Kiruna

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The Swedish state-owned mining company LKAB is slowing the green transformation of its industry in Kiruna, Northern Sweden.

One of the core areas in the company's transition, the shift to the production of fossil-free sponge iron [direct reduced iron], has been moved forward to the 2040s in Kiruna.

The news was first reported in Dagens industri and is confirmed in a press release from the company.

LKAB is Europe's largest producer of iron ore. The company's ore mines are located in the Northern Swedish municipalities of Kiruna and Gällivare. The group also invests heavily in the extraction of minerals and rare earth metals.

Puts the brakes on green transition

In 2020, LKAB announced its major investment into transforming its industry into a.o. fossil-free production. As HNN reported, SEK 400 billion was to be invested over 15-20 years in this transition.

One of the main aspects of the strategy was the carbon dioxide-free production of sponge iron. This entails using hydrogen from fossil-free electricity instead of coal and coke to produce the sponge iron, which eventually would replace iron ore pellets. 

Cooperation between LKAB, the energy producer Vattenfall, and the steel company SSAB led to the development of this type of technology under the Hybrit project. A hybrid pilot facility was put into operation in Luleå in 2020.

Moreover, Gällivare was chosen as LKAB's starting point for the transition to fossil-free sponge iron. A demonstration facility is to be built in LKAB's industrial area in Malmberget in the municipality, which is scheduled to be completed in 2028.

LKAB's President of Communication, Niklas Johansson, states to the Swedish news agency TT that the Hybrit plans for Gällivare are set for the next decade.

Prioritized mining in Kiruna after new findings

The postponing of the green shift in Kiruna from the end of the 2030s to after 2040 is, among other things, about the company choosing to prioritize mining production after the discovery of new deposits.

In the press release, LKAB refers to the discovery of resource deposits in Kiruna, which opens up opportunities to increase the production volume of pellets and fines.

"In Kiruna, we have a different situation than just a few years ago. With insight into the new deposit, we see that we can increase the production volume. This means that we will gradually be able to increase iron ore production by up to 50 percent during the 2030s," says CEO Jan Moström.

The company refers explicitly to the opportunities in the Per Geijer ore, the deposit presented in January 2023, in which LKAB has made significant discoveries of rare earth metals. 

“We increase our competitiveness through the extraction of by-products in our deposits. We increase the degree of processing both by producing sponge iron for fossil-free steel and by extracting rare minerals and phosphorus. All these aspects will be developed in parallel, although they are affected by a number of external factors we cannot always influence”, elaborates Jan Moström.

The Iron Ore Line and electricity

The external factors include the Iron Ore Line capacity, the expansion of the main power grid, and mining permits.

“The capacity of the Iron Ore Line is absolutely crucial – we simply cannot have a mine without functioning logistics. We have had a positive collaboration with the Swedish Transport Administration over the past year, and during the summer, we were able to get more deliveries out than we previously thought would be possible. However, the capacity needs to be enhanced if we are to be able to produce at full capacity and grow our production in the future”, says Moström.

The basis for the assessment of the future market is that the transition of the steel industry will continue. That said, the timetables regarding the development and expansion of processing into sponge iron are affected, writes the company. 

“The immediate focus is on the plans for the demonstration plant in Gällivare. Production will then gradually increase in Gällivare, while a continuation in Kiruna with sponge iron will likely come after the 2040s. This also affects our expected electricity needs moving forward and the rate at which our transition needs to have access to more electricity”, says Moström.

Changed energy needs

According to the Swedish news agency TT, the transition that LKAB announced in 2020 would require 50 TWh of electricity for LKAB in 2040, increasing to 70 TWh in 2050. In other words, this would correspond to about half of Sweden's electricity consumption today.

“It means a decrease in the need for the electricity we need," explains CEO Moström.

"The assessment is that the period until 2030 should be able to be managed within the scope of existing electricity systems – the needs until then concern the planned demonstration plant in Gällivare, about 5 TWh, as well as the industrial park we are planning for phosphorus and rare earth metals in Luleå, about 2 TWh, so in total we are talking about 7 TWh. For us, the expansion of the main grid to Malmberget and Kiruna are more important issues in the short term”, he adds.

To TT, the Communications President Johansson says they feel secure in having enough energy for the facility in Gällivare until 2030.

"But when we scale up, there has not happened enough there," he says.

Although the need for energy decreases, the company sums up that there are still challenges to face regarding Kiruna's electricity grid, the permit process, and the Iron Ore Line, the capacity of which is already inadequate. 

"Wise"

Political Editor of Dagens industry, Frida Wallnor, believes LKAB's Hybrit decision in Kiruna is wise.

"The climate changes can be felt here and now. However, engaging in wishful thinking will not save the climate. On the contrary, a realistic view of how long it takes to restructure complex businesses is needed," Wallnor writes in an editorial in Dagens industri.

She also emphasizes that LKAB has an existing business to fall back on, which allows the company to "hurry up slowly."

"Realistic restructuring goals reduce the chance that taxpayers' money will end up in the water or that forecasts for the need for electricity are exaggerated at the expense of other companies' opportunities to receive allocations."