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The state mining giant LKAB will invest between SEK 150-400 billion to switch to fossil-free production. But uncertainty about technological development and environmental conditions threatens the transition.
“Hydrogen will be the key, but so far it has largely been a chore. That is also the reason why we are vague about how much this will cost, ”says Jan Moström, CEO of LKAB.
Mary Phillips
The Swedish state Mining company LKAB will invest SEK 10-20 billion per year for up to 20 years to make its entire production chain carbon dioxide free by 2045.
In total, this corresponds to investments of up to SEK 400 billion, of which it is estimated that a quarter will be used to restructure existing mining operations, while the higher cost relates to the development of new technology in refining.
“This strategy represents the biggest change in LKAB’s 130-year history. It’s probably the biggest industrial investment to date, “LKAB CEO Jan Moström tells Di.
For the conversion to be successful, the technology to produce fossil-free steel that is being developed within LKAB’s joint venture with SSAB and Vattenfall, Hybrit, is critical. By direct reduction of iron ore with the help of hydrogen to so-called iron fungi, carbon is removed in the refining process and gives a final product free of carbon dioxide.
“We have complete confidence in the technology, but the big challenge is building a facility that is competitive and profitable for 20 to 30 years. We may rush a bit, but our absolute goal is to make the transformation profitable, ”says Jan Moström.
At the same time, technology is new and development in many places in its cradle. If the process is to be industrialized, huge amounts of hydrogen are needed, which would require a third of Sweden’s electricity production today.
Hydrogen will be the key. Until now, this area of technology has largely been a must, but now it is undergoing a major transformation. The progress made in this area will have a great impact in terms of investments, but also operating costs and efficiency. So we are also vague about how much this will cost, ”says Jan Moström.
It is the LKAB strategy Successfully, the equivalent of two-thirds of Sweden’s total carbon dioxide emissions will disappear, while the company’s sales will double through rationalization and the expected higher premium on the final product.
“We will fully reposition ourselves in the market by increasing the degree of refinement and also delivering a completely fossil-free product. It goes without saying that this creates great value for us and our customers, ”says Jan Moström.
LKAB now comes up with a step-by-step conversion plan that runs through 2045 with the first fossil-free iron mushroom production in 2027, when carbon dioxide emissions are said to have decreased by 1 percent. In 2029, emissions will be reduced by 11 percent and in 2033 by 20 percent. The restructuring is expected to create 3,000 new jobs per year during the investment phase.
How should the change be financed?
“There are two areas that will ensure this. One is, of course, that we have basically efficient production, that we can actually increase the profitability of the business we have today. The second part will be a combination of loans and we will gradually increase the sales of the products. that we deliver, ”says Jan Moström.
Will the billion dividends for the state be lost like this?
“Implementing such a comprehensive investment plan will, of course, greatly affect the balance sheet. This presupposes that the owner has confidence in us that we can use the money for investments instead of dividends. “
The Minister of Commerce and Industry Ibrahim Baylan (S), for his part, does not see in the current situation that the adjustment of LKAB threatens state revenues.
“LKAB is a well-managed company that is doing well despite the finances we are in. We have a continuous dialogue with the company, but right now I see in front of me that they should be able to make this type of investment and at the same time time to have a return, “he says. to Di.
Other risk for the restructuring of LKAB, the controversial issue of lengthy permitting processes that for several years put companies with environmental impact to the test. Previously, he reported on Boliden’s permitting process for the Laver copper resource, which has been ongoing for several years, as well as the Beowulf iron ore project in Kallak.
“It is the greatest individual risk. Based on the permitting processes we have today and historically, these changes will be difficult, if not impossible, to implement, “says Jan Moström.
