Strait of Hormuz Unrest Affects Swedish Mining Giant LKAB

The Swedish mining company LKAB, which mines iron ore in Northern Sweden, has significant exports to the areas now affected by the war in Iran and the unrest in the region. 

Nearly a quarter of LKAB's production goes to North Africa and the Middle East. Over ten percent of the company's production goes to customers within the Strait of Hormuz, where shipping traffic has slowed significantly after the outbreak of war. 

"The consequences of the situation depend greatly on how developments unfold, but we see now that it will impact the business," says Senior Vice President Public Affairs and External Relations, Niklas Johansson, at LKAB to High North News. 

"We have loaded ships in the Port of Narvik that were on their way back to customers with products, but are now out at sea in the region waiting to unload," says Johansson. 

Despite these being the customers' ships and their ore once the products are loaded, LKAB is working to find solutions."

"These are customers we have had for 40 years," he points out.

Large sums and quantities

Furthermore, Johansson says they have already cancelled one vessel, which was scheduled to load products in the Port of Narvik last week.

"We expect further cancellations in March and that cargo equivalent to half a million tonnes will be cancelled as well. These are enormous quantities and great values. We are talking about an approximate value of SEK 700 million with today's prices."

"These cancellations are what affect us the most going forward, that fewer ships come to Narvik to collect the products," he emphasizes.

Logistics challenges

"The consequences of the situation depend a lot on how the development unfolds going forward, but we see that this will be felt in our results and have a big impact on the business," elaborates Johansson.

The director says LKAB is looking at various ways to handle the situation going forward, but for the time being, the company has chosen to extend a maintenance shutdown at the plant in the Northern Swedish town of Kiruna, and thereby produce somewhat less.

Furthermore, he specifies that LKAB cannot catch up with the losses quicly. The logistics chain that LKAB is completely dependent on is fairly tight. 

A part of the reason is the capacity of the Iron Ore Line, the railway line between Norway and Sweden in the North, which the company uses to transport the products to the port in Narvik and out to the customers.

"If the situation resolves [in the Hormuz Strait, ed. note], we cannot just start transporting twice as much on the Iron Ore Line," explains Johansson. 

"There is no excess capacity on the railway today, and the lack of capacity is serious. Larger disruptions are often difficult to resolve and make us more vulnerable." 

"Generally, we see that there is little flexibility in the system, which makes it difficult to resolve this in other ways," he concludes.