Metallurgical industry in Sweden

In early 1998, Sweden’s proven iron ore reserves amounted to 3 billion tons. The average iron content in the ore is 51%. A distinctive quality of iron ore is the high content of magnetite, which makes the enrichment process cheaper. Sweden is often called the “home mine of Europe”. This country is the oldest supplier of iron ore to the countries of Western Europe. Already from the middle of the XVII century it was the main exporter of iron ore to England, France and other European countries.

The export of iron ore began to grow rapidly since 1890, when LKAB was founded (Fig. 1). Iron ore, along with high-quality timber, has long been Sweden’s main export products, and the iron ore industry has dominated the Swedish economy until the mid-1970s. This is explained not only by the high iron content of the ore compared to other European countries, but also by the proximity of Sweden to the consumers of raw materials. In the era of high transportation costs, this was one of the determinants of the competitiveness of the goods. It should be noted that in times of military conflicts in the region, the demand for Swedish iron ore has always been at a high level, due to the transfer of industry into the military regime. At the same time, the country’s somewhat isolated position prevented her from participating in most of them. Unchanged foreign policy neutrality since 1814 ensured non-participation in both world wars, which not only preserved the production potential and labor resources of Sweden, but also enriched the country by supplying the belligerents. For example, Sweden supplied iron ore to fascist Germany.

LKAB was originally and remains a monopoly in the iron ore industry in Sweden. Founded in 1890 as a private company, in 1907 it sold 50% of its shares to the state. And in 50 years the state bought back the remaining package. For Sweden in general, the concentration of production and monopolization in leading industries at the company level is characteristic. The 200 largest companies account for almost 75% of Sweden’s production, employment, investment and exports.

In the interwar period, Sweden in terms of GDP growth was second only to the United States. However, two deep economic crises caused a serious blow to the economy: in 1921-1922, Due to deflation after the First World War (the drop in industrial production was 25% below the level of 1925); And in the early 1930s, when unemployment among trade union members reached 30%. As can be seen from the figure at this time, the export of iron ore from Sweden fell sharply. After the Second World War, the supply of iron ore from this country was extremely important for the restoration of the economy of Western Europe.

A feature of the Swedish economy is the policy of “market socialism” – the dominance of two main objectives: full employment and income leveling. As an outcome of such a policy, an exceptionally large public sector is considered (with a focus on redistribution rather than state ownership) and active manipulation in a highly developed labor market. In the post-war period, Sweden’s economy developed at a rapid pace. The main factor in this development was exports. The growth of labor productivity averaged about 5% per year in 1960-1974. This was due to significant investment and success in employment policy. State policy ensured a stable economic prosperity of the country until the mid-1970s. However, since the mid-70’s. In connection with the exacerbation of competition in foreign markets and the energy crisis of 1973-1975. The situation of the country is noticeably more complicated. About 25% of industrial production accounted for the industry affected by the crisis – mining, ferrous metallurgy, forestry and shipbuilding. Exports of iron ore in just one year decreased from 34 million tons. In 1974 to 21 million tons. In 1975. As a result of rising oil prices, labor costs increased in 1975-1976. On 40%.

After some economic recovery in 1980-81. The global steel industry experienced a severe crisis. The export of iron ore decreased during this period to 13 million tons. Excess capacity and low global demand for iron and steel adversely affected the Swedish steel industry. To avoid too sharp structural changes in industry and the rapid growth of unemployment, the state from the mid-1970s to the mid-1980s provided substantial subsidies to affected sectors, primarily the iron and steel industry and mining. In order to restore competitiveness, the government implemented a series of devaluations, beginning in August 1977. In addition, in the iron ore industry there was a tremendous increase in labor productivity (in the 1980s it exceeded 100%). It can be seen from the graph that the former volumes of exports to the country were not restored. With the reduction in the cost of transportation to the iron ore market, countries with cheap labor resources, rich and cheap iron ore came out. At the same time, the LKAB mines by 1990 reached a depth of more than 775 meters, their productivity was decreasing, taking into account the expensive labor resources, this practically eliminated the advantage of geographical location.

During the 80-90-ies. The company went to unprecedented financial costs in order to reduce costs at all stages of production, increase the productivity of mines and improve product quality. An important direction of the company’s activity was the specialization in the production of high-quality metallized pellets (for 30 years their share in the production increased from 15.6% in 1970 to 76% in 2000). Now pellets account for more than 80% of the company’s exports. This measure became to some extent forced. The fact is that the Swedish ores contain quite a lot of phosphorus, and when the demand for them began to fall, the company began to subject them to additional grinding in order to reduce the content of this element. This additional grinding has made it possible to increase the production of pellets, especially given the increase in the number of electric furnaces in Western Europe.

In 1994, when joining the European Union, Sweden was forced to bring regulatory documents that regulated the mining industry in line with the laws of the EU. The law requiring foreign companies to obtain a special permit for geological exploration, a law on mandatory state “gold” shares in the enterprises of the industry, canceled the temporary restriction (25 years) for the ownership of deposits, abolished all taxes and deductions other than the usual corporate tax. In principle, such changes should lead to the demonopolization of the industry. However, with the exception of a short-term acquisition of a 1.7% stake in LKAB, no changes occurred. The package was soon sold again to the state.

Currently, LKAB is developing two mines – Kiruna (average iron content – 60%) and Malmberget (iron content about 50%), the Swappavaara mine was closed in 1999. Both mines are being developed underground, the length of underground workings is about 20 km. In 1997, a horizon of 1045 m was launched at the Kiruna mine, in 1999 a 1000 m horizon was introduced at the Malmberget mine. Production costs were reduced due to high automation of production, in particular, the method of remote drilling and loading of ore was mastered, which allowed introducing The regime of night drilling, which had not previously been conducted for security reasons. The technology of pumping waste rock directly to the burial site is being mastered. It should replace a complex system of lifting mechanisms and trucks. All of the above measures lead to lower production costs and increased productivity of mines.

The ore is enriched at five company-owned factories located in Malmberget, Swappavaara and Kiruna. New technologies made the development of Malmberget’s hematite deposits profitable. At the enrichment stage, significant progress has also been made in reducing costs, by reducing electricity consumption and automating the process.

During the 90’s. LKAB has established full control over the railway system, the linking mines and concentrating plants of the company with the seaports Narvik (Norway) and LuleĆ„ (Sweden), by creating operating companies. The purchase of new wagons and locomotives allowed the company to reduce transportation costs in 1996-1998. On 30%. The company plans to modernize the railroad to increase its capacity. As a result of all the measures carried out, an increase in the production of commodity iron ores to 30 million tons is expected. By the year 2005.

The struggle of the company with costs turned for LKAB into a struggle for survival. As a result, LKAB has become an advanced company in terms of underground mining technologies and in the quality of metallized pellets for the production of direct reduction products of iron. Rigid specialization in the production of high-quality iron ore, made it possible to export pellets to many countries around the world. In the most remote regions, the company’s main export product is pellets for the production of PPV.

In addition, the LKAB mines are a kind of testing ground for new methods of mining, the company’s scientific and technological divisions bring to it a stable income, selling technologies worked out at the corporation’s mines.