The dramatic drop in iron prices has hit Sweden’s biggest iron miner with full force. In 2014, the company got its year-on-year operating profit cut by 93 percent.
In February, LKAB announced a string of crisis measurements, among them costs cuts of 700 million SEK and a staff reduction of 400 people. The company planned to reduce the work force through retirements and less use of part-time workers. This strategy has not works as well as the company had hoped, and 100 employees will be dismissed from the plant in Kiruna.
“The iron prices keep falling, and we have to cut our costs faster,” says Frank Hojem, Director of Communication, to SVT. “Dismissals will unfortunately be necessary in order to secure LKAB’s competitiveness and profitability in the long run.”
The staff reduction at LKAB is planned to be finished by the first quarter of 2016.
Prices on iron ore in March 2015 dropped to under USD50/ton, the lowest in ten years, according to Bloomberg. And the price drop might not yet have reached the bottom. Some analysts believe the price will drop further to about USD 30/ton, DN reports. In 2011, the price was as high as USD 185/ton.
The situation is seriously hurting mining companies all over the Barents Region. The price downturn has already led to the bankruptcy of Northland Resources in Pajala, northern Sweden. In northern Norway, the Northern Iron in Kirkenes, and Rana Gruber are both increasingly fighting to make ends meet. In Russia, iron producer Severstal is saved partly by the low ruble rates which give higher profits on exports.
LKAB, the company which operates the mines in and around Kiruna, northern Sweden, is the biggest iron ore producer in the Barents Region with an annual production of 25.7 million tons (2014).
