ANNUAL AND SUSTAINABILITY REPORT

2020

2020 in brief
Comments by the President and CEO
How we create value
Responsibility for our impact
In focus

OUR JOURNEY TOWARDS A CARBON-FREE FUTURE

The world is facing a challenge caused by emissions that have characterised development in recent decades. The iron and steel industry accounts for a quarter of total carbon emissions from industry worldwide. At the same time, demand for steel is expected to increase by almost 50 percent by 2050.

We provide the world with tomorrow’s resources and are setting a new world standard for the iron and steel industry of the future. With environmental consideration, the highest business ethics, digitalisation and innovation, LKAB will assume a leading role in the transformation of our own industry, and over time, create a sustainable future.

We contribute to vibrant communities with growth and prosperity today and for coming generations.

-84%

LKAB has reduced its carbon emissions by 84 percent from 1960 to today’s production

CO2

We were the first iron ore producer to measure and report our carbon footprint

-14%

Steel produced with LKAB’s pellets contributes to 14 percent lower carbon emissions than the European average

2020

LKAB adopts new strategy to achieve carbon-free processes and products

2027

Industrial park for extracting critical minerals from mine waste

2030

First industrialised sponge iron plant in production

2035

New global standard for mining operations – carbon-free, digitalised and autonomous

2045+

LKAB’s processes and products carbon-free

2020 IN BRIEF

MSEK 33,914

Net sales (+8%)

MSEK 11,654

Operating profit (-1%)

28.5Mt

Iron ore products delivered (+14%)

27.1Mt

Iron ore products produced (-1%)

LKAB increased its net sales during the year, with higher delivery volumes being offset by a lower dollar rate. Operating profit was also affected by a higher cost level than in the previous year. The seismic event in the Kiruna mine in May, extended maintenance shutdowns as a result of measures associated with Covid-19 and increased investment for the future in exploration and development programmes contributed to higher costs. Operating cash flow was affected by higher urban transformation expenditure and higher capital expenditure during the year, but remains strong.

NET SALES AND OPERATING PROFIT

Net sales

Net sales in 2020

Operating profit/loss

KEY EVENTS



  • New long-term strategy to achieve carbon-free processes and products by 2045 presented, including transitioning to become a producer of carbon-free sponge iron in the future.


  • The coronavirus pandemic called for flexibility in the operations, which were mainly affected by a slowdown in the European steel industry and the need to extend maintenance shutdowns.


  • A seismic event on 18 May caused extensive damage in the Kiruna mine. Nobody was injured, but production of crushed ore from the mine was affected for the rest of the year.


  • Kiruna Municipality passed the required amendment of the zoning plan for area 2:4 in Mine City Park 2 after LKAB had requested that the government intervene.


  • The world’s first pilot facility for production of fossil-free sponge iron was commissioned as part of the HYBRIT initiative.


  • LKAB expanded its ambition where technology for extracting mining waste is being developed to include the production of inputs, such as hydrogen, and electrified processes, which could eliminate carbon emissions from the process almost entirely.

A CLEAR WAY FORWARD

2020 was a strong year for LKAB. Despite the challenges that the year brought, we achieved both high volumes and strong earnings. We have also established the direction we will take to secure the operations beyond 2060, something which also means we are taking on a leading role in the transformation of our industry.

HOW WE CREATE VALUE

Cooperation and a long-term approach have been characteristic of LKAB since the company was formed. We have a strong tradition of taking responsibility and being a positive force for development – as a supplier to a global industry, but also as an employer, a collaborative partner and as a part of the community.

OUR VALUES FORM THE BASIS OF EVERYTHING WE DO, AND OUR VISION AND MISSION DRIVE US FORWARD

28.5Mt

Iron ore products delivered in 2020, of which 84 percent are climate-efficient pellets

4,500+

The average number of employees is more than 4,500 and LKAB creates further jobs both directly and indirectly

SEK18 bn

Paid to suppliers during the year

>SEK4 bn

Paid out for urban transformation during the year

-84%

LKAB’s reduction in carbon emissions from pellet production since 1960

IRON ORE BUSINESS AREA

The Iron Ore business area mines and upgrades iron ore to produce climate-efficient products that are transported to customers in the steel industry. The business area includes mines and processing plants in Kiruna, Svappavaara and Malmberget, as well as rail freight services and ports in Narvik and Luleå.

Iron ore accounts for

92%

of sales

SALES BY REGION

Percentage of sales (MSEK)

Europe 55%

Middle East and North Africa 23%

Rest of World (including Turkey) 22%

SALES BY PRODUCT AREA

Percentage of sales of iron ore products (MSEK)

Pellets 87%

Fines 11%

Other 2%

SPECIAL PRODUCTS BUSINESS AREA

The Special Products business area develops products and services for markets involving industrial minerals, water-powered drilling technology, engineering services and mining and construction contracts. The business area is also a strategic supplier within the Group.

Special Products account for

8%

of sales

SALES BY REGION

Percentage of sales (MSEK)

Europe 66%

Rest of World 34%

SALES BY PRODUCT AREA AND SERVICE AREA

Percentage of sales (MSEK)

Magnetite 29%

Mineral sands 19%

Mining and construction services 9%

Other industrial minerals 43%

IRON ORE BUSINESS AREA

The Iron Ore business area mines and upgrades iron ore to produce climate-efficient products that are transported to customers in the steel industry. The business area includes mines and processing plants in Kiruna, Svappavaara and Malmberget, as well as rail freight services and ports in Narvik and Luleå.

Iron ore accounts for

92%

of sales

SPECIAL PRODUCTS BUSINESS AREA

The Special Products business area develops products and services for markets involving industrial minerals, water-powered drilling technology, engineering services and mining and construction contracts. The business area is also a strategic supplier within the Group.

Special Products account for

8%

of sales

SALES BY REGION

Percentage of sales (MSEK)

SALES BY PRODUCT AREA

Percentage of sales of iron ore products (MSEK)

SALES BY REGION

Percentage of sales (MSEK)

SALES BY PRODUCT AREA AND SERVICE AREA

Percentage of sales (MSEK)

Europe 55%

Middle East and North Africa 23%

Rest of World (including Turkey) 22%
Pellets 87%

Fines 11%

Other 2%
Europe 66%

Rest of World 34%
Magnetite 29%

Mineral sands 19%

Mining and construction services 9%

Other industrial minerals 43%

STRATEGY FOR THE LKAB OF THE FUTURE

LKAB’s strategy sets out the path the company will take to achieve zero carbon emissions from its own processes and products by 2045, and secures the operations beyond the year 2060.

Mining iron ore while maintaining profitability and safety at greater depths demands that we significantly develop our technology and our methods of extraction. Extensive work is under way in which LKAB is applying digitalisation, automation, electrification and new ways of working to develop a new world standard for mining operations. This development is taking place in cooperation with strategically selected partners in industry.

A key element in the shift to producing carbon-free sponge iron is that LKAB develops new technology for upgrading iron ore that replaces energy from fossil fuels with hydrogen produced using carbon-free electricity. In parallel, switches to carbon-free energy sources are to be made throughout the value chain from mining to finished iron.

By developing and industrialising technology and processes, strategically valuable earth elements, phosphorus, fluorine and gypsum will be extracted from the tailings that result from mining iron ore. This will take LKAB into new end-markets for minerals applications – such as agriculture, through phosphorus-based mineral fertilisers, and environmental technology, through batteries and permanent magnets. Other mineralisations that can be extracted from the ore are also of interest. LKAB sees opportunities and synergies in collaborations and acquisitions that strengthen the offering based on an increased share of our own mineral reserves.

LKAB’s niche position is based on magnetite ore with a high iron content that is upgraded into iron ore products for steel customers with high requirements of quality and sustainability. By switching from iron ore pellets to carbon-free sponge iron we are taking an important step forward in the value chain, increasing the value of our products further and at the same time giving our customers direct access to carbon-free iron for steelmaking.

To be competitive LKAB needs to spread its costs over greater production volumes. We are doing this by securing the supply of crushed ore in parallel with strengthening production capacity. The status of the facilities is being improved through strategic planning of maintenance while gradually introducing new technology and new methods from the development projects into the existing production structure. The ambition is to increase productivity by 40–50 percent while also transitioning to carbon-free production.

LKAB’s strategy sets out the path the company will take to achieve zero carbon emissions from its own processes and products by 2045, and secures the operations beyond the year 2060.

CARBON-FREE > 2045

By developing and industrialising technology and processes, strategically valuable earth elements, phosphorus, fluorine and gypsum will be extracted from the tailings that result from mining iron ore. This will take LKAB into new end-markets for minerals applications – such as agriculture, through phosphorus-based mineral fertilisers, and environmental technology, through batteries and permanent magnets. Other mineralisations that can be extracted from the ore are also of interest. LKAB sees opportunities and synergies in collaborations and acquisitions that strengthen the offering based on an increased share of our own mineral reserves.

To be competitive LKAB needs to spread its costs over greater production volumes. We are doing this by securing the supply of crushed ore in parallel with strengthening production capacity. The status of the facilities is being improved through strategic planning of maintenance while gradually introducing new technology and new methods from the development projects into the existing production structure. The ambition is to increase productivity by 40–50 percent while also transitioning to carbon-free production.

A key element in the shift to producing carbon-free sponge iron is that LKAB develops new technology for upgrading iron ore that replaces energy from fossil fuels with hydrogen produced using carbon-free electricity. In parallel, switches to carbon-free energy sources are to be made throughout the value chain from mining to finished iron.

LKAB’s niche position is based on magnetite ore with a high iron content that is upgraded into iron ore products for steel customers with high requirements of quality and sustainability. By switching from iron ore pellets to carbon-free sponge iron we are taking an important step forward in the value chain, increasing the value of our products further and at the same time giving our customers direct access to carbon-free iron for steelmaking.

Mining iron ore while maintaining profitability and safety at greater depths demands that we significantly develop our technology and our methods of extraction. Extensive work is under way in which LKAB is applying digitalisation, automation, electrification and new ways of working to develop a new world standard for mining operations. This development is taking place in cooperation with strategically selected partners in industry.

RESPONSIBILITY FOR OUR IMPACT

From our local operating locations out through global supply chains and in close partnership with our customers, LKAB has a significant impact. By identifying and acting on risks and opportunities and taking responsibility throughout the value chain we boost LKAB’s long-term competitiveness and increase our contribution to the development of society.

25.0kg/t

CARBON EMISSIONS
Emissions of carbon dioxide per tonne of finished product amounted to 25.0 (25.8)

159kWh/t

ENERGY INTENSITY
Energy intensity measured as kWh per tonne of finished product amounted to 159 (158)

6.3

SAFETY
The rate of accidents involving absence was 6.3 (6.8) per million hours worked

24.7%

DIVERSITY AND EQUAL OPPORTUNITY
Women made up 24.7% (23.8%) of LKAB employees

87%

SOCIAL RESPONSIBILITY AND COOPERATION
87% (90%) of LKAB employees have completed training in the Code of Conduct

OUR CONTRIBUTION TO Agenda 2030

LKAB’s strategy is driven by the balance between people, climate and resources. We focus our efforts on the areas where, through our operations, we have the greatest opportunity to contribute to more sustainable development.

in focus

This web review of LKAB’s year is a summary of LKAB’s Annual and Sustainability Report for 2020. The full report can be downloaded here.