The abuse of the Swedish railway costs 5 billion in lost taxes every year – just for LKAB

Last week there was news that was no more than occasional notices: Due to a lack of capacity on the railway, LKAB is reducing the production of iron ore by 1 million tonnes per year. This corresponds to a reduction in revenue of around SEK 1 billion. If it is not possible to raise the number of ore trains from today’s levels, the company will have to reduce even more and close an entire pellet plant. Then you have to notify staff and reduce revenues by 5 billion a year, or 30 billion until 2030.

Since LKAB is a state-owned company, this risks leading to quite substantial losses from the state treasury. For comparison, the increase in the defense budget that the government pushed through is 27 billion. One could have thought that the reduction in production would therefore be a political bomb. But the outraged response has been long in coming.

Now the problems on the ore railway, one of the world’s oldest railways, nothing new. LKAB has been nagging for 20 years about both the lack of maintenance and the need for double tracks. The situation became acute last winter when two different trains derailed at almost the same place. The trains then stood still for a total of 72 days, at a cost of 7.2 billion. The Accident Commission is not ready, but previous derailments have been caused by cracks in the rails.

The trains then stood still for a total of 72 days, at a cost of 7.2 billion.

The government has already previously tasked the Swedish Transport Administration with speeding up all investments that can increase capacity on the ore line. However, no money has been allocated. And money is needed. In the coming years, the track faces extensive maintenance work, but due to the single track, it will further reduce capacity. It is possible to carry out such work more efficiently than is usually done, this was demonstrated not least by the Swedish Transport Administration when it carried out extensive repairs in record time after the derailments, in the middle of winter. But then more personnel and more resources are required.

It is of course not only the ore railway and iron ore exports which are affected by Sweden’s lack of infrastructure. The so-called maintenance debt, the cost of maintenance that should have already been carried out, currently stands at SEK 35 billion for the roads and SEK 96 billion for the railway.

According to a survey by the Swedish Chamber of Commerce, nearly a third of companies state that deficiencies in the transport system hinder their growth. However, the regional differences are large, and in northern Sweden it is more like up to or over 50 percent.

Last winter, the National Audit Office also raised the alarm about serious shortcomings in Sweden’s long-term infrastructure planning. Both the Swedish Transport Agency’s own cost control and the government’s management of the Swedish Transport Agency were covered up. One specific thing that was pointed out was the reduced funding for a new signaling system for the railway. The Swedish Transport Administration had expressly warned of the consequences if the signal system change was postponed further. Nevertheless, the then S government cut the budget for the change in half.

Promises to invest in a new signaling system are not supposed to draw enough voters, that is an analysis that several governments of different political colors have made over the years. For quite some time it has worked okay anyway. What LKAB’s production reduction shows is that we are now past that point.

For decades the politicians have ignored the calls for better track capacity, and now the answer has finally arrived: The win machine in Kiruna, which based on both demand and the amount of iron ore in the rock could actually increase production, must instead scale back. It is difficult to find a clearer symbol.