LKAB, the Swedish miner that produces more than 80% of the EU’s iron ore, said on 28 October that the premium for direct-reduction (DR) pellets, the feed for gas- and hydrogen-based low-CO₂ steel, averaged $50 a tonne in the third quarter, up from $37 a year earlier, even as the benchmark ore price fell. It also warned that delayed maintenance on the Iron Ore Line, the railway to its export ports, will force more closures this autumn and may affect deliveries. For most EU steel buyers no step is needed yet. If you are negotiating 2027 low-CO₂ steel with a raw-material surcharge, ask which iron ore reference the surcharge tracks.
What LKAB reported
LKAB’s third-quarter interim report shows net sales of SEK 8,051 million, up from SEK 7,578 million, and an operating profit of SEK 1,595 million against a loss of SEK 2,423 million a year earlier, when the company booked large costs for moving parts of the town of Kiruna away from the mine. It delivered 6.8 million tonnes of iron ore products (6.2 million a year earlier), 86% of them pellets, and produced 6.7 million tonnes (6.9 million), with production held back by longer planned maintenance stoppages. Operating cash flow was negative at SEK 974 million, which LKAB put down mainly to more money tied up in receivables.
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Advertise with LoharoThe Middle East conflict and the closure of the Strait of Hormuz cut into deliveries early in the year, LKAB said, but it has since largely managed this by redirecting cargoes to other customers and using other routes. In its outlook it says long-term disruption could still affect delivery volumes, and that the Iron Ore Line closures may affect deliveries this autumn. A planned closure of a processing plant in Kiruna will now be limited to an extended maintenance shutdown, because the crushed-ore situation has improved.
On prices, the Platts 65% Fe fines index averaged $113 a tonne, $9 below the second quarter, while the quoted premiums for both blast-furnace and DR pellets rose from the second quarter. LKAB adds that seaborne freight has become much dearer, with the Tubarão–Qingdao reference at $37 a tonne against $23 a year earlier, and that steelmakers are increasingly looking for raw materials from suppliers closer to their own plants.
Loharo calculation: what DR-grade feed costs now
| US dollars a tonne, quarterly average | Q3 2025 | Q2 2026 | Q3 2026 |
|---|---|---|---|
| Iron ore fines, 65% Fe (Platts) | 117 | 122 | 113 |
| DR pellet premium on the 65% basis | 37 | 43 | 50 |
| Indicative DR-grade reference (fines + premium) | 154 | 165 | 163 |
| Premium as a share of that reference | 24.0% | 26.1% | 30.7% |
LKAB’s revenue split points the same way. In the first nine months its iron ore business earned SEK 14,088 million in Europe, 1.8% less than a year earlier, while sales to the Middle East and North Africa fell 25.4% to SEK 4,666 million and sales to the rest of the world more than doubled to SEK 1,899 million (Loharo calculation from note 4 of the report). Europe’s share of the business area’s revenue edged up from 67.0% to 68.2%.
What it means for EU buyers
Analysis A steel surcharge tied only to the 65% fines index would have fallen over the past year, while the feed that DR-based low-CO₂ steel needs got dearer. That gap matters most for buyers of steel from new DRI routes, which Loharo has followed at thyssenkrupp’s Duisburg plant. When a mill quotes a low-CO₂ premium or a raw-material surcharge for 2027, ask what it is indexed to and whether pellet premiums sit inside it or on top.
Analysis The delivery warning is a risk to watch, not yet a shortage. LKAB kept European sales roughly steady while it moved Middle East volumes elsewhere, and it has not put a number on the autumn rail closures. European mills that rely on Swedish pellets would feel any shortfall first; steel buyers would see it only if a mill cuts output.
What to watch
- This autumn: any LKAB notice on the Iron Ore Line closures and how many tonnes they cost.
- Early 2027: LKAB’s full-year report, with fourth-quarter deliveries and pellet premiums.
- 2027 contract talks: whether EU mills move low-CO₂ steel surcharges onto pellet-based references.
Verification status: Verified
- All figures, index averages and outlook statements come from LKAB’s own Q3 2026 interim report and press release of 28 October, read in full by the writer. The DR-grade reference, the year-on-year changes and the regional shares are Loharo calculations from those figures.
- Key: Verified = material factual claims are supported by an appropriate primary source or clearly attributed reporting/market assessments; Partially verified = a specific material claim remains unsupported, contradicted or materially overstated; Analysis = interpretation or forecast with sourced premises; Developing = material facts are checked but the situation is still changing.
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Primary sources
- Interim Report, third quarter 2026 (July–September) — LKAB, 28 October 2026
- Interim Report July–September 2026: Increased delivery volume and improved earnings — LKAB press release, 28 October 2026
Related on Loharo
- thyssenkrupp can run its Duisburg DRI plant on natural gas for longer: what it means for low-CO₂ steel buyers
- Iron ore, coking coal and scrap: how raw material costs feed through to finished steel prices
Last fact-check: 2 November 2026.
