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The LKAB facility in Kiruna, Sweden. The company said on January 12 that it had discovered Europe’s largest known deposit of rare earth elements there.
Jonas Ekstromer | Afp | Getty Images
The repercussions of Europe’s growing appetite for raw materials extend to the far north of Sweden.
Thousands of residents and buildings are uprooted in Kiruna, a city located 145 kilometers (90 miles) north of the Arctic Circle. The moving project is considered as one of the most radical urban transformations in the world.
Kiruna is physically in motion due to land subsidence from the expansion of a vast underground iron ore mine. A new house is in progress created about 3 kilometers east of the old city in a decades-long process expected to be completed by 2035.
“It’s a place that would seem exotic to many and, in a way, I suppose it is, but it’s also a small town like so many others – struggling with what it’s dealing with and facing the challenge of being so dependent on one company,” Jennie Sjöholm, a lecturer at the University of Gothenburg in Sweden, told CNBC via video call.
Founded 125 years ago as an iron ore mining town of the state-owned LKAB, Kiruna is a small community that serves as both a important European space center and houses the the largest underground iron ore mine in the world.
Everyone in Kiruna knows that we will have to leave our homes sooner or later because we depend on this mining industry.
Mats Taaveniku
Chairman of Kiruna City Council
LKAB is a small global player but a very important regional player, accounting for 80% of all iron ore mined in the European Union.
Alongside its iron ore operations, which are an integral part of the steelmaking process, LKAB has recently identified one of the largest known deposits of rare earths in Europe, strengthening its position in the extraction of materials essential to the green transition.
Move a city
There are several obstacles to the successful relocation of Kiruna, with stakeholders on all sides raising political, economic and environmental concerns. Indeed, the municipality and the LKAB have requested greater financial support from the state, as well as the release of more land to allow the transformation.
Others also have concerns reported on the relationship between resource extraction and community sustainability, particularly as it relates to potential impact on the breeding and cultivation of indigenous Sami reindeer.
In this aerial view, the Kiruna Kyrka Church is transported by road to a new location on August 20, 2025 in Kiruna, Sweden. The church, weighing 672.4 tonnes, is being transported as a whole to a new location 3 km away to avoid damage from the LKAB iron ore mine.
Bernd Lauter | Getty Images News | Getty Images
The city’s move, initially planned in 2004, gained international attention in August 2025 during the spectacular movement of its emblematic church in Kiruna. A feat of engineering, the 113-year-old wooden building was moved entirely by specialist trailers over a two-day period.
However, around the same time, the LKAB announcement expanding its iron ore mine would require the relocation of 6,000 people and 2,700 additional homes. The mining company, responsible for the move, estimated compensation costs of SEK 22.5 billion ($2.4 billion) over the next 10 years.
Niklas Johansson, LKAB’s senior vice president of public affairs and external relations, told CNBC that those asked to move were offered the market value of their property, plus an additional 25%, or the construction of a new home. About 90% chose to get a new home, Johansson said.
“The problem at the moment is that the local municipality owns very little land. [or] that they can make, from an administrative point of view, buildable,” Johansson said.
“They had to buy land from the state, which owns most of the land above the Arctic Circle. And here there are conflicts with reindeer herding, conflicts with defense, conflicts with nature, etc.,” he added.
“We live on minerals”
Mats Taaveniku, chairman of Kiruna City Council, called the city’s relocation a “huge project”, which could provide major opportunities for European citizens for decades to come.
A positive outcome, he added, depends in part on greater financial and political support from the Swedish government and the European Union.
“We have what we can call a big fight between the municipality and the LKAB, and between the municipality and our own government,” Taaveniku told CNBC via video call.
“The EU must step in to support us. It is not enough to decide that we have critical and strategic minerals. It must support us with political declarations and money, of course,” he added.
CNBC contacted spokespersons for the Swedish government and the European Commission, the EU’s executive body.
A foundry worker handles molten metal at the Betsaide plant, which primarily serves the automotive industry, in Elorrio, May 26, 2025.
Ander Gillenea | Afp | Getty Images
The EU, for its part, has recognized LKAB’s new rare earth deposit is considered strategically important under its Critical Raw Materials Act, a policy that aims for domestic production to meet 40% of the region’s annual demand by 2030.
Asked about the reaction of Kiruna residents to the relocation efforts, Taaveniku said: “Some citizens are sad because they will lose a lot of memories. They grew up in a house for two or maybe three generations, so it’s sad.
“But on the other hand, everyone knows, we live off minerals,” he said. “Kiruna is built on minerals, so every resident of Kiruna knows that we will have to leave our homes sooner or later because we are dependent on this mining industry.”
In the cold?
For those moving around, one aspect that raises concerns is that the new town of Kiruna could be up to 10 degrees Celsius colder in winter.
A study The University of Gothenburg found that Kiruna’s new city center is laid out in a grid pattern in an area where cold air accumulates, with tall buildings and narrow streets, meaning the low-lying sun will likely struggle to reach the ground for several months of the year.
A worker is pictured in the underground tunnels of the LKAB iron mine in Kiruna, northern Sweden, August 21, 2025.
Jonathan Nackstrand | Afp | Getty Images
“Kiruna is a winter town. It’s a cold arctic town. The winters are long and you have a long snow season. It’s rarely -35 [degrees Celsius] but it can also be cold for a while in the middle of winter and there is a very big difference between -15, which is not uncommon, and -25,” said Sjöholm. A specialist in built heritage, Sjöholm has been following the city’s relocation work for 25 years.
“It’s already a long winter season and if it’s cold, human comfort decreases but also things become more fragile, so to speak,” she added.
