Swedish city is moving as Europe ramps up its minerals push

The ripple effects from Europe’s growing appetite for raw materials extend all the way to Sweden’s far north.

Thousands of residents and buildings are being uprooted in Kiruna, a city that lies 145 kilometers (90 miles) north of the Arctic Circle. The relocation project is regarded as one of the world’s most radical urban transformations.

Kiruna is physically on the move because of ground subsidence from the expansion of a sprawling underground iron ore mine. A new home is being created about 3 kilometers east of the old town as part of a multi-decade process that’s expected to be completed by 2035.

“It’s a place that would seem exotic to so many and, in a way, I guess it is, but also it is a small town like so many others — struggling with what they are struggling with and challenged by being so dependent on one company,” Jennie Sjöholm, senior lecturer at Sweden’s University of Gothenburg, told CNBC by video call.

Established 125 years ago as a city for the iron ore mining operations of state-owned firm LKAB, Kiruna is a small community that serves as both a significant European space hub and home to the world’s largest underground iron ore mine.

LKAB is small in global terms but a highly significant regional player, accounting for 80% of all iron ore mined in the European Union.

Alongside its iron ore operations, which are integral to the steel-making process, LKAB recently identified one of Europe’s largest known deposits of rare earths, further strengthening its position in the extraction of essential materials for the green transition.

There are several obstacles to the successful relocation of Kiruna, with players across the spectrum raising political, economic and environmental concerns. Indeed, both the municipality and LKAB have called for greater financial support from the state, as well as the release of more land to accommodate the transformation.

Others have also flagged concerns about the relationship between resource extraction and community sustainability, particularly regarding the potential impact on indigenous Sami reindeer herding and culture.

The city’s relocation, which was first planned in 2004, received international attention in August 2025 during the spectacular move of its iconic Kiruna Church. In a feat of engineering, the 113-year-old timber building was moved in its entirety by specialized trailers over a period of two days.

At around the same time, however, LKAB also announced the expansion of its iron ore mine would require the relocation of an additional 6,000 people and 2,700 homes. The mining company, which is responsible for the move, has estimated compensation costs of 22.5 billion SEK ($2.4 billion) over the next 10 years.

Niklas Johansson, senior vice president of public affairs and external relations at LKAB, told CNBC that those being asked to relocate were being offered the market value of their property, plus an additional 25%, or the construction of a new home. Around 90% have elected to take a new house, Johansson said.

“The problem at the moment is that the local municipality has very little land that they own [or] that they can make, from an administrative point of view, buildable,” Johansson said.

“They have had to buy land from the state, who owns most of the land above the Arctic Circle. And here you have conflicts with reindeer herding, conflicts with defense, conflicts with nature, etcetera,” he added.

Mats Taaveniku, chairman of the municipal council in Kiruna, described the city’s relocation as a “huge project,” that could yield major opportunities for European citizens for decades to come.

A successful outcome, he added, hinges in part on greater financial and political support from both the Swedish government and the European Union.

“We have what we can call a big fight between the municipality and LKAB, and the municipality and our own government,” Taaveniku told CNBC by video call.

“The EU has to step up to support us. It’s not enough to make a decision that we have critical and strategic minerals. They have to support us with political statements and money, of course,” he added.

CNBC has contacted spokespeople for the Swedish government and the European Commission, the EU’s executive arm.

The EU, for its part, has recognized LKAB’s new rare earths deposit as strategically important under its Critical Raw Materials Act, a policy that aims for domestic production to satisfy 40% of the region’s annual demand by 2030.

Asked how Kiruna residents have reacted to the relocation effort, Taaveniku said: “Some of the citizens are sad because they will lose a lot of memories. They have grown up in a house for two or maybe three generations, so this is sad.”

“But on the other hand, everybody knows, we live on the minerals,” he said. “Kiruna is built on the minerals, so every resident in Kiruna knows that we have to move from our homes sooner or later because we are dependent on this mining industry.”

For those on the move, one aspect that has raised concerns is that Kiruna’s new city may be up to 10 degrees Celsius colder in the winter.

A study by the University of Gothenburg found that Kiruna’s new city center is laid out in a grid pattern in an area where cold air collects, with tall buildings and narrow streets, meaning that the low sun will likely have difficulty reaching the ground for many months of the year.

“Kiruna is a winter city. It’s a cold, Arctic city. The winters are long, and you have a long snow season. It is rarely -35 [degrees Celsius] but it could be that cold for a period of time in mid-winter and it’s a very big difference between -15, which is not uncommon, and -25,” Sjöholm said. A built heritage specialist, Sjöholm has been following the work on the city’s relocation for 25 years.

“It’s already a long winter season and if it’s cold, human comfort decreases but also things get more fragile, so to speak,” she added.