In an effort to secure raw materials and create more secure supply chains, the Swedish export credit agency (EKN) launched an import guarantee product. As the name suggests, the agency primarily deals with securing exports, but the recent global supply shocks prompted the agency to seek a new ordinance from the government. It will be the first time that the agency provides cover for imports.
Raw material import guarantee for Swedish companies
The guarantee will be available to local and international financial institutions financing Swedish companies' import of raw materials. According to the EKN, to qualify for the guarantee, the imported goods must come with an offtake agreement and be of "significant Swedish public interest."
EKN believes that companies will predominantly use the funds to acquire critical metals and minerals to transition to renewable energy. One such metal is copper, which Sweden has identified as crucial to its transition to clean energy. In September 2021, EKN launched a green guarantee scheme for Swedish exporters and businesses with working capital requirements with "direct or indirect" exports. It wants the guarantee to contribute towards the goal of making Sweden reach net-zero greenhouse gas emissions by 2050.
Sweden has always been reliant on imports for its raw materials. The supply chain disruption caused by the COVID-19 pandemic and the war in Ukraine has forced the nation to reconsider its supply chains. Russia's invasion of Ukraine is particularly worrying to Sweden as it has faced aggression from Russia and has recently made progress in joining NATO.
Giving Swedish companies a competitive edge
An example of abeneficiary from the guarantee would be Boliden, one of Sweden's largest importers of copper. It treats 250 000 tonnes of copper at its Rönnskär plant, which it sells to domestic wire and equipment manufacturers. Boliden gets 75 percent of its copper from mines and the remainder from recycled scrap.
Sweden isn't the only country that needs copper for its energy transition. The rise in copper prices is due to increased demand while supply is limited. So it constantly competes for the raw material for a constant supply of huge orders. To increase supplies, miners will have to open new mines, which is costly. By guaranteeing offtake agreements, it reduces the risk for miners to invest in new operations, making Swedish companies more attractive as customers.
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