A new railway that could carry mineral bulks and other cargoes between Finland and Norway has been dealt a blow.
A new report has found that that a potential Arctic rail corridor connecting Rovaniemi in Finland to the Arctic Ocean at Kirkenes would carry too little volume to be a commercial success.
“It was known in advance that, due to the significant costs of the construction and a relatively low projected use capacity, the project will not be financially feasible with any of the financing models examined in the report by CAPEX Advisors,” the Finnish-Norwegian joint working group exploring the project stated.
The group’s financial analysis found that an annual transport volume of approximately 2.5 Mt would be needed to cover the yearly maintenance costs. However, it said that such volumes “cannot be regarded realistic without any significant changes in business in the area or in the costs of different transport modes”.
The report did suggest that private financing could be a more viable alternative if the project could generate direct income to cover the additional cost of financing.
“For the project to be financially viable, there have to be parties willing to pay for the project,” the report stated. “This applies for both public and private financing models – socio-economic potential vs. financial potential. So far none of the identified stakeholders have committed to using or paying for the track.”
The distance from Rovaniemi to Kirkenes is about 500 km, more than 90% of which is within Finland if the tracks were built west of Lake Inari. The report warned that the Arctic railway would have diverse impacts on the environment and the Sámi people on such a route.
“It is crucial that the Sámi people, especially the reindeer herders and others directly affected by the possible railroad, are included in this kind of processes at an early stage of the process,” the report said. “Thus, it is possible to settle all the adverse impacts on traditional livelihoods – i.e. reindeer herding and the environment – in addition to the effects on the preparation of reasonable prevention measures.”
The report means the project will now be put on hold.