Swedish CEOs Warn of Harmful Supply Risks After Shock Ruling

(Bloomberg) -- The chief executives of Sweden’s biggest construction firms have warned that a local court’s surprise ruling could trigger a crippling shortage of key materials in a landmark case that pits environmental concerns against economic interests.

Companies exposed to the development, with Skanska AB the most prominent, say the fallout will reverberate throughout the biggest Nordic economy. Sweden’s government says it’s now “closely following” the process, given how much is at stake.

The case revolves around a factory that supplies 75% of Sweden’s cement. Earlier this month, a local court denied its application to extend and renew a 20-year mining permit, citing environmental risks.

The company in question, Cementa AB -- a unit of HeidelbergCement AG -- plans to appeal the decision to Sweden’s Supreme Court, though a date has yet to be set. If it fails to overturn the ruling, its limestone mining operations on the Swedish island of Gotland will come to an abrupt halt on Oct. 31.

In a comment published late on Thursday, Cementa sought to talk down the environmental concerns surrounding the plant. The planned operations carry “no risk” of jeopardizing Gotland’s drinking water supply or the island’s groundwater, according to its website. Representatives for the company and its German parent didn’t respond to an earlier request for comment from Bloomberg News.

If corporate Sweden suddenly loses three-quarters of its cement supply, a number of its biggest companies will face immediate production issues. Skanska’s CEO Anders Danielsson has already made clear that a failure to overturn the court’s decision would bring with it “serious consequences for the Swedish construction industry.”

Peab AB and NCC AB have issued similar warnings. Peab CEO Jesper Goransson says the impact would be felt not just in his industry, but across “the civil engineering market in Sweden.”

Investors should take note, according to analysts at Handelsbanken. Any production halt will “impact more or less all construction sites” in Sweden, Handelsbanken’s Johan Edberg said by phone. He says Peab and NCC are even more vulnerable than Skanska, due to their Nordic focus.

Edberg now expects the Swedish government to step in. “The stakes are too high, not just for private construction companies, but also for government infrastructure projects and more,” he said.

Simon Satherberg, a spokesman for Sweden’s minister for industry and trade, Ibrahim Baylan, told Bloomberg the government “is closely following the development surrounding Cementa’s application.”

“Interdepartmental work is in progress to follow the issue and analyze the potential consequences,” he said. “The government is in contact with the company and affected industries about how the situation develops.”

In the meantime, the industry is bracing for the worst as time runs out to overturn the decision.

“We have to be prepared for all scenarios,” Skanska’s Danielsson said.

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