The key when looking at sponge iron (aka direct reduced iron) is that the process occurs after pelletization.

LKAB's eventual switch to sponge iron, is a switch in the iron that they will sell to the market. They still need to first make pellets. But instead of selling their pelletized iron, they will conduct the next step to reduce the amount of oxygen in the iron -- a step that's normally done using coke as part of the blast-furnace process -- on behalf of their steelmaker clients and prior to delivery.

If you look at Hybrit's own process charts, you'll see that regardless of the approach -- for either the blast furnace route or the Hybrit route for use in electric arc furnaces -- the feedstock is the same, pellets.

Here's a link to an article showing the process steps: https://www.greencarcongress.com/2020/06/20200602-hybrit.html . And here's another different diagram, also showing pellets as the starting point: https://www.hybritdevelopment.se/en/

In other words, Hybrit's process starts with pellets.

Finally, even if this changes, and somehow they don't use pellets as the feedstock, LKABs own estimates states they won't have Hybrit fully operational until 2050... almost 30 years away. In fact, they only see 10% of their production swapped out to Hybrit by 2030. "2.7 million tonnes by 2030", from a company that does more than 30million metric tonnes of pellets a year.