Boom in woods: inside munitions group’s fight to boost production

The Financial Times argues that Nammo’s challenges have included a battle with a TikTok data centre over available electricity. Caliber.Az reprints the article.

The birdsong coming through the thick pine forest in central Norway could be a postcard-perfect scene, but for one thing. The rural idyll is soon shattered by several thundering explosions as two white vans are hit by various artillery shells and burst into flames.

“Isn’t that just a wonderful sight?” said an official from Nammo, a Norwegian ammunition company, using a clearing in the woods to show off its wares.

Military officers and defence ministry officials from 33 countries have come deep into the Norwegian countryside to see the latest shells capable of being used in everything from tanks and machine guns to F-35 fighter jets.

Nammo’s test event underscores the surge in demand for ammunition since Russia’s full-scale invasion of Ukraine 18 months ago, not just from Kyiv but from Western nations keen to replenish stocks after donating so much.

But it also points to an acute problem: the challenge of boosting production to meet Ukraine’s and NATO’s needs after decades of relatively little investment. Defence industry insiders say that in a heavy month of warfare Ukraine can fire more artillery rounds than all European manufacturers can produce in an entire year.

“We are in an industrial war of capacity,” said Morten Brandtzæg, Nammo’s chief executive.

European companies’ total annual production of artillery rounds lies somewhere between 350,000 and 650,000, defence industry insiders say © Nammo

Nammo and other ammunition manufacturers — which in Europe include Rheinmetall of Germany, BAE Systems of the UK, and France’s Nexter — face a swath of issues from how much the huge ramp-up in production would cost, who should foot the bill, and how fast it could go.

Nammo confronted another, more peculiar, challenge this year when Brandtzæg blamed the storage of TikTok cat videos for delaying a planned expansion of its main factory in Raufoss, 100km north of Oslo and home to its test centre.

The company discovered there was not enough electricity for its expansion as the surplus energy in its region had been taken by a data centre being built for the Chinese-owned social media group.

Brandtzæg said government officials had indicated Nammo’s power problems would be resolved soon. But he added that it raised a big topic for not just Norway but all of Europe. “How do you prioritise energy allocation between different companies? Certain criteria are needed: how many jobs are created? How relevant is it for society? How important is it for total defence?”

The biggest debate in the forest is over how to narrow the enormous gap between capacity and demand. Defence industry insiders say that European companies’ total annual production of artillery rounds lies somewhere between 350,000 and 650,000.

Ukraine’s defence minister Oleksiy Reznikov told the EU in March that the country was on average going through 110,000 shells per month, an estimated quarter of what Russia was using.

Already then, Kyiv wanted to use more, with Reznikov putting Ukraine’s minimal monthly need at 356,000 shells and stating that running artillery systems fully would consume close to 600,000. The latest counteroffensive has only increased the pressure.

“There is a monumental gap between capacity and demand. In the worst case, Ukraine is using in one month the entire annual production of the European industry. And European countries are trying to replenish their stocks at the same time,” said one defence industry executive.

The issue has grabbed the attention of politicians at the highest level across Europe and NATO. Industry leaders have briefed the western military alliance several times on the progress. The EU has promised to use €2bn to buy 1mn rounds for Ukraine in the coming year.

But much of that is coming from existing stocks being donated by European countries, who are now trying to replenish their supplies too.

At Nammo’s test event, procurement officials from the US, UK and multiple European countries watched the demonstrations, exchanging gossip and concerns over several days as the smell of gunpowder hung in the air.

The biggest debate now is over how to narrow the gap between capacity and demand for ammunition © Nammo

Among them, Brigadier General Tomas Beck, head of Norway’s land systems division, said that Russia’s invasion had led western governments to change their mindset, but not yet quickly enough.

“For the first 20 years, we could live on the stocks that we had from the cold war. Now we are almost out of equipment. Now we are donating the last stocks we have. At the same time, we have to build up again. Converting from a slow cycle to a fast cycle is an exercise. It involves more risk-taking,” he added.

It is the latter that worries companies. Brandtzæg said that for Nammo, owned by the Norwegian government and a Finnish majority state-controlled company, it could take 15-20 years to break even on a big investment, while most contracts in the industry are annual.

“Will the demand last so long?” he asked. “What keeps me awake at night is . . . how long will the support from politicians last?”

He recounted how one unnamed ammunition company “almost went bankrupt” recently when their national government cancelled an order for medium-calibre rounds because they suddenly wanted large-calibre artillery shells instead.

Nammo normally invested about €7mn a year but in 2022 it spent more than €100mn already, Brandtzæg said. “We are taking a major risk. But we don’t take all the risk,” he said, hinting that governments would need to do more if Nammo and others were to invest anything like what was needed to meet current demand.

Another industry executive is blunter, warning that despite the proposed funds from the EU there was still far too little concrete help.

“At this rate, it’s possibly going to take decades to produce one year of what’s needed. If governments want more ammunition, they need to get this going. We would go bankrupt if we had to do it ourselves,” the executive added.

Rheinmetall, Germany’s largest defence contractor, said this year that it could only build a new factory for gunpowder — a crucial ingredient for ammunition — if it received subsidies. “We cannot invest everything by ourselves, because it’s an investment into national security,” chief executive Armin Papperger told the FT in March.

Brandtzæg also urged the industry not to solely focus on capacity problems. The donation of so much western artillery and weaponry to Ukraine meant that Russia was likely to get their hands on much of the technology via the battlefield and eventually seek to copy it.

“The race for technology is there too . . . If we don’t invest more in research and development now we can be caught up within 10 years’ time,” he said.

At the event, Nammo showcased high-precision ammunition that could travel far greater distances than before, from previous ranges limited to about 24km to up to about 40km now, Brandtzæg said. Soon a new propeller would extend that to 60km-70km while future technologies promised 100km-150km, he added.

Beck, the Norwegian brigadier general, endorsed the message about not becoming complacent. He stressed that the west must not squander its opportunity as Russia loses huge amounts of men and material in Ukraine but starts to put its own industry on a war footing.

“Are we moving fast enough? I question that . . . Now is the time to act. Everybody is talking about how we’re running low. We need to boost production,” Beck said.