EU grants funds to boost ammunition production across Europe

The global surge in ammunition demand has prompted significant investments and strategic expansions across the defense industry, amid heightened geopolitical tensions and replenishment efforts, key players like Rheinmetall and BAE Systems are ramping up production capabilities.

Germany's Rheinmetall is strengthening its plant-engineering division to address surging demand for ammunition manufacturing, acquiring a majority stake in South African engineering firm Resonant Holdings, Caliber.Az reports citing the foreign media.

Rheinmetall will hold 51 per cent of the new joint venture, with Resonant’s existing shareholders retaining the remainder. Resonant, with approximately 150 employees, brings specialized expertise in constructing chemical and explosives plants, potentially boosting annual sales for the joint venture to over 100 million euros ($109 million).

The ongoing conflict in Ukraine has highlighted a critical shortfall in defense preparedness among NATO members, including Germany and the UK. This realization has led to a significant increase in orders for ammunition and investments in production capacity, as governments seek to replenish depleted stocks. Rheinmetall’s acquisition is a strategic move to enhance its capabilities in the ammunition sector, meeting the rising global demand and customer needs for advanced production facilities.

Rheinmetall has highlighted that Resonant Holdings' expertise in plant engineering—particularly in chemical, energetic, and explosives technology—perfectly complements its own capabilities. The German defense giant plans to retain Resonant’s workforce, further integrating their specialized knowledge into its operations.

Resonant’s Nuteq division has significant experience in rocket and satellite fuels and pioneered South Africa's first nitration plant capable of producing the explosives RDX, PETN, and NTO within a single facility.

This acquisition follows Rheinmetall’s previous purchase of Spanish munitions manufacturer Expal Systems in August of last year for approximately 1.2 billion euros, a sum equivalent to three times the company's annual sales.

Rheinmetall already has a presence in South Africa through its subsidiary, Rheinmetall Denel Munition, which secured a substantial contract in December 2022 from a long-time NATO customer for 155mm shells, valued in the hundreds of millions of euros.

Earlier this year, Rheinmetall announced a 300 million euro investment to construct a new ammunition plant in northern Germany, designed to produce 200,000 artillery shells and 1,900 metric tons of explosives annually. This was followed by a framework contract with the Bundeswehr in June for 155mm artillery ammunition potentially worth up to 8.5 billion euros, including an initial order for shells valued at around 880 million euros.

Given that the Bundeswehr's ammunition depots are depleted, replenishing them is estimated to cost around 40 billion euros. Rheinmetall aims to meet this demand by producing 700,000 artillery rounds annually and 10,000 tons of explosive powder by 2025.

In June, the European Union's Act in Support of Ammunition Production program allocated 500 million euros in subsidies to enhance shell and powder production across Europe. Rheinmetall is a key beneficiary, with funds supporting shell production expansion in Germany, Hungary, and Spain, and powder manufacturing enhancements in Spain and Germany.

In the UK, BAE Systems secured a 410 million pound order for munitions last year. This contract will facilitate investments in an additional 155mm machining line in Washington, England, and a new explosive-filling plant in South Wales. A February parliamentary report highlighted ammunition stockpiles as a significant concern for the UK's military services.

The surge in global ammunition demand is also benefiting other defense companies. Elbit Systems announced last week that it will establish a new manufacturing facility to fulfill a 10-year contract worth approximately $340 million with the Israeli Ministry of Defense. This follows an earlier $135 million contract to build an artillery ammunition factory for an undisclosed international client.