Rheinmetall secures major European funding to boost 155mm ammunition production.

On 26 March 2024, the European Union announced that it had allocated more than €130 million to the German company Rheinmetall as part of its efforts to enhance artillery ammunition production capacities. This funding is a portion of a larger €500 million package established under the Act of Support in Ammunition Production (ASAP) to boost the production of 155mm artillery ammunition and powder within the EU's defense infrastructure.
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The global demand for 155mm artillery shells has significantly increased since the beginning of the war in Ukraine. (Picture source: Ukraine MoD)

The funds will be distributed across six projects undertaken by Rheinmetall AG's subsidiaries located in Germany, Hungary, Romania, and Spain. This development is part of the ASAP initiative, which represents the EU's inaugural program aimed at expanding ammunition production capabilities within the member states. The formal proceedings to initiate this funding will commence with the signing of grant agreements, slated for May 2024.

Armin Papperger, CEO of Rheinmetall AG, commented on the funding, noting the EU's decision to invest in the company as a major supplier of 155mm ammunition. He highlighted the current global defense landscape, mentioning the example of Ukraine to underline the increased relevance of artillery in contemporary conflicts. Papperger also mentioned the necessity for European armed forces to supplement their artillery ammunition supplies and confirmed that Rheinmetall is proceeding with plans to escalate production.

Since 2022, Rheinmetall has been working to enhance its manufacturing capabilities. For example, the company's role as a supplier for the Ukrainian armed forces is likely to increase due to Rheinmetall AG's recent acquisition of all shares in the Spanish company Expal Systems S.A.U. This move allows Rheinmetall to provide a variety of medium- and large-caliber ammunition, including 20mm automatic cannon rounds for the Marder infantry fighting vehicle, 35mm ammunition for the Gepard anti-aircraft vehicle, and 105mm and 120mm tank ammunition for the Leopard 1 and Leopard 2 Main Battle Tanks (MBTs).

The acquisition extends Rheinmetall's involvement in its key business areas of weapons, ammunition, and propellants. The integration into Rheinmetall Expal Munitions brings additional artillery and mortar rounds, medium-caliber ammunition, fuses, and rocket propulsion systems into its product lineup, thereby expanding its presence in the global ammunition market. Additionally, the acquisition of Expal provides Rheinmetall with greater production capabilities, including access to facilities in Spain and an extension into the demilitarization and soil remediation sector in the United States.

By 2027, the Rheinmetall group aims to reach an annual production capacity of up to 1.1 million artillery shells. Additionally, there are plans to commence the annual production of up to 1.5 million propellant modules and 3,000 tonnes of RDX explosives starting in 2026. These actions demonstrate Rheinmetall's response to the increased global demand for artillery ammunition, driven by the growing requirements for military equipment in various countries and the rise in geopolitical tensions.

The EU's financial support to Rheinmetall is part of a broader strategy to reinforce defense capabilities among its member states. Furthermore, the European Union has outlined future plans for supporting the defense sector through its proposal for a European Defence Investment Programme (EDIP), aimed at promoting the expansion of production capacities for various defense products. This represents a structured approach to enhancing the military preparedness and response capabilities of the EU member states.

The Act in Support of Ammunition Production (ASAP) is a European initiative aimed at increasing ammunition production capacity within Europe. This initiative responds to the European Council's March 2023 directive for the urgent provision of ammunition and missiles to Ukraine and for EU Member States to replenish their stocks. ASAP addresses challenges and shortages within the defense supply chains, with projects exceeding a total budget of €500 million across five areas: €124 million for explosives, €248 million for powder, €90 million for shells, €50 million for missiles, and €2 million for testing and reconditioning certification.

ASAP serves as part of the European Council's three-track ammunition strategy, specifically focusing on the industrial component to enhance production capabilities. The program is designed to improve the European Union's defense industry's capacity to meet demands for timely ammunition and missile supplies by implementing specific measures and providing financial support through grants aimed at boosting production capacities and mitigating supply chain issues.

The European Commission has selected 31 projects to receive funding under ASAP, distributing a total of €500 million. These projects cover areas including explosives, powder, shells, missiles, and testing and reconditioning, aiming to increase the output and preparedness of the European defense industry. The allocated funds are intended to attract additional investment from the industry, estimated to bring total investment to around €1.4 billion, aimed at enhancing production capacity and readiness.

The objectives of ASAP include supporting the EU's defense industry in expanding manufacturing capacities, ensuring the security of supply and availability of essential inputs, facilitating finance access for defense firms, and addressing production bottlenecks for accelerated delivery. This initiative is aligned with the EU's overarching policy to support Ukraine and reinforce the Union's defense capabilities, aiming to solidify the European defense industrial and technological base while meeting the immediate demands for defense products.