Rheinmetall secures NATO contract for €300 Million worth of 155mm artillery shells.

On May 24, 2024, Rheinmetall announced a significant contract valued at nearly €300 million from a NATO customer for the supply of artillery ammunition. This contract includes several tens of thousands of 155mm artillery shells and several hundred thousand propellant charge modules, with deliveries scheduled between 2024 and 2028. This order reflects a broader trend to replenish military stockpiles depleted by ongoing conflicts, particularly the war in Ukraine.
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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. (Picture source: Rheinmetall)

The global ammunition market is projected to grow significantly, with a compound annual growth rate (CAGR) of 6.2% from 2024 to 2034. This growth is driven by factors such as increased military expenditures, rising terrorism, and political instability. Major markets contributing to this growth include North America, Europe, and Asia-Pacific, with the United States, China, and Japan playing significant roles due to their advanced defense industries and technological innovations.

In Europe, there has been an increase in demand for 155mm artillery ammunition, particularly among NATO countries. The ongoing war in Ukraine and related geopolitical tensions have influenced this demand, prompting investments in ammunition production and supply. The European Union has implemented funding initiatives to enhance ammunition production, addressing the critical need for reliable military supplies.

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 31 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.

Technological advancements in the ammunition market include the development of polymer-based bullet cases, which reduce ammunition weight and improve accuracy. These innovations are expected to drive market growth. Additionally, there is a shift towards environmentally friendly practices, with the development of non-toxic lead substitutes for ammunition, addressing environmental and health concerns associated with traditional lead-based ammunition.

The recent contract with Rheinmetall underscores the strategic importance of securing reliable supply chains for military ammunition amidst global shortages and rising production costs. Rheinmetall's capacity to fulfill such a large order reflects its ability to meet the increasing demand for military supplies. 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 enables 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, 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.