Historic Deal! Germany’s Rheinmetall Secures €8.5B Ammo Contract To Arm Bundeswehr, Allies & Ukraine

In a landmark agreement, German defense manufacturer Rheinmetall has clinched the largest order in its history. The deal, worth up to €8.5 billion ($9.1 billion), involves the supply of 155mm artillery ammunition to replenish the stocks of the Bundeswehr and its ally nations and support Ukraine in its defense. 

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On June 20, Annette Lehnigk-Emden, President of the Federal Office of Bundeswehr Equipment, Information Technology, and In-Service Support (BAAINBw), and representatives from Rheinmetall signed the framework contract in Koblenz.

“The order is primarily intended to increase the stocks of the German Armed Forces and its allies and to support Ukraine in its defensive struggle,” the company stated. Although the exact quantity of artillery shells has not been disclosed, deliveries are slated to commence in early 2025.

The Netherlands, Estonia, and Denmark are all part of this significant order, demonstrating a broad coalition keen to enhance regional security.

Rheinmetall’s new ammunition factory in Unterlüß, Lower Saxony, is central to this contract. The company said an initial call-off from the framework contract (a call-off contract allows the supply of materials, goods, and services to be secured over multiple delivery dates) has been placed to ensure the factory’s capacity utilization during its start-up phase.

This initial order includes the delivery of 155mm caliber projectiles in various versions, valued at approximately €880 million ($944 million). The company anticipates further increased call-offs in the coming years.

The new facility is expected to produce 100,000 projectiles in its second year of operation, with a projected capacity ramping up to 200,000 per year.

Rheinmetall emphasized that “the entire value chain” for the 155mm order, encompassing the projectile, fuse, explosive charge, and propellant charge, will be managed from the Lower Saxony site.

Looking ahead, Rheinmetall has committed to producing 700,000 artillery shells and 10,000 tonnes of powder annually across its production facilities in Germany, Spain, South Africa, Australia, and Hungary starting in 2025.

This ambitious plan underscores the company’s pivotal role in supporting defense efforts across multiple continents. The historic deal not only signifies Rheinmetall’s crucial contribution to European defense but also highlights the increasing cooperation among European nations in response to evolving security challenges.

Ukraine War Fueling Artillery Shells Production

The drive to increase production has been fueled by the ongoing war in Ukraine, which continues to put significant pressure on European and US artillery manufacturers. Artillery remains a crucial capability in land warfare.

The conflict has essentially turned into an artillery duel between Ukraine and Russia, with both sides using up tens of thousands of rounds each week.

Since Russia’s invasion of Ukraine began in 2022, the US Department of Defense has supplied Kyiv with over three million 155mm artillery rounds, according to State Department data.

The conflict in Ukraine has revealed that the current production capacity in the Western world is not designed to meet such high quantities.

Meanwhile, reports indicate that Russia produces nearly three times more artillery munitions than the US and Europe, raising concerns about the Western defense industrial complex’s capacity.

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A stack of 155mm artillery rounds sit behind the line of AS90 self-propelled guns and their Ukrainian operators (UK MoD)

This disparity was highlighted in March when European intelligence officials reported that Russia was firing about 10,000 shells daily, compared to Ukraine’s 2,000 shells per day, with even worse ratios in some areas along the 600-mile front.

The US and European nations have been working to address this shortfall. For instance, in May 2023, Ukroboronprom and Rheinmetall signed a strategic partnership agreement. By October of that year, they had formed a joint venture to maintain and repair Western equipment and localize the production of Rheinmetall weapons in Ukraine.

Earlier this year, Rheinmetall CEO Armin Papperger announced plans to establish at least four facilities in Ukraine, focusing on producing shells, military vehicles, gunpowder, and anti-aircraft weapons.

Russia Ukraine war
File Image: Russia Ukraine War

In May, the US Army opened its Universal Artillery Projectile Lines production facility in Mesquite, Texas, to bolster munition production capabilities.

The advanced facility, managed by General Dynamics Ordnance and Tactical Systems, will boast high-volume production capabilities for large-caliber metal components and will be outfitted with long-stroke, high-tonnage forging technology.

At the industry level, Jason Aiken, former Chief Financial Officer at General Dynamics, stated during an earnings call last year that the company was producing 20,000 artillery rounds per month and was working ahead of schedule to boost that capacity to between 85,000 and 100,000 rounds per month.

Contact the author at ashishmichel(at)gmail.com