Europe runs out of ammunition and exposed to China

The international political situation is experiencing one of the greatest moments of instability since the fall of the Berlin Wall. The Geneva Academy of Humanitarian Law counts 110 armed conflicts around the world, among which the Russian invasion of Ukraine and the war in Gaza stand out due to their impact on the global political and strategic future. In this context of tension, States have chosen to arm themselves and store, as soon as possible, their artillery projectile stores. However, they have encountered a fundamental problem for this: there is a shortage of gunpowder internationally.

The demand for gunpowder has exceeded the available supply and there is not enough for all countries. This has caused arms companies to be overwhelmed. So, The German firm Rheinmetall is working on the construction of a new factory in Lower Saxony (Germany)as well as three factories in Ukraine, with the aim of increasing their production and being able to meet the deadlines for their orders, whose value in 2023 reached 38.3 billion euros, an increase of 44% compared to the previous year. On the other side of the Atlantic, Lockheed Martinthe world’s main arms firm, announced its plan to increase the production of its missiles and rocket launch systems to meet the increase in demand.

Goodbye to the peace dividends of the 90s

However, the arms industry is experiencing a significant bottleneck generated by the current high demand, the consequences of the COVID pandemic on the supply chain and, most especially, the outdated state of its production systems. In relation to this last issue, during the 1990s there was a reduction in military spending as a consequence of the end of the Cold War: it was the time of the “peace dividends”, a term coined by George H. W. Bush and Margaret Thatcher at the beginning of that decade to name the profits generated by the decrease in investment in weapons.

That is to say, the industry was not prepared to assume the current production rate: global defense spending increased by 9% to the record figure of 2.2 trillion dollars in 2023, an upward trend that will continue this year as indicated. he think thank you British IISS, increased, in large part, by the push of NATO members. The excess demand has skyrocketed the price of gunpowder, something that is already noticeable in the cost of ammunition in the US, a country with the highest number of weapons per inhabitant, and in the Alicante municipality of Elda, where they make calculations to be able to afford the ammunition with which to celebrate the Moors and Christians festival.

Gunpowder recycling due to its shortage

At a sector level, some weapons manufacturers are focusing on the manufacture of projectile bodies instead of gunpowder, as it is more profitable at the moment. Some firms also have to deal with labor shortages, as well as production costs made more expensive by inflation. On the other hand, there is no universal gunpowder. The projectiles are diverse depending on the barrel used, so the gunpowder produced by India, for example, may not be compatible with the needs of the American HIMARS or French CAESAR rocket launcher systems, both used by Ukraine in the war against Russia.

In fact, in the French country, the second largest arms exporter in the world, there is great concern about this lack of gunpowder. So much so that the French Ministry of Defense has asked the arms companies Eurenco and Nexter to recycle the 155 millimeter gunpowder from the AuF1 and TRF artillery guns, which were destined for destruction.

Guncotton to help Ukraine

Emmanuel Macron, who already speaks openly of adopting a war economy in his country, warned in February of the shortage of gunpowder, a factor that could compromise the European plan to rearm Ukraine, under which Brussels approved an aid shipment in March. military valued at 5,000 million euros. It is the latest aid sent by kyiv’s allies, who also want to solve one of Ukraine’s main military problems: Most of its arsenal consists of Soviet artillery shells whose caliber reaches 152 millimeters. kyiv needs to use modern 155-millimeter missiles, which provide greater range, to expel Russian troops from its territory.

However, to make gunpowder, it is necessary to use nitrocellulose, a highly flammable compound known as guncotton. It is a dual-use civil-military product, created from nitric acid (used in fertilizers) and cellulose (used in paper). Well, currently there is a lack of both nitrocellulose and the precise elements to create it. This has alarmed European manufacturers, who are too exposed to dependence on China: the Asian country concentrates almost half of the entire market share of cotton linters, a material necessary to obtain pure cotton.

Objective: secure business in a multipolar world

In this context, representatives of Saab, which in addition to cars manufactures weapons, indicated in conversations with Financial Times that dependence on Beijing may pose a future risk “as we accelerate industry capacity and production in Europe.” The firm’s own executive director, Micael Johansson, pointed out that nitrocellulose was an example of the need for companies in the sector to adapt to a “multipolar world”with the aim of establishing more effective supply chains.

But it’s not that simple. Currently, there is a struggle to obtain these materials, and their dual-use condition has opened a gap in Western sanctions through which Russia is slipping, thanks to the help of Turkey. Moscow doubled the import of nitrocellulose made in countries such as Taiwan and Germany, which arrived through a Turkish firm. In addition, we must add to this the increase in Russian imports of ‘guncotton’ made in China.

The Asian country, for its part, decided to reduce its arms purchases in the last five years to supply them with weapons manufactured in Chinese territory. However, according to SIPRI, arms imports have doubled in Europe in recent years: they increased by 94% between 2019 and 2023. In addition, during that period, imports from the US increased by 17%, and India became the largest buyer. of weapons in the world.

In this context, firms in the sector seem to be adapting quickly to the new situation of global tension that is so beneficial for them. Thus, in 2023, some important firms in the arms industry recorded vigorous increases in their profits. Rheinmetall’s sales increased by 12% to 7.2 billion euros, achieving an operating profit (EBITDA) of 980 million euros. For its part, Lockheed Martin recorded a net profit of 6,352 million euros, an increase of 20.7% compared to the previous year. In the case of Thales, sales in 2023 increased by 7.9%, exceeding its own expectations. As always, when there are wars, the manufacturers of the instruments to carry them out rub their hands together.