Ukraine’s battle against Russia is consuming ammunition at unprecedented rates, with the country firing more than 5,000 artillery rounds every day — equal to a smaller European country’s orders in an entire year in peacetime.
The dramatic shift to a war footing is creating a supply chain crisis in Europe as defence manufacturers struggle to ramp up production to replenish national stockpiles as well as maintain supplies to Ukraine.
Nearly a year since Russia’s invasion, the pace of demand for ammunition and explosives is turning into a test of Europe’s industrial production capacity in a race to re-arm.
“It is a war about industrial capacity,” said Morten Brandtzæg, chief executive of Norway’s Nammo, which makes ammunition and shoulder-fired weapons.
He estimates Ukraine has been firing an estimated 5,000-6,000 artillery rounds a day, which he said is similar to the annual orders of a smaller European state before the war.
The pressure on producers has not been helped by lingering supply chain bottlenecks following the coronavirus pandemic, a lack of production capacity and a shortage of critical raw materials for some explosives, which is holding back efforts to increase output.
Some components are in such high demand, Brandtzæg said, that their delivery time has increased from months to years.
It has led to a scramble to source materials, from chemicals for explosives to metals and plastics for fuses and artillery shell casings. Most companies have increased production shifts ahead of expected orders from national governments, and are hiring more people, another challenge since the start of the pandemic.
Yves Traissac, deputy chief executive at military explosives producer Eurenco, said the company is looking to increase production capacity to meet the higher demand from customers that include Germany’s Rheinmetall and Britain’s BAE Systems.
“We are currently managing a ramp-up to meet our customer demand. It is a challenge but we are working on that,” he said.
One particular challenge is sourcing nitric acid, which the company uses in small quantities to make explosives but which is also a key ingredient in the manufacture of fertiliser. With parts of Europe’s fertiliser production reduced due to the high cost of energy, the supply of nitric acid “has to be secured with our suppliers”, said Traissac. Eurenco, he added, is working to “have additional sources of critical raw materials”.
Rheinmetall, Germany’s largest defence contractor, announced last month it would build a new explosives factory in Hungary in a joint venture with the government to address the shortage.
The explosives produced in the new plant will be used for artillery, tank, and mortar ammunition, among other things. The company has also restarted decommissioned ammunition production facilities, it told the Financial Times, and has “bought in large stocks of important materials”.
Mick Ord, chief executive of Britain’s Chemring, which supplies a range of explosives and propellants to defence contractors, said some customers have asked if it is possible to “increase output [of certain materials] by 100-200 per cent”.
According to Ord, a “lot of the post-pandemic supply chain challenges are starting to abate”.
The “bigger challenge is that our capacity has been sized to what our customer demand was and the industry has been run very broadly on that basis, where capacity meets demand”.
To increase output significantly takes time and investment in new plants, he said. “These are pretty capital intensive projects which take a few years to build, commission and bring online. It’s not the kind of supply chain where you can just flick a switch.”
UK-based Denroy, which makes shell casings and other components for a range of defence companies, has benefited from pre-ordering certain materials such as polymers and composites.
The challenge, said chief executive Kevin McNamee, is “not so much our capacity but the lead times of some of the materials are very long — it can be a six-month lead time on some specialised materials”.
“Companies might do a batch once or twice a year, so if you miss that batch, you have to wait.”
The crisis has prompted companies to work more closely with their suppliers and also with those further down the chain. Several industry executives said they were spending more time making sure on a daily basis that individual suppliers were able to deliver.
The huge demand for investment is also prompting calls for a change in the way procurement is handled by governments, with executives saying they need longer-term contracts.
Nammo, which is co-owned by the governments of Norway and Finland, usually receives annual contracts from state customers. The company started to invest in its facilities early last year and has been able to meet the demand from its customers. Nevertheless, Brandtzæg said the scale of the investments are such that they are a “huge strain on the financials of an otherwise healthy defence company”.
The investments for the company were “more than three times higher in 2022 than in the year before”. The defence industry needs longer, multiyear contracts, he added, “so that they can carry those massive investments”.
In the UK, BAE Systems has been in talks with the Ministry of Defence about ramping up production of a number of munitions for months. The company is the main supplier for the British Armed Forces and in January began a new 15-year supply contract but it is still waiting for a formal agreement to cover the additional output required by Ukraine.
Lee Smurthwaite, programme director for munitions at BAE, said the company had already increased the number of shifts at its plants, in addition to hiring temporary workers, both to meet the demands of the new contract as well as in anticipation of more work. The company’s three main munition plants typically run two to three shifts over 24 hours a day, five days a week.
The rush to re-arm and the prospect of the war lasting for some time has prompted debate about the need to pool purchasing across the EU, despite its separate industrial bases.
Countries are also looking at collaboration further afield, with France late last month announcing it would work with Australia to jointly produce and send several thousand 155mm artillery shells to Ukraine. The production of the shells will be led by France’s Nexter.
“You will never end up with just one propellant plant in Europe but if ever there was a time to say, we should be co-operating on munitions, it is now,” said Francis Tusa, editor of Defence Analysis, pointing to a recent speech by French president Emmanuel Macron where he revealed that the number of shells manufactured in France each year corresponded to a week of shelling sent by Russia into Ukraine.
There could be merit in an agreement on common purchasing of weapons such as ammunition or explosives, he added.
Work on this is under way. The European Defence Agency, set up in 2004, is part of an EU effort launched late last year to explore with industry how member states can co-ordinate the procurement of some critical equipment, including ammunition.
“It was clear that for a number of capacities there was an urgent need,” said Pieter Taal, head of the EDA’s industry, strategy and European policies unit.
Progress, however, will take time, he admitted, adding that “between member states it always takes a lot of talking back and forth”.
Trevor Taylor, of the Royal United Services Institute, said: “Scale matters in defence production and the functional case for Europeans (including the British) working together is very clear.”
But he warned: “The political hurdles to such co-operation are significant: settling who would pay for what would be challenging.”
