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Armaments boom: Germany urgently needs more military steel!
Salzgitter AG increases military steel production due to increasing defense spending in Germany in the context of geopolitical tensions.
Armaments boom: Germany urgently needs more military steel!
The arms industry in Germany is currently experiencing a real boom. German companies such as Rheinmetall AG are increasingly calling on domestic steel manufacturers to increase their production of military steel. They are overshadowed by the geopolitical changes caused in particular by the war in Ukraine and the reorientation of defense policy in Europe. Livemint reports that these developments represent a major challenge, but also an opportunity for the steel industry.
Rheinmetall, Germany's leading arms manufacturer, is particularly reliant on Swedish steelmaker SSAB AB, which poses some supply risk. Rheinmetall's shares have almost tripled this year and the company's market value has now even overtaken that of Volkswagen. A real success story, characterized by an increase in federal government defense spending alongside the easing of the “debt brake” and a general reassessment of military priorities. Economy.ac shows that Rheinmetall not only produces military hardware such as weapons and tanks, but also electronic solutions and ammunition systems.
Mission and outlook
In order to meet the increasing demand, Rheinmetall expects to double its demand for military steel in the near future, which now amounts to several thousand tons annually. Salzgitter AG and Dillinger Hüttenwerke AG are actively responding to this call to strengthen the domestic supply chain, as Dillinger has been one of the military-certified manufacturers since 2021, playing a key role in the defense industry. Salzgitter's plans to supply the defense sector became more concrete under the German government's revised fiscal rules. Livemint added that many smaller steel manufacturers like Benteler already supply the defense industry, but do not want to set up their own armaments departments.
The Federal Republic is expected to invest more than 60 billion euros in the defense budget for 2025, which represents an increase of around 15%. This comes at a time when demand for high technology in the defense sector is steadily increasing due to the changing political climate in Europe. An investigation by EY shows, among other things, that these defense investments not only help the military, but can also provide stimulus for the entire economy, which could secure or create up to 1.3 million jobs.
Criticism and challenges
Nevertheless, the debate about domestic steel production and its support is not without resistance. Many steel manufacturers are reluctant to increase their production capacity because the volume is not high enough to justify a reasonable investment. Thyssenkrupp has even stated that there are no plans to reopen a plant that closed in 2021. The emerging companies in the industry are faced with the challenge of meeting increased demands while at the same time having to find the financial resources for necessary investments.
Hans Christoph Atzpodien, chairman of the German Security and Defense Industry Association, has called for government purchase guarantees for steel production. Despite recognizing steel as a national security issue, the government has so far taken no measures to specifically strengthen domestic production for military purposes. This could prove to be a critical point in the coming months as demand for military materials continues to rise.
Overall, the development in the German defense industry is a fascinating topic that could permanently change not only the military but also the country's economic landscape. The pressure on domestic steel manufacturers will increase, but at the same time the prospects in a booming market are promising. It remains exciting to see how this industry will develop.