Rheinmetall, Europe’s largest ammunition maker, plans to open a new plant in Ukraine. Rheinmetall and a Ukrainian partner company have signed a memorandum of understanding to set up a joint venture which in future will produce ammunition in Ukraine. The MoU was signed in the presence of Alexander Kamyshin, the Ukrainian Minister for Strategic Industries, during the Munich Security Conference.

The “Ukrainian Competence Center for Ammunition” is to produce a six-digit number of 155mm calibre bullets per year in the future, including the corresponding propelling charges. To achieve this, the partners plan to build and jointly operate a new production facility. Rheinmetall will have a 51 percent stake in the new company, with the remaining 49 percent share held by the Ukrainian partner.

Just the other day, on 12 February, Chancellor Scholz took part in the ground-breaking ceremony for a new plant at Unterlüß in Lower Saxony which, along with explosives and rocket artillery components, will also produce artillery ammunition starting in 2025.

“Demand for ammunition in many countries is enormous – first and foremost in Ukraine, of course. Our intention of establishing another joint venture underscores our support for Ukraine. This joint venture will make a vital contribution to the country’s ability to defend itself – and thus to the security of all Europe”, declares Armin Papperger, chairman of the executive board of Rheinmetall AG.

As Mr Papperger puts it, “We want to be an effective partner of Ukraine, to help rebuild the country’s once powerful defence industry, and to assure Ukrainian autonomy in ammunition production. Already today, we are Kyiv’s most important defence industry partner. We are currently processing several billion euros worth of projects on behalf of Ukraine, with more almost daily.”

Rheinmetall is not only the world’s largest producer of artillery ammunition and a defence technology leader. It also has the expertise needed to plan, build and operate facilities for producing ammunition.

In October 2023 Rheinmetall AG and Ukraine’s state-owned enterprise Ukrainian Defense Industry JSC (UDI, the former Ukroboronprom) established a first joint venture in Kyiv – Rheinmetall Ukrainian Defense Industry LLC. In a first step, the company will maintain and repair combat vehicles; later, armored vehicles will also be built in Ukraine.

German Chancellor and Prime Minister of Denmark Take Part in Ground-breaking CeremonyRheinmetall is taking an important strategic step to bolster Germany’s national security preparedness. The Düsseldorf-based tech enterprise is building a new factory at its Unterlüß site in the Lüneburg Heath in Lower Saxony, further enhancing the country’s self-reliance in ammunition production. Chancellor Olaf Scholz, the Prime Minister of the Kingdom of Denmark, Mette Frederiksen, and German defence minister Boris Pistorius joined Rheinmetall AG executive board chairman Armin Papperger for the official ground-breaking ceremony of “Werk Niedersachsen”, the Group’s new ammunition factory. Numerous other prominent personalities from the world of politics, administration, the armed forces and industry were present as well.

In future, Werk Niedersachsen will produce artillery ammunition, explosives and rocket artillery components. The factory will eventually manufacture some 200,000 artillery shells a year, along with up to 1,900 tonnes of RDX explosive and, optionally, other components for producing ammunition charges. In addition, production of rocket engines and possibly warheads could take place here, which will be necessary for the planned German rocket artillery project, for example.

“To secure Germany’s strategic sovereignty in the large-calibre ammunition domain, we’re creating a national production facility that sets new standards and will primarily meet the needs of the German Bundeswehr”, declares Armin Papperger, going on to note that “with Werk Niedersachsen, we’re establishing another European centre for producing artillery ammunition and other effectors at our historic Unterlüß site. The move reflects our sense of responsibility and resolve to contribute materially to the ability of our country and our NATO partners to defend itself.”

This company-financed project represents investment volume in the €300 million range. Rheinmetall is therefore shouldering the entire cost of constructing the factory, with no government involvement. The factory will also mean around 500 new jobs in Unterlüß.

Rheinmetall’s new factory will make it possible to meet the Bundeswehr’s own needs through domestic production and – especially in a crisis – to assure unrestricted transfers to partner nations. Previous dependency on export permits issued by other countries will thus be eliminated, giving Germany full sovereignty in this national security-relevant domain. In the process, Rheinmetall will create a complete value-added chain for artillery ammunition in Unterlüß, enabling it to offer the ‘full shot’ from a single source, including the shell, fuse, explosive charge and propelling charge.

Werk Niedersachsen will operate largely autonomously, with all the work steps necessary for producing artillery shells carried out on location. In building this plant, Rheinmetall is pursuing a modular, scalable concept for assuring a secure supply of ammunition, one with the potential for additional growth.

The top priority for the new factory is the earliest possible start of production. Following a construction period of around twelve months – proceeding from the date of the contract – annual capacity will be 50,000 shells a year. Germany’s initial share of value added will come to 50 percent, gradually increasing in the second year of production to 80 percent and to 100 percent in the third. By this point, Germany will have a fully autarkic supply of artillery ammunition, with value added generated entirely at home.

In terms of volume, annual capacity will reach 100,000 shells in the second year of production, later rising to 200,000 a year.

Background: 
Artillery is a vital capability of land warfare. The war in Ukraine shows how immense the need for ammunition is. The Bundeswehr’s depots are empty; replenishing its stocks will cost an estimated €40 billion. Enormous consumption of ammunition in Ukraine is exacerbating current shortages. The western world’s available production capacity is not structured to meet demand on this scale. Like other countries, Germany therefore plans to procure large amounts of ammunition over an extended period.

Rheinmetall is a leading defence contractor and one of the world’s largest producers of ammunition.  In recent months, the Group has already been investing substantially in its production network. By 2025, Rheinmetall aims to produce up to 700,000 rounds of artillery ammunition at its plants in Germany, Spain, South Africa, Australia and Hungary, as well as 10,000 tonnes of powder.

The new Rheinmetall ammunition plant in Várpalota, Hungary, currently being built by the Hungarian holding company N7 on behalf of the joint venture company Rheinmetall Hungary Munitions Zrt., is now poised to expand as planned. The second phase of construction started in January 2024. 

The concept for a multi-phase expansion of the plant existed prior to February 2022 and the Russian invasion of Ukraine. The project constitutes a strategic Hungarian investment in cooperation with Rheinmetall in response to the shortfall in ammunition already apparent at the time given the anticipated increase in demand in Europe and NATO. Furthermore, it has the added aim of reducing Europe’s dependence on overseas imports. 

Just one year ago, the foundation stone was laid in Várpalota for the first part of the new Rheinmetall plant, where the joint venture company Rheinmetall Hungary Munitions Zrt. will in future produce ammunition for various systems. The first expansion phase of the plant will enable production of 30mm medium-calibre ammunition for the Lynx infantry fighting vehicles which will be built by Rheinmetall at its new tank plant in Zalaegerszeg, Hungary. Production starts in 2024. 

Now set to begin, the “Várpalota 2.0” expansion will increase the size of the plant by 20 hectares to approximately 120 hectares. The number of employees will grow to up to a total of 200. 

In addition, the product range will expand to include new types of ammunition, principally 155mm artillery shells for the PzH 2000 self-propelled howitzer and 120mm ammunition for the Leopard 2 main battle tank and its potential follower, the Panther KF51 EVO. Production is slated to begin in early 2026. Furthermore, Rheinmetall also plans to carry out development and acceptance testing at Várpalota. 

Part of this strategic expansion of capacity for the production of ammunition in Hungary is also an additional plant for the production of explosives (RDX), which is being built in parallel on the same site and also in a joint venture between Reinmetall and N7. This will also make a major contribution to ensuring the security of supply of this elementary raw material for ammunition production in Europe.

Part of the Várpalota’s output will meet the needs of the Hungarian armed forces, with the rest destined for export.  

In addition to the newly built plant operated by Rheinmetall Hungary Munitions Zrt., today Rheinmetall already produces ammunition in Germany, Spain, Switzerland, Austria, Italy, South Africa, Australia and the United States.