Rheinmetall's Powder Plant Gamble: A €350 Million Bet on Artillery Self-Sufficiency
Published on 07/24/2026 at 05:11 | Redaktion boerse-global.de
The DĂĽsseldorf-based defence group has been on a deal-making tear that spans four continents, yet its share price tells a more cautious story. Within a single fortnight, Rheinmetall announced contracts or collaborations touching Kuwait, Norway, the UK, the US, and Germany, while simultaneously breaking ground on a major expansion of its propellant plant in Bavaria. The flurry of activity underscores a company that is both capitalising on surging European defence demand and wrestling with the fallout from a cancelled frigate programme that knocked investor confidence in early July.
From the Arctic to the Gulf: A Global Order Book Takes Shape
The latest wave of announcements began on 10 July, when Rheinmetall secured its first-ever order from Kuwait for the MASS naval decoy system, including?? countermeasures. Three days later, the company signed a memorandum of understanding with Lockheed Martin to establish a European co-production line for the ATACMS missile system at its German facilities. That was followed on 15 July by a pact with Space Norway to monitor maritime traffic in the Arctic using X-band radar data.
The pace accelerated on 16 July, when the "Omnia Training" consortium — a joint venture between Rheinmetall and Raytheon UK — won a contract to digitise British army training. Rheinmetall’s share of the 15-year deal is worth nearly €1 billion. On 20 July, the group received a call-off order worth around €100 million for hardware and services under the existing framework agreement to digitise the Bundeswehr’s land-based operations. A day later, French technology group Thales signed a framework contract with Rheinmetall to supply optronic sighting systems for armoured vehicles.
Already on 14 July, Rheinmetall had announced the first delivery of 155mm artillery shells from its new plant in Unterlüß to Ukraine — a low five-figure quantity under an existing government contract.
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Aschau Becomes the Heart of "Project Firepower"
While the contract announcements grabbed headlines, the most strategically significant move came on 23 July, when Rheinmetall laid the cornerstone for a major expansion of its powder plant in Aschau am Inn, Bavaria. The ceremony was attended by state premier Markus Söder, state secretary Nils Schmid, economy minister Hubert Aiwanger, and Rheinmetall CEO Armin Papperger.
The company is pouring roughly €350 million into the Aschau site alone, part of a group-wide investment programme totalling €650 million. Current annual powder production of 1,700 tonnes is slated to rise to 2,500 tonnes within two years, while output of propellant charge modules will jump from 300,000 to over one million units per year. Production is expected to begin in 2027, with full capacity of 4,200 tonnes of powder annually targeted for 2028. Group-wide, Rheinmetall aims to reach 20,000 tonnes of powder per year by 2030.
The workforce in Aschau is expanding from around 800 to 1,400 employees. Local mayor Christian Weyrich put the figure at roughly 400 new jobs and a total headcount of about 1,300 at the historic site, which has been producing powder since the 1930s. He noted that Rheinmetall would overtake ZF Lifetech to become the region’s largest employer, and described the sabotage risk for a defence site as manageable.
Papperger framed the expansion in stark geopolitical terms. The US, he said, now holds only 20 to 30 percent of its former ammunition stockpiles and is producing primarily for its own needs, forcing Europe to build its own capacity. "Without the Aschau plant, NATO would not be combat-capable," he told reporters. State secretary Schmid pointed to the acute demand for 155mm shells, which have become the principal consumable in the Ukraine conflict. On raw materials, Papperger said the earlier critical shortage of nitrocellulose had been resolved, with reserves now sufficient for four years. The company is also exploring replacing the cotton linters currently used with wood pulp, to reduce import dependence.
A €100 Billion Backlog in Sight
Beyond the Aschau expansion, Papperger expects the group’s order backlog to exceed €100 billion by year-end, describing the coming decade as one of high production demands for the European defence industry. International expansion continues: Rheinmetall and Bulgaria have reportedly resumed talks on a joint munitions plant that would produce powder, 155mm shells, and propellant charge modules. The project envisages an investment of around €1 billion and roughly 1,000 new jobs, though a founding agreement and secured financing are still lacking. Bulgaria is hoping for support from the EU’s SAFE programme.
On the legal front, a Russian court case continues to cast a shadow. Moscow prosecutors and the entity AG Garnison are demanding €47.2 million from Rheinmetall over alleged unjust enrichment, stemming from a contract to build and equip a combat training centre in Mulino, Russia. The hearing is being held behind closed doors.
The F126 Hangover and a Divided Analyst View
The torrent of positive news stands in contrast to the ad-hoc announcement on 2 July, when Rheinmetall disclosed the cancellation of the F126 frigate programme. The company estimated potential revenue losses of up to €300 million for the current financial year, though it reaffirmed its target of more than 60 percent revenue growth for the second quarter of 2026.
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Analysts have responded with mixed signals. Bank of America cut its price target from €1,770 to €1,300 on 21 July, citing a more conservative long-term forecast for ammunition sales through 2030, but maintained a "Buy" rating. Jefferies had already confirmed its buy recommendation with a €1,300 price target on 10 July, following a sector analysis of European defence market dynamics. Rheinmetall also remains a potential bidder for the Kiel-based German Naval Yards shipyard, after talks between Thyssenkrupp Marine Systems and the yard’s owner collapsed.
A Stock That Has Halved From Its Peak
Despite the barrage of contract wins and the strategic investment in Aschau, Rheinmetall’s share price has failed to regain momentum. The stock closed at €1,022.00 on Thursday, recovering 8.01 percent over the past 30 days but still trading 49.08 percent below its 52-week high of €2,007.00 reached in October 2025. Year-to-date, the shares are down 34.34 percent.
Investors are now looking to 6 August, when Rheinmetall will publish its second-quarter interim report for 2026 along with an updated annual forecast. Only then will it become clear how the wave of new orders and the loss of the F126 programme are reflected in the numbers — and whether the market’s scepticism is justified or merely a pause before the next leg of growth.
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