【Industry News】 EU defense industry's revival hampered by high costs and supply shortages

Representatives of the defense industry warn that rising costs of materials, energy and dependence on imports from third world countries could limit the revival of the European defense industry.

EU member states are investing massively in national defense industries in response to the Russia-Ukraine conflict. However, the price and availability of some key materials are complicating further development.

Ji?í Hynek, head of the Czech Republic's Arms and Defense Industry Association, told EURACTIV.cz, "Currently EU countries do not exploit or only in small quantities the raw materials needed for the production of most military products."

Hynek also noted that the EU imports key materials from third world countries, especially Asia and Africa.

Hynek said, "Just a few examples of products that are currently in short supply on the market include all packaging materials, most chemicals, and cellulose needed to produce gunpowder. Synthetic rubber is also in short supply, and its price is astronomical."

"For example, bulletproof undershirts, which are in high demand, could not be produced here if materials were not imported from Asia, primarily China. Some manufacturers have moved production directly there." He added that he has not seen any efforts to alleviate the situation.

Italy, one of Europe's leaders in the defense sector, is suffering from high material costs. While the country has so far imported several materials from Russia, such as aluminum, platinum, palladium or rhodium, it has had to find alternative suppliers.

Paolo Può, president of Cantiere Navale Vittoria, which produces military, commercial and transport vessels, recently told Corriere della Sera that "steel has gone up from around 700 euros to 3,500 euros per ton, while aluminum has gone up from 5 euros to 15 euros per kilogram."

Può also admitted that the company is now asking the Italian government to intervene, as most of its contracts are with the state.

Some European companies are already preparing to protect their operations from soaring material prices and potential shortages.

A spokeswoman for Rheinmetall, Germany's largest weapons manufacturer, told EURACTIV , "In terms of raw materials, we are taking precautions and have, for example, purchased large quantities of aluminum and plastics. In addition, we have purchased semiconductors or electronic components, so we should not experience any supply problems in the medium term."

The spokesperson added, "In general, we have increased our working capital, i.e. the value of our inventory and working capital, significantly this year."

EURACTIV understands that even before the Russia-Ukraine conflict, scarcity of chips and semiconductors had hampered French weapons production.

Greece is also experiencing a shortage, but more of a shortage of rare earth elements. On the other hand, Bulgaria or Spain do not see a significant problem in this regard.

Further details on material shortages in the European defense industry remain taboo for strategic and security reasons.

However, if investments do not keep pace with the growth in the production of key materials, Europe could face another dependency challenge - a status quo it is currently experiencing in the energy sector. (Source: euractiv)