EU arms manufacturers concern about dependency on Chinese raw materials as demand rises due to war in Ukraine – FT

The Financial Times has found out about the European arms manufacturers’ concerns regarding their dependency on Chinese cotton used in gunpowder propellants. Possible supply constraints threaten the ability to expand production to support Ukraine in the war.

Source: Financial Times

Quote: "Demand for ammunition has soared with Ukraine consuming shells at high rates in its war against Russia. But defence contractors have struggled to scale up output because of supply chain constraints of various inputs, including nitrocellulose, also known as 'guncotton'."

Details: The Financial Times noted that cotton linters are a byproduct and key ingredient necessary for nitrocellulose production used in artillery shells and other explosives. 

The Financial Times stated that leading arms manufacturers, including the Swedish Saab and the German Rheinmetall, warned that Europe is overly dependent on lint from China, which accounts for just under half of global trade.

Armin Papperger, chief executive of Rheinmetall, told the Financial Times that Europe relies on China supplying "more than 70 per cent" of cotton fibre. "There is a risk [that China could withhold linters for geopolitical reasons]. And that is the reason why we buy as much as possible to fill our stocks," he said.

"There is a huge undersupply of [nitrocellulose], which is causing difficulties elsewhere within the industry. The shortage just highlights the need to strengthen the responsiveness and ability of the European Union’s defence industry to ensure the timely supply of ammunition and missiles in Europe," another industry executive told the Financial Times.

The International Trade Centre states that China accounts for nearly half of the world's market for cotton cellulose. 

Companies have warned that it will be challenging to quickly increase explosives production, being reliant on Chinese sources, and there is a risk that China may restrict material exports in the even of deteriorating relations.

Swedish Saab stated that "[the reliance on China] can pose an increased future risk as we and the industry ramp up capacity and production in Europe", emphasising that there are currently no issues with the supply chain.

Saab stated that in the long term, there may be a need to consider alternative methods of producing critically important materials to ensure the security of the European "ammunition ecosystem". 

Rheinmetall, whose subsidiary Nitrochemie produces nitrocellulose, confirmed that it is considering establishing a branch in Lower Saxony as part of a new ammunition production facility.

Armin Papperger pointed out that the company has accumulated a three-year supply of cotton wool after Russia's full-scale invasion of Ukraine and deliveries continue "every month from China". "But the point is Europe should be independent in the long term," he emphasised.

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