**German Defense Firms Push for Increased Domestic Steel Production**
German defense manufacturers, including Rheinmetall AG, are calling on local steel producers to enhance their output of military-grade metal. This initiative aims to secure the long-term production of armored vehicles and tanks amid rising defense expenditures across Europe, particularly in response to Russia’s ongoing conflict in Ukraine and shifts in U.S. military engagement in the region.
Currently, German defense companies primarily depend on Swedish steelmaker SSAB AB for their steel supply, which poses a risk of shortages as demand escalates. In response to this challenge, two domestic producers—Salzgitter AG and AG der Dillinger Hüttenwerke, Germany’s oldest joint-stock company—are taking steps to bolster the local supply chain. However, other manufacturers remain cautious, highlighting the complexities of quickly adapting in a capital-intensive sector.
Dillinger, which has been military-certified since 2021 and has roots dating back over 200 years, plays a crucial role in the defense industry with its heavy-plate production. The company has stated that it is in discussions with various well-known land vehicle manufacturers across Germany and Europe regarding steel supply.
Salzgitter, one of Europe’s largest steelmakers, has yet to supply the defense sector but is poised to change that. The company is responding to the German government’s recent fiscal reforms aimed at increasing defense spending, alongside U.S. pressures for NATO members to take greater responsibility for their security.
Thomas Möllmann, head of Salzgitter’s new defense task force, emphasized the importance of sourcing steel domestically, stating, “When we talk about resilience, it makes no sense to source steel from abroad in this day and age.” He noted that supplying defense firms would restore steelmakers’ status as “systemically relevant” players in Germany. Although the volume of steel sold to the defense sector is currently lower than that for the automotive industry, the potential for higher profit margins makes it an attractive market.
Salzgitter initially sought military certification to supply emergency response agencies but is now shifting focus to contracts with defense manufacturers. Deliveries are expected to commence soon, pending approval of their application.
Rheinmetall has reported a significant increase in its demand for military-grade steel, which has doubled over the past two years, requiring several thousand tons annually. The company has begun purchasing initial supplies from domestic producers and is optimistic about the additional support.
As Europe intensifies its rearmament efforts, Rheinmetall stands to benefit significantly, with its stock price nearly tripling this year, elevating it into the euro area’s main benchmark index.
**FAQ**
**Why are German defense manufacturers seeking increased domestic steel production?**
German defense manufacturers are seeking increased domestic steel production to ensure a reliable supply of military-grade metal, reduce dependency on foreign sources, and support the growing demand for armored vehicles and tanks in light of rising defense spending in Europe.
