Rheinmetall’s Bavarian Powder Bet: Groundbreaking Ceremony Overshadows Chinese Sanctions and Analyst Doubts
Published on 07/25/2026 at 14:21 | Redaktion boerse-global.de
Rheinmetall’s expansion in southern Bavaria is moving from blueprint to concrete. The Düsseldorf-based defence group formally broke ground on a €350 million powder plant in Aschau am Inn on Friday, a project designed to more than double the site’s annual propellant output from 1,700 tonnes to 4,200 tonnes. The ceremony, attended by Bavarian premier Markus Söder and state economy minister Hubert Aiwanger, marked the start of a construction phase that will see production begin in 2027, with full capacity targeted for 2028.
Chief executive Armin Papperger used the occasion to underscore the strategic urgency, warning that “Nato is not combat-capable without this plant” — a pointed reference to Europe’s reliance on imported precursor materials, particularly from China. The expansion is part of the group’s broader Firepower programme, which aims to lift total powder capacity to 20,000 tonnes by 2030 at a combined investment of €650 million. Papperger also flagged that the order backlog could exceed €100 billion by year-end.
The timing of the groundbreaking was notable. Just days earlier, Beijing placed Rheinmetall on an export control list alongside two German mid-cap firms, Antraco Chemie and Sindlhauser Materials. The move came in retaliation for the EU’s 21st sanctions package against Russia, which had added 51 entities to Brussels’ list, including 14 from China and Hong Kong. The Chinese countermeasures target dual-use goods such as rare earths, now requiring special export permits. For Rheinmetall, the immediate impact appears manageable: the group holds four to five years of inventory and already sources propellants from Turkey, Australia and the US. The Aschau expansion is itself designed to reduce precisely this kind of supply-chain vulnerability.
Yet the stock’s trajectory tells a more complicated story. Rheinmetall shares closed Friday at €1,032.60, up 1.29% on the day and 5.34% for the week. The 30-day gain of 9.13% suggests investors are warming to the news flow around Aschau and the pipeline of orders. But the recovery remains partial at best. The stock is still 48.55% below its 52-week high of €2,007.00, reached in early October last year, and the annualised volatility of roughly 67% underscores its status as one of the DAX’s most jittery names.
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The mid-term picture is clouded by a major setback in the naval segment. In early July, the German defence ministry awarded the €5 billion-plus contract for six F126 frigates to ThyssenKrupp Marine Systems, leaving Rheinmetall empty-handed. The news triggered an 18.7% single-day rout in June, and the technical damage persists: the stock now trades 7.56% below its 50-day moving average and more than 30% below the 200-day line.
Analyst sentiment has also cooled. On 20 July, Bank of America’s Benjamin Heelan slashed his price target from €1,770 to €1,300, while maintaining a “Buy” rating. Heelan cited a structural shift in warfare toward drones and precision munitions, arguing that the traditional artillery ammunition business faces mounting pressure. The downgrade highlights a tension at the heart of Rheinmetall’s strategy: even as the group pours capital into expanding legacy powder capacity, some on the sell side question whether the demand profile for conventional artillery will hold up over the long term.
Adding to the operational noise, a Ukrainian report has raised reliability concerns about Rheinmetall’s Skynex air-defence system, alleging jamming and target-tracking failures during a Russian drone attack in early April. The company rejects the claims and suspects operator error. The controversy comes shortly after Rheinmetall secured a several-hundred-million-euro order for four additional Skynex units.
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Meanwhile, the security environment for the defence industry is tightening. Germany’s domestic intelligence service has warned of elevated espionage and sabotage risks, as well as potential attacks on defence-sector executives by Russian actors. Papperger has been under police protection since 2022.
Investors will get a clearer read on the numbers when Rheinmetall publishes its second-quarter and first-half results on 6 August. The focus will be on how the order book in the munitions division is evolving amid the conflicting signals — between the billion-euro expansion in Bavaria and the more cautious analyst voices questioning the long-term outlook for conventional artillery.
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