Rheinmetall’s Dual Challenge: Chinese Export Curbs and a €350 Million Powder Bet
Published on 07/25/2026 at 07:02 | Redaktion boerse-global.de
The Düsseldorf-based defence and automotive supplier found itself in an unfamiliar position last week—caught in the crossfire of a trade dispute between Beijing and Brussels. China’s Ministry of Commerce placed Rheinmetall on an export control list alongside 13 other EU companies, a move that took immediate effect on Friday. The restrictions target so-called dual-use goods—products with both civilian and military applications—and require special government approval for any such exports to the listed firms. Beijing framed the measure as a direct response to the EU’s 21st sanctions package against Russia, which had recently begun targeting Chinese companies.
The list includes a mix of European industrial players: German firms Antraco Chemie and Sindlhauser Materials, Italian supplier Lafert, and Polish sensor specialist Vigo Photonics. While Vigo Photonics downplayed the impact, noting that its key inputs come from Japan and Europe, Rheinmetall itself offered no immediate comment on the potential fallout. For a company whose revenue is overwhelmingly tied to European and American defence contracts, the practical effect may be limited—but the symbolic weight of being singled out by Beijing is hard to ignore.
A Powder Plant Takes Shape in Bavaria
Just two days before the Chinese announcement, Rheinmetall was celebrating a very different kind of milestone. On Wednesday, the company broke ground on a €350 million expansion of its propellant powder plant in Aschau am Inn, a project dubbed “Firepower.” The investment aims to boost production capacity to over one million propellant charge modules per year by 2028, cementing the company’s role as a linchpin of Europe’s artillery supply chain.
The Aschau expansion ranks among Rheinmetall’s largest single investments during the current European rearmament wave. Chief Executive Armin Papperger has been vocal about the need for reliable, long-term government commitments to justify such spending. At the World Security Summit earlier this month, he took aim at former Chancellor Angela Merkel, accusing her of deliberately sidelining the German defence industry for years. “She said we don’t really need the industry—in an emergency, we’d call the Americans,” Papperger was quoted as saying. He pointed to a concrete example: Rheinmetall built a €500 million artillery plant, only to receive an initial German order for just 200,000 rounds of ammunition.
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The company has since ramped up its artillery ammunition capacity from 70,000 to one million rounds per year, surpassing US production of conventional munitions, according to Papperger. Yet the Firepower project’s 2028 timeline underscores the gap between industrial ambition and the pace of government procurement.
Stock Recovers, but Structural Questions Linger
Despite the dual headwinds of Chinese export controls and a recent naval contract loss, Rheinmetall’s shares showed resilience on Friday, closing at €1,032.60—a gain of 1.29% on the day and 5.34% for the week. Over the past 30 days, the stock has climbed 9.13%, suggesting that investors are not yet pricing the China restrictions as a fundamental threat.
But the longer-term picture remains sobering. The stock sits 48.55% below its 52-week high of €2,007.00, reached on 3 October last year. The recovery of recent weeks has only partially offset the sharp decline from that peak. Technical indicators tell a similar story: the shares trade roughly 7.56% below their 50-day moving average and more than 30% below the 200-day average.
The mid-term drag stems largely from a major disappointment in the naval segment. In early July, the German defence ministry awarded the multi-billion-euro contract for six F126 frigates to rival ThyssenKrupp Marine Systems, leaving Rheinmetall empty-handed. The news triggered an 18.7% single-day drop in June, and the stock has yet to fully recover. The setback highlights that even with a full order book in land systems, Rheinmetall remains vulnerable to individual contract losses.
Analyst Caution Meets Industrial Momentum
On 20 July, Bank of America analyst Benjamin Heelan cut his price target for Rheinmetall from €1,770 to €1,300, while maintaining a “Buy” rating. Heelan cited a structural shift in warfare toward drones and precision weapons, which he argued is putting increasing pressure on the traditional ammunition business. The downgrade came just as the company was laying the groundwork for a massive expansion of that very business—a tension that investors will be watching closely.
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The next major data point arrives on 6 August, when Rheinmetall reports its second-quarter and first-half results. The market will be looking for clarity on how the order backlog in ammunition is evolving, caught between the company’s multi-billion-euro capacity build-out and the more cautious signals from analysts about the long-term demand for conventional artillery rounds.
For now, Rheinmetall finds itself navigating a complex landscape: a geopolitical squeeze from China, a domestic political debate over procurement reliability, a naval setback, and a massive industrial bet on the future of artillery. The stock’s recent recovery suggests some confidence that the growth story remains intact—but the path back to the highs of last October looks anything but straightforward.
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