European defence contractors have warned that reliance on Chinese cotton used in gunpowder for ammunition threatens their ability to expand output as western countries race to bolster Ukraine’s overstretched military.
Cotton linters, a byproduct and a primary ingredient needed to produce nitrocellulose, are used in artillery shells and other explosives.
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”.
Leading arms producers, including Sweden’s Saab and Germany’s Rheinmetall, warned that Europe was overly dependent on linters from China, which accounts for just under half of the global trade.
Armin Papperger, chief executive of Rheinmetall, a leading ammunition producer, told the Financial Times that Europe relied on China for “more than 70 per cent” of its cotton linters.
“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.
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The EU aims to increase production of Nato-standard 155mm shells to 1.4mn annually to replenish member states’ stocks, which have been depleted to help Ukrainian armed forces in the face of superior Russian production capacities. It has launched a €2bn fund to boost European explosives production.
“There is a huge undersupply of [nitrocellulose], which is causing difficulties elsewhere within the industry,” said another industry executive.
“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.”
European leaders have highlighted the gunpowder shortage. “We have all become aware of the need to face up to the scarcity of some components, especially gunpowders,” French President Emmanuel Macron said in March after a meeting of Ukraine’s main backers.
China accounts for almost half of cotton linters pulp traded globally, according to the International Trade Centre. The largest importers of the material include Germany, Sweden and Belgium.
The companies warned that it would be difficult to rapidly scale up production of explosives while being dependent on Chinese sources and there was a danger that China could restrict exports of the material if relations worsened.
Saab said that “[the reliance on China] can pose an increased future risk as we and the industry ramp up capacity and production in Europe”, while stressing that there were no current supply chain issues.
Concerns about cotton linters supplies come as Germany and other European nations look to diversify and “de-risk” their supply of critical materials away from China, which for decades was a low-cost, reliable outsourcing destination.
Russia, which also has been boosting its ammunition output, has increased imports of nitrocellulose from China in the past two years. Its purchases from China jumped from $3.4mn in 2022 to $7.18mn in the first 10 months of 2023, according to import data examined by the UK’s Royal United Services Institute.
Saab said that in the long run, companies might have to consider alternative ways of manufacturing critical materials to secure Europe’s “ammunition ecosystem”. While work was ongoing on making cellulose from wood, the company said this was not yet in production.
The Swedish group’s chief Micael Johansson recently told the FT that nitrocellulose was an example of how defence companies would have to build new supply chains in a “multipolar world” where “not only the western rules-based order will be present”.
He added: “We have to think about like-minded countries and who can we work with in the long term, who can we trust.”
Britain’s BAE Systems, which supplies the UK’s armed forces with ammunition, said that while there were sufficient inventories of raw materials for its munitions production, it was “aware of potential concerns relating to the future availability of nitrocellulose” and was actively engaging with its partners to ensure future supplies.
Rheinmetall, whose subsidiary Nitrochemie produces nitrocellulose, confirmed that it was considering setting up a linters production unit in Lower Saxony as part of a new ammunition manufacturing site.
Papperger said the company had amassed a three-year stockpile of linters after Russia’s full-scale invasion of Ukraine, and deliveries continued “every month from China”.
“But the point is Europe should be independent in the long term,” he added.
Christian Mölling, the German Council of Foreign Relations lead for security and defence, said nitrocellulose was a “cheap chemical product”, and the production of one of its key ingredients had long been outsourced to places like China.
“If you want to scale ammunition production, it’s not just about raw materials, it’s also about building new production sites, which depending on standards can take between six months and two years.”
Additional reporting by Richard Milne in Oslo
Source: Economy - ft.com
