In another encouraging sign that Europe is beginning to react more forcefully to the challenge on its eastern doorstep, the prices of some of its defense stocks have been moving up.
The Wall Street Journal, October 20:
Shares in German arms maker Rheinmetall traded sharply higher Monday after the group’s joint venture received an order worth billions of euros, a fresh sign of growing demand for defense products in Europe.
Artec, a JV owned by Rheinmetall and KNDS Germany that produces armoured vehicles, received the order worth 3.41 billion euros ($3.97 billion) from European defense organization OCCAR, the company said Monday. Rheinmetall accounts for the bulk of the order’s value, at nearly 3 billion euros.
Frankfurt-listed shares rose 5% to 1,744.50 euros following news of the order, and amid the continued Russia-Ukraine conflict and signs over the weekend of renewed fighting between Israel and Gaza, despite a recent ceasefire. Other defense companies in Germany and across Europe also traded higher.
Under the contract, Artec will deliver 150 Schakal infantry fighting vehicles to the German armed forces, and 72 to the Dutch military. A further 248 vehicles are included as an option in the contract, Rheinmetall said. . . .
I wrote about Rheinmetall for Capital Matters back in March:
It’s a marker of a changed world — and a changed Europe — that the market capitalization of the German arms manufacturer Rheinmetall now exceeds that of Volkswagen, still something of a surprise even allowing for VW’s well-publicized difficulties. Rheinmetall is now looking at taking over a VW plant in Osnabrück, which could be retooled to manufacture armored vehicles.
Volkswagen’s market cap is now around €49 billion, Rheinmetall’s now stands at €79 billion.
Back to Capital Matters in March:
Grim as it is to put it this way, Russia’s war against Ukraine has been good for Rheinmetall, something reflected in its share price. This has now been supercharged by the growing rift between the U.S. and Europe. Rheinmetall’s stock was trading at just over EUR 600 at the beginning of the year, against over EUR 1,400 now. The day of the Russian invasion (February 24, 2022), the share price was EUR 100.
As of the time of writing the Rheinmetall share is trading at around €1,754.
As I noted in March, Moscow had earlier paid Rheinmetall a distinctly unwelcome compliment:
One indication of the company’s success is that its CEO is now given the same level of security protection as Germany’s chancellor. This was after the discovery of a Russian plot to assassinate him last year.
That’s just another reminder that Moscow’s gray zone “war” against the West has been going on for quite a while.
One consequence of Donald Trump’s (reasonable) insistence that Europe should bear more of the responsibility for its own defense appears to be a broader revival in its arms sector. This has not only benefited the Rheinmetall share price; other stocks mentioned as doing well by the Wall Street Journal include “Italy’s Leonardo and Fincantieri, British firms BAE Systems and Babcock International and France’s Thales and Dassault Aviation.”
Germany alone is expected to spend hundreds of billions more on armaments, and it has more money than most European countries to do so. Meanwhile, European leaders are said to want 50 percent of its spending in this area to remain in Europe rather than go to U.S. manufacturers. Trump’s approach to NATO is not without its costs.
Could it be that camouflage reindustrialization will begin to repair some of the damage being done to Europe’s economies by green deindustrialization?
Indeed, could it be that a camouflage bubble will replace that long-ago green bubble?
The WSJ:
TKMS, the warship business of industrial giant Thyssenkrupp, on Monday debuted on Germany’s DAX index after being spun off from the parent company, gaining 66%% from its opening price to trade at 99.80 euros.
I just hope that the Europeans and, indeed, the Americans, can get hold of the rare earth products they will need for a suitably high-tech military build-out.