Rheinmetall stock climbs as Europe’s largest ammunition factory opens in Unterlüß amid rising defense demand

Shares of German defense conglomerate Rheinmetall AG (ETR: RHM) advanced by €19.50 on Friday, closing at €1,744.50, reflecting renewed investor confidence after the firm inaugurated a sprawling new ammunition manufacturing plant in Unterlüß, Lower Saxony. The uptick, representing a 1.13% single-day gain, follows broader defense sector tailwinds as NATO states rush to address chronic ammunition shortages.

The new factory—constructed in just 15 months at a cost nearing €500 million—is being positioned by Rheinmetall as a game-changer in the European munitions ecosystem. Once fully operational by 2027, the 30,000-square-metre facility is expected to produce 350,000 artillery shells annually, accounting for a major share of Europe’s resupply requirements.

The stock’s movement reflects institutional optimism surrounding Rheinmetall’s capacity expansion, defense procurement alignment, and cross-border production ambitions. Analysts believe the plant’s commissioning marks a significant de-risking milestone in the company’s multi-country ramp-up strategy.

How does the Unterlüß plant strengthen Rheinmetall’s artillery shell production footprint across Europe?

The new Werk Niedersachsen (Lower Saxony plant) is Rheinmetall’s largest single-location munitions facility and complements its broader production network spanning Spain and South Africa. According to Rheinmetall Chief Executive Officer Armin Papperger, the Unterlüß site will enable Germany to meet its own armed forces’ needs through local production while providing delivery assurances to allied NATO states.

The Düsseldorf-based technology group had already made headlines in 2023 with its €1.2 billion acquisition of Spanish arms manufacturer Expal Systems, a move that laid the groundwork for an annual output target of 1.5 million shells across its global network starting in 2027.

By the end of 2025, the Unterlüß plant aims to deliver its first batch of 25,000 shells. In 2026, the facility will also begin manufacturing engines for artillery rockets, supporting a broader pivot toward integrated munition systems. Full-scale operations are expected to stabilize in 2027, generating 500 direct jobs and potentially hundreds more across suppliers and logistics partners.

What role did global defense leaders and NATO play in the inauguration ceremony?

The strategic and symbolic significance of the Unterlüß factory was underscored by the presence of senior German and NATO officials at the opening ceremony. Among the dignitaries were German Federal Finance Minister Lars Klingbeil, Defense Minister Boris Pistorius, and NATO Secretary General Mark Rutte. The Bulgarian President Rumen Radev was also in attendance, alongside delegations from the United States, Latvia, and Lithuania.

Pistorius emphasized that the project represents a national security imperative, not merely a commercial enterprise. “Your success means security for our country,” he stated in his address to Rheinmetall and its peers in the defense industry, reinforcing the government’s support for rapid industrial ramp-up.

Mark Rutte, who took over the NATO leadership from Jens Stoltenberg, praised the defense contractor as “strong and successful” and issued a warning regarding the rearmament programs in Russia and China. He noted that these nations appear to be preparing for prolonged confrontation, thus requiring reciprocal readiness across NATO’s European flank.

What institutional sentiment is driving interest in Rheinmetall shares and the broader defense sector?

Rheinmetall’s performance on the Frankfurt Stock Exchange has increasingly mirrored sentiment surrounding Europe’s evolving security posture. Investors have taken a longer-term view of the defense sector since Russia’s full-scale invasion of Ukraine in 2022 disrupted long-standing supply chains and exposed critical gaps in Europe’s warfighting capabilities.

With the European Union’s €8 billion European Defence Fund and Germany’s €100 billion special military fund both acting as tailwinds, Rheinmetall is viewed as a prime beneficiary. The Unterlüß factory, designed and built at “Rheinmetall speed” according to Papperger, demonstrates the firm’s ability to mobilize capital, engineering, and political support quickly in a high-stakes environment.

A boost in daily trading volumes and consistent fund flows from institutional investors suggest continued bullishness. Analysts note that Rheinmetall’s strategy to decentralize munitions production across NATO geographies—through planned sites in Romania, Lithuania, and the United Kingdom—adds a layer of supply resilience that is being rewarded by capital markets.

What future expansions and contracts are tied to the new Unterlüß munitions hub?

Beyond domestic and alliance-wide demand, Rheinmetall is actively targeting international contracts. A Letter of Intent was signed with Romania’s Minister of Economy, Radu-Dinel Miruță, during the Unterlüß inauguration, outlining a future €550 million investment in a Romanian ammunition plant. The move is part of Rheinmetall’s broader strategy to co-develop a pan-European defense manufacturing ecosystem.

CEO Armin Papperger stated that Rheinmetall is fully capable of replicating the Unterlüß buildout across other NATO member states in a similarly compressed timeframe. Specific expansion projects in Lithuania and the UK are already in early phases.

The company’s long-standing site in Unterlüß—active since 1899—is already home to 3,200 employees and serves as a major testing, R&D, and tracked vehicle development center. The addition of artillery shell production deepens its role as a flagship Rheinmetall location.

Can Rheinmetall sustain its valuation momentum as defense orders scale across NATO?

Rheinmetall AG’s current market capitalization stands at approximately €8.03 billion, reflecting growing investor confidence in the German defense and automotive technology group. With a relatively elevated price-to-earnings (P/E) ratio of 89.36, the valuation signals strong market expectations for earnings acceleration driven by expanding defense contracts and capacity utilization gains. Over the past 24 months, Rheinmetall has consistently outperformed many of its European defense peers on the stock exchange, riding a powerful wave of geopolitical tailwinds, EU-wide rearmament strategies, and a marked increase in national defense budgets across NATO member states.

The company’s strategic execution—including the €500 million Unterlüß ammunition facility, the €1.2 billion acquisition of Spain’s Expal Systems, and forward deployment of new projects in Romania, Lithuania, and the UK—has cemented its position as a cornerstone of Europe’s next-generation defense industrial base. With its 52-week high of €1,944.00 still within striking distance, Rheinmetall AG shares continue to exhibit strong momentum amid heightened institutional interest and defense ETF inflows. Investor sentiment remains firmly positive, especially following the recent ceremonial opening of Europe’s largest artillery shell manufacturing plant, which further validates the group’s capacity-led growth model.

Crucially, upcoming multi-year procurement contracts from NATO-aligned countries—including the recently signed Letter of Intent with Romania—signal long-term revenue visibility and production runway for Rheinmetall. Analysts tracking the European defense sector suggest that Rheinmetall’s ability to rapidly scale vertically integrated manufacturing assets, while maintaining political backing and cross-border delivery assurance, gives it a rare advantage in the highly regulated munitions space. As NATO continues to prioritize indigenous defense production, Rheinmetall’s expanding role as a pan-European defense partner could support further share price appreciation, sustained earnings growth, and inclusion in more institutional defense allocations.