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An analysis of the German defence industry landscape: how medium-sized companies can benefit from the strengthening of the industrial base.
The security policy turning point (Zeitenwende) since 2022 has moved the defence industry to the centre of industrial policy. The 100 billion euro Bundeswehr special fund, the NATO commitment of 2 % of GDP for defence and the EU defence initiatives (EDF, EDIS, EDIP) create an investment framework that will keep the German defence industry supplied with orders for years to come. For medium-sized companies this means: entering the defence industry has never been more attractive than it is now.
A political paradigm shift
For decades the defence industry was regarded in Germany as a politically sensitive subject. The Zeitenwende has changed this fundamentally: defence industrial capability is today understood as a national security resource. For suppliers this means not only more orders, but also social acceptance and political support.
Rapidly scaling up defence production is running into capacity bottlenecks in the supply chain. The prime contractors can only increase their production capacity if the supplier pyramid grows with them. This applies in particular to specialised technologies for which there are only a few qualified providers — a classic field for highly specialised medium-sized companies.
A concrete example: ammunition production
The German government has announced a major expansion of ammunition production. Rheinmetall is building new plants in Germany and Lithuania. Every ammunition factory needs melting furnaces, casting plant and heat treatment furnaces — all with refractory linings. For refractory specialists, this means concrete opportunities for orders in both new construction and maintenance.
Alongside direct contracts, there is a growing number of funding programmes and framework conditions intended to make it easier for medium-sized companies to enter the defence industry. The EU and the German government have recognised that a strong industrial base is only possible with a broad foundation of specialised suppliers.
Companies in refractory construction have specific positioning opportunities in the defence industry. Their core capability — mastering high-temperature processes, manufacturing and installing furnace linings, carrying out maintenance under difficult conditions — is in demand at many points in the defence value chain.
Competitive advantage: Made in Germany
German refractory expertise enjoys the highest reputation worldwide. In a defence context there is a further advantage: producing in Germany avoids the export and technology transfer problems that can arise with foreign suppliers. Prime contractors prefer local suppliers in order to reduce dependencies on third countries.
Dipl.-Ing. Aleksander Stepanov
Deputy Operations Manager & Project Manager
Refractory construction, industrial furnace construction and plant engineering
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