Defense industry expands – New growth drivers: Hensoldt, Almonty and Rheinmetall

Rheinmetall expands Maritime Division

For years, German shipyards have been making headlines primarily due to economic difficulties. However, the era of struggling businesses is now likely to be over. With the acquisition of the Marine Division of the Bremen-based Lürssen Group, which operates under the name Naval Vessels Lürssen, the Düsseldorf-based defense group Rheinmetall is focusing fully on maritime military technology. The division currently employs around 2,100 people and generated revenue of around EUR 1 billion last year. According to information from NDR, the division has an order backlog of around EUR 7 billion. Customers include not only the German Navy but also other countries. Rheinmetall apparently sees particular growth potential in the field of autonomous ships – drones are now conquering the seas as well. The purchase makes sense for Rheinmetall: until now, the Company has focused exclusively on artillery. With its own shipyards, it is broadening its base and securing additional sources of revenue.

Almonty: Tungsten specialist goes all-in on the US

The shipyard acquisition is just another piece of news from the defense sector, showing that industry is securing more and more business. Last week, news agency Bloomberg reported that tungsten producer Almonty Industries plans to acquire a mine in the US. The Company, regarded as one of the few serious alternatives to tungsten from China, Russia and North Korea, already operates the Panasqueira mine in Portugal and is about to bring the massive Sangdong mine project in South Korea into production in the coming weeks, which from 2027 could supply 40% of tungsten outside China. The planned acquisition of a mine in the US highlights Almonty's increasing integration into supply chains there.

Until now, the United States has been solely dependent on tungsten imports. However, from 2027, imports from rival economies will be banned. Almonty is one of the few hopes for decision-makers in Washington to become independent in terms of the critical raw material tungsten. This has already been emphasized by the US Congress, among others, which wrote a letter to Almonty. Another point in the Company's favor is that Almonty is considered extremely competent in selecting suitable tungsten projects and operating them. It succeeded years ago in acquiring the Panasqueira mine, now known for its high-grade production, for just one euro – the previous owners had simply been unable to cope with the project. Recent media reports on competing mines, such as Tungsten West in Plymouth, England, cite challenging economic benchmarks in the event that current tungsten prices fall.

No subsidies needed – Almonty runs like a well-oiled machine

Recent comments by Almonty CEO Lewis Black to Bloomberg also demonstrate that the tungsten producer, with its projects and comprehensive know-how, is like a well-oiled machine that can increase its output at any time. Instead of investing directly in the business, as is the case with rare earths company MP Materials, the Almonty CEO envisions supporting the Company exclusively through long-term purchase agreements at current market prices. The subtext of this statement is that, unlike many other companies in the critical raw materials sector, Almonty is not dependent on subsidies – a strong selling point for investors. Furthermore, the recent escalation caused by Russian drones entering Polish airspace also supports Almonty's investment story. In an interview with Handelsblatt, security expert Carlo Massala emphasizes that everything points to a deliberate provocation by Russia. Coupled with the Russian military exercise named "West", currently underway, this escalation has caught the attention of policymakers. Several decision-makers have already called for increased investments in drones and reconnaissance technology.

How much tungsten is in modern drones?

While state-of-the-art reconnaissance systems come from radar specialist Hensoldt, which is also likely to benefit indirectly from Rheinmetall's new naval business, the discussion about more drones shows once again that tungsten is the key raw material in the defense sector. This critical metal plays a key role not only in armor and weaponry but also in unmanned aerial vehicles (UAVs) and their ammunition. According to the Institute for Science and International Security, Shahed-136 drones contain up to 5 kg of tungsten. Larger drones capable of carrying armor-piercing projectiles carry as much as 60 kg of tungsten. Even in purely civilian drones, tungsten carbide ensures greater durability, despite low weight, in rotors and gears. This, in turn, increases the range.

Rheinmetall and Hensoldt saturated – Catch-up potential at Almonty

While Rheinmetall's entry into the naval business only gave its share price a slight boost and Hensoldt already seems to have priced in a lot of defense sector speculation, Almonty's share price is still trading below the level of a few months ago despite continuous progress. The Company's unique expertise, which was already profitable at significantly lower tungsten prices, the planned mine purchase in the US, the launch of the massive Sangdong mine, and the further integration into US defense supply chains all point to further upside potential for Almonty Industries.