War in Ukraine is not all good news for the arms industry

A new report from the Stockholm International Peace Research Institute (SIPRI) shows that the world’s top 100 arms makers continued to grow sales in 2021, but supply chain problems slowed the sector’s growth. I am here

While both Russia’s aggression and Ukraine’s response, as well as the Western response, have boosted demand for weapons, producers face challenges in obtaining raw materials and parts.

“It will take time to ramp up production,” said Diego López da Silva, senior researcher at SIPRI. It may take years to meet the new demand.

The main focus of the report was on industry patterns in 2021, when supply chain issues related to the pandemic appeared to slow growth.

SIPRI, an international organization focused on conflict, armaments, arms control and disarmament research, said Russia is a major supplier of raw materials used in arms production.

The war in Ukraine has increased demand for weapons as Russia ramps up production and Western countries consider replacing donated stocks to Kyiv. can give.

“Sending billions of dollars worth of ammunition and other equipment to Ukraine could hamper ongoing efforts in the United States and Europe to strengthen the military and replenish stockpiles,” the report said. Told.

According to a report released on Monday, the contraction due to the COVID-19 pandemic has played a role in keeping the growth in 2021 at 1.9% compared to 2020. SIPRI predicted that the war in Ukraine could create similar problems for the industry in the short to medium term.

Russian companies are ramping up production because of the war, but they are struggling to access the semiconductors, SIPRI reports. Businesses are also affected by war-related restrictions, for example in terms of receiving payments.

“We could have expected an even greater increase in arms sales in 2021 were it not for the continuing supply chain issues,” said Lucie Béraud-Sudreau, director of the SIPRI Military Expenditures and Arms Production Program. Growth.

“Both large and small arms companies said their sales were affected during the year. Some companies, such as Airbus and General Dynamics, also reported labor shortages.

War in Ukraine is not all good news for the arms industry

The list of the top 100 arms suppliers is dominated by one US company, with 40 of its companies located in it.

They also account for more than half of sales, accounting for $299 billion (€284 billion) of a worldwide total of $592 billion. As of 2018, five of the top 100 companies are located in the United States.

North America was the only region to see a decline in arms sales compared to 2020. The 0.8% decline in reals was partly due to higher inflation in the US economy in 2021.

In 2021, 27 of the top 100 arms suppliers were headquartered in Europe. Total arms sales in the region were $123 billion, up 4.2% from 2020.

While it was a profitable year for shipbuilders, aircraft manufacturers in this sector did not do so well.

With arms sales of $4.5 billion, Rheinmetall (31st) remained Germany’s largest arms company. However, due to the pandemic and supply chain disruptions, arms sales are expected to fall by 1.7% in 2021.

SIPRI researcher Lorenzo Scarzato said: “Most European companies specializing in military aerospace are reporting losses in 2021, which they attribute to supply chain disruptions.” Overall, European shipyards were less affected by the pandemic and were able to increase their sales in 2021.