Shares of German defense giant Rheinmetall AG soared by as much as 11% in Frankfurt, marking their largest single-day gain in over two years.
The rally comes as European officials deliberate on a significant increase in military spending to support Ukraine, amid growing concerns over the future of US security commitments under a potential second Trump administration, Bloomberg said.
Over the past year, Rheinmetall’s stock has more than doubled, driven by a surge in military orders, particularly from Germany.
If Europe moves forward with its latest spending plans, the company could be poised to ramp up its production capacity even further.
Fears of US disengagement push Europe toward self-reliance
The proposed European defense package is expected to be announced only after Germany’s federal election on February 23, in an effort to avoid stirring political controversy.
Officials familiar with the matter indicate that European governments are bracing for a potential shift in US foreign policy, particularly after former President Donald Trump’s recent call with Russian President Vladimir Putin, which sidelined European leaders, Bloomberg said.
Trump has repeatedly urged NATO allies to boost defense spending, even suggesting that European nations should allocate up to 5% of their GDP for military needs.
This figure far exceeds current commitments, with no NATO member currently approaching that threshold.
The uncertainty over Washington’s continued support has accelerated discussions on increasing domestic European production of defense equipment, a move that could benefit Rheinmetall and other military contractors.
Rheinmetall eyes expansion in Ukraine
Rheinmetall CEO Armin Papperger met with Ukrainian President Volodymyr Zelenskiy over the weekend to discuss expanding the company’s operations in Ukraine.
Talks reportedly focused on joint industry projects, including plans to scale up production of 155-mm artillery shells within Ukraine.
Papperger has been vocal about Rheinmetall’s ability to adapt to evolving military demands.
In a recent interview with DW, he noted that prior to the Ukraine war, the company produced only 70,000 artillery shells annually.
That figure has since risen to 750,000, with production capacity expected to reach 1.1 million shells in the near future.
“We are already supplying millions of shells to Ukraine,” he said. “If more is needed, we will certainly increase capacity.”
However, he cautioned that sustained investment and long-term planning are required to maintain production efficiency.
Geopolitical tensions fuel urgency in European defense spending
The latest developments come as tensions between the US and Europe continue to rise, not only over Ukraine but also over trade policies.
European leaders are set to hold an emergency meeting in Paris today to discuss the ongoing crisis, while US-Russia negotiations on Ukraine are scheduled to begin Tuesday in Saudi Arabia.
Notably, Ukraine has not yet confirmed its participation in the talks, and European nations were not invited.
Meanwhile, Trump has reaffirmed his commitment to imposing tariffs on foreign cars starting April 2, a move that could further strain transatlantic relations.
The announcement had a mixed impact on European automakers, with Mercedes-Benz and Volkswagen posting slight gains of 0.3%, while BMW remained flat.
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