The EU failing to make good on its ammo supply vow is bothering Kiev – and Helsinki too. The Finns have decided to take matters into their own hands and turn their country into one large TNT and gunpowder production facility. This is the way they seek to make up for their losses in the wake of the falling-out with Russia, but China may well spoil their party.
The Ukraine conflict has prompted a surging demand for TNT, mostly used in artillery ammunition and mortars, in Western countries. TNT was invented in the early 20th century and has been in active use to this day because its mass production is far cheaper than that of more sophisticated explosives. The EU’s only TNT factory, the one based in Poland, cannot catch up with the growing demand.
Recently, a rumour swirled in the Finnish media that Finland was about to launch a new TNT production facility, and Antti Häkkänen, the country’s defence minister, was quick to confirm it. ‘We need to step up the production of explosives and reconsider our manufacturing industry’s role in this field,’ he said. ‘Russia is poised to sustain a drawn-out war effort, which will keep our need for explosives at a high level.’
But Finland has no intention to build the factory on its own. The minister is seeking an appreciable investment in the TNT factory from the EU. According to him, the government has already told its NATO allies about. Besides, the talks are ongoing to have private investors on board with the project. ‘The market participants know full well about the need for these products. Bu anyway, it is the government that is going to play the pivotal role in it,’ Häkkänen claims.
The list of potential partners includes Forcit Group, a Finnish company specialising in the explosives. Its CEO, Joakim Westerlund, has confirmed the company’s interest, but so far there have been no definitive steps forward. The location of the future factory has not been agreed on either, but it is only a matter of time. ‘It is being discussed, and we are looking to have meaningful results by the late spring,’ the defence minister vows as he is pinning his hopes on the fast-growing explosives manufacturing industry in Finland.
In March 2024, the EU supported the Finnish industry with a €32.5mn financial aid package. Notably, the Finns received more than what they had been shooting for, namely, €24mn, which means the country’s defence industry is about to see its heyday. The Vihtavuori-based powder mill in central Finland, for one, has ramped up its production figures as part of Nammo AS (short for Nordic Ammunition Company), an aerospace and defence group offering a wide range of military products.
The group’s assets are co-owned in equal shares by the Norwegian ministry of trade and industry, and Patria Group, a large Finnish defence contractor. In recent months alone, a total of €70mn has been invested in the development of the Nammo-run powder plant, and the investors are looking for quick revenues. ‘In my view, we must step up more <…> We are in an industrial war of capacity,’ Nammo’s president and CEO Morten Brandtzæg told the Financial Times.
Finland is one of the leading EU countries in terms of the Ukraine support. To date, Helsinki has spent a total of €1.5bn in military aid. The Finnish producers have had a major role sending in hand grenades and other armaments and vehicles. In early 2024, the companies decided to supply the Ukrainian armed forces with artillery ammunition, above all, 155mm shells Ukraine is in dire need of. The company behind the production is Nammo Lapua, also part of said group, whose facility is based in Sastamala. Ilta-Sanomat has run a feature on the company’s activities.
‘We are NATO’s largest independent defence industry operator,’ proudly says Raimo Helasmäki, executive vice-president for commercial ammunition at Nammo Lapua. Amid the Ukraine conflict, the demand for the factory-built products has hit a record high. This year the company’s output will have quintupled, with the plant expecting even more orders. The group has already applied for the EU’s Act in Support of Ammunition Production ASAP programme. Should it receive the nod, Nammo AS will build a new arms factory.
According to reporter Jouko Juonala, most of the factory staff are healthy young males who are not going to be recruited for military drills. All of them have been locked in as ammo manufacturing personnel.
That being said, the Finnish contribution may well turn out to be a drop in the ocean. Italehti apprehensively quotes Dmytro Kuleba, the Ukrainian foreign minister, as saying that the EU is unlikely to make good on its early spring vow to produce a total of 1mn artillery shells for Kiev throughout the year. According to Bloomberg, the actual figure is going to be 30 per cent of the target amount at best. Meanwhile, European ammo producers claim their factories are operating at full capacity.
‘Before February 2022, a single 155mm shell cost about $2,100. Currently, the price has soared to around $8,400,’ said Rob Bauer, a lieutenant-admiral in the Royal Netherlands Navy who currently chairs the NATO military committee.
This is exactly what Finland seeks to cash in on as the country is hoping for a new EU tranche to build new production facilities. But the Finnish ambitions have been hampered by something else.
One of the key materials for ammo production is tungsten. As of today, 12 per cent of the metal’s global annual production is used in the defence industry, with China accounting for 85 per cent of the output and Russia a further 5 per cent. Finland has no tungsten reserves of its own. The EU and the US are both importing tungsten from Vietnam, Bolivia, Austria and other countries, but their stocks combined cannot hold a candle to those China has.
‘Everyone is now ramping up their capacity to produce more munitions, but there’s no tungsten, and what tungsten there is, [is] coming from perhaps jurisdictions that you may have to defend yourself against in the future,’ Lewis Black, CEO of Canadian mining company Almonty Industries, told Nikkei Asia.
The EU now knows for a fact that the US can limit its global commodity exports. That is what Beijing did with its graphite stocks needed for EV batteries. With China producing 65 per cent of the world’s graphite resources, that step took a toll on Western Europe’s car-making businesses. With this in mind, the EU’s defence contractors have little hope to source their tungsten from China. Instead, they are looking for help from Almonty Industries, which is trying to reopen the Sangdong mine in South Korea shut down in the 1990s. Germany’s KfW bank has already allocated a $75.1bn loan to invest in the facility’s relaunch.
‘Ultimately when that is open, it will account for roughly 30 to 35 per cent of non-Chinese supply,’ Lewis Black pledges. So far, he believes that, on top of potentially cut-off Chinese tungsten exports, the Western European manufacturing industry may face another ‘worst-case scenario’ where no one will be able to compete with China’s cheap offers. If that is the case, tungsten production will entail significant government subsidies.
But according to Finnish experts, Finland can potentially produce nitrocellulose, the main ingredient of gunpowder. Currently, it is China again that is one of the leading producers, but the EU’s dependence on the eastern supplies can be slashed by Finnish industrialists. Stora Enso, a forest industry company, is now weighing this possibility as it strives to repurpose its production to cater for the defence needs.
After all, the Finnish defence minister claims asserts that the country not only needs more weapons to help Ukraine but also seeks to beef up its own security. Antti Häkkänen invokes the Winter War of 1939–1940 to back up his concerns over Finland possibly having to cross swords with its eastern neighbour. But Helsinki’s plans to expand the domestic defence industry are also imputed to its current economic plight. After losing a major trading partner in the Russian Federation with its vast market, the country’s economy is facing a looming downturn. The country is being ravaged by worker strikes that, back in February, affected the arms producers too.
The Finns are keen on making up for their financial losses in the wake of the termination of economic relations with its large neighbouring market where they opted to embark on a militarisation campaign boosted by the ‘Russian scare’. In other words, Finland is planning to capitalise on Russia again, except it is going to be a different strategy altogether.