German defence giant Rheinmetall plans to invest more than €1.5bn in new munitions factories in Romania and Bulgaria, part of a broader European effort to boost defence production amid Russia’s war in Ukraine.

Romania signed a framework agreement with Rheinmetall on August 27 to build a €535mn munitions ignition powder plant in Brașov County. Romanian Industry Minister Radu Miruță said the factory could become “the most advanced ammunition powder factory in the world”.

Earlier this week, Rheinmetall announced plans for two additional plants in Bulgaria, including a gunpowder factory and a separate site for Nato-standard 155mm artillery shells. Total investment in Bulgaria is estimated at over €1bn.

“The gunpowder factory will be as large as two German plants – the biggest in Europe,” said former Bulgarian prime minister Boyko Borissov, who was in Germany this week.

The new facilities will mark a shift in Bulgaria’s arms industry from Soviet-standard to Nato-compatible munitions, reflecting growing regional demand for Western-calibre weapons.

Bulgarian President Rumen Radev, who visited Rheinmetall’s new ammunition factory in Germany on August 27, said the country is “becoming part of the European defence ecosystem”.

Europe’s defence sector has expanded rapidly since Russia’s invasion of Ukraine in 2022. As bne IntelliNews has reported, shares of European defence companies have tripled over the past year, and the Europe STOXX Total Market Aerospace & Defence Index is up about 46% year-to-date.

Rheinmetall, one of Europe’s largest defence manufacturers, reported record operating profits of nearly €1.5bn in 2024, a 61% increase from the previous year. On August 27, the company opened a new ammunition plant in northern Germany, which CEO Armin Papperger said will be Europe’s largest at full capacity.

With Serbia and Bosnia & Herzegovina already hosting significant defence industries, Romania and Bulgaria’s new plants will cement the Balkans as a hub for European arms production.