Shares of the German defense giant Rheinmetall experienced a significant decline of over 16% on Wednesday following the German Ministry of Defense’s decision to cancel the delayed F126 frigate program, for which Rheinmetall was the main contractor, according to reports.
As of 09:06 GMT, Rheinmetall’s stock price was down by 13%, heading towards what could be its steepest daily drop in history. In contrast, shares of German shipbuilder ThyssenKrupp Marine Systems (TKMS) rose by 9.8%, potentially marking their best performance since April of this year.
Reports from Der Spiegel and Financial Times indicated that Defense Minister Boris Pistorius planned to withdraw government involvement from the F126 project, opting instead to focus on acquiring Meko-class frigates from TKMS.
The German Ministry of Defense confirmed the discontinuation of the F126 project, explaining that after replacing the initial main contractor Damen Schelde Naval Shipbuilding with Naval Vessels Lürssen (NVL), continuing the program would exceed costs of 18 billion euros for six F126 vessels, including approximately 15.2 billion euros contracted with NVL.
Rheinmetall declined to comment on the situation.
In a statement, TKMS expressed excitement about contributing to the strengthening of the German Navy, revealing that preparatory work had commenced in February, with plans to deliver the first Meko A-200 frigate by 2029. They also noted the possibility of involving other German shipyards if an option for an additional four vessels is exercised.
Costly Shift for the German Government
According to Der Spiegel, over 2 billion euros have already been spent since the government placed the order for the F126 in 2020. In May, Rheinmetall offered to take over the project for a total of 12.8 billion euros.
The Ministry of Defense stated in March that it planned to purchase four Meko A-200 frigates from TKMS as a temporary solution to meet NATO anti-submarine warfare commitments, with deliveries expected to start by the end of 2029.
On Wednesday, the ministry clarified that it now aims to acquire a total of eight Meko frigates “primarily for anti-submarine warfare,” with an approximate cost of 6.3 billion euros for the first four and 5.3 billion euros for an option on four more, provided it is exercised by the end of 2026.
Armin Papperger, CEO of Rheinmetall, had stated in May that the group anticipated signing the F126 contract in the second quarter.
Amid complex rearmament efforts in Europe, with Germany and France canceling their joint fighter jet project FCAS and the heavy tank program MGCS facing nearly a decade of delays, the Franco-German tank manufacturer KNDS unveiled plans on Wednesday for a dual listing on the Frankfurt and Paris stock exchanges.
Analysts consulted by Reuters suggest that the listings could value the company at around 15 billion euros.
