Growth in arms trade stunted by supply issues: Report

STOCKHOLM - Sales of arms and military services grew in 2021, researchers said on Monday, but were limited by worldwide supply issues related to the Covie-19 pandemic, with the war in Ukraine increasing demand while worsening supply difficulties.

The top 100 arms companies sold weapons and related services totalling US$592 billion (S$798 billion) in 2021, 1.9 per cent more than the year before, said the latest report from the Stockholm International Peace Research Institute (Sipri).

However, the growth was severely impacted by widespread supply chain issues.

“The lasting impact of the pandemic is really starting to show in arms companies,” said Dr Nan Tian, a senior researcher at Sipri.

Disruptions from both labour shortages and difficulties in sourcing raw materials were “slowing down the companies’ ability to produce weapons systems and deliver them on time”.

“So what we see really is a potentially slower increase to what many would have expected in arms sales in 2021,” Dr Tian said.

Russia’s invasion of Ukraine is also expected to worsen supply chain issues, in part “because Russia is a major supplier of raw materials used in arms production”, said the report’s authors.

But the war has at the same time increased demand.

“Definitely demand will increase in the coming years,” Dr Tian said, adding that it was harder to gauge by how much. Two factors would impact demand.

The Ukraine effect

First, countries that have sent hundreds of millions of dollars worth of arms to Ukraine will be looking to replenish stockpiles.

Second, the worsening security environment means “countries are looking to procure more weapons”. With the supply crunch expected to worsen, it could hamper these efforts, the authors noted.

US companies continue to dominate global arms production, accounting for over half – US$299 billion – of global sales and 40 of the top companies.

At the same time, the region was the only one to see a drop in sales: 0.9 per cent down on the 2020 figures.

Among the top five companies – Lockheed Martin, Raytheon Technologies, Boeing, Northrop Grumman and General Dynamics – only Raytheon saw an increase in sales.

Meanwhile, sales from the eight largest Chinese arms companies rose 6.3 per cent to US$109 billion in 2021. European companies took 27 of the spots on the top 100, with combined sales of US$123 billion, up 4.2 per cent compared with 2020.

The report also noted a trend of private equity firms buying up arms companies, something the authors said had become more apparent over the last three or four years. This trend threatens to make the arms industry more opaque and harder to track, Dr Tian said, “because private equity firms will buy these companies and then essentially not produce any more financial records”. AFP