Global Explosives Shortage Due to Ukraine and Middle East Wars... Will Inflation Worsen? [Sisa Show]

Shortage of Military and Civilian TNT Explosives Deepens
Rising Costs for Rare Earth Mining and Civil Engineering Projects

■ Broadcast: The Asia Business Daily 'So Jongseop's Current Affairs Show'

■ Host: Political Specialist So Jongseop

■ Director: Producer Park Sumin

■ Guest: Reporter Lee Hyunwoo

The prolonged wars in Ukraine and the Middle East have triggered a global emergency in the supply of explosives. As military explosives are concentrated in war zones, there is now a severe shortage of industrial explosives for civilian use, which, along with rising raw material prices, has emerged as a new factor fueling global inflation.

Global Explosives Shortage... 300 Million Rounds Consumed in Ukraine War Alone

AP Yonhap News

After World War II and the Vietnam War, there was a period of peace lasting about 30 years, during which many countries reduced their weapons production, including a significant decrease in explosives manufacturing. However, with the war in Ukraine approaching four years and the Middle East conflict overlapping, demand for explosives has surged to levels far beyond expectations. The issue is not limited to military explosives; industrial explosives used in mining and construction sites have also become extremely difficult to obtain.

It is reported that, on average, both sides in the Ukraine war fire 70,000 shells per day. Over the approximately four years since the war began, more than 300 million rounds-including shells, missiles, explosive devices, and bullets-are estimated to have been used. This means that more than 80% of the bombs stockpiled by the United States and other countries worldwide have been depleted.

The United States and Western countries now face a severe shortage of bombs and gunpowder that had been stockpiled for emergencies. As the shortage of military TNT explosives worsened, the U.S. military decided to resume domestic production for the first time in 40 years. More than 70% of various explosive materials, from black powder to nitrocellulose, had been produced in China and Russia, but imports from these countries have now been virtually cut off.

Since the imposition of sanctions against Russia following the outbreak of the Ukraine war, the United States and Europe have relied on Poland to meet most of their explosives demand for four years. Poland, fulfilling orders from the European Union and the United States, has supplied explosives to Ukraine and Israel, but its production capacity has now reached its limit.

To make matters worse, the intensifying trade and tariff disputes between the United States and China, along with the AI boom fueling fierce competition for rare earth mines-key materials for electronic devices-have further exacerbated the situation. As rare earth mining industries in Australia, Central and South America, and Southeast Asia have become more active, demand for civilian explosives needed for mining has also surged. The price of civilian TNT explosives, which was about 50 cents per pound in the early 2000s, has now soared to 20 dollars-a fortyfold increase.

Explosives are widely used in the construction sector for building demolition during reconstruction and for constructing tunnels and bridges, so the surge in explosives prices significantly impacts overall inflation. Experts analyze that this has become a new driver of global inflation.

Era of Drone and Unmanned Robot Warfare... Yet Conventional Shell Usage Surges

Reuters Yonhap News

Recent war coverage often focuses on drone attacks and advanced weapons utilizing AI, but in reality, the use of conventional weapons on the battlefield has increased significantly compared to the past. The most widely used weapon in the Ukraine and Middle East wars has been the 155mm artillery cannon. This is because these wars have mostly taken the form of urban siege battles, making reinforced concrete buildings the main obstacle.

As defending soldiers hide in buildings and cover to engage in urban warfare, attackers must destroy these structures to advance. The problem is that modern apartment and office buildings made of reinforced concrete are as sturdy as military concrete fortresses. Drones and unmanned robots have insufficient destructive power, and even direct hits from several ballistic missiles often fail to bring them down. Ultimately, only continuous bombardment with conventional artillery can demolish them.

As the war has entered its middle phase, the Ukraine conflict has taken on the characteristics of a trench war similar to World War I, with advances of no more than 2 kilometers per day. Soldiers and tanks that venture outside become immediate targets for drones, facing high risk of death, so ground troops can only move after enemy positions have been completely suppressed by artillery. This has led to an extreme dependence on artillery.

In contrast, for 30 years since the end of the Cold War, production of shells and gunpowder has steadily declined. Defense companies in Europe and the United States have produced little domestically, relying instead on China, Russia, and other third countries. As explosives production and ammunition stockpiles were reduced, the explosive surge in demand has resulted in a severe supply shortage.

Russia is not immune to the explosives shortage either. Although Russia has greatly increased its explosives production, it still falls short. However, Russia was originally a major producer of ammonium nitrate-the main ingredient in fertilizer and gunpowder-so when fertilizer exports were blocked, it converted all of this capacity to military production. Russia increased its annual shell production from 1 million to over 4 million rounds, more than twice the combined output of the United States and Europe.

However, even this level of production is insufficient to produce the high-quality explosives needed for advanced bombs and missiles. Russia is focusing on producing conventional bombs used during the Cold War era, which are of lower quality. To address the shortage, Russia has been importing large quantities of conventional shells from North Korea, but the high rate of duds has become a significant concern even within Russia.

Currently, Russian forces are reportedly using over 60,000 to 70,000 rounds per day on the front lines, while Ukrainian forces use about one-tenth of that amount. Russia is barely able to supply enough for the front lines and has no capacity to build up reserves, so it continues to increase imports from North Korea.

Opportunities for Korean Defense Exports, But Mid-to-Long-Term Risks Remain

The Hanwha K9A1 self-propelled howitzer exhibited at the U.S. Army Association Expo held in Washington DC on the 14th of last month (local time). Photo by Yonhap News Agency

For South Korea, this situation has created opportunities for defense exports. As the United States filled the gap in its Ukraine-bound shell supplies with Korean-made shells, exports to the United States and Europe have increased significantly. With the U.S. facing a severe supply shortage, not only South Korea but also Japan and Turkey have been asked to export stockpiled bombs and explosives.

The defense industry expects to benefit for some time as long as both wars continue. However, there are concerns that if the wars drag on too long, it will become increasingly difficult for South Korea to continue benefiting. As military explosives become scarcer, civilian explosives will become even harder to obtain in the market, and intensifying arms races among the United States, China, and Russia may prompt countries to further increase their stockpiles and restrict exports of materials.

If export restrictions are tightened, South Korea may also find it difficult to secure the raw materials needed to manufacture shells. Rising raw material prices are another burden. Explosives are crucial for mining resources, new city construction, and major civil engineering projects like roads and tunnels. A worsening explosives shortage could affect not only electronics prices but also housing prices, potentially having a negative impact on the Korean economy.

Ultimately, the situation will depend on the course of the wars and efforts toward ceasefire, but if both conflicts continue into next year, there are mid-to-long-term concerns that the shortage of explosives could adversely affect the Korean economy. War is causing economic ripple effects not only for the countries directly involved but also for the entire world, and it should not be overlooked that there are potential risks lurking behind the current boom in Korean defense exports.