Australia pours billions into missile procurement amidst global shortages

By Kirsty Needham

AVALON, Australia (Reuters) -The Ukraine war and increased European defence spending are likely to slow Australia's plans to develop its own missile components' capability as it pushes ahead with a multibillion-dollar effort to acquire long-range strike missiles.

Prime Minister Anthony Albanese pledged A$74 billion ($47 billion) last year for missile acquisition including A$21 billion to establish a Guided Weapons and Explosive Ordnance Enterprise in Australia, as his Labor government reshaped the country's defence strategy to respond to China's military build-up.

Hedging against global supply issues, Australia signed a flurry of orders with U.S. and European defence companies, including Lockheed Martin, Kongsberg and Raytheon.

Lockheed Martin President for Missiles and Fire Control Tim Cahill said that the U.S. company was in discussions with Australia on "long term and short term solutions" for hypersonic missiles, which Australia wants to defend its northern borders.

"Long range strike and hypersonics - long range fast strike and very survivable strike - is clearly a priority," Cahill said in an interview at this week's Avalon Air Show.

Gathered at the event in the southern state of Victoria, defence executives said global missile component shortages and high demand, and the need to improve the capacity of Australian suppliers, meant Australian components would only gradually be built into local production.

Norway's Kongsberg plans to have a common supply chain between Europe, the United States and the Indo Pacific when new factories in Australia and the United States open, with the workload distributed across the facilities, said its Executive Vice President of Missiles & Space Oyvind Kolset.

"Of course the demand is extremely high now, it's a challenge to ramp up at the rate we are doing now, but at least we have worked on this for a number of years," Kolset said, referring to missile production for the Ukraine war.

Australia's Defence Department said the first guided missile production in Australia by Kongsberg, of its Joint Strike Missile and Naval Strike Missile, would start in 2027.

The company has also contracted 10 Australian suppliers for possible work on installations of its Naval Strike Missile on the deck of Australian frigates, said Kongsberg Australia general manager John Fry.

Some parts of the missile supply chain require more industrial capacity than Australian currently has, he said.

"Making the missile from scratch with today's capability wouldn't be possible. We can't do that in Norway either, we rely on suppliers in the U.S. and Europe," said Kolset.

Lockheed Martin, meanwhile, expects to produce Guided Multiple Launch Rocket Systems (GMLRS) in Australia this year.

The supply of solid rocket motors needed for GMLRS in the United States was "not sufficient", Cahill said in an example of global shortages.

Cahill said Australia's Guided Weapons and Explosive Ordnance Enterprise was strategically important and would bring high capacity production outside the United States for the first time.

Although 60 local companies had been identified as potential suppliers, Australian content would be slowly be brought in, he said.

Lockheed Martin has delivered the first two of 42 High Mobility Artillery Rocket Systems (HIMARS) launcher vehicles ordered by Australia, even with the demand in Ukraine.

Australia has said army regiments with HIMARS can be transported by C-17 aircraft to neighbouring island states, which have defence agreements with Australia, in any regional conflict.

Australia will select a second order of land-based missile systems by the end of the year, with HIMARS and Kongsberg's Naval Strike Missile mounted on an Australian-made Bushmaster truck shortlisted.

Kongsberg's Kolset said the United States Marines Corp was already deploying its system in the region. "For the Marines, this is their highest priority programme," he said.

($1 = 1.5853 Australian dollars)

(Reporting by Kirsty Needham in Avalon; Editing by Kate Mayberry and Lincoln Feast.)