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Patriot’s Battlefield Success Spotlights Missile Supply Crunch

A US Patriot missile system at Rzeszow-Jasionska airport in Poland. Photographer: Sean Gallup/Getty Images (Sean Gallup/Photographer: Sean Gallup/Getty )

(Bloomberg) -- From Ukraine to the Middle East, the Patriot air defense system is having a moment: a reliable American weapon downing enemy threats. But that’s also driving demand for missiles that the US defense industry is struggling to meet.

The Patriot sits at the center of Ukraine’s demand for more help in defending against Russian strikes, and on Tuesday the US and several NATO allies announced plans to send Ukraine four of the systems. President Joe Biden, kicking off a three-day summit of alliance leaders, called it a “historic donation.”

The fact that it’s been such a challenge to find more Patriots for Ukraine highlights familiar obstacles linked to supply chain and production constraints faced by companies including its main producer RTX Corp. Manufacturers of everything from air defense to artillery shells have raced to boost production in response to demand from Ukraine even though the process may take years.

“I’d be hard pressed to say that we’re where we want to be on the ramp up,” RTX Chief Executive Chris Calio said at a US Chamber of Commerce event in Washington on Tuesday. “If you think about Patriot, we were doing that from a standstill in 2020 to where we are now.”

Introduced in the early 1980s and debuted during the 1991 Gulf War, the Patriot has emerged in Ukraine and the Middle East as a dependable system, neutralizing Iranian-designed drones and reportedly a Russian hypersonic missile, among the fastest and most-advanced weapons.

That’s been a boon for the reputation of the Patriot system — a connected array of components including a command center, radar, power units, launchers and missiles, known as interceptors — which all together are estimated to cost more than $1 billion and require about 90 soldiers.

Part of Patriot’s recent success is the latest missile type — known as the PAC-3 - which works by hitting an incoming target directly, rather than exploding nearby, like its predecessors.

Ukraine, the 19th country to operate the system, has been the primary demand driver for those missiles as it seeks to repel Russia’s punishing aerial assault, including an attack earlier this week on a children’s hospital in Kyiv. 

The White House on June 20 announced it would halt deliveries to allies of missiles for the Patriot system, as well as a separate system called NASAMS, directing the shipments to Ukraine instead. Lockheed Martin Corp., which makes the Patriot PAC-3 missile, is working to increase production from the pre-invasion level of 500 per year to 550 by end-2024 and 650 by 2027, according to spokeswoman Allison Smith.

While the Pentagon or its contractors haven’t released a cost estimate for the full system, Washington-based Center for Strategic and International Studies pegs it at $400 million, before accounting for missiles. Those go for about $4 million each. For comparison, Lockhead Martin’s F-35 fighter jets can cost more than $100 million each. 

There’s a “big question” over how many missiles Ukraine has been using, said George Ferguson, senior aerospace defense analyst at Bloomberg Intelligence, adding that the US might need to push contractors to produce more.

“It’s a function of how many missiles are being used, how quickly the US stockpile is depleting and the contractors’ manufacturing rate,” he said. “If the stockpiles are depleting too fast for comfort, the US would need to induce contractors to add to productive capacity.”

Contractors appear capable of increasing output, but it’s likely “everybody is always going to be stressed to meet the demand,” said Bradley Martin, director of the RAND National Security Supply Chain Institute. “The munitions expenditures in Ukraine have been huge.”

That figure isn’t sufficient to meet demand if the US got into a drawn-out war against a major adversary, said Todd Harrison, a senior fellow at the American Enterprise Institute specializing in defense. 

“We need to be looking at an order-of-magnitude increase in production,” he said. During a protracted direct conflict against Russia or China, stockpiles will be depleted and victory will depend on ramping up production, he said. 

Major Patriot contractors have warned that they rely upon the same limited number of subcontractors to produce critical components, which has complicated efforts to keep up and makes a spike in need from an all-out conflict nearly impossible to meet.

If the US can keep up with demand it could capitalize on the newfound popularity of Patriot by displacing competing weapons suppliers like Russia, analysts say. The Ukraine war and international sanctions against Moscow have challenged the country’s defense industry and deterred potential customers. For example, Slovakia in 2022 moved a Russian-made S-300 to Ukraine. In return, the Pentagon relocated one of its own Patriot systems to the NATO member.

“There are multiple efforts underway to increase missile production,” said Darrell Ames, spokesperson for the US Army’s Program Executive Office Missiles and Space.

--With assistance from Natalia Drozdiak.

©2024 Bloomberg L.P.

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