The Logistics of Modern War: Why Industrial Capacity Still Decides Campaigns

Executive Summary

For three decades after the Cold War, Western defense planning assumed that wars would be short, that precision would substitute for mass, and that industrial mobilization was a twentieth-century artifact rendered obsolete by smart munitions and lean, just-in-time supply chains. The Russia-Ukraine war, now in its fifth year, and the deterrence calculus surrounding a potential Taiwan Strait contingency have overturned that assumption. Both cases point to the same structural finding: the belligerent, or coalition, that can sustain the highest rate of production over the longest period tends to shape the terms of the conflict, regardless of how sophisticated any single weapons platform may be.

This assessment examines the return of industrial capacity as a central variable in strategic calculation. It traces the historical precedent for mass production as a determinant of victory, from the “shell hunger” of the First World War through the Arsenal of Democracy of 1941–1945 and the “iron mountain” logistics of the 1991 Gulf War. It then analyzes the contemporary evidence: the gap between American artillery-shell production targets and delivered output; the disproportionate role North Korean munitions have played in sustaining Russian offensive operations; the widening disparity between Chinese and American shipbuilding capacity; the CSIS and Heritage Foundation wargame findings on how quickly American precision-guided munitions inventories would be exhausted in a Taiwan Strait conflict; and the emergence of low-cost drone manufacturing, led by Ukraine, as a new axis of industrial competition that runs parallel to, rather than in place of, traditional heavy manufacturing.

The assessment further examines the political economy of remobilizing Western industrial bases — the European Union’s Readiness 2030 (ReArm Europe) initiative, the United States’ stalled shipbuilding revival, and the structural dependence of both on Chinese-controlled rare-earth and critical-mineral processing — as well as the diplomatic and legal instruments now being deployed to manage these vulnerabilities. It closes with three forward-looking scenarios and a probability-weighted strategic outlook for policymakers, military planners, and business leaders operating in defense-adjacent sectors.

The central judgment is that industrial capacity has re-emerged as a first-order strategic variable, on par with force posture and doctrine, and that the state or coalition able to convert economic scale into sustained military production — not merely the state with the most advanced weapon in isolation — will hold the decisive advantage in any prolonged confrontation between great powers.

Key Judgments

High confidence. Sustained high-intensity conflict, whether in Ukraine or in a hypothetical Taiwan Strait scenario, consumes munitions, platforms, and consumables at rates that exceed what peacetime-sized Western defense industrial bases can replace, let alone expand fast enough to matter within the likely duration of the fighting.
High confidence. China holds a decisive and widening advantage in shipbuilding capacity relative to the United States, a gap that matters disproportionately in a maritime contingency because it determines which side can better repair, replace, and out-produce naval losses over an extended campaign.
Moderate-to-high confidence. North Korean ammunition transfers have substituted for a substantial share of Russia’s own artillery production shortfall since 2023, meaning that an ostensibly bilateral war has in practice been sustained by a trilateral industrial arrangement — a pattern with implications for how future conflicts may be industrially supported by third parties.
Moderate confidence. European and American efforts to rebuild munitions and shipbuilding capacity are real and accelerating, but are constrained by labor shortages, fragmented national procurement systems, and multi-year lead times for expanding specialized industrial infrastructure (forging presses, propellant plants, shipyard drydocks), such that meaningful capacity increases are unlikely to be fully realized before the early 2030s.
Moderate confidence. China’s dominance of rare-earth and critical-mineral processing constitutes a structural chokepoint on Western rearmament that is at least as significant as any single weapons-platform gap, and Beijing has demonstrated both the willingness and the administrative machinery to use export licensing as coercive leverage.
Moderate confidence. The proliferation of low-cost, mass-producible drones — exemplified by Ukraine’s expansion from a handful of manufacturers in 2022 to an industrial base capable of producing several million unmanned systems annually — represents a genuine, if partial, alternative pathway to battlefield mass that does not require the heavy industrial infrastructure of traditional armor or artillery production, though it does not replace the need for that infrastructure.
Low-to-moderate confidence. Whether a Taiwan Strait contingency would replicate the multi-year attritional pattern of Ukraine, or instead be decided within weeks by a naval and missile exchange before industrial mobilization could matter, remains genuinely contested among defense analysts and is highly sensitive to unresolved questions about Chinese amphibious throughput, the durability of a blockade, and the speed of any external intervention.

Introduction

War has always been, in the formulation attributed to the historian Paul Kennedy, “the ultimate test of the correlation between military strength and the more general components of economic and social efficiency.” For a generation, that proposition was allowed to drift into the background of Western strategic thought. The wars the United States and its allies fought after 1991 — the Gulf War notwithstanding — were wars of choice against opponents with negligible industrial capacity, fought with expensive, low-volume precision munitions expended at rates that never stressed the underlying production base. Procurement systems optimized accordingly: fewer platforms, higher unit cost, longer development timelines, and ammunition stockpiles sized for short, decisive campaigns rather than protracted attrition.

The full-scale Russian invasion of Ukraine in February 2022 reintroduced a form of warfare that Western planners had assumed belonged to the past: high-intensity, artillery-centric, attritional conflict in which the side that can keep firing longer holds a structural advantage independent of tactical skill on any given day. Three and a half years later, the war has become as much a contest between the Russian, North Korean, Ukrainian, European, and American defense-industrial bases as it is a contest between armies in the field. Simultaneously, the deterrence problem posed by a potential Chinese move against Taiwan has forced a parallel reckoning: American war-game after war-game has found that current American munitions stockpiles, however qualitatively superior individual weapons may be, would not survive even the opening weeks of a peer conflict in the Indo-Pacific.

This assessment is organized around a single analytical question: in an era in which both revisionist and status quo powers are rediscovering the primacy of industrial mass, which actors are positioned to convert economic weight into sustained military output, and which are not? The answer has direct implications for deterrence credibility, alliance burden-sharing, defense procurement reform, and the broader trajectory of great-power competition through the end of this decade.

Historical Background

The proposition that industrial capacity decides prolonged wars is not new; it is closer to a rediscovered law of modern conflict. The First World War exposed it first, in the form of the 1915 “shell crisis” that toppled the British government of H. H. Asquith’s War Office leadership, after armies on both the Western and Eastern Fronts discovered that pre-war stockpiles, sized for a short war, were exhausted within months by the consumption rates of industrial-age artillery. The war that followed became, in large part, a competition between national mobilization boards to convert civilian manufacturing — chemical plants, machine-tool factories, rail networks — into sustained ammunition output.

The Second World War generalized the lesson at a far larger scale. The United States, entering the conflict with a peacetime military and a limited arms industry, used the War Production Board to convert its civilian economy — most visibly its automobile sector — into what President Franklin Roosevelt termed the “Arsenal of Democracy.” American aircraft production rose from roughly 6,000 units in 1940 to more than 96,000 in 1944; tank production climbed from 331 units in 1940 to nearly 29,500 by 1943; and shipyards, using prefabrication techniques pioneered by the industrialist Henry Kaiser, delivered more than 2,700 Liberty-class cargo ships between 1941 and 1945 — a single ship class that remains the largest production run of any vessel type in history. At its wartime peak, this mobilized industrial base accounted for roughly half of American economic output and supplied not only US forces but, through Lend-Lease, the Soviet and British war efforts as well. On the other side of the conflict, Germany’s Afrika Korps under Erwin Rommel repeatedly achieved tactical breakthroughs in North Africa that could not be sustained because the fuel, ammunition, and vehicle-replacement pipeline across the Mediterranean could not keep pace with the tempo of maneuver Rommel’s operational instincts demanded — a textbook illustration of tactical brilliance defeated by logistical insufficiency.

The pattern recurred, in muted form, during the Cold War and its aftermath. The 1991 Gulf War is frequently remembered for the precision of its air campaign, but the operation that made it possible was primarily logistical: the six-month buildup of Operation Desert Shield, in which US Central Command’s logistics staff under then–Brigadier General William “Gus” Pagonis assembled what became known informally as the “iron mountain” — an enormous forward-positioned stockpile of fuel, ammunition, spare parts, and water sufficient to sustain a rapid, high-tempo offensive without resupply interruption. The operation’s decisiveness rested as much on that stockpile as on any single weapons system.

What distinguishes the post-2022 period is the return of sustained, multi-year attrition against a peer or near-peer adversary — a scenario Western industrial bases had not been sized for since the Cold War’s end, and one that has forced a rapid, still-incomplete relearning of lessons that a generation of planners had set aside.

Strategic Context

Three converging developments have restored industrial capacity to the center of strategic planning. First, the war in Ukraine has demonstrated that a determined, mid-sized power backed by external supply can sustain high-intensity combat for years, provided ammunition production — its own and its partners’ — keeps pace with consumption. Ukrainian gunners have at times been forced to ration fire to a fraction of what doctrine would prescribe, a modern echo of the 1915 shell crisis, precisely because Western 155mm production could not initially match the rate at which shells were being expended.

Second, the CSIS and RAND wargaming literature on a Taiwan Strait contingency has converged on an uncomfortable finding: current American stockpiles of long-range precision-guided munitions, however qualitatively dominant, are sized for a short, low-intensity conflict and would be substantially depleted within the first one to three weeks of a peer conflict against China — a country whose economic scale and shipbuilding base dwarf those of the United States. Unlike Ukraine, Taiwan is an island; resupply during an active blockade would be far more difficult than resupplying a continental power across an open land border, meaning that pre-positioned stockpile depth, not surge production begun after the fact, would likely determine the outcome of any early engagement.

Third, both developments have occurred against the backdrop of a structural realignment of global industrial capacity itself. China’s dominance of shipbuilding, rare-earth processing, and a growing share of advanced manufacturing generally means that the “arsenal of democracy” model of the 1940s — in which the United States could out-produce every adversary combined — no longer describes the underlying industrial balance. The strategic context of 2026, in other words, is one in which the United States and its allies are simultaneously relearning the importance of industrial mass and discovering that they no longer hold the industrial advantage that mass production historically required.

Detailed Analysis

Military Dimension

The clearest evidence of industrial capacity’s return as a military variable is found in artillery ammunition. Before 2022, the United States produced roughly 14,000 155mm howitzer rounds per month, a rate calibrated to peacetime training requirements rather than sustained combat. Following the invasion of Ukraine, the US Army set a target of 100,000 rounds per month by October 2025 — a near sevenfold increase — and opened new government-owned production facilities, including a Universal Artillery Projectile Line complex at Mesquite, Texas, alongside expanded lines at the Scranton Army Ammunition Plant and a new facility in Ingersoll, Canada. Despite roughly two years of investment and Army officials describing the scale of new construction as unmatched “since World War II,” a Department of Defense Inspector General report published in mid-2026 found actual output running at approximately 36,000 rounds per month as of March 2026 — up substantially from pre-war levels, but well short of target, with the report identifying insufficient forged metal-parts capacity, rather than explosives or propellant, as the primary bottleneck. Congressional testimony in early 2026 placed Army-wide output somewhat higher, near 56,000 shells per month, with lawmakers expressing frustration that a flagship new facility built specifically to close the gap had, at that point, yet to produce a single finished projectile under one of its major contracts. Whatever the precise figure, the consistent finding across Pentagon, congressional, and inspector-general sources is the same: the gap between the stated wartime production target and delivered output has persisted for more than two years, illustrating how difficult it is to convert political will and budget authority into forged steel and assembled propellant charges on a compressed timeline.

Russia’s side of the ledger illustrates a different industrial pathway to the same end: sustained fire volume. Western and Ukrainian officials estimate Russian domestic artillery-shell production at no more than roughly 2.3 million rounds in 2024, a figure that on its own would be inadequate to sustain the reported daily expenditure of Russian forces along the front. Reuters and the UK-based Open Source Centre, examining satellite imagery and shipping records, estimated in 2026 that North Korea transferred between four and six million artillery shells to Russia between 2023 and early 2025, with some individual unit-level Russian military reports reviewed by investigators showing between half and all of the ammunition fired by specific batteries originating in North Korea; South Korean intelligence has offered a considerably higher cumulative estimate, and Ukrainian military intelligence has separately assessed that North Korean supplies constituted between roughly a quarter and 40 percent of Russia’s total artillery ammunition needs during the war’s most intensive phase, alongside deliveries of ballistic missiles and artillery systems. By late 2025, Ukrainian intelligence reported that North Korean shipments had fallen by more than half as Pyongyang’s own reserves showed signs of depletion, even as North Korean state media claimed record domestic production levels in 2026. Whatever the exact figures, the strategic point is unambiguous: the Russia-Ukraine war has in practice been sustained by a trilateral industrial arrangement, with a third country’s manufacturing base substituting for a substantial share of one belligerent’s own shortfall — a pattern of external industrial subsidization that planners assessing other potential conflicts, including a Taiwan contingency, should not assume will be absent from a rival’s calculations. By late 2025, NATO’s Secretary General was noting publicly that the trajectory was reversing: Russian output, reported at roughly 250,000 rounds a month (about seven million annually), had for a period exceeded the combined production of all NATO members, though NATO’s collectively expanding output, with an alliance-wide target of 267,000 rounds per month by 2026, was closing the gap.

At sea, the industrial disparity is starker still. An unclassified US Navy Office of Naval Intelligence briefing slide, first reported by the outlet The War Zone and subsequently referenced in CSIS analysis, placed Chinese shipbuilding capacity at approximately 230 times that of the United States, with Chinese shipyards possessing an estimated 23.25 million gross tons of production capacity against fewer than 100,000 tons in American yards. CSIS analysis notes that China’s naval shipyards alone number in the dozens and individually exceed the output of the largest American yards, meaning that in a conflict lasting more than a few weeks, China would likely be able to repair damaged vessels and construct replacements at a pace the United States could not approach. The People’s Liberation Army Navy has already surpassed the US Navy in raw hull count and is projected to continue widening that gap: the US fleet was expected to dip to roughly 287 ships in 2026 before gradually recovering, while Chinese naval sources project a fleet exceeding 370 vessels, with China’s November 2025 commissioning of the Fujian — its first carrier equipped with electromagnetic catapults — underscoring qualitative as well as quantitative progress. Analysts note the US retains a genuine and durable qualitative edge in carriers, nuclear-powered submarines, and combat experience, and that allied navies, particularly Japan’s and South Korea’s, would materially offset China’s numerical advantage should they join a US-led coalition; the shipbuilding capacity gap nonetheless matters most precisely in the scenario planners most fear — a protracted, multi-month conflict in which attritional replacement, not opening-salvo qualitative superiority, determines the outcome.

The Pentagon’s own wargaming reinforces the same conclusion for munitions rather than hulls. A series of unclassified CSIS wargames examining a Taiwan Strait conflict found that across roughly two dozen iterations, US forces typically expended more than 5,000 long-range missiles within three weeks of fighting, and that the United States would likely exhaust some categories of long-range precision-guided munitions — the Long-Range Anti-Ship Missile in particular — in under a week. A parallel Heritage Foundation analysis estimated total US vertical-launch-system munitions inventory at roughly 17,000 rounds, a figure it assessed as insufficient to fully reload even a single carrier strike group’s fleet, with heavyweight Mark 48 torpedo stocks of roughly 1,300 units facing a projected wartime consumption rate of 60 to 120 per week. A separate CSIS wargame series modeling a Chinese blockade rather than an outright invasion found that even with sustained US resupply on the model of Ukraine, Chinese submarines and mines destroyed roughly 40 percent of inbound shipping to Taiwan, and concluded explicitly that the “Ukraine strategy” of external resupply — effective on a continental landmass with an open border — was insufficient for an island whose blockade could be made airtight and whose energy reserves (natural gas exhausted within roughly ten days across every scenario modeled) left far less time for industrial mobilization to matter than Ukraine’s had.

Political Dimension

Converting industrial potential into delivered ammunition is as much a political as an engineering problem. In democracies, defense-industrial mobilization competes for capital, labor, and political attention against every other domestic priority, and unlike in 1941 or 1943, there is no single galvanizing attack analogous to Pearl Harbor to suspend that competition. The US Army’s 155mm shortfall has been publicly attributed not to any single failure but to a “whole host of reasons,” in the words of one Army spokesperson — a diffusion of responsibility across contractors, subcontractor tiers, workforce shortages, and the multi-year lead time required to stand up specialized forging and explosive-loading infrastructure that had, in some cases, not been meaningfully expanded since the Cold War. Legislative oversight has surfaced open frustration: congressional testimony in early 2026 recorded lawmakers pressing Army acquisition officials on why a marquee new production facility had, roughly two years after its announcement, yet to deliver a single finished projectile under a major contract.

In Europe, the political economy is complicated further by the EU’s institutional structure itself. Analysts note that European platform fragmentation — the number of distinct weapons systems in service relative to the size of the collective force — runs more than four times higher than in the United States, a legacy of 27 national defense-industrial policies that have historically prioritized domestic-employment and sovereignty considerations over continental economies of scale. The June 2026 collapse of the Franco-German Future Combat Air System fighter program, following an unresolved leadership dispute between Dassault and Airbus, was cited by defense-industry analysts as a clear illustration of this fragmentation risk even amid an otherwise unprecedented mobilization of European defense investment. Hungary’s prior government repeatedly diluted or blocked EU measures tied to Ukraine before a change in government in 2026, illustrating how a single member state’s domestic politics can constrain a collective industrial response even when the broader alliance is aligned.

Autocratic mobilization carries its own distinct political dynamics. Russia’s ability to sustain wartime production has depended in part on regionally targeted recruitment incentives — with the number of Russian regions offering enlistment bonuses reportedly nearly doubling between 2025 and 2026 — reflecting the parallel challenge of sustaining both the industrial workforce and the frontline force simultaneously in a system without the labor-market flexibility that market economies possess. Pyongyang’s willingness to supply Russia at scale, meanwhile, has been driven by its own distinct political calculus: reported compensation in the form of energy, food, technology transfer, and diplomatic cover has made the arrangement a rare instance of North Korean industrial capacity being converted into direct geopolitical leverage, formalized in a June 2024 bilateral defense treaty. This trilateral pattern — one state’s shortfall covered by a second state’s surplus capacity, in exchange for political and material concessions — is a structural feature analysts assess is likely to recur in future conflicts involving states with constrained domestic production, and one that Western planners have only begun to build into their own contingency assessments of how a rival might sustain a protracted campaign.

Economic Dimension

The scale of capital now being redirected toward defense-industrial capacity is substantial by recent historical standards, if still modest relative to the mobilizations of the twentieth century. The European Union’s Readiness 2030 initiative, commonly referred to as ReArm Europe, aims to unlock roughly €800 billion in defense investment across the bloc, anchored by a €150 billion joint borrowing instrument known as SAFE (Security Action for Europe) that allows the European Commission to raise capital on behalf of member states specifically for defense-industrial expansion. Collective EU defense spending was projected to exceed the 2 percent of GDP benchmark in 2025 for the first time as a bloc-wide aggregate, and financial analysts project the rearmament drive will meaningfully increase European demand for industrial metals — an estimated 6 percent increase in aggregate metals demand by 2027, with copper, nickel, and steel identified as the primary beneficiaries given their use across munitions, vehicles, and communications infrastructure. European defense-technology startups raised a record $8.7 billion in venture capital in 2025, up 55 percent year-on-year, with the United Kingdom and Germany the leading national sources of capital and Munich emerging as a specific hub — evidence of private capital beginning to follow public procurement signals, even as analysts caution that defense-tech exit paths remain narrow, with acquisition by an established prime contractor currently the only realistic route to liquidity for most such startups.

In the United States, the economic dimension centers on shipbuilding, an industry now widely assessed as the single most consequential and most difficult American industrial-base gap to close. Bipartisan legislation — the SHIPS for America Act, introduced by Senators Mark Kelly and Todd Young with the backing of more than 70 industry organizations — seeks to rebuild commercial and naval shipbuilding capacity that has been in near-continuous decline since federal shipbuilding subsidies lapsed in the early 1980s. The clearest concrete example of the effort is the December 2024 acquisition of the Philadelphia shipyard, then delivering fewer than two vessels a year, by South Korea’s Hanwha Group for roughly $100 million, followed by a $5 billion infrastructure investment plan intended to expand the yard’s output toward 20 vessels annually — a target that, if achieved, would still fall well short of the roughly one ship per week that Hanwha’s own Geoje shipyard in South Korea currently produces. The yard’s first order for a US-built liquefied natural gas carrier, placed in mid-2025, was the first such domestic order in nearly fifty years, underscoring both the scale of the prior industrial hollowing-out and the very early stage of any recovery. Economically, the shipbuilding case illustrates a broader pattern across this assessment: political will and initial capital commitments have materialized more quickly than the underlying industrial capacity — skilled tradespeople, specialized components, drydock infrastructure — can be rebuilt, meaning that the economic dimension of rearmament is currently a story of investment outpacing delivered capacity, with a multi-year lag before that investment converts into ships, shells, or missiles at scale.

Technological Dimension

The most significant technological development bearing on industrial capacity is not any single new weapon but a new pathway to achieving battlefield mass. Ukraine’s drone-manufacturing base has expanded from roughly seven producers before 2022 to approximately 500 today, with annual first-person-view (FPV) drone output rising from an estimated 3,000 to 5,000 units in 2022 to roughly 3 to 4 million by 2025, and installed capacity now assessed at 8 to 10 million units annually — a scale Ukrainian officials say could theoretically be expanded still further, to a range of 20 to 30 million units a year, with sufficient external financing. President Volodymyr Zelensky stated in mid-2026 that Ukraine was producing 10 million drones annually with plans to double that figure; by comparison, one widely cited 2025 industry estimate placed total annual US military drone production at roughly 100,000 units — a gap of two orders of magnitude that illustrates how a mid-sized economy under existential pressure can, in a specific technology category, out-produce a vastly larger industrial base that has not prioritized that category. This is best understood not as a substitute for traditional heavy manufacturing — Ukraine’s artillery-shell and armored-vehicle needs remain substantially dependent on Western and domestic heavy industry — but as a genuinely new and parallel axis of industrial competition, one with a far lower capital and infrastructure threshold than forging artillery barrels or building warships, and one that has already begun reshaping procurement priorities across NATO and non-NATO militaries alike.

This development sits alongside a related and sharper-edged technological dynamic: the cost-imposition asymmetry between low-cost mass-produced strike systems and the far more expensive interceptors required to defeat them. A single-use attack drone or loitering munition can often be manufactured for a few hundred to a few thousand dollars, while the guided interceptors used to shoot them down — surface-to-air missile systems such as Patriot’s PAC-3 round, for example — can cost several million dollars apiece. Sustained engagement at that cost ratio is economically unsustainable for the defender over any prolonged campaign, which is why Ukraine, Israel, and a growing number of Western militaries have accelerated development of lower-cost interceptor and counter-drone systems specifically to correct the asymmetry, even as offensive drone volumes continue to rise. On the higher end of the technology spectrum, both Chinese and Western militaries are separately investing in autonomous and semi-autonomous “attritable” systems intended to be produced cheaply and in volume precisely because they are expected to be lost in combat — an implicit acknowledgment, on both sides, that future conflicts will again be shaped by which side can absorb attrition and keep producing replacements, rather than by which side fields the single most capable individual platform.

Legal / Diplomatic Dimension

The legal and diplomatic architecture surrounding industrial mobilization has itself become a battleground. China’s evolving rare-earth and critical-mineral export-control regime is the most consequential example. Beijing controls an estimated 90 percent of global rare-earth processing capacity and dominant shares of tungsten and antimony refining, inputs essential to precision-guided munitions, jet-engine components, and magnet-dependent guidance systems. Successive rounds of export controls through 2025 and into 2026 — including a January 2026 expansion of China’s export licensing catalogue to cover additional rare-earth compounds, and a June 2026 decision to add ten US entities, including two prominent American rare-earth producers, to its export control list — have coincided with reported sixfold increases in neodymium-praseodymium oxide prices between January and June 2026 and with European defense contractors reporting difficulty securing magnets for missile-guidance systems. Analysts at CSIS and elsewhere describe the resulting situation as a strategic trilemma for Western governments: accept continued dependence, pursue an estimated $30 to $50 billion, five-to-seven-year effort to build independent processing capacity, or adopt a hybrid model combining stockpiling, diversification, and recycling. NATO formally recognized rare earths as a critical defense-security variable at its June 2025 Summit Defence Industry Forum, where twelve allied nations launched a joint acquisition initiative, and the United States convened a Critical Minerals Ministerial in February 2026 that produced eleven new bilateral frameworks and a $10 billion Export-Import Bank loan facility intended to seed a domestic strategic reserve — concrete but early-stage responses to a dependency that took China three decades of deliberate industrial policy to construct.

A second legal dimension concerns maritime chokepoints and the laws, or lack of enforceable law, governing them. Houthi attacks on commercial shipping in the Red Sea and Bab-el-Mandeb Strait, ongoing since late 2023 and renewed again in mid-2026 amid the broader Iran-Israel confrontation, have forced the large majority of Asia-Europe container traffic away from the Suez Canal — a route that normally carries 12 to 15 percent of global trade — and around the Cape of Good Hope, adding 10 to 14 days per voyage and pushing Asia-Europe freight rates 25 to 40 percent above pre-crisis levels. Industry planners now model continued disruption through at least 2027 as a base case rather than a worst case, illustrating how a non-state actor with a relatively modest arsenal of missiles and drones has imposed a sustained, quantifiable tax on global maritime logistics — with direct relevance to any future conflict in which sea lines of communication, rather than fixed production facilities, become the primary target. Finally, domestic legal frameworks intended to protect strategic industries can themselves constrain the speed of mobilization: the US Jones Act, which restricts domestic maritime trade to American-built and -crewed vessels, is credited by supporters with preserving a baseline shipbuilding and mariner-training capability, while critics argue it has simultaneously insulated the industry from the competitive pressure that might otherwise have kept it globally competitive — a genuine and unresolved policy tension at the heart of the current shipbuilding-revival debate.

Scenario Analysis

Scenario One — Protracted Attrition Persists. The Russia-Ukraine war continues in something close to its current form: neither side achieves a decisive breakthrough, and the conflict remains primarily a contest of sustained production, with North Korean and Iranian material support continuing to substitute for Russian shortfalls and Western production gradually closing, but not eliminating, the gap with Russian and combined adversary output. European and American industrial investment continues to scale, but the war’s trajectory is determined more by relative production curves than by any single battlefield event.

Scenario Two — Major-Power Shock Exposes the Stockpile Gap. A Taiwan Strait contingency, whether a full invasion attempt or an extended blockade, occurs before Western munitions-production increases have meaningfully closed the gap identified in CSIS and Heritage Foundation wargaming. Precision-guided munitions inventories are exhausted within the first one to three weeks, as multiple wargame iterations project, forcing a rapid and improvised reliance on less precise, more abundant munitions, on allied contributions, and on emergency surge production that cannot plausibly generate meaningful additional output within the likely timeframe of an initial engagement. The scenario would represent the starkest possible validation of this assessment’s central thesis, with consequences for deterrence credibility extending well beyond the immediate conflict.

Scenario Three — Successful Industrial Rebalancing. Sustained European and American investment — ReArm Europe’s €800 billion program, the SHIPS for America Act and its successors, expanded munitions plants, and diversified critical-mineral supply chains — succeeds in materially closing the production gap with Russia and China by the early-to-mid 2030s, restoring a credible deterrent margin without requiring an actual test of arms. This outcome depends on sustained multi-year political commitment across changes in government on both sides of the Atlantic, continued private capital inflow, and at least partial success in reducing dependence on Chinese-processed critical minerals.

Probability Assessment

Scenario	Assessed Likelihood (3–5 year horizon)	Key Assumptions
Protracted attrition persists in Ukraine or a similar theater	High	Neither side achieves decisive battlefield breakthrough; external material support to both sides continues at broadly current levels
A major-power contingency occurs before Western stockpiles are rebuilt	Low to Moderate	Deterrence broadly holds in the near term, but the underlying stockpile and shipbuilding gap identified in this assessment persists through at least the late 2020s
Western industrial rebalancing substantially closes the capacity gap by the early 2030s	Moderate	Requires sustained multi-year political and financial commitment across electoral cycles in the US and multiple European states, which is plausible but historically difficult to sustain
China’s rare-earth leverage is substantially neutralized within five years	Low	Independent processing capacity requires an assessed five-to-seven-year minimum build-out even with immediate, well-funded investment
Low-cost drone manufacturing meaningfully substitutes for traditional heavy-industrial capacity (armor, artillery, shipbuilding)	Low	Drone mass addresses a specific tactical niche but does not substitute for naval tonnage, armored vehicles, or heavy artillery, which remain governed by traditional industrial constraints

These assessments should be read as qualitative judgments reflecting the balance of currently available open-source evidence, not statistical probabilities; they are subject to revision as production data, battlefield outcomes, and policy commitments evolve.

Strategic Outlook

Over the coming three to five years, the defining industrial-strategic question is unlikely to be which single weapons system a given power fields, but rather whether the United States, the European Union, and their partners can convert the current wave of political commitment and capital investment into delivered production before either a major-power contingency tests the gap directly, or the current period of Western strategic advantage in other domains (finance, alliance structure, technology diffusion) erodes further. The evidence assembled in this assessment suggests that meaningful capacity increases are underway but are running years behind the political rhetoric that has accompanied them — a pattern consistent with the historical record, in which industrial mobilization has always taken longer than political leaders initially promise, from the 1915 shell crisis onward.

For policymakers, the practical implication is that near-term deterrence, particularly in the Indo-Pacific, will likely have to rest more heavily on pre-positioned stockpile depth, allied burden-sharing, and asymmetric or lower-cost capabilities (long-range fires, sea mines, distributed unmanned systems) than on the assumption that surge production could meaningfully reinforce forces after a conflict has begun. For European policymakers specifically, the central risk identified in this assessment is not insufficient political will — which by 2026 is arguably more robust than at any point since the Cold War’s end — but institutional fragmentation, which threatens to convert a genuinely large pool of committed capital into a proliferation of incompatible national programs rather than a coherent continental industrial base. For business leaders in defense-adjacent sectors, the outlook points toward sustained multi-year demand growth in munitions manufacturing, shipbuilding, critical-mineral processing and recycling, and unmanned-systems production, tempered by the genuine execution risk — labor shortages, permitting delays, supply-chain fragility — that has already caused the best-documented American case, the 155mm shell program, to run years behind its own stated targets.

Conclusion

The wars and deterrence scenarios examined in this assessment point to a single, recurring structural finding: technological sophistication in any individual weapons system has not displaced the older, less glamorous determinant of prolonged conflict outcomes — the capacity to keep producing at scale, month after month, for as long as the fighting continues. Ukraine’s ability to sustain resistance has depended as much on Western and domestic ammunition and drone production as on any tactical innovation. Russia’s ability to sustain offensive operations has depended, to a striking and underappreciated degree, on North Korean industrial capacity substituting for its own shortfall. American deterrence credibility in the Indo-Pacific rests, according to the Pentagon’s own unclassified wargaming, on stockpiles that would not survive the opening weeks of the very contingency they are meant to deter. And the industrial rebalancing now underway in Washington and Brussels — genuine, well-funded, and politically durable by recent standards — is nonetheless running on a timeline measured in years, against a strategic environment that offers no guarantee of years in which to complete it. Industrial capacity, in short, has not returned to strategic relevance; it never left. What has changed is that, after three decades of choosing not to look at it, Western policymakers no longer have that option.

Frequently Asked Questions

Why does industrial capacity matter more than advanced weapons technology in prolonged wars? Because sophisticated weapons are typically produced in small numbers at high unit cost, while sustained combat consumes munitions, vehicles, and platforms at rates that only high-volume, lower-cost manufacturing can replace. Wars that last months or years become, in practice, contests of relative production rates rather than contests decided purely by the qualitative superiority of any single system.

How does China’s shipbuilding capacity compare to the United States? An unclassified US Navy intelligence assessment places Chinese shipbuilding capacity at roughly 230 times that of the United States by gross tonnage. China’s navy has already surpassed the US Navy in total hull count, and the disparity in industrial capacity means China would likely be able to replace and repair naval losses far faster than the United States in a conflict lasting more than a few weeks.

Why has the US struggled to reach its 155mm artillery shell production target? The US Army set a goal of 100,000 155mm rounds per month by October 2025 but was producing roughly 36,000 to 56,000 per month by early-to-mid 2026, according to Pentagon and inspector-general reporting. Officials have identified insufficient forged metal-parts manufacturing capacity, rather than explosives or propellant supply, as the principal bottleneck, alongside broader contractor and workforce constraints.

What would happen to US munitions stockpiles in a Taiwan Strait conflict? Unclassified CSIS and Heritage Foundation wargaming consistently finds that key categories of long-range precision-guided munitions, including anti-ship missiles, would be substantially depleted within roughly one to three weeks of high-intensity conflict, with total precision-strike inventories insufficient for even a single full reload of deployed naval forces.

Can Europe’s rearmament close the industrial gap with Russia and China? The European Union’s Readiness 2030 (ReArm Europe) program has committed roughly €800 billion toward defense-industrial investment, but analysts assess that institutional fragmentation across 27 national procurement systems, labor shortages, and multi-year infrastructure lead times mean meaningful capacity gains are unlikely to be fully realized before the early 2030s.

Related StratReview Analysis

Suggested internal links for readers of this assessment:

European Strategic Autonomy and the Transatlantic Defense Gap: NATO Burden-Sharing and EU Rearmament
China’s Maritime Strategy: From Coastal Defense to Indo-Pacific Power
Autonomous Weapons and the Future Battlefield
Russian Military Strategy in Ukraine: August 2026 Assessment
Arctic Great-Power Competition: Russia’s Northern Fleet and China’s Polar Silk Road

Sources

CSIS, “Empty Bins in a Wartime Environment: The Challenge to the U.S. Defense Industrial Base,” csis.org
CSIS, “Unpacking China’s Naval Buildup,” csis.org
CSIS, “Is the United States Prepared for a War with China?,” csis.org
CSIS, “Lights Out? Wargaming a Chinese Blockade of Taiwan,” reprinted via Small Wars Journal
The Heritage Foundation, “Chapter 6: Assessing the U.S. Indo-Pacific Munitions System,” TIDALWAVE project, heritage.org
The War Zone (TWZ), “Alarming Navy Intel Slide Warns Of China’s 200 Times Greater Shipbuilding Capacity”
Defense News, “Manufacturing woes hamper US 155-mm ammo production,” July 2026
Stars and Stripes, “Bang for Army’s billions of bucks not measuring up in 155 mm shell production, IG says,” July 2026
Breaking Defense, “Army official ‘not happy’ as Mesquite facility’s 155mm production lags,” February 2026
Reuters / Open Source Centre investigation, reported via The Moscow Times, “North Korea Supplying Up to 100% of Russian Artillery Shells Used in Ukraine,” 2026
Kyiv Post, “North Korea Supplies Up to 40% of Russia’s Artillery Shells, Ukrainian Intel Says,” July 2026
bne IntelliNews, “North Korea halves shell supply to Russia as stockpiles run low, says Ukraine,” November 2025
NATO Secretary General Mark Rutte, remarks at NATO-Industry Forum, Romania, November 2025, reported via IntelliNews
European Commission, “Future of European defence,” commission.europa.eu
CEPA, “Europe’s Defense Factories: More Urgency Please,” April 2026
Defense.info, “Two Wars, One Industrial Base: How Ukraine and Asia’s Engagement Are Rewiring European Defense,” August 2026
CNBC, “Europe defense stocks face rearmament test,” July 2026
CSIS / Center for Strategic and International Studies critical minerals analysis, cited via Discovery Alert and Rare Earth Exchanges, 2026
Just Security, “How Ukraine Became a Drone Superpower,” June 2026
Kyiv Post, “Zelensky Says Ukraine Plans to Double Drone Production,” July 2026
Aviation Week, “Ukraine Eyes Drone Production Topping 7 Million Units,” May 2026
S&P Global Market Intelligence, “Red Sea shipping reopens, but renewed Houthi threats keep route uncertainty high,” February 2026
Maritime Executive, “Maritime Revival?,” September 2025
Hanwha Group newsroom, “How Hanwha Philly Shipyard plans to anchor America’s next shipbuilding boom”
The National WWII Museum, “Becoming the Arsenal of Democracy”
Air & Space Forces Magazine, “Roosevelt Builds the Arsenal”

This assessment reflects open-source reporting and analysis available as of September 2026. Figures on ammunition production, troop deployments, and stockpile levels are drawn from a mix of official government reporting, inspector-general findings, and reputable open-source intelligence organizations, and should be understood as estimates subject to revision as new information becomes available.