Germany's Federal Ministry of Defense officially announced the termination of the F126 frigate project on June 24, citing that the cost of building six frigates is expected to soar from an initial estimate of around €10 billion to over €18 billion, accompanied by significant delays. Rheinmetall's shares closed down 18.7% on the day, hitting their lowest level in nearly 15 months, with a market value loss of over €11 billion.
F126 Project Cost Expected to Soar from €10 Billion to Over €18 Billion
The F126 frigate project was originally to be handled by the Dutch shipbuilder Damen Schelde Naval Shipbuilding, but the supplier failed to complete the task on time and within budget. According to Der Spiegel, Rheinmetall proposed in May to take over for €12.8 billion; Rheinmetall CEO Armin Papperger also stated in May that he expected to sign the F126 deal in the second quarter. The German Defense Ministry said that since signing the F126 order in 2020, it has provided services worth approximately €3.5 billion.
The new procurement plan is clear: the first four Meko A-200 frigates will cost around €6.3 billion; Germany can exercise an option to purchase four more by the end of 2026, adding approximately €5.3 billion, primarily for anti-submarine warfare. TKMS CEO Oliver Burkhard said on LinkedIn: "This is definitely good news, especially for us."
TKMS Began Preparations in February, Aiming for First Meko A-200 Delivery in 2029
TKMS stated that preparations began in February 2026, with the goal of delivering the first Meko A-200 frigate in 2029. It believes that if the option to build four more is exercised, there is an opportunity to cooperate with other German shipyards. The German Defense Ministry announced in March 2026 that it would purchase the initial four frigates from TKMS as an interim solution to fulfill NATO anti-submarine commitments starting in 2028, with the first delivery target set for the end of 2029.
Brokerage Metzler estimates that if the Meko order and the Canadian Navy order are both finalized, TKMS's order backlog will exceed €68 billion.
JPMorgan Warns on Rheinmetall's 2026 Order Target, DAX Index Closes Down 0.6%
JPMorgan analysts stated that the cancellation decision represents a major obstacle for Rheinmetall in achieving its 2026 order target of €80 billion. Rheinmetall only entered the naval defense sector last year through the acquisition of NVL, and the cancellation of the F126 project has dealt a blow to its naval business expansion plans. Other defense stocks were also affected: Hensoldt fell 3.3%, and Renk fell 8.1%.
The German DAX index closed down 0.6% on Wednesday at 24,740 points. On the same day, Brent crude oil fell about 3.5% to $77.59 per barrel due to progress in US-Iran talks, while the Dow Jones rose 0.9%, but neither could offset the drag from Rheinmetall. Also on the same day, KNDS (a Franco-German tank manufacturer) announced a dual IPO plan, with sources valuing it at around €15 billion.
Frequently Asked Questions
Why did Germany choose to cancel the F126 project instead of letting Rheinmetall take over?
The German Defense Ministry cited severe delays and expected cost overruns—originally estimated at around €10 billion, now expected to exceed €18 billion. Although Berlin considered awarding the contract to Rheinmetall's NVL division, it ultimately decided to cancel the entire plan and switch to the TKMS Meko A-200 solution, which already had two months of preparation work.
What is the specific structure of the Meko A-200 procurement plan?
The procurement is divided into two batches: the first four ships for about €6.3 billion, and if the option to purchase four more is exercised by the end of 2026, an additional €5.3 billion, totaling up to €11.6 billion, primarily for anti-submarine warfare. TKMS aims to deliver the first ship in 2029.
What is the order situation for Rheinmetall after the cancellation of the F126 project?
JPMorgan analysts stated that the cancellation poses a major obstacle to Rheinmetall's 2026 order target of €80 billion. Rheinmetall only entered the naval defense sector last year through the acquisition of NVL, and the cancellation of F126 directly impacts its naval business expansion strategy. Rheinmetall declined to comment on the news.
