Star shells are for illumination only. In reality, they could cause a fire on board ship if hit in the right spot, but I don't know if SH3 models that or not; probably not. Escorts and merchants will use them to see you at night, or at least to force you to dive. After a ship is hit, they already know you're out there. The only question is "where?".
Before you light up that convoy, remember, if you can see the enemy, they can see you too.
With SH3 + GWX, your deck gun has only HE rounds available; the useless starshells and armor piercing rounds are deleted.
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Raptor
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