The Coming Crash in Ammunition Prices

The Obama caused bubble in ammunition prices seems ready to bust.   Over the last few years people have seen ammunition prices double or triple. Handgun and rifle ammunition has been hard to find at times.   .22 long rifle ammunition tripled in price over the last 18 months.   People would line up to buy ammunition at prices two and three times the level that they were just two years ago.

All of that is about to change.   Ammunition supply looks as though it is ready to catch up with demand.   Centerfire pistol and rifle cartridges are available on most store shelves.   When I walked into a local Wal-Mart this morning, their were over 30 signs on the ammunition case indicating a rollback of prices by 10-15%.

In classic economic fashion, the bubble was fueled by actions of the Federal government.   Many federal agencies bought enormous quantities of ammunition. While the quantities were only a small percentage of total production, the raw figures fueled conspiracy theories. Obama administration actions fueled fear of coming shortages, gun bans, registration of ammunition sales, even potential low level warfare. All of this led to the current bubble of ammunition sales.

In response, the economy reacted the way that free markets are supposed to work.   Ammunition suppliers started running their manufacturing plants day and night, adding additional shifts.   Importers scoured the world markets, trying to buy everything they could to satisfy the insatiable demand.   Foreign manufacturers bumped up their production to try to fill the desire for more and more ammunition.   Ammunition production was at the highest level ever for small arms, short of war.

But unlike during war, this ammunition was not being fired in combat.   Most of it was not being fired at all.   It was being stored against future need. Very little was actually being used.

There are limits to this sort of demand.   I gave away a couple of thousand .22 rounds to make a point. A person who only had 37 .22 shells out of a box of 50 is well justified in wanting a thousand or two, or a case of 5,000 "just because".    Once they have the 5,000, their desire for more becomes less.   Then demand drops, likely below pre-bubble levels for a while.

In the meantime, manufactures cannot stop production instantly. They have orders in the pipeline. They have supplies coming in that they have no storage space for.   They have employees that they have trained and who they do not want to lay off.   For all these reasons, demand drops suddenly, but supply cannot drop as quickly.   As supply took a while to spin up, it will take a while to spin down.

This means that retailers and wholesalers will be saddled with a glut of merchandise that they cannot sell at the current high prices.   They will have to put it on sale.   Lower prices bring about the expectation that prices will fall even further.   The prices crash.

That is when a prudent person buys what they want, at very good prices.   Demand will not stay at the artificially low prices of the crash.   The new crop of urban, hip, shooters will want to feed their equipment, and the new demand will be higher than it was before the bubble, but it will take a while to settle out.

Metal prices have already fallen from the highs of the bubble. Copper and lead are far lower than they were.    You will know that the bubble is close to the bottom when you see .22 LR on sale for below 4 cents per round. At the lowest, we might see .22 cartridges below $10 for 500.

©2014 by Dean Weingarten: Permission to share is granted when this notice is included.
Link to Gun Watch

“I visited the local Cabelas on Fri(6/6)morning and NOT a
single box of 22cal. in the store.It’s been like that for
almost 2 years. ?????? When in America has it taken that long for supply to catch up with demand? There has to be other reasons at play!!!”

Supply does not catch up with demand effortlessly, by magic.

Ammunition manufacture is complex, dangerous, and requires machinery so specialized it cannot be used to make anything else; as capital equipment, it is frighteningly costly, made by an ever-shrinking number of factory equipment suppliers who face their own problems in obtaining raw materials, creating a labor force, building factories, and (not least) their own regulatory agencies.

Ammunition profit margins are lower than for any other gun-related product. And all of it applies with even greater force to rimfire ammunition.

oldbugleboy is mistaken in assuming that two years is an unacceptable delay in catching supply up with demand: it has never happened so speedily, not even in wartime.

Anybody who’s attained the slightest familiarity with Allied logistics during WWII will know that the Brits were never able to expand small arms ammunition production beyond a tiny number of highly specialized plants. They fretted constantly that the Luftwaffe would locate these facilities, target them, and put them out of action by air strikes, but it was avoided. Fortunately.

American ammunition production did not improve at a better rate either despite great advantages in slack industrial capacity, assembly-line know-how, raw material stocks, labor force flexibility, and freedom from attack.

Barriers to expansion of ammunition production (and to entry of new producers) in the United States have long been economic and technical, but are becoming increasingly regulatory, legalistic, and bureaucratic. OSHA puts ever tighter workplace rules onto manufacturing firms; EPA conjures up more restrictive regulations week by week.

Mining and smelting of lead, zinc, and copper are highly regulated (to the point where the nation’s last lead smelter recently stopped operating); use, cleanup, and waste disposal are at least as regulated in the workplace (where it all dovetails conveniently with OSHA regulations). Used-lead recovery from shooting ranges is subject to its own burdensome regulatory tangle.

Primer making is very touchy, dealing as it does with primary explosives, the composition of which not only blows up easily, but can be poisonous.

Nitro propellants are less dangerous in and of themselves, but production requires a large number of volatile and corrosive chemicals: nitric acid, sulfuric acid, ether, hydroxides, various solvents. Unpleasant enough that one must avoid breathing fumes and vapors; the safety rules and regulatory compliance paperwork are even worse.

And the legal liability climate has changed radically over the past few generations - more paperwork, more time and effort that must be diverted from production. And insurance costs continue to rise: more and more business-insurance firms are leaving the field of gun and ammunition manufacturing, in preference to facing ever-mounting liability payouts and public condemnation (their own bureaucratic regulatory overlords aren’t too friendly either).

And as if all that wasn’t enough, gun and ammunition makers must operate under the thumb of their own regulatory agency, the Bureau of Alcohol, Tobacco, Firearms, and Explosives. Manufacturers large and small, and every level of the industry down to retailers large and small, must comply with every decree BATFE publishes. No gainsaying, no real appeal. Mounting a legal challenge to any particular ruling is possible in theory, but in practice can become so costly and time-consuming that few complainants care to pursue ... ones that do so think long and hard before going forward. And it’s evident to everyone, that a hostile, flippant, unaccountable legal profession (entirely too comfy with the regulatory bureaucracy and elected officials) can negate any success on a whim.

Keeping these real concrete reasons in mind, the gun industry might be less than interested in ramping up production of a commodity enjoying only the thinnest of profit margins, where demand from a fickle, whimsical public might collapse at any moment. And the same reasons have likely given pause to any entrepreneurial hopefuls who might be thinking about setting up in business.

oldbugleboy is free to bring to light any other reasons, if these are not enough.

So I know four people with over a hundred guns? I also know many people that do not own a gun. I find your belief that people do not own 100 guns to be laughable. My next door neighbor has 12 AR’s for himself. All different and outfitted with different options up to match grade.
My kids got a 22 on their 10th bd. A shotgun on their 12th bd and a bolt action on or around 13 when they could hunt deer. An AR when 16 and a handgun when 18. Two of them went on to be very successful in the US Army and one in the US Navy. Never had an incident with any of them and they are all very responsible guns owners.

I used that article deliberately to point out that while gun ownership is allegedly lagging(note there was a ? in that headline) there are more new gun owners than ever. From the article:

There are estimates, however, according to the Geneva-based Small Arms Survey – the leading source of international public information about firearms – the U.S. has the best-armed civilian population in the world, with an estimated 270 million total guns. That’s an average of 89 firearms for every 100 residents — far ahead of Yemen, which comes in second with about 55 firearms for every 100 people, or Switzerland, which is third with 46 guns for every 100 people.

That is ALL people, including kids. So if under 18 makes up 24% of the population then there is over one gun for every adult In the US. BTW the 270 million guns is an “agreed upon” number. Many trackers think it could be as high as 500 million.

Do an exercise. Think of 50 people you know and check each one that you think or know owns a gun. I bet you don't even get to half.

The day is coming fast when every wise family will be wanting a few more guns

And just so we are clear that’s per person. Starts at 7 with a 22’ 8 it’s a pump 20’ 12 it’s small cal dear rifle, 13 pump or auto 12 shot gun. They start picking. Breaks my heart when they go auto. 14 big cal dear rifle.. ....

Hs graduation one got an am just to have one. I got a browning shotgun on valentines day from my lovely bride. She fell in love with my sons m&pc 9 mm so she was so happy when anniversary came. ...... ARs, more pistols, lever actions,

I have my single shit 20 ga from when I was a boy. I have my dad’s first shot gun (16 gauge). I have an old double barrel scatter gun my grandfather had. I need those family treasures. I need my god given rights.

I guess no one needs a farm with their own shooting range. I do.

I don’t get the need comment. Very progressive on your part.

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