Where is all the ammunition at?

Where is all the ammunition at?

It seems pretty ridiculous that for several years now, the ammunition market has been in a constant state of disarray and unable to satiate demand for product. There are reasons, however, and not all of them are centered around conspiracy theories. Here we will explore several reasons why the ammo shortage is happening, and what the outlook might look like in 2021 and beyond. 

The ammunition market has been consolidating heavily over the past several years

Bigger companies are buying smaller ones, and then, only the ones that are profitable. Smaller companies are generally getting into the re-manufacturing game or the reload market, and shouldn’t be considered for this discussion. 

The cost of doing business at scale in the  ammunition market is prohibitive to smaller start ups. Funding is tight because of regulatory issues and low availability of components and raw materials. 

The net result is fewer corporate umbrellas over few companies, with more brand lines. It’s a sideways distribution of volume and most of the newcomers are either too small to move the market or too niche to be of mainstream value. 

Materials are in shorter supply than previous years and decades

Lead smelting is all but outlawed. The American production of smelted lead is so highly regulated that the last mainstream commercial plant for this material shut down last year, in part due to heavier regulatory influence. Imports on the material and recycling efforts are slowed considerably due to demand and the general economic conditions. Copper is another option, but is pricey. Brass is also in shorter supply thanks to economic and lock-down situations. These are also heavy material components for the tech sector, and there is pressure as new developments happen across the board. Ultimately, the materials exist to increase supply, but the constraints on the supply chain are causing issues currently. 

Unprecedented new gun ownership numbers are exacerbating the situation

There are an estimated 6-8 million NEW gun owners this past year, and that number seems to be steadily increasing thanks to changing administrations, fear and general unrest, great marketing and new markets opening up widely in the gun industry. Why buy a gun if you can’t buy ammunition? Many shops are forced to ration ammunition to ensure they can continue to sell other items as a bundle, or as a value-add. 

Law Enforcement purchases have increase because of perceived concern with public unrest and crime rates

Law enforcement purchasing has skyrocketed, despite (and in because) lowered approved budgets; rioting, demonstrations and civil unrest. This isn’t just the capitol riot and the George Floyd protests and associated rioting. Demonstrations and law enforcement’s response to it has increased the purchasing of ammunition for LE. During the pandemic, crime rates have crept up in certain areas, and have minimized in other areas (types of crime, not necessarily geographic locations). This is having an effect on purchasing at the law enforcement levels.

Coronavirus is a thing

There are fewer people working fewer shifts, and those people are constrained by stay at home orders in many areas. The rate of illness, and incubation and quarantine timelines don’t help with getting skilled workers back to the production line. State governments and local regulations and orders have made this even harder to deal with. The day-to-day infrastructure (food, transportation, etc.) is also not there to support the return to work for employees. 

Increased legislation is happening in many places making the agility of the distributors and manufacturers more sluggish 

California and New York among other states have enacted ammunition laws within the past two years and it has changed how consumers can access ammunition. It has put a strain on distributors and dealers because of increased compliance mandates. This pushes the timeline back. In several states there are pending regulations that require background checks or severely limit ammunition purchases. 

New calibers are getting great press and overselling their available distribution mix

Calibers that weren’t here 2 years ago in the mainstream are all of a sudden in crazy demand. That’s great, except it means more mainstream cartridges with lesser margins can’t be made because machines are running for production on the newer, more profitable rounds. So not only is demand on these newer calibers high enough to affect production and distribution, but the fact that the more widespread ammunition is being usurped in priority means there is more of a backlog created on those cartridges as well. 

Shooters are shooting more

There is not as much to do during lock-downs and shooting ranges, while “non-essential” are mostly back online now and have a heavy flow of customers. Hunting seasons have been running pretty smoothly, thanks to being outdoors and contributing to overall state revenues. Not to mention (well, we obviously are) stimulus checks make spending money on guns and ammunition an easy choice for those who are otherwise comfortably employed or financially stable – and even some who are not. Regardless of why, there is a lot more traffic at the ranges, in the field and buying ammunition. Some say the influx of new gun owners is also contributing heavily, and with more than 6 million new gun owners added in 2020, that’s not a stretch to be a consideration, certainly.

General fear and market conditions leads to hoarding and stockpiling

Whether you feared the Biden Administration, the rioting and protesting or the COVID pandemic, or even the toilet paper conundrum of 2020, fear is a big motivating factor for a lot of what people did this year, and going forward.

New laws, huge riots, online threats, and actual violence in the streets are a real thing this past 18 months, and look to be part of our near future at least for a while. With sparring between all political groups and a divided nation on several controversial topics, not the least of which is the  Second Amendment, people are hoarding when possible.

Like when the .22LR shortage happened, but on steroids, 2020 and 2021 has been set up to be a bad year to try and get any kind of bulk ammo, when everyone buying ammo wants as much as they can get.  

The way ammunition is purchased is changing, online and beyond

New laws regarding interstate transport and internet sales of ammunition are complicating the process. As good as inventory systems are, you won’t be able to guarantee supply even if a new shipment drops because bots are buying up ammunition for sale on the secondary market. The producers aren’t selling through the dealer channels as much as they were because it’s harder to manage and costs more to maintain. As a result, the smaller range of options for getting ammunition at any price, leads to a harder purchase all the way around. 

The training cycle is longer than you might think – ammunition production line work is a skilled trade to some extent

A company cannot simply train a new set of people immediately and hope to control liabilities and system failures. Imagine a new set of employees on the line in production takes 6-10 weeks to train; and even\ then it’s another 6 months before each of them is a solid contributor to the process at the same speed as previous workers. 

Another consideration is that for the most part, manufacturers are not making more money on the same products. They cannot price gouge (at least not heavily) and therefore, the impetus to retain and train hoards of new employees to meet temporary demand, is low. 

The shifts in demand have historically been temporary (generally less than 6-8 months). Not only that, but with new regulations on the horizon, none of the big manufacturers are going to go all-in (no matter what their press releases say), in order to meet current demand, if they fear they will not be able to benefit from increased spending to accomplish such a task in the long-term. 

Ammunition is a commodity product, much like grocery. It’s a low margin item when in demand, and there is little impetus to throw money at solving problems because the margins, even in the best of times, are being squeezed more and more as time goes by. The only ways to make more money as a manufacturer is to have a greater portion of the market, offer a niche product of spectacular demand or to have exclusive channels of distribution. The price of 9mm is pretty stable and because of increasing raw material cost and compliance costs that won’t change any time soon. 

Government orders are also up

Everything local and state law enforcement is doing in response to rioting, demonstrations and overall general unrest, you can bet that federal law enforcement and National Guard is doing two or three-fold. With the money that the government can throw around and the consistency of purchases, the manufacturers are going to be prioritizing certain runs of ammunition as needed. It doesn’t matter what the manufacturers and brands are saying – logic and following the dollars will lead you back to the same conclusion – money and clout talks, regardless of how “for the people” manufacturers claim to be. 

Manufacturers still have to deliver on contracts and options when they exist before the general market can get excess production

As a result of historical contracts and big paychecks, the manufacturers sign more and more of them as demand on the institutional and government side increases. It’s part of the game. A lot of what’s coming off the line is already spoken for by government, military or law enforcement – and it’s either been paid for or the funds exist to make the contract whole. The demand is certainly there. 

Conclusions

Ammunition manufacturers aren’t all that reliable and accurate when they make press releases about demand, supply and taking care of the little guy. But that doesn’t mean they are operating in a nefarious way, necessarily. There are huge stressors on the ammunition industry currently, and many of those are unexpected consequences of the pandemic, changes in the landscape and economic variables. 

The point is this: there is no ammunition because everyone wants it, and the supply lines are shortened, the labor force is strained, and the market is growing without the proportional investment to meet that staggering (likely temporary) growth. Ammo is a fixed cost good that operates on healthy margins when not in high demand, and worse margins when it is in demand. It’s not an easily scaled money maker even if you discount the production machine’s costs over millions of rounds.

Unfortunately for you, you are the last person on the list of priority thanks to a structured process in the industry that awards larger buyers, older relationships and more profitable customers. 

The good news? Well, as long as new regulation isn’t forced through, and the return to work happens as they tell us it will in the media, the temporary shortage will only last about 5-8 months more. Of course there are a lot of people who have money to burn who are more fearful or more willing to sti on ammunition than most of the market. This could delay those timelines. 

The best course of action is to stay diligent and look for ammunition where you can, giving a precedence to larger retail/e-tail, as they have substantially bigger sway with distributors and manufacturers as direct resellers. Buy what you can, but try your best not to support third party or aftermarket price gouging which will just make the hoarding worse.