Shooting Sports Forum - Discussion with vendors on the ammunition shortages and price increases

In the past year or so, most people involved in the shooting sports have noticed a growing "ammunition crisis" which has been marked by dramatic increases in ammunition prices, and in many cases, a corresponding shortage of ammunition stocks. It is not unusual to contact vendors and find the entire surplus ammunition stock sold out, and where there is ammunition in stock, to find prices have gone up by two times or more. These shortages and price increases have been across the board, in all ammunition types, and they have been particularly noticeable for shooters who rely on surplus and military ammunition, such as factory loaded .223 for example. In the past year, the price of surplus .223 ammo has doubled or in some cases nearly tripled, to give just one example.

This forum is a discussion on these shortages and prices increases. I've invited a couple of ammunition vendors--Dave, from The-armory.com, and Kola, from StarsAndStripesAmmo.com--to comment on the following questions about the ammunition crisis. I thought their inside knowledge of the industry could be particularly informative and help us learn more about some possible causes for this crisis. They have not spoken with each other, so their answers may be very different. Also, we should not expect them to have all the answers. But, they have both thought about these issues a lot, and they deal with them on a daily basis, so I thought it would be interesting and useful for us to hear their insights. And by the way, if you know of any other ammunition vendors that would like to contribute to this discussion, please invite them to join in and make a comment here as well. And it will be great to hear your questions and discussion, too.

I asked Dave and Kola to send me their responses to the following basic two questions. I'm posting their complete responses below (these have not been modified in any way), which will serve as a good way to kick off our discussion. By the way, I want to thank both of these guys in advance--and I hope some of you will too--for sharing their time and insights with us. I've invited them to join in the discussion and make further comments or answer questions if they are able to.

* What are the main causes of the rapid price increases, and shortages in the available supply, of ammunition over the past year?

* Should we expect that these prices will eventually stabilize or return to a lower level, or should we assume that they will probably never be lower than they are, and therefore stock up on ammunition now?

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Here are the responses from Dave, who is from The Armory ( http://www.the-armory.com ), a web-based firearms and ammunition store.

> * What are the main causes of the rapid price increases, and
> shortages in the available supply, of ammunition over the past year?

We've all heard the standard answer that "there is a war going on". This is
an incomplete answer. .223 (5.56x45mm), .308 (7.62x51mm), 9x19mm, SOME .45
ACP, 7.62x39mm, 5.45x39mm and 7.62x54R are impacted as they are military
calibers and subject to demand from military contracts. Although not
mainstream, .50 BMG shooters are in the mix and have been feeling the
shortage as well. There is a secondary effect to other calibers and bullet
weights in the industry because of the limited number of production lines
available. Commercial, automated pistol ammunition manufacturing machines
start at about $20,000 each. Rifle caliber machines are about $40,000 each.
The major manufacturers may have a dozen machines or so in each plant, but
not enough to dedicate each line to one caliber and bullet weight. Retooling
between runs may take a few manhours to do and production stops during re-
tooling, so it becomes a painful management decision to change the line.
This is most apparent in small manufacturers like Dakota (Corbon) and Black
Hills Ammo where their operations are just a handful of machines and it may
be several weeks to even a few months between runs on a particular caliber
and bullet weight. With a high customer demand (beligerents in combat), a
lot of orders and production gets sucked up in military contracts. This
leaves the American consumer (as a whole, a high-demand consumer) with "the
scraps" in a lot of cases. A good example of this was the 7.62x39mm shortage
a while back--Syria literally sucked up supply for a few months while it was
stocking up. But this is really just a part of the whole problem.

Second in the contract-filling arena are "big box" stores like Wal-Mart. In
case you didn't know it, Winchester has dedicated loading-dock space for Wal-
Mart trucks. They have EIS (Enterprise Information Systems) architecture in
place to know which stores are running low on stock and fill those trucks and
turn them around accordingly. The manufacturers are contracted to fill
orders for the box stores and due to penalty clauses in the contracts, have
to fill those contracts according to the specs, even down to what order ammo
is loading in the trucks, how it's shrink-wrapped onto a pallet and what ammo
goes where on a pallet.

After the 'marts, wholesale distributors get ammo (sometimes at horrible
prices) and in turn allocate to sales reps who then push the ammo out to
their customers (retail ammo vendors).

Direct supply and demand of ammunition has had a lot to do with ammo prices,
but it's just a part. For those who haven't followed metal prices in recent
years, it's been going up rapidly (copper maxed out at almost four times its
price in 2004 with other metals behaving similarly). Metals are commodities
and futures are traded in exchanges throughout the world. Those futures set
contract prices for metals. Commodities tend to follow eachother. When oil
is up, gold and silver eventually works its way up and the other metals work
their way up. Higher oil prices mean higher production and transportation
costs for everything else. As long as it's economical to produce a metal,
mines are profitable. On average, mining gold costs $280-300 per ounce to
produce. As long as the price is above that, mines will operate. The same
holds true for any other mine operation. Copper has been very profitable so
mines have produced now to surplus. More on the copper surplus later.

Other industries compete for our same metals. China and India are both
industrializing very rapidly. The demand for cheap consumer electronics has
been fueling this and will continue to fuel this. Brass, lead and copper are
used in these industries and are in direct competition with the ammunition
industry.

For those that haven't followed the industry closesly, South Africa
effectively went off the market about a year ago. IANSA and the UN blew the
whistle on South Africa for selling off surplus to ARMSCORP (a German-based
company, not the Filipino company the rest of us know) who was supposed to
scrap the ammo and sell of the components. Instead it was sold on the US
surplus market as well as the Central and South American markets. Fearing
the wrath of the UN and the image of being the world's source of
proliferation of arms and munitions, the South African Congress closed the
doors on its surplus. Without a huge source of billions of rounds of ammo,
there is less competition to other international vendors to keep their prices
down.

For those that watch ammo, the major manufacturers have averaged 5-6
increases per year for the last two years. I have personally seen good
sellers (Winchester .45 Colt Cowboy comes to mind right away in one
particular incident) that haven't been produced for a couple months,
magically appear after a price hike at the higher price, which meant the
production happened before the price hike and presumably were produced with
components at the previous price. I am sure they are profit-taking where
they think they can get away with it. Remington Ammo reported it's first
profit in years this past quarter.

Manufactuers also watch what is happening with other manufacturers and try to
set production on what may be hitting the streets soon. Even since El Dorado
(PMC) went out of business a couple years ago, PMC ammo has only trickled
into the US. The Koreans have surplus and they are hungry for business. The
first shipments are arriving in time for the summer slowdown. Not knowing
exactly what is on that shipment, a lot of manufacturers are leary of
investing too much into production that the PMC shipment may force down
prices on.

Another often forgotten facet is the value of the dollar. A lot of ammo is
imported. Anything Winchester that has an "A" in the product code means that
it is imported. Q3131A was the .223 55-gr FMJBT load made in Israel. I
haven't seen it in over a year. For quite a while, S&B was making .45 ACP
230-gr for the Winchester Q4170A loading. A lot of Winchester shotshells are
now made in Australia (XU168A is one I'm looking at right now). A weak
dollar drives the prices of imported ammo up. Hotshot (Igman) is from
Bosnia. S&B is from Czech Republic. Prvi Partizan (Wolf Gold Line, FNM,
Hornady metric calibers) is from Serbia. Pricing from these manufacturers
are dictated by the Euro, which the Dollar has been doing horribly against.

> * Should we expect that these prices will eventually stabilize or
> return to a lower level, or should we assume that they will probably
> never be lower than they are, and therefore stock up on ammunition now?

If I were a betting man, Winchester's new price hike in June (with other
manufacturers to follow by July), should be the last of it. Copper prices
are already down almost 25%. I expect prices to start SLOWLY dropping by the
end of the summer. I emphasize slowly because the sharks have to finish
their feeding frenzy (the manufacturers smelled blood in the waters and got a
taste for profits, so they will be slow to give it up and distributors and
retailers eventually have to sell off their high-priced inventories and
replenish with lower priced stocks). I also think the ammo market is still
speculating on PMC and will be slow to react to after pricing is established
and orders start filling out.

As far as stocking up on ammo--you can't have too much. If you're waiting
for really low prices, you may be waiting for a long time. I think the days
of cases of 1000 rounds of 7.62x39mm for $69 retail went away with Clinton's
Executive Order banning Chinese imports.

Also, depending on the latest round of legislation to follow the Virginia
Tech tragedy, the market may become interesting. Bans have always fueled
sales and prices. How do you proliferate private ownership of "assault
weapons"?--you ban them so everyone becomes interested in them, wants them,
pays the price for them and then raise their children to want them. People
who shoot military-style weapons buy lots of ammo (I average half a case with
every AR or AK sold).

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Here are the responses from Kola, who owns Stars and Stripes Custom Ammunition, a store that specializes in building custom ammunition loads in a huge variety of calibers ( http://www.starsandstripesammo.com/ ).

> * What are the main causes of the rapid price increases, and
> shortages in the available supply, of ammunition over the past year?

First, I'd like to introduce myself to the members of this forum being few of you probably know who I am. I'm Clint Huisinga, owner of Stars & Stripes Custom Ammunition, a lot of people also know me by my callsign Kola. I've been in the ammunition manufacturing business for over 20 years, producing with few exceptions just about every self contained rifle, pistol, and shotgun cartridge that has ever existed. My perspective on this question pertains more to the manufacturing of ammunition being Stars & Stripes does not sell other branded products. This gives me a view of ammunition that might be different than someone who is solely in retailing ammunition, but may be similar and for the same reasons.

The increase in ammo prices and shortages are coming due to several factors, the most notable are the huge spikes in oil prices several years ago. The war in Iraq is also having a play, as are the rules of capitalism. One area that I believe is beginning to show its ugly head more prevalently are politics, and I think we are entering the juvenile stage of the new Brady era of gun control that started back in 1990s.

The main components of ammunition are metalic, and as such it takes a lot of energy to mine the raw materials and turn them into the proper alloys for ammunition. Gunpower and primers are not exactly cheap to make either, if all of you only knew how complex the manufacturing process was on smokeless gunpowder alone! Due to the cost of producing these components manufacturers turn out literally millions to billions of pieces at a time. This effectively locks in the prices of ammunition or the components until they sell out and new stock is produced, think of this like the futures market that is traded on Wall Street. Things that sell more quickly obviously see more frequent price increases and the increases don't seem as drastic, but if you are making 600 Nitro, you might notice a huge increase being this cartridge doesn't move as fast as say 30-06 does. And as oil prices continue to rise we'll see loaded ammo and reloading component prices follow like a shadow several months to a year or so down the road. If oil prices go down do I believe component costs will go down? Who are we kidding, not many large businesses follow the raw material price curve and once prices go up they tend to stay up. Don't hold your breathe waiting for prices to come down if you see oil prices drop drastically in the near future!

The war in Iraq is also playing havoc with our ammo supply. Olin corp is probably the largest small arms ammo producer for our military and is also a NATO supplier. Their focus has been on war time production for the last few years and as such supplies of calibers like 223, 308, and 9mm have suffered. I've had difficulty getting common components from Olin that are only produced by that company as of late, and these are components used in ammo that actually sells; 300 WSM, 348 WCF, etc. Other companies like Remington and Federal also have federal contracts and they too are focusing on war time production. Due to the demand for NATO calibers, production incentive for sporting ammunition has been put on the back burner. While Stars & Stripes doesn't produce any of the large volume mainstrean ammo for the armed forces, It's been my policy through 2 wars now to make sure the little guys were effected to the smallest degree possible by making the government contract stuff separately from the commercial products. Could the big three take better care of the consumer during this rather small war? Most certainly, but as big business grows success is often counted in numbers and the bottom line, not customer satisfaction. Something for people to also consider is what is 'surplus' ammo when it concerns current in use weapon systems? Surplus ammo ends up on the market for many reasons, and never because some country has too much ammo for their army! A lot of the NATO countries have troops in Iraq and Afganistan so they are using their ammo, which means none of it is sitting in storage going south, so less of it is ending up on the surplus market. The funny thing about surplus ammo for current weapons is that it never ever ends up on the market because their is too much of it, if less is being used less is ordered to keep reserves current. Most surplus ammo for current in use weapons ends up on the market because the using army has had any number of problems with it and has decided that those lots should be scrapped or demilled to keep problems at a minimum. As the older lots of ammo get used up, it will probably be a while before more so called surplus comes in. Keep in mind that some manufacturers produces a line of ammo using the mil-spec headstamps with current date codes, but this is not surplus ammo, it is new sporting ammo aimed directly at the commercial market and in some cases it is re-milled using all of or some pulled down components from demilled ammo. For calibers like 6.5X55 Mauser, 30-06, 303 British, and 8mm Mauser the end is really within sight when it comes to surplus ammo being none of these calibers have been in use anywhere in the world for over 40 years. Yes, the rifles and ammo are still out there, but newer calibers prevail in any troubled region or conflict. The ammo will turn up from time to time in large lots, but those lots are going to become increasingly difficult to find and in smaller and smaller quantities. Until the fall of the Soviet Union and the opening of the East Bloc countries, vast supplies of 8mm Mauser surplus had all but dried up!

In today's arms market we now have a lot of arsenals that used to be behind the iron curtain that are now either 100% private companies or partially state run and operate on capitalist ideaology. Every round of 7.62X39 you see on the market today from current imports post 1994 is newly made to adhere to BATF and State Dept. rulings to allow this ammo to be imported into the states. All of the former East Bloc arsenals are producing sporting ammo in 7.62X39 for the US market. True M43 ammo with its soft mild steel core was erroneously classified as armor piercing and cannot be imported anymore, but the same bullet construction applies to a lot of 7.62X54R and 8X57 ammo and it is still importable since politicians and some citizens view AK type rifles differently than bolt actions and think it is the ammo that made these weapons so effective. Besides Isreal, the USA commercial arms market is the largest in the world. The former East Bloc companies now fully understand capitalism and how it works, and they understand the real money is going to be made on the American market. Those companies did nothing but run day and night during soviet times and produced ammo non-stop. Today they have an ability for unlimited production of ammunition that no US company can match. They know that if they constrict or stop ammo flow they can raise profits since demand will skyrocket and to a degree panic will set in as shooters start to wonder when the ammo flow will come back. Unfortunately for the American consumer, none of the M43 7.62X39 ammo can be imported into the states, otherwise you'd see prices of that ammo lower now than ever due to the unimaginable stockpiles of that caliber in the former Soviet Republics, none of which use 7.62X39 anymore, a true surplus situation being only the Third World countries still use AKM47s and the 7.62X39. The two main Russian asenals are Tula and Ishevsk, but there are probably a dozen more companies in other republics that used to be behind the iron curtain, but they are all more or less controlled by the same people that control the Russian companies. All of these companies now produce the popular western calibers too now in addition to the traditional Eastern Bloc calibers.

I think the scariest part of all of the shortages are the role that our own government has had in the shortages, and this role is only going to get worse. As part of the 1994 Gun Control Act that gave us the assault rifle bans and high cap magazine bans, we also got a great many more things that people never heard about. Ever wonder why US made surplus for 223(5.56mm), 308(7.62mm), and 30-06 disappeared from the market? Loaded ammunition in government inventory cannot be sold to the public any longer as of 1994. If it was in private hands, controlled by another government, or was demilled with the original primer killed and removed then reassembled with a new non-milspec primer then it can still be sold. I'm not going into every deatil, but only the ban on assault style weapons and magazine capacity had a sunset in 2004, everything else was signed into law. If you think this isn't real, look into this a bit further. You might be surprised! There is a lot more to gun control than banning guns, and I feel all shooters should broaden their horizons a bit when it comes to laws. Look a bit deeper next time something comes up, there are many gun owners advocacy groups, including the NRA, that send out alerts and post the new bills so you can see them before they become law. Its a pain in the butt to read bills, write letters, and talk with othger gun owners, but we have to do it and stop relying on the 'other guy' to do it. I think that if the import permits for ammo and components were ever cut off that at least the two major Russian companies would set up shop here in the states with their unused production tooling and produce ammunition domestically, maybe even a chinese company or two, but prices will certainly be higher. These are huge companies and I doubt they would abandon the US market unless it was not economically feasible to persue it or there were political road blocks preventing it, and we've seen similar happenings with the arms cummunity being it is easier to sell certain firearms here in the States by reassembling the parts kits, or new parts, and making certain items domenstically to comply with laws.

> * Should we expect that these prices will eventually stabilize or
> return to a lower level, or should we assume that they will probably
> never be lower than they are, and therefore stock up on ammunition now?

So? Will ammo prices ever come down? Maybe a little if oil prices drop, but I doubt it'll be significant. Should everyone stockpile ammo? That's a tough question to answer and certainly a personal one. Keep in mind that most localities have rules for the storage of large quantities of munitions, and violating the rules can land you in some serious hot water. Keep more than a couple thousand rounds in your house and you are most certainly violating some sort of local law and will only be incompliance if you let officials know it is there and put up the proper HAZMAT signs to alert everyone what you have in the event of an emergency. Ammo must also be stored properly or else it goes bad and or becomes unsafe for use in a very short time span, yes, it will probably still go bang but not like it should. Large quanties of stored ammo can be hazardous in ways that only Hollywood portrays(even for a single cartridge it seems) and you have to have one helluva ammo dump to make a crater in the ground, and the right initiation sequence, but overall ammunition even in large quantity is much much safer than storing gasoline. Few people have the proper facilities to store ammo so it can maintain its 20 year expected life span, so buying tons of ammo and burying it can be a very very bad investment, especially if it is already 15-20 years old. My first thoughts are that if you shoot a lot and have had supply difficulties for your caliber, buy a little more than you think you'll need. If you do plan on hoarding a huge quantity of ammo, check your local laws first. I'm not saying you have to let everyone know what you have, but at least know how to store the stuff and reduce the risks. Last thing you need is to have a fire then have some firefighters killed or injured if they ever had to respond to an emergency on your property. In the very least if that were to happen you'll probably end up a convicted felon and never to be able to legally be anywhere near a firearm, much less shoot one, and ammo prices and supply problems will instantly cease to be a concern for you or will take on a whole new meaning. Hoarding ammo also places demand on the ammo market and as suppliers and manufacturers see larger quantities sold they want to raise prices and cut back a little on supply. This is the simple rule of capitalism; supply and demand. I'm not a fan of hoarding, it creates market panic and causes others to hoard as well when then feel their supply is becoming restricted. The problem acts like a line of dominos. The only thing that will truly drive down ammo prices and increase supply are a drop in demand for the product and a drop in component manufacturing costs, but that just isn't going to happen in the forseeable future.

Hopefully this response to the questions answers a lot of peoples' questions and gives you a little more insight to what drives ammo costs and supply, and why the market does what it does. As always, happy and safe shooting