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Sniper

What The Great Ammunition Shortage Says About Inflation

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Reading this article, it's interesting, the ammo shortage and high prices wasn't about over demand, it also seems to be from the consolidation of suppliers and control...

...."Concentration is increasing prices and keeping them high. The ammunition duopoly and the "Great Ammunition Shortage" is just one example.

One of the more interesting questions in the discussion over inflation is the relationship between concentration and pricing changes. Most economists believe that supply shocks are increasing profits, but that this increase will serve as an inducement to more productive capacity.

Ammunition is a highly concentrated industry. There are many ammo brands, like CCI, Federal, Remington, Winchester, and Speer, but they are all controlled by two firms - Vista Outdoor and the Olin Corporation. As Elle Ekman wrote in the American Prospect, Vista and Olin rolled up the industry through mergers, as well as taking advantage of the privatization of government facilities making ammunition and government contracts.

But the industry hasn’t experienced such competitive dynamics. Profits, said Priyadarshi, have gone to share repurchases and paying down debt.

There are several reasons for this, but the main ones are consolidation and high barriers to entry in the industry. Ammunition is difficult to produce, as it requires careful manufacturing processes to safely handle explosive materials. Vista recently bought its competitor Remington out of bankruptcy, lowering the number of firms in the industry that could even build a factory and distribute ammunition effectively.

In other words, Vista executives are planning to ensure that prices won’t come down. They have expanded some capacity on the margins, but because there are only two real firms now, they can easily pull that extra production offline if necessary.

https://www.zerohedge.com/political/what-great-ammunition-shortage-says-about-inflation

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What the hell do you mean the ammo price increases weren't about over demand? We basically doubled ammo purchases. Is there a single domestic manufacturer of ammo or components that didn't expand production? We still aren't meeting demand fully. 

One of the quotes form the article is this "If Blinder were correct, then one would expect lots of new productive capacity and new entrants into this market."

We saw both. The price of components has dropped back down from the peak. The price of powder has dropped back down form the peak. In general at least. The things really choking further expansion are primers and manufacturing capacity. If you shoot common calibers, you have probably noticed there is more available at off peak prices. However, if you shoot less common stuff, you are still hurting because the production lines are making what they will sell the most of. 

As for new entrants, we are seeing new imports. We have Palmetto looking to bring russian ammo production to the US by purchasing the machinery and importing it. I've seen people sporting significant purchases of primer brands I have never heard of in my life. So we somebody somewhere is participating in new markets even for primers, the hardest nut to crack in the supply chain for ammo manufacturers. 

I'm not a fan of the massive consolidation that has occurred, mainly because we are basically two bad management decisions away from being seriously screwed. But I'd argue that a lot of what we are seeing is the fact that regulatory pressures and government activism are driving some of the behavior. Every public firearms related stock has to ask themselves how to cope with activist funds trying to screw them either independently or at the behest of state legislation on investment funds belonging to the state. Stock buybacks and building war chests would seem a natural response to that threat. 

 

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8 minutes ago, raz-0 said:

We still aren't meeting demand fully. 

Not sure where you're looking, but at my normal haunts, there's plenty to choose from.... but the pricing still sucks... (as the article above notes).

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1 hour ago, Sniper said:

Not sure where you're looking, but at my normal haunts, there's plenty to choose from.... but the pricing still sucks... (as the article above notes).

If you want 9mm or 223 yes, they can usually sell you something. Outside of that there’s more issues. 

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1 hour ago, raz-0 said:

If you want 9mm or 223 yes, they can usually sell you something. Outside of that there’s more issues. 

Yeah, and those are the most popular rounds that most are looking for... so the problem is? Not a supply issue.

I see plenty of the other calibers I shoot, 22LR and 40.

Do you want them to produce a glut of other, rare calibers, so they have to sell them cheaper. Another point of the article was the evil term, "profit".

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22 minutes ago, Sniper said:

Yeah, and those are the most popular rounds that most are looking for... so the problem is? Not a supply issue.

I see plenty of the other calibers I shoot, 22LR and 40.

Do you want them to produce a glut of other, rare calibers, so they have to sell them cheaper. Another point of the article was the evil term, "profit".

We are definitely in a sell everything to somebody mode rather than a sell something to everybody mode. Even after expansion of capacity. 

Primers are still in short supply, and i don’t think there will be much easing of that until the ammo they are selling sits on shelves longer than it does now. 

I’m fine with profit. But with this kind of consolidation, we are a couple of decisions from the 2d being screwed over or priced for only the wealthy. It’s a sector where an adversarial relationship between the manufacturers and the customer base isn’t a good situation. 
 

 

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14 hours ago, raz-0 said:

Primers are still in short supply, and i don’t think there will be much easing of that until the ammo they are selling sits on shelves longer than it does now. 

I’m fine with profit. But with this kind of consolidation, we are a couple of decisions from the 2d being screwed over or priced for only the wealthy. It’s a sector where an adversarial relationship between the manufacturers and the customer base isn’t a good situation. 

Like it says in the article, when the industry gets consolidated down to two main manufactures, it hurts the consumers. Doesn't matter if it's primers or regular ammo, they just regulate output to keep their profits up. They know, based on the last two years, what people are willing to pay. They know, if you want it, you'll buy it, at whatever price. I think the range we're in now, like $350 - $400 a case for 9mm might be the range for a while.

Plus, the cost to enter for a new manufacturer is daunting. Between the supply shortages in raw materials and the regulatory environment of the current administration and the anti-gun sentiment, good luck seeing any new entries in this area.

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2 hours ago, Sniper said:

Like it says in the article, when the industry gets consolidated down to two main manufactures, it hurts the consumers. Doesn't matter if it's primers or regular ammo, they just regulate output to keep their profits up. They know, based on the last two years, what people are willing to pay. They know, if you want it, you'll buy it, at whatever price. I think the range we're in now, like $350 - $400 a case for 9mm might be the range for a while.

Plus, the cost to enter for a new manufacturer is daunting. Between the supply shortages in raw materials and the regulatory environment of the current administration and the anti-gun sentiment, good luck seeing any new entries in this area.

My prediction is more will be done to prop up ammo prices than component prices. I suspect primer prices will drop off when demand for ammo falls. Mainly because unlike the rest of it, primers involve significantly more skilled manual labor. They will be happy to be making a profit having reloaders pay to keep their primer manufacturing capacity on hand for the next crunch when they can ratchet up the margin on them. Primarily by selling them as part of loaded ammo. 

It may need to see some of the new ammo manufacturers (assemblers?) fail first though. 

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Ammo prices will come down anytime you have a large swings and prices that remain elevated you will get new entrants. Also we've seen 556 go from a dollar around down to 52 cents today.   Not to mention you Have 5 million new gun owners and with social unrest,  It's a recipe for higher demand and elevated prices on top of that we have a liberal Communist administration that hates us but prices will come down and when they do stack deep now if any of you have any 762X39 let me know lol

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12 minutes ago, FishNHard said:

sgammo has a bunch of 7.62x39 in stock,  before the craziness i got 3 crates of 5.45x39 paid $369 for 2160 rds per crate on GB its goin for $1000 per crate , i should have bought 50 crates LOL

I remember when SGA was begging people to buy their ammo.

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