An Interesting Analysis of the Ammo Shortage:

[pneuby]

From a blog I subscribe to...

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... Like a lot of industries, there are cost pressures in ammunition; the price of raw materials, like brass, have gone up. Additionally, the State Department has blocked imports from Russia, adding to the pricing pressure. But the cost story is really a sideshow; the pricing increase is going almost entirely to profit. For Vista, margins skyrocketed in 2020, and continued to increase in 2021. As the CFO of Vista, Sudhanshu Shekhar Priyadarshi, told investors in November, margins rose to a record 27% in Q2 of 2021, on top of an already extraordinary 2020. According to Blinder, and most economists, competitors should enter the market and invest in new factories, or existing firms should expand existing capacity to seize market share, eventually leading to reduced prices. 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. And the limits on capacity were explicit. The head of ammunition for Vista, Jason R. Vanderbrink, explained that the “most important” reason for the Remington acquisition was “added capacity to Vista without increasing the overall market capacity." ...Vista has set up two pricing programs to ensure high prices and stability. The first is a subscription service for ammunition, which gives them a steady flow of ammunition demand and lets them plan production more easily. The second is, well, an informal form of price-fixing, or output reduction. They aren’t totally explicit about it, but they use code words to make the point. Here’s Metz explaining that they collude with their competition to keep capacity lower than it should be. "Now with ammunition being the largest part of our business. I mean, clearly, buying a Remington, we've created what we feel like is an even more disciplined industry now as we go forward. We've got, I think, like competitors in the sense that they watch growth, they watch their margin profiles. And we feel like we've got a disciplined industry. And I've mentioned previously that we studied, as best we can…industry capacity and making sure that we're not only managing our capacity, but very mindful of what's being brought into the industry, so we don't get over our skis, if you will.” 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. We’ve seen the management of pricing across economic cycles in other concentrated industries. Chris Leonard wrote about Tyson Food’s control of the poultry business, and how during the financial crisis this meant the entire industry could raise prices by all cutting production at once... When economists like Alan Blinder, Jason Furman and Larry Summers, discuss inflation and concentration, they are relying on the idea that markets are competitive, and that new entrants will drive down margins of existing players. This is not a crazy theory. Some bottlenecks will go away; Congress is acting to reduce the problem at the ports, otherwise known as the world’s most profitable traffic jam. But in terms of concentrated industries, is it really true that there will be mass entry with high profit margins? As we see with ammunition, the answer is, probably not... (It was quite a challenge excerpting this much longer article, which is followed by, “Welcome to BIG, a newsletter on the politics of monopoly power...” Primers are the most dangerous components of ammunition to manufacture. It is much easier and much less risky for ammunition makers to boost production by adding shifts – up to 24-hour production – than to make the massive investment in new machinery to manufacture powders and primers, with the uncertainty of how much longer demand will remain at current levels.)
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https://www.zerohedge.com/political/wha ... -inflation

[Suck My Glock]

On a related note to this;...I've been spending some time looking into become a commercial bullet caster of projectiles for reloaders.

I had assumed that, just like the shortages of reloading supplies in past panics, every bubba with an automated Magma casting machine must be making record money right now,...but in fact, several have gone under due to supply issues, and more are likely to follow. Thus, there has been a slight concentration of bullet casters these last 2 years. (Nothing like what's going on with Vista and Olin, though.)

Also, the environmentalist war on lead refining has made it difficult to be a competitively priced producer of projectiles unless you happen to be located near one of the very few remaining lead recycling smelters in the country. (That's why there are no more casters in Az. Laredo quit, BNB's website is abandoned, Meister moved to Missouri and Z-Cast moved to Kentucky.) Lead is expensive to transport, and trucking it across several states costs a lot. The only remaining lead recycling smelters in operation in the western states are in Lewiston, ID., (supplying CCI, Freedom Munitions, X-treme bullets, and a handful of others) and City of Industry, CA.,...and that one is likely to be forced to shutter just like all the other Commiefornia smelters. Most of the manufacturers of custom lead alloys that commercial casters require are east of the Mississippi. The casters who happen to be located near these smelters are able to be priced competitively and will survive. They number enough to count on one hand.

But even these smelters are at risk of shutting down, or at least moving their operations. Most automotive battery recycling has now been diverted to Mexico, India and China, and no more hard rock mining of lead occurs here now since 2016. In fact, the Lewiston smelter in Idaho is actually not so much a smelting/refining operation as it is merely a re-caster themselves, receiving recycled lead from India and China via the Columbia River inland port, melting it down to blend with other metals to make useful alloys such as those used in the ammunition industry. And they just built that facility in the last year. Because that's how the market and supply routes are changing. As the refining/smelting of lead slowly gets completely banned here, future facilities like the one in Lewiston will all need to be at or near a port for receiving the ships filled with foreign-refined lead.

All of this is merely to say that whatever your regular supply of cast bullets is, it is likely to be challenged and or interrupted in the future. And while lead has already become more expensive as a result of the stop of lead mining and interfering with lead recycling/refining/smelting, it is going to get even more expensive as more U.S. facilities get regulated out of existence.

I'm actually trying now to find lead recycling/foundries in northern Mexico, so see if an affordable short-haul truckload could be ordered for delivery here in Az. We shall see.

[That Guy]

Lotta words to just say “supply and demand” and “the invisible hand”. The golden age of cheap ammo which I’ll spit ball from about 1990-2019 (with a few significant spikes during that time span) is most likely gone and will never come back. Folks have sorta become accustomed to higher prices and the gun industry is going to keep them high. If you haven’t figgered it out yet, those gun/ammo manufacturers are only your friend as long as their interests coincide with yours. Few people recall just how goddamn expensive ammo was from 1968-1986 (when you couldn’t get ammo shipped to your doorstep any longer) and you could only get it from an FFL holder i.e. your friendly local gun shop. The big winner of the 1968 GCA were the licensed gun shops and the big main stream gun and ammo manufacturing companies. Outfits like Winchester and Remington were ecstatic when most milsurp gun and ammo imports stopped in 1968 and gun shops happy when nobody could get cheap rifles or rounds sent to their home. But back to ammo.
In 1975 a box of 20 Remington or Federal .223 (they were the only people making it) was generally around $4.00 a box which seems cheap except gas was a touch over .50 a gallon and minimum wage was $2.10 an hour. If you lived in a small town with only one place that sold ammo they could pretty much ask what they wanted. So, to get ONE box of .223 you had to work basically TWO hours at minimum wage to earn enough. Forget 7.62X39 only Norma made any and that was $20.00 a box (it sucked owning a Vietnam bring back SKS).A huge reason that para-military style semi-auto weapons weren’t that popular is that unless you reloaded few people could afford to shoot them. HK-41’s and AR-15’s often sat for months in shops collecting dust, G-43’s and M1940 Tokarev’s sat forever.

Once ammo could be delivered to your doorstep and all that cheap ChiCom ammo came in followed by Russian, Yugo, Romanian etc prices plummeted and stayed rock bottom, with a few exceptions, for decades. People got spoilt, old timers forgot how bad it used to be, and new shooters figgered cheap ammo was a Gawd given natural law of economics. Even now, with ammo comparatively high ammo prices (if you contrast them against pre-Covid prices) factoring in minimum wage yard stick vis-a-vis the cost of ammo post 1968/ pre-1986 era it’s still cheaper. And guns!? Guns are WAY cheaper and have a FAR better selection that the pre-1986 era’s.
But in the gun world optimism doesn’t sell s***-fear does so here ya go: as a side note and if Putin does invade Ukraine, even the ammo which was already approved for import ain’t gonna be allowed in-maybe even the stuff sitting in bonded warehouses.

[smithers599]

OTOH, maybe President De Santis, with Republican House and Republican Senate, will get rid of the import restrictions, and ease up on the lead production.