Ammo Choke-Point

Trainer John Farnam of Defense Training International puts out an occasional newsletter with his quips, quotes, and observations.  In a post sent out on Sunday, he described a conversation with the CEO of a major ammunition manufacturer.

It appears the choke-point for ammo production is not powder or primers but rather brass.

I spent last Friday with the CEO of a major domestic ammunition
manufacturer. While there, I was able to get a small quantity of high-performance
40S&W and 45ACP ammunition, as well as some 9mm hardball. He also had some
40S&W practice ammunition and several boxes of high-performance 308.

No high-performance 9mm, and no 223/5.56×45 of any kind. I would surely
have acquired some had it been there!

He indicated his current in-hand orders will consume his entire
manufacturing capacity for at least the next twenty-four months, and that is assuming
no major change in world events.

He also indicted the real choke-point is brass casings. Propellent
powder, bullets, even primers are currently in at least adequate supply.
Conversely, brass is chronically hard to get, and generalized shortages are
holding-up production, industry-wide.

The Demand Curve Has Shifted To The Right

With all the new shooters coming into the market, the demand curve for ammunition has shifted significantly to the right. In other words, the market for ammunition has grown and grown substantially. Unfortunately, supply has not kept up with demand. One just has to go to the sporting goods department at any Walmart to understand that.

One of the common questions that Rob Morse and I asked of ammo producers last week at the NRA Annual Meeting was about supply and whether we’d be seeing the shortage easing. The answer was always that they were working at full capacity and they didn’t know when they’d catch up with demand. The problem for manufacturers beyond filling orders is deciding whether or not this current demand for ammunition is a short term up-cycle.

Remington has made the decision that the increased demand for ammunition is here to stay. As reported in the Outdoor Wire this morning, Remington announced a $32 million expansion to their ammo plant in Lonoke, Arkansas. They expect this new capacity to come on line in the second quarter of 2014.

“We are proud to provide job growth within communities that have supported us for so many years, while meeting the increasing global demand for superior ammunition products,” said Jim Grahlmann, Lonoke Plant Manager. “This expansion reinforces our commitment to deliver the finest quality products for our customers.”

“We continue to invest in all of our manufacturing operations because we are committed to ensuring quality, increasing product availability and improving on-time delivery,” said Kevin Miniard, Chief Operating Officer of Remington. “This significant investment in Lonoke is a testament to that commitment. Our customers can count on Remington to invest in its manufacturing operations in order to ensure that its facilities are state-of-the art and its employees are the best in the industry.”

If Remington is willing to spend $32 million to expand plant and capacity, it is as good an indicator as any that the increased demand we are seeing for ammunition is not just some short term event. Remington is betting house money that it is here to stay.