From Recoil magazine
In the early stages of the COVID-19 lockdowns, the media began reporting on a surge in firearms sales across the United States. Fast forward to almost August, and everyone is asking “where did all the ammo go?” Online retailers are out of stock, you can't get rounds from big box stores, and what ammo is available is either limited in quantity or highly priced. According to reps in the ammo industry, demand right now is 10x higher than during the 2013 ammo shortage.
Certainly, you could shout “supply and demand” which is technically correct, but also a gross oversimplification of the answer. To understand why we're in an ammo shortage, we have to dig in to both sides of supply and demand. At the risk of putting the cart before the horse, the first aspect of the current crisis we want to examine is why the demand for ammo is so high.
In a phone interview with Mike Fisher, the VP of Sales and Marketing for Magtech, he pointed out that over the last few years, demand for ammo has been relatively flat. After the recovery from the 2013 crisis, and during the “Trump Slump,” the ammo market has been pretty stable. In 2018, the National Shooting Sports Foundation reported that the entire industry made 8.1 billion rounds of ammo, across all calibers and gauges.
WHY IS DEMAND SO HIGH?
But now, several unique factors are driving the increase in demand. The first, are the COVID-19 lockdowns. People started buying more guns, and when people buy more guns they also buy more ammo. That would have been fine, but then the civil unrest started. Nothing makes people more uncomfortable than seeing Starbucks on fire, so Americans did what Americans do: bought more guns and ammo. Add to that the fact that it's an election year anyway, and ammo sales always spike in an election year, and you've got historic levels of demand creating an ammo shortage.
Demand is also driven by the same psychological factors that caused the toilet paper shortage: hoarding. According to recent research (Sheu & Kuo, 2020) “hoarding stems from a human’s response, either rationally or emotionally, to scarcity, and so may occur on either the supply or the demand side. As argued by [other researchers], hoarding can be an overall response that involves a mix of a strategic, rational and emotional human responses (such as anxiety, panic and fear) to perceived threats to supply.” That's a smart person way of saying that when people think we're going to run out of ammo, they buy as much as they can and sit on it, which contributes to the scarcity by artificially inflating demand.
Another factor driving increased demand, and oddly higher prices as well are the huge numbers of new gun owners entering the market. The NSSF estimates that up to 40% of the guns sold this year have been to first time gun buyers. With sales at over 8 million guns and going strong, that's a lot of new owners buying guns. They're also buying ammo, but unlike people who have been doing this for a while, they have no idea what ammo is “supposed” to cost. To someone who moved to Texas from LA and now they want a gun, paying $25.99 for a box of 9mm seems reasonable, because that's just what it costs at the moment.
SO JUST MAKE MORE AMMO, RIGHT?
With demand driven by spikes in buying, hoarding, and new gun owners, what is the industry doing to keep up? Every company I spoke with is already at maximum capacity. Magtech is running 3 shifts, Federal is working around the clock, and the smaller guys are making ammo as fast as they can. The problem is that only a few companies produce ammo at the volumes needed – companies like Magtech and Federal, for example. They're already at capacity, and adding capacity for a company that large is actually difficult. Adding a new line to make more 9mm ammo requires purchasing expensive machines, installing them, quality control on the new machines, and hopefully getting all that done in time to make enough ammo to pay off the cost of the new machines before the bottom drops out of the market. It's actually easier for smaller companies to add capacity, because there are ammo manufacturing machines that produce rounds at a lower rate, which are more affordable. But these small machines produce thousands of rounds a month as opposed to the tens of millions of rounds that Winchester is manufacturing, and that won't make a dent in the ammo shortage. It's also important to remember that the increased consumer demand must be met along with existing government contracts. The same ammo lines that make rounds for gun shops also make rounds for federal, state, and local law enforcement agencies, and those contracts don't disappear because it's hard to make or source primers.
There are other, not so front page economic effects of COVID-19 that affect the supply lines for raw materials and components. Raw materials like lead, copper, and brass for projectiles, primers, and casings is one piece, and the other is gunpowder itself. The economic downturn not only impacts the industries that produce the raw materials, but with politically tense tariffs, sourcing materials globally takes a two-fold hit: first by supply line disruption via pandemic, and second, the cost-effectiveness through government sanctions. This trickles down to the consumer as well, not leaving behind the choices manufacturers must choose about price and shipping. Additionally, Reuters reported that the trucking industry has taken a massive hit due to regulations around COVID-19, threatening the future of smaller overland shipping operations that have less than 20 vehicles on the road.
NO END IN SIGHT
Some industry experts estimate that we won't see a return to normal inventory levels for 12 months, even when assuming a Republican presidential victory in November. Normal inventory is defined as being able to buy as much as ammo as you want and can afford from the internet or your local retailer. Worse yet, prices may not return to pre-COVID levels for an up to 12 months after that. The long term disruption to the supply chain tends to result in increased costs for manufacturers which will get passed on to the consumer until we see a full economic recovery. Unless one of the factors causing massive demand suddenly changes or disappears, we can expect to see increased prices and rationing for some time to come.
That being the case, market disruption is the time for entrepreneurs to make strides where they would normally be crawling. Smaller ammunition manufacturing businesses now have a chance to capture part of the market otherwise dominated by big names, and with the multitude of new shooters, that stockpile of ammunition can quickly turn into a head start for competitions in the coming years. The difference between preparedness and hoarding in this world, is an ammo shortage is only a negative for the later.
