A worker at Arms Corporation of the Philippines (Armscor), one of the world's leading manufacturers ... [+]
Bullets are hard to come by in the U.S. because demand is outstripping the production capacity of American manufacturers, and importers can’t pick up the slack because coronavirus is disrupting the international supply chain for retail ammunition.
U.S. imports of shelf-ready ammunition plunged 34% in the three months ended Aug. 31 compared to the same period in 2019, according to the most recent data from Chris Rogers of S&P Global Market Intelligence Panjiva.
Ammunition imports were impacted by Covid-19 shutdowns in Europe, particularly involving manufacturers in Spain, Italy and Eastern Europe, according to Mark Oliva, public affairs director for the National Shooting Sports Foundation, the U.S. gun industry group.
This does not include imports of ammunition parts and raw materials, which increased during that time, according to Rogers, by 50% in June, by 78% in July and by 107% in August, compared to the year before. Ammo parts and materials are primarily for business-to-business activity between importers and U.S. manufacturers, and disruptions to retail occur when there’s a bottleneck in the manufacturing supply chain.
The gun industry just went through its strongest summer ever, amid an economic catastrophe in which tens of millions of workers lost their jobs and gross domestic product plunged by a third. New buyers who feared civil unrest and rising crime during the Covid-19 pandemic bought guns for self-protection and loaded up on ammunition.
The Federal Bureau of Investigation conducted a record 3.93 million background checks on gun purchasers in June. (Background checks are the best proxy for nationwide gun sales.) The tally for 2020 has already exceeded every prior year since the FBI started keeping track in 1998. This means that gun sales were breaking records as the coronavirus pandemic infected millions of Americans and killed more than 213,000.
Handguns are particularly popular — retailers say that compact, user-friendly pistols are favored by novice buyers seeking to protect themselves. U.S. manufacturers like Smith & Wesson and Sturm, Ruger
Importers have played a crucial role in feeding the U.S. demand for guns. U.S. imports of handguns from gunmakers like Glock of Austria and Beretta of Italy rose 46% in the three months ended Aug. 31, according to S&P’s Rogers.
But while pistol imports have helped retailers keep pace with demand, imports of complete, shelf-ready ammunition have fallen short, resulting in bare shelves where bullets used to be.
Workers at Arms Corporation of the Philippines (Armscor), one of the world's leading manufacturers ... [+]
“Historically, imported amounts of lower-priced ammunition have taken up the slack in unmet demand in the U.S. ammunition industry during cyclical periods of rising consumer demand,” said Rommel Dionisio, gun industry analyst for Aegis Capital. “However, potential shipment delays resulting from recent COVID-19 related shutdowns around the world may be delaying the delivery of such imported ammunition into the U.S. at the current time.”
The top U.S. ammo manufacturers are Vista Outdoor, which recently acquired Remington’s bullet business, and Olin Corp.
The disruption is causing inventories to run dry in America. Retailers told this reporter that ammunition is selling out everywhere, especially for commonly used caliber like 9 mm and .38, prompting some shops to ration one box per purchase.
American consumers and retailers are learning that they can no longer rely on importers. So why don’t American ammo factories just ramp up production?
Dionisio said the large U.S. ammunition manufacturers, including Vista Outdoor, Olin and Remington, have been hesitant to expand production capacity during cyclical upturns in demand, for fear of being unable to use it when demand tapers off.
“It is not as simple as adding a few extra shifts of labor,” said Dionisio, who described expansion as “capital intensive, requiring significant outlays on machinery and facility expansion” with a lengthy buildup of 12 to 18 months.
Vista Outdoor, the top U.S. manufacturer of ammunition with 30% of market share, recently took a large stake in ammo production that could have significant implications on the industry going forward. Vista paid $81.4 million for Remington’s ammo brand after the venerable gun company filed for Chapter 11 bankruptcy protection for the second time in two years.
“We are rapidly onboarding Remington Ammunition capacity, while also continuing operations at our existing domestic facilities, so that we can continue to support the strong consumer demand in the marketplace,” said Fred Ferguson, Vice President for Public Affairs for Vista Outdoor.
Dionisio described Vista’s decision to boost its ammo production capacity through the Remington acquisition as “certainly timely,” considering the nationwide bullet shortage.
