Even as supply starts to catch up with demand, the average ammo cost remains high.
So why is ammo still so expensive? A more ample supply should equate to lower prices, right?
Well, the reality isn’t so simple.
For one thing, record inflation is driving up prices across the board, and ammo is no exception. For another, while the gap has narrowed, demand for guns and ammo continues to surge. So we’re not seeing the drop in prices we had all hoped for.
One of the biggest factors affecting the price of ammo right now is the supply of raw materials.
Or rather, the lack of supply.
To better understand why the cost of ammo is holding at record levels, let’s take a look at how ammo is made, the economics of that process, and how the value of essential materials is driving those prices.
How Ammunition Is Produced
It can be easy to take something as simple as ammo for granted. If you’re like a lot of shooters, you’re used to ordering all the stock you could want in bulk. Especially when free shipping is an option.
A heroic amount of work goes into producing quality gun ammo. It’s part of the reason why manufacturers struggle to produce enough stock for the rising demand.
This isn’t like handloading a few hundred rounds for your next range day. Not only does every component need to be made from scratch, but vigorously quality and safety tested at every stage of production. Even the most dedicated hand-loader probably doesn’t practice the same level of commercial quality control.
The safeguards limit how much manufacturers can do to accelerate ammo production. And only being able to put out so much stock for a very in-demand commodity has ripple effects on the economics of producing that product.
The Economics of Ammo Production
In 2022, ammo is relatively plentiful. At least if you compare it to the early months of 2020 when there were empty shelves in every gun store.
So it would be understandable to challenge why retailers are still demanding a premium when you can see for yourself that the supply situation has improved.
It’s because of an important facet of how manufacturers set ammunition prices.
It’s true that when there’s more of a commodity available, the value of that commodity should decrease. Silver is more scarce and valuable than tin, gold is more scarce and valuable than silver, and so on.
But the equation gets more complicated when you’re talking about a manufactured good rather than a raw material like tin, silver, or gold.
You see, to ensure profitability manufacturers can’t set ammo prices based on what that last batch cost to produce. They have to set them based on the anticipated cost to produce the next batch.
In theory, their profit margin remains constant, a set percentage of the production cost. But when circumstances affect that production cost, they have to adjust the price of the finished product in kind to keep that profit margin constant.
This brings us to the issue at hand: the rising cost of raw materials needed to produce ammo.
Scarcity of Key Materials Is Impacting Ammo Cost
An individual rifle or handgun cartridge had four components: a case, a propellant charge, a projectile, and a primer. The propellant and primer use chemicals that are most often widely available. The issue tends to lie in those metal components.
Lead, steel, and copper are the building blocks of ammunition. A shortage of any one of those could lead to an uptick in prices. To see this phenomenon in action, let’s look at each of these metals.
Lead is used in about 90% of the billions of rounds of ammunition produced every year. No lead, no ammo.
Normally, lead would be considered a common metal of modest value. But thanks to an unforeseen consequence of COVID, we did experience a shortage of lead last year.
The culprit was a spike in demand for lead-acid car batteries. During the long months of the pandemic, people tended to drive less. Millions of cars left to idle for long periods led to millions of failed batteries that needed replacing when life started to resume as normal.
The result was an unexpected run on lead. While the shortage hit the auto industry hardest of all, it certainly didn’t help drive down ammo prices.
Though not nearly as ubiquitous as lead, steel finds its way into a variety of popular cartridges. And like lead, it too saw a spike in price last year.
Again, we can lay the blame on COVID. As manufacturing activities resumed full speed, there was a sudden demand for raw materials. But some materials, like steel, couldn’t be produced in great enough quantity to satisfy demand.
Prices continued to rise through the end of the year. As with lead, this was a much bigger problem for other industries. But it didn’t help the ammo price situation.
By far the most problematic raw material at this time is copper. Virtually all cartridge cases are made from brass, which is an alloy of copper and zinc. It’s also used to create the protective jackets most rounds use.
The problem is that copper is used in so many industries. About half of the world’s supply is used in construction, but increasing demand for electric vehicles and energy storage devices is straining global inventories.
American ammo manufacturers have to compete with electronics firms, property developers, and even the U.S. Mint to secure enough of the red metal for their needs.
At this time, demand continues to outstrip production. As long as that remains the case, manufacturers will have to continue to raise prices to maintain healthy profits.
What Will Ammunition Prices Look Like in the Future?
The good news is that the market for commodities like copper and other raw materials tends to stabilize over time. Unfortunately, they’re far from the only factor that can drive up ammo cost.
To cushion the blow of rising unpredictable prices, you need to invest in an Ammo Prime membership.
A membership gets you an 8% discount and free shipping on every order, helping to bring the cost of ammo back down to earth. You’ll also get priority alerts when new stock arrives, giving you an advantage in snagging those hard-to-find calibers. Join now and start saving today.