Recently Jason Vanderbrink, the head of Federal, makers of a significant chunk of the ammo market under the brand names of Federal, Speer, CCI and now Remington, put out a brief video addressing the ammo shortage and why a) you can’t find ammo and b) when you do, why it is so ungodly expensive. Apparently they got a lot of the same questions over and over so Jason addressed those questions in a subsequent video. The whole thing is interesting and you should check it out but one thing really jumped out at me around the 3:50 mark so I have that bookmarked in the embedded video….
The gist is this. Prior to March 2020, there was already a ton of “excess capacity” in the ammo industry, according to Jason. That means that they had more factory capability than they had demand. That is generally not a good thing, it means idle machinery and factory space that you pay taxes and maintenance for but for which you aren’t getting maximum return. That is also why ammo was dirt cheap and plentiful in 2019.
People saying “just build another factory” don’t have the basics of how businesses work to make that statement. Building a factory is hugely expensive and time consuming. You have zoning issues and you have to be able to finance the new building and new equipment plus you have to be able to hire people to run the machines who will show up and not be high. As a businessman you also need to look beyond the next week and think longer term. Spending a couple million bucks to build a new factory in response to 10 months of unusual demand when you had excess capacity in a normal year is dumb and making dumb decisions is how businesses fail. Plus it would take a year or more under the best case scenario to get a new factory up and running and who knows what is going to be happening a year from now.
Another factor for businesses are the political considerations and right now the firearms industry has few friends in government and a whole bunch of enemies. Former Vice-President Biden pledged to eliminate online ammo sales and with the largest retailer in the world, Wal-Mart, basically getting out of the ammo business that means that if that pledge becomes a reality, it is going to be difficult to get ammo to consumers at all. The few retailers who still sell ammo like Academy, Rural King and Bass Pro/Cabelas aren’t in every city so there will be a real bottleneck. If banks decide to stop processing payments for places that sell guns and ammo, something I expect to happen soon, then it really becomes a problem.
The same is true for gun manufacturers. Sure, if Palmetto State Armory tripled their capacity, they could still sell out of every AR and AK they could make on a daily basis but building a new factory takes time and specialized machines and people to run those machines. If I owned PSA I wouldn’t invest a few million bucks into new capacity with the real threat of my business being shut down in 2021.
It is easy to complain and make simplistic comments like “build another factory” but it really isn’t that simple. I wish it were but it isn’t. We aren’t going to get back to the days of sub .$.20/round ammo anytime soon and likely we never will. Bitching about it isn’t going to change that reality.