Gun and Ammo Sales Keep Munitions Industry Profits Up

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One bright spot in the picture for metal demand is the munitions market. According to Tulsa World, the industry cannot keep up with the demand for handguns and ammunition. In particular, sales of revolvers and the associated smaller caliber ammunition have been so fast that shops are sold out within 24 hours of a new delivery. The president of one firm commented they are selling 10 times the volume of ammunition they are used to. Distributors put the demand down to fears that the new administration’s political pledges will be put into effect limiting the personal ownership of handguns and the general economic malaise that folks perceive as being the precursor to a rise in theft, burglaries and muggings. Places on concealed carry weapon courses and permits applications are both at record levels suggesting this is not existing owners buying a second weapon but new buyers coming into the market.

The demand will be good news for gun manufacturers on two fronts. The grades of steel and stainless required for handguns are not specialist enough to cause a shortage of materials which could push up the costs. But ammunition costs have been all over the place during the last few years as any sports enthusiast will confirm. Demand from the military, both here and around the world has created temporary shortages in production capacity at times pushing up prices. Olin’s Winchester subsidiary, the largest US producer of small caliber ammunition, has limited capacity and is busy supplying the military. And although the cost of raw materials (copper, nickel, lead, tin, antimony and steel) have all halved over the last 12 months, shop prices have not fallen at all as reported by this specialist blog back in November. So manufacturers are able to enjoy robust sales without fear of supply side cost pressures eating into their profits. The difficulty in meeting demand will also mean gun and ammo manufacturers are  two of very few industries not having to discount heavily to encourage sales.

–Stuart Burns

Comments (4)

  1. dave says:

    I disagree with the notion that gun companies do not have to worry. Gun prices have skyrocketed in recent years and with the economic downturn things are really not looking all that well. I have been shooting since 1990 and I have noticed sharp reductions in what gun companies offer in their catalogs (example: Ruger). The only real expansion has been in small. concealable handguns. Also, with more new guns “going polymer” this reduces the volume of all-steel guns thus increasing their prices from a lack of former volume. Sad days for us “blue steel and wood” guys.

  2. Keith says:

    the gun industry will feel the slump later if indeed O’Bam Bam doesnt attack ownership.
    the buying frenzy will create a glut and after the “O” leaves office the companies will feel it for a long time

  3. stuart says:

    Keith you have a good point there, every bull run is followed by a bear market as we all know only too well. The current demand shows how the decision to buy a personal weapon is a lot more complicated than we at first may assume.

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