07 August 2009

A trendline of a vital consumable

The following are personal observations only. YMMV.

Yesterday was the last day for complaints.

As an individual who enjoys not just firearms but the entire history of warfare, I now have had the first-hand experience of the civilian market in times of unease and unrest.  America is like no other Nation on the planet in the civil use and support of arms, not just firearms but ancient, medieval, old west and other venues of arms.  From flint napping and spear creation through bows of ancient to modern eras, through knives, swords, axes, polearms, quarterstaves, through to firearms from the first cannons to the most modern and high-tech of arms, the American people cover all bases.  Before NASCAR, hell before baseball was a popular spectator sport the demonstration of finesse of firearms was one of the largest, single attractions to Americans.  From Buffalo Bill's Wild West Show to individuals who demonstrated the fine art of what happens when you actually can put a bullet through a washer thrown up into the air, Americans have a deep respect, fascination and adoration of firearms that goes back to the earliest parts of the Colonial era.  The ability to protect oneself, one's family and one's property are cornerstones of the ability to create civil society.  The low number of civilian deaths, per year, due to firearms points to an understanding of responsibility and moderation of the use of such arms so as to not endanger the general public.  More people die, per year, from not having cuts and scrapes properly treated and getting septicemia than to firearms.  Taking care of cuts and treating them properly would save more lives than any firearm prohibition ever talked about.

Others have noted the rise of the purchase of handguns (long guns are not part of the record, but evidence indicates a similar rise with them) from a period starting in SEPT 2008 onwards.  The ammunition market lagged but then trended faster than sales, which makes sense as all those new firearms needed to be tested... but the buying didn't stop.  The ammo scarcity of the early part of 2009 takes into consideration that our war use of the calibers in question for handguns and rifles, but that is far below peaks of government demand in 2003-07 which saw the US purchasing rounds from Canada, UK, Germany and France for war use.  There were some problems getting some calibers of ammo during that period, but stuff like 22 long rifle, a rimfire round used traditionally for target, marksmanship and small game/varmint control went from plentiful before 2008 to scarce until just the last few weeks.  Of course 22 lr is one of the most popular rounds in America as it is a low damage, high utility round that is lightweight, cheap and continues to have utility across a wide venue of use.

One interesting note that I have no idea if anyone else has talked about, is one that puts forward the actual cognizance of those first time purchasers for the safe use and keeping of their firearms.  To me it was amazing that per caliber cleaning supplies of the most popular calibers went scarce starting in DEC 08.  For a period starting then and only now seeing a trickle back for the basics like bore brushes and mops, it was hard to find an online supplier in stock of such items.  Still being in the 'try out a number of things to see what works' on cleaning solutions, lead and copper removers, and lubricants, it was fascinating to see that a very few of those also went scarce for a period of JAN 09 to MAY 09.  Things like 'gun ropes' or 'bore snakes', which are one-pass fast cleaning concepts invented when soldiers with shoelaces, brushes but not wanting to take out a cleaning rod attached them all together with cleaning fluid and a final tied on patch of lubricant to drop a weighted end down a barrel and clean that in one go, those things have only gotten low sporadically for a few calibers throughout this period.

Together these latter, less remarked upon shortages, points to something far different than wild-eyed Americans just buying up all the firearms in sight, but of intending to make this a long-term interest and wanting their arms in good condition for safe use.  This is to the great and deep credit of those who, in their millions, have become first time firearms purchasers in the last 9 months or so.

Rifle ammunition for popular calibers, like the .223 and .30 Caliber have also seen sporadic shortages, but in those markets the problem has been in firearm supply so that manufacturers of AR-15 parts (a civilian version of the M-16) have suffered shortages.  The rifle ammo market is bolstered, somewhat, by diversity of platforms around a common bullet size, so that the differing cartridge types each have their own production lines for manufacturers.  This is due to the past diversity of rifle production over time, covering that basic caliber but with differing cartridges and performance by platform: .308 Winchester/7.62 x51 NATO, .30 Caliber, .303 British/SMLE, .30-06 Winchester.  This contributes, at least somewhat, to the 'which is out, ammo or gear?' problem as each niche market has its own variations.  Really, this will be a wonderful economics paper if we survive long enough to keep that viable.

For a period starting in NOV 08 to approximately MAR 09 the idea that you may have the most accurate rifle you can buy became a hard choice between the best but not present components and available ammo or having the components and not the ammo.  That dynamic finally got to a market that should be immune to it on the ammunition side, which is the military surplus rounds from overseas for popular sporting bolt-action rifles, like the Mosin-Nagant, but also the Mauser and even rifles like the Short Magazine Lee-Enfield and Schmidt-Rubin.  Overseas ammunition for these older weapons, not assault weapons by any stretch of anyone's imagination even if you have the bayonet with it, seemed relatively safe from the market fluctuations.  What it suffered, instead, was shortages due to shipment delays due to unexpected demand.  For nearly a month starting in mid JUN 09 through to late JUL 09 the price per round of ammo like the 7.62 x54R started to climb as Bulgarian, Czech, Romanian, Russian and other sources of military surplus ammunition started to run down.  Even with a few major shipments in on Bulgarian and Czech rounds, that market still is not at the point it was nearly a year and a half ago.  Luckily there are so many milsurp rifles for these rounds that their prices have trended stable even with the huge demand in the rest of the market.  You can still pick up a good, serviceable Mosin-Nagant for $100 or less with a Very Good bore even if the cosmetics may be lacking.  In all the fact that there could be a draw-down of such ammunition, especially corrosively primed Soviet Bloc ammunition, was a surprise as it takes more care to use such rounds than it does those with non-corrosive primer.  With that said there was a run on the ammo for just a few months and the availability of overseas milsurp ammo is a trending indicator as it is an outlier on the overall market.

At the relative specialty and high-end of the market is 50 Action Express.  That is a round with few suppliers, and a relatively small purchasing population as its main venue is the Magnum Research, particularly their Desert Eagle in 50 AE.  Just as the run on ammo started I found a supplier that had custom loads of this, and that took nearly 4 months to get.  It has seen spotty supply from Hornady and Magnum Research (loading CCI/Speer), and good supply but at very high cost from CCI/Speer.  Precision Cartridge also had a small supply out recently, but that dried up very fast, too.  Basically for a 20 round box you would expect to pay a minimum of $27 delivered at the low end and $35 at the high end.  There has always been more expensive ammo for this platform above that price point, but no one can sell it at that price point no matter how low the supply gets for cheaper stuff, all the way down to zero supply.  There is an economics lesson there in voluntary captive markets and price points, I'm sure.  And a 'box here and a box there' when you are seeing $1.35 to $1.45 per round is still pricey.  And MR has had its 'buy 6 get one free' deal for 50 AE for months, yet it is cheaper to get it at a reseller, even with that.  Still, MR sets a cap with that deal at about a $1.50/round so buying more expensive while the OEM has a better deal has a capping effect.

The main and number one drain in the market has been on the popular self-defense rounds for the 45 ACP platforms.  This is due to the long-lasting admiration that US handgun owners have for the Colt 1911 platform designed by Browning.  In all of its variations by so many companies, it remains one of the largest selling handguns for civil use in America and has retained that even while popular 9mm and 10mm platforms have moved in to the popular Law Enforcement market.  Those latter have nearly wiped out the previous popular LE platform of the 357 Magnum revolver round, which was based on the 380 round the previous popular LE platform in 9mm.  Now the 357 Magnum is an 'odd-ball' seen in police reports, and often only seen in self-defense reports when retired LE members are involved.  The 9mm and 10mm (40 S&W) have been in relative good supply compared to 45 ACP over this period of time, but that is in comparison, only.

As I do need 45 ACP for one of my platforms, the sudden dearth of it at any part of the market, save at the extreme high-end, custom loaded, hunting realm for big game... I actually had to stop and research that at the time, learn more about ballistics, examine the use of such rounds and that similar had been suggested for my platform... what was prohibiting because everything save the casing and primer cup was custom, was price.  For target work prior to the ammo run that started in DEC 08, I could reliably get 45 ACP for 32-35 cents/round delivered.  In MAR 09 I had my platform worked on to accept older magazine types and that work was only recently finished, but through that period I was looking to get some target rounds just to have when it came back from the shop.  Yet the price for standard Round Nose ball ammo for 45 ACP stuck between 60 cents/round and $1/round delivered.

To put that into perspective,  for my purposes a box of 50 rounds is standard and I would expect to pay $16/box for target ammo.  Not fancy stuff, not hollow point, not custom, and not even reloadable for some of it, like CCI Blazer.  My price break-point was around $20/box for target ammo: above that and, really, it was getting to a rich diet.  At one point I decided that getting 'specialty ammo' that wasn't self-defense (stuff like tracer rounds) was worth looking into and that stuff I could find at $1/round delivered.  Heading into JUL 09 I had orders in at one custom reload place which was, and is, swamped with back orders as it was still hitting in that part of the market I would consider 'affordable'.  While I like Hornady for one of my other platforms, their standard of 20 rounds/box and high price per round didn't really do it when they trickled some supply on the market.

Which was gone in a day or two.

Graf & Sons got in a shipment of CCI Blazer and I purchased 3 boxes of it two weeks ago.  And that lasted less than a week after the weekend posting of supply.

Now a major shipment to Ammunition To Go has gotten in from Fiocchi and Aguila (plus CCI/Speer, but in non-target rounds).  I put in a larger order for Fiocchi last weekend.  The supply of Fiocchi dried up two days ago and Aguila is next cheapest in the category.

I had thought that it was a good sign that the bottom of the market, 22 lr, had seemingly firmed up with actual selection of rounds returning to it.  It is one of the most popular rounds in the US and cheaply made, yet the lack of supply for it has been a deeply troubling thing to see.  I could reliably get it for 5 cents/round or even less, delivered up until summer of 2008.  For most of 2009 up until the last month, it was hard to get at 8-10 cents/round when it was available at all.  The three words that allow one to go through the ammunition listings quickly are: Out Of Stock.  The 22 lr round made a comeback in JUL 09 now putting a bottom to that part of the market, for awhile, at least.  As it is a small, lightweight and easy to store round in bricks of 500, the fact that you can now buy it in brick amounts at low cost may signal that Americans finally feel they have enough of it to last them through any period of time and it will remain useful for years, during which, if things go well, they won't have a need to buy any ammo.

There will be some pent-up demand for 45 ACP as the market has gone nearly half a year without any refresh to it from the major suppliers.  That, alone, will see much of what is now getting to the shelves disappear from them.  And those that have purchased handguns as new owners and been without a good supply will be part of that demand.  In other parts of the market the draw down of reserves, in areas like 50 AE, will continue to see shortages as it is a low production run round with a limited market.

What has been fascinating to see is the lack of market response by manufacturers and custom loaders.

For one of the first times in the ammo market the possibility of a low-end custom loader getting enough orders to warrant an attempt to push into the larger market has been available.  When you are a custom loader and have 6-8 months of orders to fill and lack of supply, the time to purchase new equipment or up production levels has to be immense.  You still do not want quality standards to go down, however, and face the problem of either keeping quality up and supply down, or shifting to make a 'general market' push with new equipment that may not be up to the older standards in full, but still service the larger market.  Keeping a niche, high cost per round market and seeking to service the larger market with a known name has been a prime opportunity the last 9 months.  Yet none of the small time operations have tried to do that.  Here the appeal to a broader audience for support and offering shares or purchase bonuses to those that invest in a company to expand it has been overlooked.  The general firearms audience is large and even a small commitment from a good sized group of individuals, say 100 people willing to invest $1,000 each, is not an insubstantial capital consideration if you are an under 10 person operation.

Even more surprising is the lack of ability of the major manufacturers to vary from their schedules to attempt to gain market share.  While supplying war reserve is a prime consideration, these producers already have committed production lines for that and it is a relatively stable flow for the Armed Forces.  Overseas firms, like Sellier & Bellot from the Czech Republic, Fiocchi from Italy, Aguila from Mexico and RWS from Germany don't suffer those constraints, nor does Barnaul from Russia.  Likewise Magtech, Precision Cartridge and others on the domestic side don't have that pressing need, either, not to speak of the small custom loaders like Buchanan, Reeds and Georgia Arms.  For that last group the quality/quantity problem may be an obstacle, or not wanting to grow too quickly without assurances of a good market.  But the point is to change market divisions by providing a service at a good price point while the other suppliers are not doing so.  And 45 ACP is not a small market.

There have been new resellers jumping into the market, that is for sure, but that just divides up the limited ammo pie from production: no one has wanted to expand the pie to gain market share.

In all the multiple markets and tiers with niches within the firearms market, itself, is a fascinating review of basic economic theory, manufacturing scale problems and niche market needs.  Moving the problem to the suppliers of cartridge brass then begs the question: why no more manufacturing on that part?  Market demand without supply is supposed to drive suppliers to seek new and innovative ways to expand market share so they can capture it at the expense of competitors who can't do so.  Why are no manufacturers executing some precision sub-groups to jump on demand needs that are going unmet?  Again that is a market capture system, and the first to meet that unmet demand at a price that meets that demand is well on their way to being a harder competitor in that market not only due to meeting that demand but to customer loyalty.  Winchester had a good and ready market for its Silvertips to LW Seecamp owners... right to the moment they changed their design and Seecamp owners saw problems with the new design and the LW Seecamp company then started to recommend Speer over Winchester, and Winchester fell to competition status with Hornady and Federal Hdyra Shock rounds.  It has taken years for Winchester to finally re-address that niche community, but the sudden switch in loyalty created new market opportunities, and now new suppliers have inroads to that niche market as its consumers no longer are wedded to just the top recommended cartridge manufacturer.

Standard market analysis for commodity goods with quality variations should apply here, and yet the system is not behaving in that fashion.  It makes for interesting observation if a bit frustrating in understanding just what is driving these collective markets and sub-markets.  And when demand absorbs, easily, the lowest end production of the market and that part of the market cannot get supply, something really is out of whack.

Now I wonder how the blade markets have been doing lately...

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