Demand will continue to exceed supply, but not because we're still buying at panic levels.
This article is an interesting read on the subject:
Concentration is increasing prices and keeping them high. The ammunition duopoly and the "Great Ammunition Shortage" is just one example.
mattstoller.substack.com
It was posted earlier on the hide. It's written by someone completely outside the firearms industry, so with no ties to Vista or Olin.
TLDR: The industry is now consolidated enough that we're not likely to see ammo prices go back to normal without some sort of major shakeup.
With only two companies controlling nearly all domestic manufacturing, they can manipulate production to keep prices high (by restricting supply), and they've been open about that with investors. There's plenty of incentive for them to maintain the perception of a shortage to keep margins high, and basically none for them to go back to pre-pandemic levels of inventory surplus.
A few quotes from the CEO of Vista that paint the picture pretty well:
"Because of some of the consolidation we've done with Remington, even if you look long term, we don't see
the same type of price compression the industry may have experienced in previous times."
"Now with ammunition being the largest part of our business. I mean, clearly, buying a Remington, we've created what we feel like is an even more disciplined industry now as we go forward.
We've got, I think, like competitors in the sense that they watch growth, they watch their margin profiles. And we feel like we've got a disciplined industry."
And I've mentioned previously that we studied, as best we can…
industry capacity and making sure that we're not only managing our capacity, but very mindful of what's being brought into the industry, so we don't get over our skis, if you will."
By getting over their skis, he's talking about ending up in a situation where production is too high and is negatively impacting their margins by causing prices to drop. Meaning enough of a surplus that ammo is sitting on the shelves. If you can charge 100% more for something, you only have to make half as much of it. And if that creates a perception of shortage, even better because it increases turnover.
We've spend 2 years teaching the industry that we are willing to pay as much as 200-300% more that we were a few years ago for ammo and reloading components. We shouldn't expect them to forget that.
www.texarkanagazette.com
