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Expansion Industries May Be the Light at the End of the Tunnel Reloaders Have Been Hoping For


Dan Z. for TTAG

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Reader C. Allen Cody, Jr. writes . . .

Why are ammunition primers scarce? Collusion? Gun Control? Price Controls? Revolution? No one knows for sure, but what we do know is that ammunition primers have been, and will remain, scarce, and there will be limited availability until later this year at the earliest.

Two corporations in the shooting sports arena – Olin Corporation and Vista Outdoor, Inc. – have a corner on the market for ammunition primers, at least here in the US. One startup company, Expansion Industries, is stepping up to help fill the void.

Historical Backdrop

2020 and 2021 saw the addition of several million new gun owners, and the demand for ammunition in all the popular calibers increased dramatically. And yet for months, retailer shelves have remained bare of primers for both pistol (small and large), rifle (small, large, magnum), and even shotgun ammunition. A check of popular retailers’ websites that normally stock primers for sale to the public indicates that most (not all, but close to it) primers are out of stock and on backorder. Sure, scalpers are still offering primers for sale on some websites, but there’s still a very limited supply available.

Gun owners and shooters universally understand that ammunition primers are an essential component in the production of centerfire ammunition. Simply put, the primer is what makes the gun go bang. The cartridge won’t fire until the primer ignites the powder and sends the bullet down the barrel toward its intended target.

Without all of the essential components — the primer, the shell casing, the gunpowder, and the projectile — gun owners can only purchase factory ammunition.

Gun and ammunition sales began to skyrocket at the beginning of 2020 as Covid ramped up, the George Floyd riots raged and the election neared. Ammunition supplies became scarce and only recently has ammunition in most popular calibers become available again, albeit at higher prices. Granted, the Covid pandemic created materials supply challenges and shortages, and this added to the manufacturers’ inability to keep up with demand. Lately, ammunition availability has increased, but so have prices.

Basic laws of economics dictate that prices rise when demand exceeds supply. The lack of supply of primers means that reloaders — the portion of shooting sports enthusiasts in this country that reload spent cartridges at a significant savings — simply means that purchasing factory ammunition is the only solution if the components aren’t available.

To be fair, reloading isn’t all about price. A skilled reloader can achieve greater accuracy over the use of factory ammunition, and the use of specific components will achieve superior results over factory loads for different uses like hunting, target shooting, or self-defense.

Olin Corporation

In 2021 Olin (NYSE: OLIN) recorded sales revenue of $8.9 billion dollars. Olin owns Winchester Ammunition. In September 2019 Winchester received a 7-year contract to operate the Lake City Army Ammunition Plant in Independence, Missouri, and the company assumed full control and operation in October 2020.

In its 2021 annual report the company noted that sales to US Government Agencies under contract accounted for only 4% of revenue, but that is largely due to Winchester. Total 2021 backlog associated with the Winchester business was $2.2 billion, and $1.9 billion as of January 31, 2022. International sales accounted for another 5% of Winchester revenue. 2021 Winchester sales increased by $656 million, primarily due to increased commercial ammunition pricing and higher commercial and military sales volumes, which includes ammunition produced at Lake City.

Vista Outdoor

Vista Outdoor, Inc. (NYSE: VSTO) reported 2021 revenue of $2.2 billion. The company operates two segments – shooting sports, and outdoor products. The shooting sports segment’s share of revenue equaled 68%, or approximately $1.5 billion dollars. Vista owns CCI, Federal Premium, Alliant Powder, and RCBS (reloading equipment), among other brands in its shooting sports segment.

Vista notes in its 2021 annual report that ammunition sales accounted for the largest portion of the shooting sports segment’s revenue, and that ammunition is a “consumable, repeat purchase product.”. The revenue derived from ammunition sales to government agencies is unclear.

A Corner on the Primer Market

Together Winchester, CCI, and Federal Premium currently account for most of the ammunition primers produced and sold in the US. According to publicly available data, since 2015 Olin has received more than 1,600 federal contracts to supply ammunition and components to federal agencies. Vista has racked up more than 1,000 similar contracts in the same timeframe.

Many of these contracts are multi-year procurements, and financial data taken from their respective annual reports suggests that ammunition sales account for annual revenue in the hundreds of millions of dollars for each company.

According to articles and videos available on social media outlets, when questioned about the lack of availability of ammunition and primers both companies have been quick to respond that (paraphrasing) they are working around the clock to increase capacity to meet pent up consumer demand. To make matters worse, in December of last year a Vista spokesperson stated that CCI and Federal primers would be unavailable for 2022 due to the need to make ammunition to meet demand, and the company would not accept more orders until further notice.

All of this leads to several questions of why are primers still relatively unavailable? Among the possible theories, all but one makes no sense, are unprovable, and will surely enrage certain political factions of the country with cries of conspiracy, or worse.

Gun Control

The most glaring question is why are federal government agencies, e.g., ATF, Homeland Security, FBI (as well as the armed forces through government owned manufacturing facilities, e.g., Lake City) buying so much ammunition? On its face it doesn’t make sense because the Biden Administration is clearly anti-2nd Amendment, and pro-gun control. The plethora of litigation within our federal judicial system is a testament to the government’s repeated attempts to keep guns out of the hands of law-abiding citizens.

One possibility is that the government may be intentionally stockpiling ammunition, either as a form of gun control or in preparation for an unknown, future event. We can’t prove it, but it could be to effectively limit or remove supply available to the public – i.e., as a form of back door gun control.

The government cannot legally prevent citizens from arming themselves or taking advantage of their constitutional rights, but it can buy up available supplies of ammunition and components to prevent — to some degree — the use of civilian-owned guns. Bluntly put, you can’t shoot a gun if you don’t have the ammunition for it. You can’t reload your cases if you can’t get components (i.e., primers, powder, projectiles). The rebuttal to this is that government ammunition purchases quantities have been relatively stable for several years and current purchases don’t represent an unusual increase in volume.

Of course, a more sinister theory would be that the government is stockpiling ammunition in preparation for what it perceives as the possibility of a violent insurrection. That kind of talk, however, promotes claims of crazy conspiracy theories from the left and the mainstream media. We won’t go there.

Price Controls and Collusion

It should be known that while government sales generate a stable revenue stream for ammunition manufacturers like Olin and Vista, the government does not (i.e., will not) pay a premium price. Profit margins rarely exceed 10% for federal contracts. However, it will reimburse the contractor for legitimate (allowable) costs, such as for materials and a separate, modest “fee.” And we know that materials costs have been steadily rising. As we have seen both companies are large, publicly held corporations and shareholders are normally unimpressed (i.e., unsatisfied) with low profitability.

This leads to another theory that Olin and Vista are intentionally limiting commercial supply of ammunition and components to drive up prices, all the while claiming they’re doing the best that they can to produce ammunition. In other words, they’re allegedly colluding to drive prices and profits up. The government won’t pay premium prices so, this theory goes, the higher profit margins have to come from retail and commercial sales.

 

Again, the data don’t support this theory. In fact, Vista claims that its commercial ammunition sales dropped after the 2016 general election, and only picked up prior to the 2020 election.

While the data show that both companies have focused on satisfying government contractual sales, the collusion theory is unprovable and would create a sizable backlash from customers, the media, and politicians. At best we can conclude that both companies are working to meet their government contracts, but may have focused too heavily on the government sales to the detriment of commercial side of the business. Therefore, we will chalk this up to be another conspiracy theory and end it right there.

Reality

This leaves us with the most plausible — and most sane — reason for limited primer availability. The confluence of world events has created the current shortage. The Covid pandemic resulted in labor and materials shortages, higher prices, and increased regulation regarding transportation of product to market. This is coupled with economic and political unrest and uncertainty in the US, increased gun sales, war in eastern Europe, and threats of conflict with other countries.

All have contributed to the current primer shortages. Both Olin and Vista are in business to make a profit, and they are producing as much ammunition (and components) as possible, considering all the market constraints under which they must operate. Adding capacity is a slow and expensive proposition. And adding capacity now may result in idled machinery and layoffs in the future when demand eventually cools…prospects both companies no doubt want to avoid.

There is Another

There is a glimmer of hope for reloaders, however. Expansion Industries out of Carrollton, Texas, has entered the primer manufacturing arena and expects to begin shipping primers to wholesalers later in 2022. The author contacted the company regarding the future availability of primers and heard back from Rickie Smissen, Jr., Expansion Industries co-owner and national marketing director.

Smissen explained that the company was formed to fill the imbalance in the retail side and will be supplying both primers and ammunition to the commercial market in the coming months. Smissen noted that initial production will be allocated to its original equipment manufacturer customers first because “they took a chance on us and ordered when no one knew who we were.”

Expansion’s OEM customers (i.e., small to medium factory operations, mom and pop ammunition shops, online reloading supply retailers) will get their orders filled first before retail customers will be able to purchase product directly from Expansion, but Smissen added that, “eventually they will be able to do so.”

As far as the collusion theory goes, Smissen said “at the end of the day if you are an ammunition manufacturer and you signed a contract to produce ammunition for Uncle Sam, [then] you are subject to getting that contract done first, and the rest of your business becomes secondary… But it’s not honest to say those contracts don’t have an effect on domestic ammunition supply.”

Smissen went on to say, “The real question that people are not asking is why after such a demand increase, do domestic ammunition manufacturers not double down, reinvest in their companies, reinvest in American Jobs, and produce more product? In our case it’s left an incredible opportunity to fill the gap the other larger manufacturers either don’t want to fill or can’t fill.”

Expansion’s solution to the imbalance between government and commercial sales is “to just make more pie.” Smissen theorizes that a lot of manufacturers are “happy with their profit margins and either lack the will power or logistics to increase their energetics/primer capacity.” He said Expansion designed their energetics lines with cell manufacturing in mind, and that “we can increase our lines at a fraction of the cost of implementing a full line and we can react easier to what the market demand is.”

But what about pricing? Smissen explained that all the OEM customers have signed “MAP” pricing agreements, or the minimum advertised pricing, to try to help prevent any price gouging. He adds, “The biggest way we are combating that is by ramping up our production and selling a sizable amount of primers. Eventually the volume we expect to manufacture will help stabilize the primer market domestically.”

Finally, he stated that, “We are hoping that by the end of the summer that our first energetics/primer building will be at full production with other energetics/primer buildings going live first quarter of 2023.”

It will be interesting to see how the rest of 2022 plays out regarding Olin and Vista Outdoor. For now, however, we can only wait and hope that the future will turn brighter for reloaders once Expansion Industries begins full production.

 

Disclaimer: The opinions in this article are those of the author alone, offer information only, and do not reflect opinions from any other source. Wherever possible, information was gathered from reliable public sources such as the Internet, company press releases, or social media outlets. This article is not intended to promote, advertise, or sell any product or service. The author did not reach out to either Olin or Vista Outdoor for comment. Comments from Expansion Ammunition were used with permission.

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