Friday, June 29, 2007

Why is ammo so expensive?

Yesterday, I was reading the gun thing forums, and the question was asked (and I'm paraphrasing here):

"Dear everloving god .30-06 hunting ammo is expensive. I've seen .30-06 anywhere from $8.50 a box to $30 a box, what's the difference and why are they sucking m life blood away with every shot?"

Well, that's an interesting question; and like most interesting questions, it's got a long, and somewhat complicated answer.

The first thing is that the price of ammo has gone up at least 50% over the past few years (and in some cases has doubled or more). It used to be $4 a box for 5.56 55gr Mil-Ball and now (if you can get any), its between $6.50 and $9 depending on who made it, where, when etc...

This is for two reasons:
  1. The war has made demand for new ammo skyrocket all over the world (not just the U.S.). There is only so much production capacity available.

    For example, Syria took up pretty much an entire years worth of production of 7.62x39 from Russia; leaving none on the market from the major Russian producers for that entire year except what was already stocked.

    Ohlin is the primary manufacturer of 5.56 ammo and components in the world (they ARE Winchester ammunition; and they make the components for many of the other ammo companies) and most of their production capacity has been spent fulfilling orders from the US, and NATO allies.

  2. The price of the metals used in ammunition production (copper, nickel, lead, tin, antimony) have all gone through the roof as well. Over the past four years, the price of copper has quadrupled from recent lows. Copper is the main component of cases and jackets.

    This increase in demand for commodities is primarily due to increased demand from China and India; as well as a reaction to the drawdown in the mining industry in the mid 90s. The industry added too much production capacity in the late 80s (which itself was a reaction to housing booms, and computer manufacturing booms) which glutted the market with cheap copper, causing the prices to collapse. This made mining less profitable, therefore they reduced capacity to compensate, which would have naturally settled the price to a reasonable, profitable but not ridiculous level.

    Well, no-one foresaw this major upswing in demand, they reduced production capacity too far, and the cycle continues to rollercoaster. In a couple years the commodity prices should come down a bit, and stabilize; because additional production capacity will have come on line (it takes 2-6 years for mining production capacity changes to catch up to the market).
Anyway, this whole issue has made ALL ammo more expensive; but the biggest impact is on the low end; both because it's the low end where raw materials cost is the largest percentage of their production cost; and because high end ammo is already priced about as high as the market will bear (at least what it will bear today anyway).

What we're seeing in response is a reloading renaissance over the past three years. From the 60s through the mid 80s, good factory ammo was REALLY expensive (relative to income, even more so than today); and after '86 the availability of surplus ammunition was poor (rule changes in how the gov't disposed of surplus); so lots of folks handloaded/reloaded.

In the 90s the cost of ammo fell precipitously, because of the aforementioned copper glut; and because of new sources of cheap surplus ammo from abroad. In fact, a large number of ammunition manufacturers went out of business (partly form the price changes, and partly from liability costs); and many ammunition factories in the U.S. closed, because their bare production cost was higher than the retail cost of the imported ammo.

As a result, you couldn't load it yourself for less than the cost of buying the imports; and handloading became far less popular. Basically, instead of being the best way to shoot on the cheap; handloading was reduced to those for whom it was a hobby in and of itself; or an adjunct for competition shooters (who need large volumes of premium quality ammo), and shooters who shot rare chamberings (for which cheap ammo wasn't available).

Well, most of that imported ammo supply has dried up; partly because of the war, and partly because the UN and the ATF are working together (no, not a conspiracy theory, it's verifiably true) to reduce global ammo exports (and thus imports into this country).

This has resulted in the near complete removal of South African surplus ammo from the market for example. They had been our best source of good quality surplus 7.62x51 and 5.56n ammunition. Other countries have of course been effected as well; but it's the SA stuff being missing that really hurts us EBR shooters.

Now, addressing "premium" ammo specifically (by which I mean hunting and defensive ammo primarily, but premium target ammo as well), there is another set of conditions added on top of that which increase the costs.

Typically speaking, at todays prices, generic FMJ ammo is about $16 a box of 50 retail for .45acp, $13 a box of 50 retail for 9mm, and $6.50 a box of 20 retail for .223.

Those same chamberings in a premium defensive or hunting ammunition would run you about $19 a box of 20 for .45, about $17 a box of 20 for 9mm, and about $23 a box of 20 for .223... maybe a bit more or a bit less depending on which exact load you are talking about.

Thats a swing from about $0.30 a round to about $0.95 a round for .45; from $0.26 to $1.17 a round for 9mm; and from $0.33 a round to $1.15 a round for .223

Basically, you typically pay three to four times as much for "premium" ammo as you do for generic stuff... and it used to be a bigger disparity before the commodity crunch made low end ammo so much more expensive.


Ok, Why? Are the ammo companies just gouging?

Well, no they aren't gouging; but they are charging what the market will bear. As I said, the increase in ammo prices overall has only bumped premium ammo up between 10 and 20% while it has bumped low end ammo up 50% to 400%. Part of that is because the materials costs are a lower percentage of the total price of premium ammo (which we'll get to in a minute), and part is because the ammo companies just can't charge any more without hurting sales badly.

Ok, so they are charging as much as they can get for it; but why is premium ammo so much more expensive to make?

It comes down to the type and construction of component used; and the care taken with the construction of the round overall.
  1. Quality components are more expensive

  2. Making ANYTHING to a high degree of precision is more time consuming, requires more skill, and has a higher rejection rate; and that's even more so with ammo. Ammunition requires more precision than most other products to begin with, never mind premium ammunition (which has tolerances measured in ten thousandths of an inch and ten thousandths of an ounce).
The fact is, it takes a lot of time to make top quality ammo. In your own home you can crank out 1000 rounds per hour of medium quality ammunition in the same time it takes to make bulk ammo, using a progressive reloading machine just like the smaller premium ammo manufacturers use (the Dillon Super1050) ; just by using better quality components.

Just about every major manufacturer has a line of ammuniton that uses better quality components, and are built to a better standard. These rounds are naturally more expensive; but they aren't any more time consuming to make on standard production machinery. These are their medium priced rounds (the difference between an $8.50 box of .30-06 and a $15 box)

Making the best match grade ammunition though, it takes a lot of time. You go from 1000 rounds an hour on a progressive machine, to 20 or 30 rounds per hour on a single stage; because every step has to be carefully controlled, monitored, weighed and measured, to ensure consistency (the difference between a $15 box and a $30 box).

Of course the big ammunition manufacturers aren't loading their ammo by hand at 30 rounds per hour (though some of the smaller specialty places will, for an enormous amount of money); they've spent tens of millions of dollars on manufacturing technologies that allow them to load thousands of rounds per hour at the top quality; but that's still a lot less production capacity than the hundreds of thousands of rounds per hour they can get with bulk ammo from the same investment in machinery.

The "super premium" rounds from Federal (the gold match line), Black Hills, Norma, Dynamit Nobel, Lapua, Eley etc... are all substantially more expensive than even the "premium" rounds, because they use even higher quality components, and take a lot more care in loading to ensure consistency (which means accuracy and precision); thus use more expensive and time consuming production techniques and equipment.

As to why premium hunting and defensive COMPONENTS (bullets, cases, and primers; as opposed to the full assemblage of the rounds they are made into), theres a few reasons:
  1. Manufacturing time, technology, and tooling are expensive

  2. There is a lower volume of sales of such components to amortize the costs of said development and tooling

  3. There is a much higher level of precision, quality control, rejection rate etc… for such bullets; which both increases production time overall, and which requires even MORE expensive manufacturing technology and tooling.
All told, the bullet is generally the second most expensive component of a loaded round (the brass case is generally the most expensive, though sometimes those positions reverse); but it’s the quality control that really ups the cost.

Just to give you an example of how MUCH the quality control ups the cost vs how much the cost of components does; let's look at the costs of handloading bulk rounds vs the absolute best quality match rounds.

This isolates the differences in productions costs for the loaded rounds. Though it incorporates the cost differences in components, you'll see those are actually rather small compared to the actual manufacturing costs - labor, production line time, and quality control.

Using .223 as an example, the costs per 1000 rounds are as follows:
Bulk Ammo:
  • Primers - $22
  • Cases - $152
  • Bullets - $83
  • Powder - $35
Super Premium Match Grade:
  • Benchrest primers - $29
  • Match grade cases - $200
  • Match bullets - $133
  • Match grade powder - $43
As you can see, there is a substantial difference in cost per round for just the components of bulk ammo vs. top quality. The bulk ammo costs us $292 per 1000, or $0.29 per round; the premium $405 per thousand, or $0.41 per round.
A side note: I used the average of several different brands of match grade brass here, because the absolute top quality brass (from Lapua of Finland), is insanely expensive. In fact, even the most premium ammunition from all but a few specialty manufacturers doesn't use special benchrest brass, because it costs two to three times the price of standard bulk production brass, for a very small increase in performance over the match brass which is only 50% more expensive than bulk. Ammunition made with such brass sells for $40 per box (of 20) or more.
Compare though the price difference in those components, with the price difference in the loaded rounds:
  • Bulk component cost was $0.29 per round, bulk loaded cost was $0.33 per round. The labor, production line time, and QC component of the rounds price here was only $0.04. That's only about 13% of the cost of the loaded round.

  • The premium components were $0.12 more expensive per rounds (almost 30%) at $0.41; but the loaded cost of a premium round is about $1.15. This means that production costs (labor, production line time, and QC) were $0.74 more than the component cost; 65% of the cost of the loaded round.
If premium loaded rounds were made to about the same standard as bulk ammo, as a cost percent, they would only cost about $o.53 per round; less than half their actual cost.

Of course you see the difference at the other end. A rifle that will group 5 shots into 8" at 300 yards with the bulk ammo may group into under 1" with the higher quality ammo (and in fact this happens every day).

Alright, but what if you aren't a target shooter; and you don't need that 1/4 moa grouping; or a handgun shooter where 8 MOA is generally considered pretty good shooting?

It's all about consistency of performance. With target shooting you're worried about pinpoint accuracy; but with defense and hunting you need good (though not spectacular) accuracy with the best possible terminal performance.

To achieve this, you can't significantly reduce the quality control required, and you actually have to increase the technology required.

Now as I said above, technology and quality control are also factored into the price of those premium components themselves. We've talked about QC costs already, but why, other than good quality control, are the component bullets expensive?

Simple, because a lot of technology and development went into making them perform properly for their intended role.

A lot of development? It's just a hunk of metal that weighs a half an ounce (or less), just how much development could there be?

A whole hell of a lot actually.

Premium defensive hollowpoint ammunition is designed to penetrate well, but still expand to the maximum possible extent, while retaining all of its weight and not fragmenting; across a range of pressures and velocities appropriate to the weapons it will be shot from.

That's not easy; in fact it's fantastically difficult.

The hollowpoint bullet was invented in the late 1880s, but it wasn't until the late 1980s that hollow points that would reliably feed, expand, and not disintegrate were fully developed. It was the mid 1990s before you could find a whole selection of them from various manufacturers; and we are STILL trying to figure out how to optimize the performance of such bullets; and improve their capabilities across a broader range of weapons (short barreled guns perform very differently from long barreled guns for example).

The story in hunting bullets is similar; only there are even more variables, because instead of trying to stop a relatively fragile, thin skinned human being at short range, you have to design bullets that will stop everything from tiny furry ground squirrels at short range, to huge relatively (compared to humans) thick skinned elk, ram etc... at VERY long ranges; to damn near armored hide rhinos, elephants, hippos, and other dangerous game, at medium to short ranges.

Each type of game, and type of hunt, requires different performance characteristics from the bullets. Thin skinned small game require shallow penetration and radical expansion. Thick skinned game require very deep penetration with very little expansion. Dangerous thin skinned game (mountain lions for example) require both deep penetration and expansion.

The technology of those bullets goes into managing their penetration and expansion; and developing that technology has been a long, difficult, and expensive process.

Now, if you’re just plinking or casual target shooting, there is no need to buy ammo built to this standard; and in the common calibers there are several sources of mil-surp or generic ammo available at much lower cost than the various hunting and defensive loads.
Just a note on mil-surp, and imported generic ammo. Some are corrosive, some not, and some maybe/iffy. They almost all use FMJ (though some use lower quality JHP or other designs); and are generally made to various foreign military standards. Those standards are generally pretty good, but not something to trust a match, or a trophy buck to, and certainly not something I'd trust in a defensive handgun situation.
For hunting, match use, or defensive use though; theres a pretty good reason why you want to use the best ammo you can: You only get one shot at doing it right.

Would you bet your life on a cheap bullet?