Metal vs. Ammo price

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Abndoc

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The commodities market shows a drop of roughly 50% for brass, lead and copper. The previous high prices were used as a justification for high ammo prices. Does anyone expect to see a price drop soon? Or will the current panic buying continue to keep demand up and manufacturers bottom line inflated?

Which company will be first for a price drop? I imagine that the companies follow these online forums as good business practice, so come on, throw us consumers a bone.
 
This has been covered repeatedly - just because the price of a commodity has dropped does not mean that the end user price of the goods made with those materials will drop.

The companies have bought large amounts of stock, which they paid a certain price for. If the price drops tomorrow, they still have X amount of old stock that they paid the old price for. If they dropped their price, they'd be losing money. They're not going to lose money.

Also, in case anyone here hasn't noticed, pretty much anything gun-related is flying off the shelves like crazy thanks to the recent election. Gun and ammo manufacturers are making a mint, regardless of what the price they pay for raw materials is.

Simply put, a drop in the base price of raw materials does not in any significant way translate to the end user price of the goods made with those materials. If we see a price drop, it will be quite a while in the future.
 
As Kingpin mentioned, there won't be a price drop, not immediately at least, but in the next 4-5 months you'll see a drop.

If you're interested in seeing the kind of lead time it takes for prices to change, just check out the internet archive of ammoman.com's site for the last 4-5 years and compare it to the historical prices of copper and lead. It took nearly a half a year for the material cost of these industrial metals to actually raise the price of ammunition. There are also other factors, military surplus ammunition isn't nearly as prevalent as 5 years ago and the current high demand is also driving up prices. The prices today also reflect the price of industrial metals 4-5 months ago, which is is nearly 300% higher from what they are today.
 
Does anyone have any idea how much stock they normally keep on hand? Six months worth, maybe? It may be wishful thinking on my part, but wouldn't smaller ammo makers be more responsive to the market due to smaller inventory and less lead time?
 
Does anyone have any idea how much stock they normally keep on hand? Six months worth, maybe? It may be wishful thinking on my part, but wouldn't smaller ammo makers be more responsive to the market due to smaller inventory and less lead time?

It's not so much a matter of stock on hand, as it is raw materials on hand.

Companies buy raw materials in massive quantities, so it's there whenever they need it. Companies will also play the commodities market to try to hedge their bets against potentially rising costs in the future. This means they could have say a 3-6 months supply of raw materials laying around at any given time.If they think prices are going to go up, or there's evidence they are going up - they'll stock up while the prices are good.

The question isn't so much a matter of the amount of mfg's stock they keep around, but how fast they can process the raw materials, and sell the product of those materials. It doesn't matter if they can move the finished product quickly, if they've got a years supply of material at a high cost - they have to keep their cost high to make their money back until that material is gone.

Not 100% sure this is how it works with ammo, but it's how it works in just about any other commodities driven process.
 
Something else that should be considered is that the cost of oil and natural gas has also declined sharply. So the cost of manufacturing has probably dropped (much electricity is produced using natural gas) and the cost of transporting the ammo from the plant to wholesalers has dropped.

It won't be major, but it should have some effect.
 
Also, just because a manufacturer runs out of old stock raw materials and is now able to buy new materials at the lower price, does not mean that prices will drop.

Plainly put, sellers will charge what the market will bear. If the customers are buying a ten-dollar box of ammo at the same rate as they used to buy the same box of ammo for five dollars a year ago - guess what? No price drop.

People need to realize that a drop in the price of raw goods means extremely little in terms of end-user effect. It's just that simple. There is no one factor that can be pointed to and used as an indicator of future price points.
 
Manufacturers know this: the average consumer doesn't know squat about what the average price of raw materials actually is. So when prices go up, they raise their costs. When prices go back down, they don't drop their costs because now they're making a crapton of money that's pure profit.
 
Exactly. To look at the commodities market and assume that because lead or copper or brass has dropped that the prices of ammo or other goods made with those metals will automatically drop in price as well is short-sighted and incorrect.

As much as we'd all like such things to be exact 1:1 indicators of the prices we end up paying at the register, it's simply not the case.
 
Supply and demand. Stop buying and the price comes down. Look at the gas prices, people had enough, and cut back, and down goes the price. Its simple economics we all learned in high school. Same with ammo, if we all banded together and stopped buying, it would have to come down.
 
Except that supply and demand is only part of the equation. Demand can drop off entirely, but that doesn't make the stock the manufacturers have on hand any cheaper to get rid of. Sure, you might see some small drop in price at the register, but the fact is that there are a number of factors that come into play.
 
If demand is low and manufacturer B is selling ammo at a lower cost because he used up all his expensive metals, manufacturer A isn't going to sit there and keep prices high so they can still make money on their old stock. They will lower it until they're selling it at cost, and lower if the other prices are much lower and they can't move their ammo.
 
Mike the Wolf:

What you probably meant was that when costs rise, retail prices must also rise, but when costs go down, retail prices often don't follow.
Good point.

What truly baffles me is that huge numbers of people decided to wait until the election to realize what they already suspected for months.
 
prices

oil prices dropped not because of lack of use but because the stock market dumped.people sold of their futures,and thats what dropped oil.ammo does not go on stock market.allso as I read posts many people are burning up ammo like its peas.500/1000 rds a week end is crazy.I cant posibly see how you can learn marksmanship that way.I know a bunch of top marksmen(their dying out)they shot about 25 a day.every day.not hundreds.so I expect that the demand is still very high.:rolleyes::uhoh:
 
because the stock market dumped

I'm no expert, but I think the oil companies are traded on the stock market, but crude oil is on the commodities market. If a sudden drop in price for crude is reflective of pump price, then why wouldn't a change in metal commodities prices reflect in product prices likewise?

When you buy a tank of gas, the price you are paying for is not what that gas cost in the gas station storage tank, but the predicted replacement cost of that gas. Thats why you can fill up your truck one day at one price, and go back the next to fill your car and the price will be up or down. You know it's the same gas you bought yesterday.

Metal prices may turn around slower than energy, but it should still change.
 
What happened to JIT manufacturing? If you think that someone hoards large amounts of commodities, then you have been smoking.
You do not have the capital to keep many weeks of raw supplies on hand.

Don't believe the smoke.

ATK's 10-k and statements have been talking about how they are trying to sell premium bullets and raise their consumer margins to make up for the pending decrease in military consumption.

Do some reading and some thinking!
bill
 
ATK's 10-k and statements have been talking about how they are trying to sell premium bullets and raise their consumer margins to make up for the pending decrease in military consumption.
Where in ATK's annual report does it say any of that?

JIT manufacturing has little to do with any of it, it has much more to do with fixing futures for raw materials. If anything the report sheds light on the fact that ATK bought raw material futures in effort to beat the market and will now be taking a huge hit since the commodity market has crashed.
 
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