What decides the price of ammo?

[John Wayne]

Getting started in reloading has got me wondering what exactly determines the cost of a round of ammunition. I'm not talking about inflated prices on hard-to-find calibers like .380 Auto, I'm talking about national retailer (i.e., WalMart) prices within the same store on different calibers, regardless of availability.

.38 special and 9mm cost roughly the same for me to reload. AFAICT, they also use very similar bullets, are the two most common revolver/auto casings, use the same primers, and don't use a whole lot of powder.

But WWB 9mm is $11 a box at WalMart, and .38 spl. is $16.

Likewise, .38 S&W uses similar components to .38 Special, but costs double the price. Maybe it's the heeled bullets in this example?

Same with .45 Colt and .45 ACP, one is double the price of the other.

.25 Auto doesn't use up much lead, brass, or powder, yet it costs as much as .357 Sig at some stores.


Unless there's something I'm missing, material costs can be eliminated for similar cartridges as they're basically the same. I understand why .45/70 costs more than .223, because it uses a lot more lead and a larger case, primer, etc.

Do ammo companies just charge outrageous prices for say, .32 Colt ammo because making .32 Colt ammo takes time away from something else they could be making, like .40 S&W?

 

[Big Boy]

Demand.

EDIT: Supply & Demand.

 

[Zoogster]

There is a base minimum price set by cost of raw materials and machinery maintenance.
Then there is various costs to running a business.
Finally there is profit, which they of course desire to be as high as the market will allow.

Unless there's something I'm missing,

Supply and demand fluctuates.
A very popular cartridge has increased demand, but that is then met by increased supply and competition. So there is bulk production of the cartridge. That reduces the value.
A less popular cartridge is made in smaller batches by fewer companies. There is less competition, and so the cost can be higher. A smaller market will also be effected more by spikes in demand. It will also be slower to reset to a lower price because there is less competition between manufacturers to force it back down once the cause for the spike in demand has subsided.
So they go up, but are slow to go down. Many revolver calibers are now in this position as semi-auto pistols have replaced them in LEO and military roles, and civilians use fewer of them. So you will find revolver calibers using the same or even smaller amounts of raw materials will normally cost more than similar semi-auto calibers.

A business naturally wishes to charge as much as people will pay for a product. When they push prices of ammo higher and people panic and purchase even more ammo, hurrying to stockpile it before it goes even higher, it tells them they can do whatever they want.
If they raise prices on complete cartridges and demand stays high, they are not going to lower thier profits by lowering thier prices.
If they raise prices on reloading components and people still come along and buy them, they have little reason to lower them.
After major demand spikes if they do not lower prices by much and yet still sell all they can produce, what incentive do they have to reduce profits?

Unless you are able to make your own primers, powder, and bullets you are still subject to thier control over prices even as a reloader. The actual cost to produce pure components is very low, but is not something the average person is set up to do. Reliable powders with set burn rates require a certain amount of quality control.

Less common calibers have less competition, so they go for what the fewer competing companies are willing to sell them for. They also don't exceed production, like they can for say one of the most common police or military calibers. If they make millions of rounds for a military or police contract, and then there is a change, like say the current war stops, there may be more rounds than needed some places along the supply chain.
So for a short time there is excessive rounds in those calibers, driving the value of other rounds in that caliber down even further. (Unless of course every gun owner is rushing out to buy up all the surplus, then the drop in price is minimal, there is merely greater supply but prices are not lowered by much before the temporary excess in supply is exhausted.)

So common rounds have various factors that help bring the cost of rounds down occasionally. While less common ones are effected by the upward spikes in cost, but far slower to be brought back down through competition.

 

[qajaq59]

One thing everyone seems to forget is shipping. While the price of making the ammo may go down, the shipping continues to climb. We recently had occasion to ship 1400 pounds of our stuff from up in the Boston area and the prices were outrageous. And fuel costs are heading up again so don't look for prices to go down much.

 

[Speedo66]

Basic economic theory:

1-Supply and demand

2-Economy of scale

1-Large demand, you pay what the market will bear, i.e. prices for .223 and .308.

2-The more you make, the cheaper the item gets to manufacture. Explains why 9mm can go for $10-15/box, while Winchester charges $70/box for 38-40.

 

[mbt2001]

The market...

 

[huntsman]

What decides the price of ammo?

Volume of sale and .gov contracts

 

[ServiceSoon]

In all of your examples the caliber which is shot more often cost less. Sounds correct to me.

 

[stchman]

A. Political climate
B. Supply and demand
C. Complexity to manufacture


There may be more determining factors, but those are the big ones IMO.

 

[John Wayne]

I understand supply and demand and raw material costs. It doesn't seem like .30-40 Krag would be any more costly to produce than a similar round like .30 WCF...I mean, ammo companies have had the machines to load both these calibers for the last century. Maybe they're using the older, less-efficient, more expensive machinery to manufacture calibers with low demand?

Service Soon, that's what it seems like to me as well. But if it all comes down to the popularity of a cartridge, why has .380 ammo not gone down? Now that there are over 5 reputable manufacturers making very popular .380 micro pistols, wouldn't the demand go up to make it at least a little cheaper?

I don't see political climate being a factor; all that does is drive ammo prices up in general. I'm wondering why some calibers cost more than others, at the same time, in the same place, even after materials and manufacturing costs are factored in. Same with shipping, the price of ammo goes up across the board (more heavily in calibers that weigh more, weight isn't the deciding factor of the price of ammo).

 

[RockyMtnTactical]

Supply and Demand, The market, etc...

 

[scout26]

I mean, ammo companies have had the machines to load both these calibers for the last century. Maybe they're using the older, less-efficient, more expensive machinery to manufacture calibers with low demand?

Umm, not exactly. They have the dies to load those calibers. But they don't have a production line for each caliber. They have to change over the machines. Look at the "Pics of my reloading bench" thread. Some people have 2,3,4,5, or more reloaders, not one for every caliber they shoot, but they buy a new one when their demand for that caliber makes the investment in a new machine makes more sense then doing a change over on an existing machine. Think of when you change your reloader from one caliber to another. How long does that take ?? Now picture that on a large scale. I'm the Logistics Manager a can manufacturer. We have five lines, but can make ~20 different size cans. When we have to change sizes on our production lines, we lose anyhwere from a couple of hours to 3 or 4 days of production. We still have to pay for lights, heat, employees, etc. while we're not making any product to sell. Those costs have to be covered, every time we do a change over. So what we do is try to project what the demand will be for the next 3-6 months of less popular sizes of cans, so that when we do a changeover we run enough to cover the anticipated demand to minimize the line down time. While our smaller sizes use less material, they actually can cost more to produce because of the changeover costs.

Service Soon, that's what it seems like to me as well. But if it all comes down to the popularity of a cartridge, why has .380 ammo not gone down? Now that there are over 5 reputable manufacturers making very popular .380 micro pistols, wouldn't the demand go up to make it at least a little cheaper?

The increased demand makes the price go up. .380 is a perfect example. Manufacturers generally ran it once a year, enough to meet historical demand and a little more. The 5 new .380 pistols that came out this year, coupled with the unprecedented demand for all ammo (caused by the political climate), created a shortage. Demand greater then supply causes prices to rise. (see http://en.wikipedia.org/wiki/Supply_and_demand )

I don't see political climate being a factor; all that does is drive ammo prices up in general. I'm wondering why some calibers cost more than others, at the same time, in the same place, even after materials and manufacturing costs are factored in. Same with shipping, the price of ammo goes up across the board (more heavily in calibers that weigh more, weight isn't the deciding factor of the price of ammo).

The political climate has created the demand. (Panic buying) Which pushed up the costs of raw materials. Remember the production lines can only produce X number of each type of round. For example, our lines can make only make 20-30 gallon cans per minute, but can crank out 70-80 pint cans. With demand for every caliber going through the roof, the manufacturers had to decide if it is worthwhile to shutdown lines to change over, when there's a huge demand for what's currently running. Just pulling numbers out of my 4th point, let's say the line can run at 100 rounds per minute with 9mm at a profit of .02 per round. But it can only run .380 at 75 rounds per minute with the same (or less) profit. Does it then make sense to shut it down, and valuable production time to make something that produces less profit or can actually cost you money.

On average 15-50% or product prices are transportation costs. I can tell you all about Logistics costs, if you're interested.

 

[John Wayne]

scout26, yours is the first post that explains it. All my other theories were based on the assumption that ammunition manufacturers had dedicated machines to produce each caliber. Having to change machinery would obviously run up production costs, as you said.

 

[9mmepiphany]

All my other theories were based on the assumption that ammunition manufacturers had dedicated machines to produce each caliber

that's a fairly common belief, until you become aware that certain calibers are only available at certain times of the year

increased demand always causes the price to rise until supply catches up.

retailers will always charge as much as people are willing to pay, until they aren't will to pay it anymore...that defines a free market