US brass producers see spike in ammo demand

While demand for metal products has been widely impacted by the coronavirus pandemic across multiple industries, US brass producers have begun to see a sharp uptick in demand for brass shells as gun sales spike.

Many Americans are flocking to local gun stores with the intent to stock up on firearms and ammunition, leaving scrap dealers and brass producers scrambling to keep up with demand and potentially leading to higher prices for brass scrap.

The rush for ammunition has manufacturers ramping up production of brass shells, giving mills and scrap dealers alike a surge in the demand for brass and shell scrap.

"Demand for brass and ammo specifically is intense right now," one dealer said. "Our refurbished, resale brass shell casing business is through the roof."

US ammunition and firearm demand typically spikes during periods of unrest and uncertainty or when fears over government regulation surface. US firearm production spiked in 2016 ahead of the presidential election, hitting a record 11.5mn units, according to the US Bureau of Alcohol, Tobaccos, Firearms and Explosives (ATF). Firearm production fell to a six-year low in 2017 of 8.3mn units after the election of President Donald Trump, a staunch supporter of gun ownership.

"Our ammunition business for brass is way up for April and May," a US brass producer said. "Those orders have been off for roughly a year or so. Knowing that we have these orders in place, we are already quoting for May deliveries."

But there are some scrap dealers that are out of the market right now because of slim margins and too much competition for limited quantities available.

Base metal dealers of copper and zinc, the components that make up brass, have yet to see a benefit of the run on brass shells.

"We are not seeing too much change in our usual demand for any of the base metals versus pre-virus," a dealer said. "But if brass demand continues and scrap remains tight, we could see a rise in copper cathodes and special high-grade zinc."

Spreads for brass scrap and shell scrap have been relatively flat for the year. Brass scrap spreads have averaged 11-13¢/lb under the next active month Comex copper contract for the copper portion, with the zinc portion at 6-8¢/lb under the LME three-month price. Brass shells typically run 8-10¢/lb cheaper on the copper portion than copper scrap because of lead residue and flat-5¢/lb cheaper on the zinc. But with the increased demand and because of the tightened supply of scrap, spreads may strengthen in the coming weeks and months for both components.

By Mike Hlafka