It's the Bullets, Stupid

The DEW Line is authored by a member of the trade press horde (er, careful how you pronounce that word!) that caters to the defense and aerospace industry.

In the weapons business, this horde generally tends to focus coverage on all the high-tech stuff -- you know, your F-22s, your TSATs, your DARPA phrasealators. The low-tech stuff -- basic small arms and ammunition -- generally gets ignored despite its extremely high relevance to operations in the current wars in Iraq and Afghanistan.

In this spirit, The DEW Line would like to draw your attention to the ATK Lake City Small Caliber Ammunition business. ATK acquired the business after the US Army privatized the Lake City Depot in 1999, gaining a virtual lock on the military's annual appetite for bullets ranging from .50-caliber down to 5.56mm.

In 2000, ATK proudly predicted that total ammunition production should average about 450 million rounds per year to meet the military's demand. Then 9/11 happened. As the overall DOD budget doubled from about $300 billion in 2000 to perhaps $600 billion in 2007, ATK's production also doubled from 450 million rounds per year in 2001 to 1 billion rounds per year in 2007. Truly, it's a good time to be in the ammunition business.

Sometimes you can learn a lot about the future from a single piece of data. If you're wondering how long the wars in Iraq, Afghanistan and elsewhere may continue, you might consider looking up the military's projected demand for bullets.

Perhaps ATK is being overly optimistic, but the company does not foresee any drop-off in demand for small-caliber ammunition. In fact, the company has received funding this year from the army to boost production capacity to 1.6 billion rounds per year, or more than three times the predicted rate in 2000.

It's going to be a long war.

Comments

[Joe Katzman]

Stephen... our enemies are not restricting themselves to Iraq and Afghanistan. Neither are they going away. For instance, their creeping takeover of Pakistan seems to have suffered only a temporary setback after 9/11.

The bullets will very likely be used, and the capacity bottleneck absolutely needed to be fixed. But as a predictor and "future views" indicator, its scope is wider than just Iraq & Afghanistan.

[Joe Katzman]

See also:

http://www.defenseindustrydaily.com/2005/09/us-ammo-shortage-gd-now-a-second-source-prime-as-it-delivers-guns-ammo/index.php