According to a recent study by Hexa Research Inc., the global ammunition market was worth USD 11.8 billion in 2015. It is expected to grow at a CAGR exceeding 2% from 2016 to 2024 (forecast period). This industry bears a huge economical impact all over the world. This may be owed to its significant contributions towards excise, state and federal taxes.
Rising popularity of shooting and hunting sports has triggered huge demand for shooting rifles and shotguns in a number of geographical markets. A key market driver is the growing threat of terrorism in several parts of the world. India, China, South Korea and Pakistan are well-known terrorist hotspots in present times. Consequently, the Middle East and certain Asia Pacific regions are witnessing an arms race, with governmental defense departments increasing not only their troop count, but also their expenditures on various types of ammunitions and calibers.
Another prominent characteristic of the defense industry is the investment in modernizing military equipment. Developed nations in particular, are acquiring smart weapons for law enforcement. Furthermore, the emphasis on range, precision, weight and lethality of ammunition is on the rise. This has paved the way for guided precision ammunition. Many manufacturers are investing in the research and development of advanced products that are lightweight and that offer high precision. Such technological innovations are creating new opportunities for companies operating in the global market.
The industry is witnessing demand for non-lethal ammunition including rubber bullets, beanbag rounds, wax bullets, and plastic bullets for security purposes. Many agencies are investing huge funds in the R&D of such novel products. This is also likely to further market growth.
However, a few developed nations are engaged in demilitarization initiatives that are resulting in declining defense budgets. The U.S. and some European countries have been steadily reducing their military force following the wars on Afghanistan and Iraq. This could hamper the industry’s growth prospects in the years to come. Another factor that may inhibit demand is the changing political, legal and economic scenario worldwide.
Key stakeholders in the worldwide market are manufacturers, raw material suppliers, distributors, and end-users. The presence of direct distribution channels is a key feature in this industry. OEMs (Original Equipment Manufacturers) and Tier 1 & Tier 2 operators are the other important entities in the ecosystem.
The ammunition market is segmented on the basis of products, end-users and regions. Products consist of bullets, rockets, and mortars. Bullets garnered maximum revenues in 2015. They accounted for over 53% of the market share that year. This segment primarily includes small caliber bullets employed for civil purposes. Common firearms used in civil applications are rifles, shotguns, revolvers and pistols. On the other hand, rockets and mortars are mainly used by the defense and military sectors. Emerging economies are a major source of demand for advanced, medium, and large caliber products.
End-users are split into civil and defense. Civil applications dominated the market in 2015, capturing 75% of the total revenue. This segment is sub-divided into self-defense, law enforcement, and sports & hunting. The rising trend of hiring private security personnel in the developing world spurs market demand for self-defense. Hunting and sports would be another lucrative sub-segment in the near future. According to the U.S. Fish and Wildlife Services, Americans spend around USD 50 billion on sports and hunting every year. Outdoor recreational activities in North America are expected to give a major boost to the overall demand till 2024.
Major regional fragments are Asia Pacific, North America, Europe, Latin America, and MEA (The Middle East & Africa). North America, mainly the U.S., is a key military spender in the world. The U.S. ammunition industry generated revenues worth USD 1.5 billion in 2015. Its large army is deployed in several locations across the globe as a part of NATO’s (North Atlantic Treaty Organization’s) peacekeeping initiatives. Although the country has withdrawn from Afghanistan and Iraq, its demand for ammunitions is likely to remain high till 2024. Regular modernization programs in the U.S. army coupled with development of innovative technology should propel this region’s prospects for growth. Moreover, it is a major production hub with several leading companies having their manufacturing facilities in the country.
Picatinny Arsenal, U.S.’s defense arms and ammunition developer is committed to research and development of advanced weapons. The U.S. Army Contracting Command awarded a 10-year contract worth USD 387 million to ATK Defense Group to produce small-caliber ammunition. The production which includes a mix of high-quality 5.56mm, 0.50mm, and 7.62mm caliber military ammunition, began in October 2013. ATK is also in charge of operation and maintenance of the facility. Such moves reflect the nation’s emphasis on strengthening its military capacity. This will ensure gradual growth of the ammunition industry in the U.S.
Asia Pacific was the largest market in 2015. It is projected to grow at a CAGR of 4.6% through the forecast period and to continue its leadership till 2024. India, China, and South Korea contribute significantly to the total regional revenue generated in the ammunition industry. India faces imminent threat from neighboring countries such as Pakistan and China. With an aim towards strengthening its military capability, the Indian government, in March 2016, signed a contract worth USD 15 billion, for the purchase of ammunition. Hostile relations between North Korea and South Korea have led South Korea, China, and Japan to modernize their military operations.
Europe was the second-largest regional segment in 2015. Countries such as Germany, France, and the UK, have a robust manufacturing base of small arms and ammunition. Therefore, Europe is one of the leading exporters in this market. However, regional demand was adversely affected by the financial meltdown in the recent past. Africa would grow at a CAGR of 2.3% till 2024. Its growth will be fueled by the recent political unrest in Libya and Syria coupled with escalating insurgency in other parts of the continent.
The global ammunition industry is largely fragmented. North America and Europe are home to many eminent vendors. The global market is anticipated to witness mergers and acquisitions and joint development initiatives. This may be attributed to cuts in defense budgets taking place in many first world countries. The limited budgets are expected to force governments to privatize their production facilities in an attempt to stay efficient. Experts foresee a number of public-private collaborations in the coming years. Such partnerships between governments and private enterprises would sustain capabilities and further technological advancements.
Some of the leading players in the global ammunition market are Orbital ATK Inc., Nammo AS, Olin Corporation, General Dynamics Corporation, and Remington Arms Company. Other reputed participants include Magtech Ammunition Company, Inc., Federal Premium Ammunition, BAE Systems, Ruag Ammotech, and CCI Ammunition. The 2012 collaboration between BAE Systems and General Dynamics Corporation led to the production of the 81mm Roll Controlled Guided Mortar (RCGM).
Research Support Specialist, USA