This report serves as a critical update regarding the operational instability observed at the Advanced Armament Company (AAC) ammunition manufacturing facility in West Columbia, South Carolina. As of January 10, 2026, the situation has evolved from a reported “temporary production pause” into a confirmed, systemic operational contraction with profound implications for the United States commercial small arms market. The developments observed over the last five weeks represent a fundamental structural shift—a “decoupling”—of the civilian ammunition sector from the National Defense Industrial Base (DIB).

The initial ambiguity surrounding the status of the AAC facility has been resolved through a combination of federal regulatory filings, definitive supply chain data, and forensic analysis of market behavior. We can now confirm that JJE Capital Holdings, the parent entity of Palmetto State Armory (PSA) and AAC, has initiated a formal wind-down of its current ammunition assembly operations, driven by a catastrophic unavailability of energetic precursors.

The Evolution of the Crisis: From Speculation to Confirmation

On December 4, 2025, industry observers noted early signals of distress within PSA’s vertical integration strategy. At that time, company representatives characterized the production halt as a short-term measure to address an “unforeseen powder shortage”.⁷ However, data emerging in early January 2026 has crystallized the severity of the situation. The confirmation of mass layoffs via the South Carolina Department of Employment and Workforce, effective January 30, 2026, indicates that the facility is entering a state of “cold idle” rather than a momentary pause.¹

This operational freeze coincides with a significant pivot in JJE Capital Holdings’ long-term strategy. Recognizing that reliance on Tier 1 defense contractors for critical energetic components is no longer a viable business model for a high-volume civilian manufacturer, PSA leadership has announced an ambitious plan to construct a proprietary gunpowder manufacturing facility, potentially in partnership with another entity.⁷

Strategic Implications for the Market

The withdrawal of AAC from the manufacturing landscape has removed the primary deflationary force in the US commercial ammunition market. For the past three years, AAC acted as a “price anchor,” utilizing its vertical integration of brass and projectiles to undercut legacy manufacturers. With AAC’s volume removed, the market has seen an immediate reversion to inflationary pricing mechanics. Competitors have already capitalized on this vacuum, with Winchester implementing price increases of 3% to 8% effective January 1, 2026.³

Furthermore, the timing of this supply collapse creates a “perfect storm” of scarcity when juxtaposed against demand-side shocks. The recent legal victories in the Ninth Circuit Court of Appeals regarding the Second Amendment have reopened the California market to standard-capacity components and ammunition, creating a surge in demand precisely as the supply of affordable domestic ammunition hits zero.⁴

1. The Energetics Crisis: A Root Cause Engineering Analysis

To understand the paralysis of the AAC plant, one must look upstream to the raw material crisis affecting the entire US small arms ecosystem. The manufacture of modern smokeless propellant is a complex chemical engineering feat reliant on a narrow, fragile supply chain of nitrocellulose, nitroglycerin, and stabilizing agents.

1.1 The Fragility of the Domestic Energetics Base

The United States ammunition industry operates on a tiered system of dependency. At the top are the Tier 1 manufacturers—primarily Olin Winchester and BAE Systems. These entities control the domestic production of “ball powder,” which is the industry standard for 5.56 NATO and 9mm Luger loading. Historically, the commercial market has subsisted on the “spillover” capacity of these Tier 1 plants. However, in Q4 2025, two catastrophic factors converged to eliminate this spillover entirely.

1.2 The AES Facility Explosion: A Critical Node Failure

The primary catalyst for the current shortage was the catastrophic failure at the AES facility in Tennessee in late 2025. This facility was a critical node in the precursor supply chain, responsible for processing specific grades of nitrocellulose and other energetic inputs required for the final blending of smokeless powder,.

The destruction of this capacity sent a shockwave through the industry. Data suggests that nearly 85% of the remaining available propellant volume was immediately diverted to fulfill priority DoD contracts, which are protected by “DX” or “DO” ratings under the Defense Production Act. These ratings legally compel suppliers to prioritize government orders over all commercial obligations.

1.3 The “Tier 2” Vulnerability and the False Security of Partial Integration

AAC’s business model was predicated on Tier 2 vertical integration. JJE Capital Holdings invested millions into machinery to manufacture brass cases and projectiles in-house. However, they remained strictly assemblers regarding propellant (powder). This partial integration created a false sense of security. When St. Marks Powder redirected its allocation, AAC was left with commercially fatal options. Internal communications suggest that purchasing powder at inflated spot market rates would have necessitated raising the retail price of a standard 50-round box of 9mm ammunition from ~$19.99 to approximately ~$60.00.⁷

2. Operational Forensic Analysis: The Status of the West Columbia Facility

The most significant development since the initial December 4 report is the clarification of the “pause” through definitive regulatory filings. While forum representatives utilized the softer language of a “temporary pause,” federal labor data paints a definitive picture.

2.1 WARN Notice Verification and Labor Implications

The Worker Adjustment and Retraining Notification (WARN) Act data for South Carolina serves as the “smoking gun” that confirms the depth of the shutdown. The filings explicitly list “SC Industrial Holdings (dba Palmetto State Armory)” as filing for a “Temporary Closure” affecting 78 employees.

Key Regulatory Data Points:

• Notice Date: December 1, 2025.
• Layoff Effective Date: January 30, 2026.¹
• Location: 201 and 230 Metropolitan Dr., West Columbia, SC 29170.
• Classification: Temporary Closure.

The magnitude of this layoff—78 employees—likely represents the entirety of the production line staff across multiple shifts, including machine operators and material handlers. Retaining only a skeleton crew indicates that the facility is entering a “cold idle” state.

2.2 Asset Utilization and Opportunity Cost

With the layoff date set for January 30, 2026, the facility is currently in a “wind-down” phase. The opportunity cost is massive. AAC was intended to be the volume engine for PSA’s firearm sales; without cheap AAC ammo, the value proposition of a budget AR-15 diminishes.

3. Quality Control Post-Mortem: The Engineering of Failure

Serious engineering failures in AAC’s product line—specifically the 5.56 NATO and.300 Blackout loads—have continued to surface in January 2026 reviews.

3.1 Jacket Separation Phenomena: A Manufacturing Defect

Multiple user reports describe a critical failure mode known as “jacket separation,” particularly affecting the Sabre Blade Black Tip and OTM projectiles.⁸ This failure mode typically points to a breakdown in the bonding process or inconsistencies in jacket thickness. If the copper jacket is too thin or brittle due to improper annealing, the centrifugal force of a 300,000 RPM spin can rip the jacket apart inside a suppressor.

3.2 Internal Ballistics: Primer Pocket Leaks and Overpressure

Reports of “popped primers” and blown case heads in 77gr OTM loads indicate severe overpressure events.⁹ It is highly probable that during the onset of the powder shortage, AAC engineers were forced to blend different lots of powder or utilize “non-standard” canister grade powders to keep production lines running.

3.3 Warranty Implications and Liability

Recent data indicates that PSA’s warranty policies are being strictly enforced to exclude damage resulting from “substandard, reloaded or defective ammunition” [¹²],. Consumers have reported being “ghosted” by customer service regarding ammo-related Return Merchandise Authorization (RMA) claims.¹⁰

4. Strategic Pivot: Vertical Integration 2.0 (Propellant Manufacturing)

PSA has announced that it will construct its own gunpowder facility to bypass the broken supply chain.⁷ This represents a move from Tier 2 Integration (Assembly) to Tier 1 Integration (Raw Material Synthesis).

4.1 Engineering Feasibility & Timeline Analysis

PSA representatives have cited a timeline of “about a year” for this new facility to come online.⁷ From an engineering perspective, this is highly optimistic for a “greenfield” project due to EPA permitting and explosive safety siting requirements. The forum mention of “working with another company” strongly supports a Joint Venture (JV) hypothesis, likely with an existing chemical entity.

5. Economic & Market Dynamics: Pricing and Inventory (Jan 2026)

5.1 The “Anchor” is Gone: Inflationary Mechanics

With AAC inventory drying up, the floor price for ammunition has risen.

• Competitor Price Hikes: Effective January 1, 2026, Winchester implemented price increases of 3% to 8%.³
• Current Spot Prices: 5.56 NATO is trending toward $0.50 – $0.60/round for basic ball ammo, and 9mm Luger is trending toward $0.28 – $0.32/round.¹¹

6. The California Paradox: Legal Victory vs. Supply Failure

In a twist of irony, just as AAC halted production, the demand signal from one of the largest markets in the US—California—turned aggressively positive.

6.1 The Ninth Circuit Decision

On January 2, 2026, the Ninth Circuit Court of Appeals issued a ruling in Baird v. Bonta declaring California’s open carry bans unconstitutional.⁴

6.2 PSA’s Strategic Response

PSA CEO Jamin McCallum released a statement declaring the decision a “victory for the Second Amendment”.⁵ PSA has stated they will prioritize shipments to California once the decision is finalized.⁵ This likely means that the dwindling remaining stock of AAC ammunition will be diverted to the California market, accelerating scarcity for the rest of the nation.

7. Forecast & Strategic Recommendations (Q1 – Q4 2026)

Based on the engineering, regulatory, and economic data analyzed, we project the following scenarios for 2026.

7.1 Recommendations for Stakeholders

• For Retailers: Diversify supply chains to European imports (Fiocchi, Norma, PPU) which are less affected by the US-specific AES/St. Marks bottleneck.
• For Consumers: Verify the “Lot Number” of any AAC ammo purchased on the secondary market. Avoid lots from late 2025 to mitigate the risk of jacket separation.
• For Investors: Monitor JJE Capital Holdings’ filings for “Joint Venture” announcements regarding the new propellant plant.

8. Conclusion

The developments of January 2026 confirm that the Advanced Armament Company (AAC) is effectively offline as a mass-producer of ammunition for the current calendar year. The “pause” has hardened into a strategic retreat, evidenced by the layoff of the production workforce scheduled for January 30, 2026.¹ JJE Capital Holdings has correctly identified that vertical integration of energetics is the only way to survive, but the timeline for such a capability is measured in years, not quarters.

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Sources Used

1. Latest Layoffs in South Carolina – WARNTracker.com, accessed January 10, 2026, https://www.warntracker.com/?state=SC
2. SC Industrial Holdings, LLC complete WARN notice layoff history on Dec 2025, accessed January 10, 2026, https://www.warntracker.com/company/sc-industrial-holdings
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