US seeks to scale back penny and nickel production costs

It has long been known that minting pennies has been a costly process; it costs more to make the penny than it is worth. Canada ditched its penny in 2012, but the U.S. continues to mint one cent coins. But did you know it costs more to produce nickels as well?

Costly to produce

Over the years, producing coins has become costly. According to the Washington Post, at this point, nickels cost almost double their face value to produce. WaPo published a graphic based on information obtained from the U.S. Mint and the Federal Reserve, here is the breakdown provided:

  • Pennies – 1.8 for a one-cent coin
  • Nickels – 9.4 cents
  • Dimes – 4.6 cents
  • Quarters – 10.5 cents
  • Dollar – 5.4 cents

Reportedly, it wasn’t until 2006 that the government actually began losing money on minting pennies and nickels; since then, it has been a recurring issue. It has long been debated whether or not it is worth it to keep producing pennies, but now the issue emerging is whether or not the costs of minting nickels is worth that investment as well.

U.S. fiscal budget 2015 looks at the issue

The Washington Post article noted $105 million was lost on the production of pennies and nickels last year, and this trend is close to the two preceding years in terms of loss. In looking at the U.S. fiscal budget 2015, President Obama recently proposed the idea of either a) phasing nickels and pennies out, or b) using cheaper metals to produce these coins.

In the budget, the Obama administration noted it was doing a “comprehensive review” of minting U.S. currency going forward. The review also states it will examine the increased growth of electronic commerce and how people use money. The new fiscal year begins on Oct. 1, 2014.

According to a MarketWatch report dated March 4, 2014, there are three separate studies being done that look at the nation’s actual use of coins, U.S. Mint facilities and potential alternative metals for production. An example of this is Canada’s switch to steel in some of its coins.  Nickels are minted from copper and nickel; pennies used to be made mostly from copper, but are now primarily composed of zinc.

The U.S. administration is hoping the studies result in alternative options for both pennies and nickels, as the expense is largely driven by cost of the metals used during the minting process.

Keep or ditch the coins?

Not surprisingly, if the government were to try phasing out the nickel, or even the penny, there would be those fighting the decision. For instance, the zinc industry has a heavy investment in penny production, as do some coin-based operators; companies such as CoinStar would also lose business.

Others probably wouldn’t miss a change at all. According to the Consumerist, a large number of consumers don’t even bother retrieving loose change after going through airport security.

At this time, it does not necessarily appear the government is looking to eliminate either the penny or the nickel, but it looks like officials are definitely seeking out ways to address the problem.