The cost for the United States Mint to produce and distribute the cent the the nickel fell for the 2012 fiscal year, mostly as the result of lower metal costs. Despite the decline, costs were still about double the respective face values of the two lowest circulating denominations.
For the fiscal year ending September 30, 2012, the unit cost for the Mint to produce and distribute the cent was 2.00 cents and the unit cost for the nickel was 10.09 cents. This compares to costs from the prior fiscal year of 2.41 cents and 11.18 cents, respectively.
A component of the decrease in costs was the lower cost of copper, nickel, and zinc. From the 2011 fiscal year to the 2012 fiscal year, the average daily market prices of copper decreased 13.8%, nickel decreased 26%, and zinc decreased 15.8%. The composition of the cent currently consists of 97.5% zinc and 2.5% copper. The composition of the nickel is 75% copper and 25% nickel.
In addition to the reduction in metals costs, plant expenses at the Philadelphia and Denver facilities decreased by about 3%, and Selling, General, and Administrative costs decreased by 2.8%.
Unit Cost to Produce and Manufacture Cent
|FY 2011||FY 2012|
|Cost of Goods Sold||0.0197||0.0163|
|Sales, General & Administrative||0.0041||0.0034|
|Distribution to Reserve Banks||0.0003||0.0003|
|Total Unit Cost||0.0241||0.0200|
Unit Cost to Produce and Manufacture Nickel
|FY 2011||FY 2012|
|Cost of Goods Sold||0.0938||0.0829|
|Sales, General & Administrative||0.0176||0.0173|
|Distribution to Reserve Banks||0.0004||0.0007|
|Total Unit Cost||0.1118||0.1009|
For the 2012 fiscal year, the US Mint produced and shipped 5.835 billion cents and 1.006 billion nickels. The production and distribution of the penny generated a loss of $58.0 million, while the nickel generated a loss of $51.2 million, resulting in a total loss of $109.2 million across both denominations. These figures represented slightly smaller losses than the prior year, when the loss from the cent was $60.2 million and the loss from the nickel was $56.5 million, for a total loss of $116.70 across both denominations.
This is the seventh consecutive year that the cost for the cent and nickel exceeded their face values. From 2006 to 2012, the cent and nickel have now generated total losses of $469 million.
|Fiscal Year||Cent Unit Cost||Nickel Unit Cost||Seigniorage (millions)|
Although the cent and nickel have been produced at a loss in recent years, the positive seigniorage generated by higher denomination circulating coins has always more than offset the losses. For the 2012 fiscal year, seigniorage across all denominations remained at a positive $105.9 million. This is down by 69.6% from the prior fiscal year when seigniorage generation was $348.8 million. The decline is attributable to the suspension of production for the Presidential $1 Coins.
The US Mint is in the process of performing research and development activities with regards to alternative metallic materials for circulating coins. Under the Coin Modernization, Oversight, and Continuity Act of 2010, the Mint is due to provide a report of their findings and suggestions to Congress later this month.
During a recent House Subcommittee hearing, the Acting Director of the United States Mint Richard A. Peterson reported that a research and development laboratory at the Philadelphia Mint had conducted two sets of trial strikes on a variety of metallic compositions and evaluated them for attributes such as hardness, ductility, corrosion, wear resistance, electromagnetic signature, availability of raw materials, and cost.
While a compositional change might improve the situation for a nickel, it would not reduce the cost of producing and distributing the cent below its face value. In response to a question at the hearing Peterson said, “If the metal for the penny were free, we would still exceed one cent.”