Cost to Make Penny and Nickel Rises, Annual Loss Reaches $116.7 Million

The cost for the United States Mint to produce and distribute the cent and nickel rose to their highest levels, and are now more than double the respective face values. For the fiscal year ending September 30, 2011, the unit cost for the cent was 2.41 cents and the cost for the nickel was 11.18 cents.

The cost for the two lowest circulating denominations increased compared to the prior year due to higher material costs and a change in the method of allocation for sales, general, and administrative expenses. In previous years, the Mint allocated SG&A expenses based on gross margins. For the 2011 fiscal year, costs were allocated based on the costs to manufacture, market, and distribute. The new approach conforms to accounting standards and leading commercial and public sector practices.

Unit Cost to Produce and Manufacture Cent

FY 2011 FY 2010
Cost of Goods Sold 0.0197 0.0176
Sales, General & Administrative 0.0041
Distribution to Reserve Banks 0.0003 0.0003
Total Unit Cost 0.0241 0.0179

Unit Cost to Produce and Manufacture Nickel

FY 2011 FY 2010
Cost of Goods Sold 0.0938 0.0916
Sales, General & Administrative 0.0176
Distribution to Reserve Banks 0.0004 0.0006
Total Unit Cost 0.1118 0.0922

This represents the sixth year in a row that the cost to produce and distribute the cent and nickel have exceeded their face values. For the 2011 fiscal year, the two denominations were produced at a loss of $116.7 million. This amount is nearly triple than the loss of $42.6 million generated from the two denominations during the prior year.

From 2006 to 2011, the cent and nickel have now generated losses of $359.80 million.

Fiscal Year Cent Unit Cost Nickel Unit Cost Seigniorage (millions)
2011 0.0241 0.1118 ($116.70)
2010 0.0179 0.0922 ($42.60)
2009 0.0162 0.0603 ($22.00)
2008 0.0142 0.0883 ($47.00)
2007 0.0167 0.0953 ($98.60)
2006 0.0121 0.0597 ($32.90)
Total ($359.80)

Although the cent and nickel have generated significant losses in recent years, the positive seigniorage generated by higher denomination circulating coins has offset the losses. For the 2011 fiscal year, production of the dime, quarter dollar, and $1 coin for circulation generated seigniorage of $488.8 million.

In December 2010, Congress passed the Coin Modernization, Oversight, and Continuity Act of 2010, which authorizes the Treasury Department to conduct research and development activities with regards to circulating coin compositions. Any changes in composition would still need to be accomplished by an act of Congress. The US Mint has engaged a contractor to conduct the research and development, which will serve as the basis for the report to Congress due in December 2012.

On December 15, 2011, Rep. Steve Stivers introduced two bills which would require the the composition of the cent and nickel to be produced primarily of steel within 90 days of enactment. The bills have two cosponsors and both been referred to the House Committee on Financial Services.


  1. Clair Hardesty says

    What isn’t shown here is the cost of just the metal content of the coins. Through last year, the metal content of the penny was still below one cent, the nickel slightly over five cents. The US historically spent more to produce coins than the face value of the coins when looked at by the same measures being used here. Gold coins and the silver dollars contained exactly their face value in precious metals and the fractional silver coins contained about 94 cents of silver per dollar face value. When the cost of production and distribution is added, they were all over the line being drawn today. In that light I wonder why the initial cost of delivering a coin that will last over 30 years is such an issue to so many people. This is not a new thing and the production and distribution of coins for circulation is still a very profitable enterprise when all denominations are considered. That was never the case prior to 1965.

  2. SmallPotatos says

    Good point. shouldn’t the distribution cost be spread out over the next 30 years? of couse, you would have to go back over the past 29 years and extrapolate 1/30 of each of those years cost to produce and distribute and then bring that cost forward.

    maybe a repeat of 2009 every now and then wouldn’t be a bad idea. i have yet to see a 2009 nickel or dime, and rarely see pennies or quarters.

  3. Ed says

    The situation pre-1965 is obviously much different than the situation now. Circulating coins have lost the notion that they should have any relationship to their intrinsic value. They are now manufactured units which represent a certain value within commercial transactions. The metal value of a nickel is about 5 cents and the metal value of a $1 coin is about 6 cents, but at the cash register all that matters is what is stamped on the metal.

    The US Mint manufactures these transactional units at a certain cost and must sell them to Federal Reserve Banks at face value. That’s the end of the equation from an accounting standpoint.

  4. Koichi Ito says

    Switching to Aluminum from Zinc(Pennies) and Copper+Nickel(Nickels), will save millions of dollars. So it is wise idea to mint aluminum pennies and nickels(5cent coins) for circulation!

  5. TMoney says

    Sorry Ed, there must be SOME correlation (even if it is weak), otherwise this disucssion wouldn’t be happening. There is an upper bound to the cost of metal for coin production and it looks to be about 50% of the face value at the moment.

  6. Ralph says

    Maybe the mint could make some gold and silver coins with a realistic monetary value. This program would be very popular. The profits from this could be used to support the existing coinage for the short period in which these coins still have commercial value.

  7. Ralph says

    Or perhaps the Mint could issue a quoted value series of coins such as has been suggested by Hugo Salinas-Price. These coins would never go obsolete since anytime inflation caused the metal prices to go up, the quoted value could also be increased.

  8. Troy says

    Let’s also not forget that the US was on the Gold Standard prior to the early 1970s, so the value of those coins was higer than now because the value of the dollar and it’s related buying power was higher. Our currency now has a fiat value (a value not backed by hard specie), so there is little change the Mint can really make money or break even on those two coins.

    So we could do one of two things:

    1. Change the metals to cheaper metals. This will reduce the cost, but could make using them more difficult in vending machines which would have to be recalibrated to reflect the new weights and materials.

    2. Eliminate the values. Other nations whose base currency has devalued over the years have dropped low ranking coins (Mexico’s Peso, the UK Pound as examples here). Make the dime our lowest issued coin. This will though force sales tax states to change their rates which may cause some states to run an election.

    No matter which option, it will cost money to make the change; and something needs to happen to address the issue before the losses on those coins overwhelm the profits of the Dime, Quarter, and Dollar coins.

    In fact, why not eliminate the paper dollar and enforce the Dollar Coin? That will help offset losses as well.

  9. R. J. S. says

    Yes, I agree with Hugo and Ralph. Coins could be made with no monetary value stamped
    on them, only the weight of the metal. For example, imagine a one ounce coin made of an
    alloy of silver and nickel. One containing one half ounce of silver would be worth about
    Fifteen dollars today. Tomorrow it may be more, or it may be less. All sorts of mixtures of
    alloys could be manufactured, and they would all be REAL MONEY !!!


  10. Erica Healey says

    I think we should just do away with coinage. As long as paper is cheaper – go with it. For ease of transition, keep the quarter, but all other coins are a pain in the butt to consumers and retailers. Think of the savings in time and how much more efficient check-out could be.

  11. says

    Maybe they should go back to wooden nickles! 😉
    And injection plastic pennies.
    Even “Gelt” coins like for Hannukah! At least you could eat them in an emergency.

  12. Ricky Stevens says

    In regard to making coins out of aluminum: They tried to do that in the late 70s. Vending machine companies complained coins wouldn’t work in their machines/people could defraud the machines. Also, doctors said no to the idea because aluminum doesn’t show up that well on x-rays. They were worried about misdiagnosing children who might swallow aluminum coins.

  13. Grafton Reed says

    The life of a coin has a great impact on determining it’s value. Not in face value, but intrinsically, over time, in the numerous transactions it is involved.

  14. ProjectTermina says

    Honestly, the U.S. Currency has inflated to the point that pennies are virtually never used, so the U.S. would be saving millions of dollars if they stopped making them. Pennies are erased from our currency, stores round to multiples of 5, we put up machines that exchange 10 pennies for a dime, 5 pennies for a nickel, etc., everyone’s happy. Long ago, the penny was useful, but it’s obsolete now. Spending more money than the face value of the coin is just not worth it. Besides, chances are it will end up at the bottom of some person’s drawers, so it doesn’t circulate.

  15. Penny Theif says

    As long as this hype keeps up and the face value continue to grow, I’m game with keeping the change. Save today, because with this hype, 50 or 100 years from now the collectors market on these will be huge. I wont be around to see it, but my kids kids will be. Conservatively, play this game to your advantage, its the money market. Eventually, someone’s going to say enough is enough and theres going to only be credit cards and no metal or paper money.

  16. Birch Weber says

    Erica, the problem with paper is it goes out of circulation at a rate much larger than that of metal coins. In fact, the US government would actually save money if we stopped printing 1 dollar and 5 dollar bills and replaced them with coins for this reason. It is also surprisingly expensive to print paper currency: security precautions like watermarks and special inks cost quite a bit.

  17. everett says

    Simply change the penny to a two cent coin and dont change size or metals. Make half as many and save cost.

  18. Thomas Seth says

    Why not stop minting the penny and the nickel just round every transaction to the nearest dime. While the government is at it they could stop printing the one dollar bill that only has a life span of about 18 months and replace it with a decent dollar coin. Then start printing and releasing more two dollar bills so you would never have to have more then a couple of dollar coins in your pocket at any one time. I have just solved a problem and save the government millions of dollars.s

  19. Keith Larson says

    If everyone put all the pennys, nickles, etc. back in circulation instead of having jars of them laying
    around the costs could be reduced.

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