The United States Mint has issued the first biennial report to Congress required under the Coin Modernization, Oversight, and Continuity Act of 2010. The report includes an analysis of the production costs for each circulating coin, the findings of an alternative metals study, and Mint’s recommendations with regard to potential changes in coin composition.
After a “thorough and meaningful” research and development study that took nearly two years to complete with an outside consultant, the US Mint has indicated that additional work is required before recommendations can be made for any specific changes in coin composition of methods of coin production.
Trail strikes for cent on aluminized steel and copper plated steel
Production Cost Analysis
The production cost analysis provided by the Mint indicates that both the cent and nickel cost more than their respective face values to produce and distribute at 2.00 cents for each penny and 10.09 cents for each nickel. The costs for the remaining denominations remained below their face values at 4.99 cents for the dime, 11.30 cents for the quarter-dollar, and 21.11 cents for the $1 coin.
The cent is currently struck in copper plated zinc with metal content consisting of 97.5% zinc and 2.5% copper. Under current law, the Secretary of the Treasury has the authority to vary the copper and zinc alloy used for the one cent coin.
Steam corrosion tested one cent trial strikes on aluminized steel
The nickel is struck in 75% copper and 25% nickel. The dime, quarter dollar, and half dollar are struck in 91.67% copper and 8.33% nickel. The specifications for the nickel, dime, quarter dollar, and half dollar are specified under the Coinage Act of 1965.
The composition of the $1 coin consists of 88.5% copper, 6% zinc, 3.5% manganese, and 2% nickel. Under current law, the Secretary of the Treasury has the authority to select the composition of the dollar coin, as long as it has similar metallic, anti-counterfeiting properties as United States coinage in circulation.
Research and Development Study
Under the Coin Modernization, Oversight, and Continuity Act of 2010, the Secretary of the Treasury was given the authority to conduct research and development activities on all circulating coins. Working on behalf of the Secretary, the United States Mint contracted the services of Concurrent Technologies Corporation (CTC) to commence research and development activities and deliver a report.
Trial strikes for five cent piece using multi-ply-plated steel and unplated copper alloy
The efforts of the US Mint included the construction of a dedicated R&D laboratory at the Philadelphia Mint which conducted trail strikes and evaluations on 29 different metallic formulations. The evaluations consisted of tests for hardness, ductility, weight, color, surface finish, coinability, corrosion and wear resistance, electromagnetic signature, supply chain availability, and cost.
CTC and the US Mint also conducted significant outreach to the public and key stakeholders to determine their principal concerns for alternative materials and potential costs for changes.
Wear tested five cent trial strikes on unplated copper alloy
Alternative materials evaluated for the cent included aluminized steel, aluminum, copper-plated steel, and stainless steel. Materials evaluated for the 5 cent coin and quarter dollar included dura-white-plated zinc, multi-ply-plated-steel, stainless steel, nickel plated steel, and copper based alloys. Materials evaluated for the $1 coin included plated zinc and copper based alloys.
The alternative material candidates were classified as two different types. First, seamless candidates which had approximately the same electromagnetic signature and weight as the incumbent coins. These candidates would provide for a modest cost savings to the Mint. Second, non-seamless candidates with a different electromagnetic signature and/or weight than the incumbent coin. These would provide a larger cost savings to the Mint, but may result in significant conversion costs for the private sector to upgrade coin processing equipment.
Recommendations
The United States Mint’s report to Congress indicates that the Mint must perform additional work before it has sufficient information to recommend possible new metallic materials or other changes to coin production. The report specifies that the Mint needs to: “(1) conduct production scale tests with multiple lots of proposed coin materials to verify the potential supply chains and the results from the preliminary tests described in the CTC study, and (2) further research estimated stakeholder costs associated with a change in electromagnetic signature.”
While this was the overall recommendation of the Mint, the report from CTC offered some specific recommendations for consideration by the United States Mint, which included the following:
- Maintain coin dimensions (thickness and diameter) for all future coins regardless of materials of composition since the conversion coins for coin processing equipment would be too large to justify any changes.
- Maintain the current materials of construction for the cent. After accounting for metal and production cost, copper plated steel one-cent coins would offer no cost savings compared to the current composition of copper-plated zinc. Aluminum alloys were fond to jam or destroy coin acceptance or coin handing equipment, removing this composition from consideration.
- Further develop copper based alloys for the composition of the nickel. Although these alloys would not bring costs to parity with face value, they would produce material cost savings. The alloys considered have a yellow cast color or golden hue color. The US Mint would achieve an annual cost savings of up to $16.7 million based on March 2012 metals pricing and 2011 production rates. There would be conversion costs for private sector coin acceptance equipment ranging from an estimated $11.3 million to $56.4 million depending on the alloy selected.
- Consider copper based alloys for use in the dime, quarter dollar, and half dollar coins. The US Mint would achieve an annual cost savings of approximately $2.2 million annually for the quarter dollar and $3.9 million annually for the dime based on March 2012 metal pricing and 2011 production rates. There would be conversion costs for private sector coin acceptance equipment estimated at $9.20 million for the quarter and $6.92 million for the dime. It was noted that one of the copper alloys had a slight yellow cast, which might cause confusion between the quarter and $1 coin.
- Maintain the current composition for the $1 coin, as none of the alternative material costs showed an improvement in cost.
- Continue long range research of surface engineering of zinc or steel for one-cent coin as a useful technology to reduce costs associated with copper plating. The report mentions the example of inexpensive paints or colored particles on bare zinc covered with a wear resistant coating.
- Continue research and development on stainless steel as a potential alternative for lower denomination coins. Also continue development of stainless steel alloys clad to copper alloy for higher denomination coinage to mimic the current electromagnetic signature of the dime, quarter, and half dollar.
The complete reports provided by the United States Mint and CTC can be accessed here.
Great! now in addition to wasting billions and billions on pennies we can waste countless millions on seeking a way to lose a little less.
When did common sense die?
Are money is already flat . So let’s make it even more Worthless.
Eliminate the cent entirely – retail purchases adjust to 5 cent increments. The extra nickel from purchases can be used to pay employees more- everybody wins – mint nickels from zinc so that the mines selling that metal to the mint won’t need to waste $$$$$$$$ lobbying in D.C.. Why is this so hard?
Using precious metals like gold, silver and platinum in coins inspires confidence and strength in a country. That the money has real value and will endure, just like the country. Even copper large cents were meaningful with the size and weight. Using every scheme to hollow out the value, using cheap metals that corrode quickly says the country is cheap, weak and won’t last very long. Revalue all the coins and currency and put the precious metals back in.
Waste of time, money and resources. Our leadership is is anything but leaders.
We’ve destroyed the dollar so much in the past 100 years, we’re almost at the point where the dollar has moved 2 decimals -> $1.00 to $.01. (It has lost over 99% of its value since 1913). Remember your grandfather/great grandfather telling you he used to buy a candy bar for a penny, or nickel…. We’re at that point again. A candy bar today costs $1.50 and its half the size as the ones your grandfather was buying. I really believe we need to scrap the penny, nickel, dime AND quarter. Take it back 2 decimals and start making half dollars, dollars, 2 dollar and 5 dollar coins out of more valuable metals alloys. Like 10% silver 90% copper. What can you actually buy with a dollar today?
After reviewing the article, it appears to me that the most likely course of action is either a continuation of the status quo for the time being or else simple abolition of the penny and nickel. If I am reading it right there does not seem to be any mix of metals of which will currently reduce penny costs. Nickel costs seem like they can be reduced, but not to the point where the US Mint starts profiting from seigniorage again. This leads me to conclude that either no action will be taken, or else the coins will just be flat-out abolished.
I like the pictures of the trial strikes.
Greg,
That’s not going to happen anytime soon because it would force the US government to openly acknowledge inflation the massive inflation that has been forced upon us, something I am dubious they are willing to do regardless of who is president or which party is in charge.
There is no way for the USMint to make 1¢ coins at a seigniorage profit – the non-material costs are over 1¢ per coin. I would simply do what Canada did earlier this year and drop the denomination.
Also, all of the coins below 25¢ are now, due to continuing inflation, no longer useful for legitimate commerce and are only there to fine-parse state and local sales taxes. Yes, I figure that overall inflation in the USA has been about 80:1 since the end of the gold standard in 1933 – we’ve added nearly two full ‘zeroes’ to the dollar since then!
If our current slate of coins and banknotes were of the same relative buying power as they were before 1933, we would be using ‘common’ coins from $1 to $100 (nothing smaller) and banknotes for $100 on up into the millions of dollars. We’d also have regularly-circulating gold coins from $250 up to $2K.
Mike
Appleton, WI
Typical government work… spend 2 years working on a project only to come the conclusion that you need more time to come to a conclusion. Are we really this lost as a country?
You know, the obvious answer to the production cost vs face value problem is to revalue our money. I agree with the commenters who said we’ve just about destroyed the value of the dollar. The way to fix that is to make a dollar again worth a dollar. It seems to me that we need to revalue current dollars at no more than 10 cents and start the inflation process all over again. Revaluing a national currency is not a taboo and we should do it. Yes there are one-time costs involved, but it makes a lot of sense when you think about it
after we spent all the money and now more future money to discuuss what we should do with the costs. i have 2 thibgs to say, if we paid food stamps in small change people would just stop using small change and second. most babies walk at about 2-3 years old or less and do not need to be taught how to walk.
Western Sage,
I agree common sense dictates we have to revalue the dollar, but no president is going to want to take responsibility for doing that. We’re far more likely to have such a revaluation forced upon us by out of control inflation.
I think you mean “re-denominating” not “revaluing” the money. Revaluing is for exchange rates. But re-denomination will just delay things for a few years. Plus they’d have to redesign all the coins and currency to the “NEW” dollar, and the new coins would have to be completely different than the old ones, and we’d have to go through a period of time, possibly several years before all the old denominations have been removed from circulation. Then guess what? Inflation will have run rampant for those few years and prices would be back to where they are now within a decade. So we waste billions and billions of dollars on re-denominating our currency and a few years later, we’re back where we were before. Re-denomination feeds hyper-inflation. Look at history. 2-5% inflation per year is what we’ve got now, and eventually, your low denomination coins will become virtually useless and should be eliminated. The US penny should have been eliminated 50 years ago, and the nickel and dime at least 20 years ago. We’re on the verge of needing to eliminate the quarter now.
I think a revaluation of the currency would be the best thing to do. I don’t see our politicians, though, taking such a profound step. Next best would be to just keep the copper-nickel clad coins and find something besides the copper coated “dirt” we now have. Use something like stainless steel.
Our current 1 cent coins being made of Zinc are the worst ever. Put them in ocean salt water for a month or more and you can hardly identify them. They come out as disfigured blobs of metal. I have boxes with hundreds of them which have come out of the ocean and they are trash. I can find cents made before 1987 and they are fine and spendable. Even the dimes and quarters I find are partly eaten into where the zinc is a wafer inside. Eliminate Zinc and find something that can stand up to salt water and other air and ground acids, and we may have a coin that can last for many years. That alone would save money. People aren’t hoarding all these modern coins, they lose many of them and then they become worthless.