US Mint wants to make cheaper coins

It costs 2 cents to make a penny and 11 cents to make a nickel. As the cost of metals continues to rise, the agency is trying to contain expenses.

By Bruce Kennedy Dec 21, 2012 10:05AM

Image: Stacks of coins (Digital Vision/Getty Images)Could you live without change -- pocket change, that is? A number of countries are cutting back on their coins, especially the low-denomination currencies.

 

Soon, the Canadian penny will be permanently taken out of circulation. "Some Canadians consider the penny more of a nuisance than a useful coin,"  said a government report from Ottawa earlier this year. "Over time, the penny’s burden to the economy has grown relative to its value as a means of payment."

 

Is there a similar future in store, therefore, for America's pennies, nickels, dimes and quarters? One major issue: The metal and production costs of U.S. coins are often higher than the coin’s actual face value.  

 

According to a new, two-year study by the U.S. Mint, it now costs two cents to make and distribute a Lincoln penny -- and over 11 cents for a nickel. And the Mint is on a quest to make its coins much more cost-efficient.

 

Part of that cost-cutting has come through better production methods. "We've gone to two-shift operations of our plants, lean manufacturing resources, to try to look for cheaper, more efficient ways to do business," says Tom Jurkowsky, the U.S. Mint’s Director of Public Affairs.

 

But the bigger problem right now is the rising cost of metals. Pennies made between 1909 and 1982 were 95% copper. But as a much sought-after international commodity, the price of copper has soared over the past two decades. A U.S. penny now has a 2.5% copper coating -- with the rest of the coin made from zinc.  

 

The Mint has committed a lot of resources to finding the right combination of alternative metals for its coins. It’s been working with an research and development consultant, set up a research laboratory at the Philadelphia Mint and is testing scores of metals and dozens of different alloys.

 

Jurkowsky says that only zinc, iron (used to make steel) and aluminum are the the most cost-efficient, non-toxic and plentiful metals around for any new coinage.

 

But there's another issue for all U.S. coins, except the penny.

 

Many modern vending machines sort coins -- including rejecting counterfeits and non-U.S. currency -- by using scanners that detect a coin’s size and weight. Those scanners also use electromagnets to evaluate the coin’s metallic composition. So there’s concern that any new coins using new metal alloys would be costly for a wide swath of U.S. businesses.

 

In fact, the vending machine industry estimates a one-time, all-encompassing upgrade of its machines to accept coins of the same size and weight as the current ones, but with a different electromagnetic "signature," would cost between $700 million and $3.5 billion.

 

With those costs in mind, the Mint conducted "significant outreach" with companies that need coins to drive their day-to-day business -- including the vending machine industry, the makers of commercial coin-processing equipment, the public transportation sector, laundromats and car washes.

 

"It’s important to understand we’re attempting to emulate current coin characteristics," says Jurkowsky. "The electromagnetic signature is the most difficult characteristic to duplicate. When we reached out to the coin dependent companies, we’re not just going at this willy-nilly, we’re aware of the societal impact."

 

The U.S. Mint begins the second part of its testing early next year -- seeing if they can produce coins that are not only cost efficient but also have the same weight, durability and look as the pocket change we’re all familiar with.

 

As for the humble penny, Jurkowsky says it's not going away -- at least, not yet. And while it will probably always cost more than a penny's worth to make a penny, he says there’s still  great demand for them from the Federal Reserve -- which distributes them to the public via financial institutions. In fact, of the estimated 10.5 billion U.S. coins produced last year, more than 60% were pennies.


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Tags: Economy
26Comments
Dec 21, 2012 1:22PM
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Our coins (and paper money) are already being made cheaper by stupid economic decisions by our federal government's deficit spending. The dollar is fast approaching the value of a penny of forty years ago.
Dec 21, 2012 12:04PM
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Drop the penny. Make the nickle the new penny. That's about all it's worth anyway.
Dec 21, 2012 3:13PM
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remember when banks would count jars of coins for us FOR FREE?  even las vegas would enable us to trade coin jars full of stuff into cash. 

 

bring back the "old fashion" coin counters.  they still exist.  make it FREE to return your coins to the banks to be reused. 

 

HOW MANY coins are still good but out of circulation because we keep excess in jars and drawers at home?  i know i have about 15 pounds of coins i basically do not use because of the fuss in trading coins into dollar bills. 

Dec 21, 2012 3:04PM
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There's probably billions of pennies lying around in drawers and jars. How about the gov't offer a two for one buy back to get all of those old pennies back in circulation? Make it worth people's time to cash them in and they will.
Dec 21, 2012 12:49PM
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It seems as though the mint could collect the pennies in a stores parking lot and avoid making new. People throw them away....
Dec 26, 2012 6:41PM
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Before you drop the penny .. think about the cost..... I make something worth .01 now cost .05 ... something worth .06 now cost .1 ... .11 nor cost 15 ... 16 cost .20 LOL ... keep this going and you havea  10% to 20% cost in goods.. and yes it will happen  companies ROUND UP NEVER DOWN ... Do not be foolish and let someone tell you it will not happen.. when all your purchase are rounded up to the nearst .5 ... say you make 1000 perchase per year at .04 round  up... hmm what does that cost?????? $40.00/year per person in the USA  that is alot of penny cash..... Do not be stupid and drop the penny you do not want every thing rounded to the .05. This counts to every step of the process to making a product  .. it is the small changes that make the big changes....  

Dec 26, 2012 6:47PM
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I also forgot to add.. what is the life of a penny at .10 tax rate ? if you spend a penny 10 or 20 times it makes its worth back no? and then some over time..  i would spend .11 cents to make a nickle all day if i knew it would be used 20 to 40 times .. why cause i make 2x the initial investment.. what happen to basic math and or research . I bet each nickle makesbacke 10x its value in taxes. I have 1989 nickels in my pocket and a 2002.. I am sure they are paid in full based on taxes
Dec 21, 2012 3:10PM
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delete the penny.  it's lost it's usefulness
Dec 24, 2012 3:56PM
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What would the Ferengi*s do in this situation?

Dec 24, 2012 10:19PM
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The zinc industry lobbies to keep the penny in circulation. A penny is made from zinc and then plated with a thin covering of copper. We are supporting the zinc industry!
Dec 26, 2012 1:44PM
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It's getting so that a nickle isn't worth a dime anymore. (Yogi Berra)
Dec 24, 2012 4:28PM
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As for the u.s. mint know it would be cost effective any way you could look at it.
Dec 21, 2012 2:25PM
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There is a movement to do away with the dollar bill for  coins now they want to do away with coins? Just make them out of what is cheapest and do away with the penny.
Dec 26, 2012 5:24PM
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why not make them cheap enough for them to be copied. huh

dummies

Dec 24, 2012 10:21PM
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Brutus Fishface, that is a great idea!
Dec 24, 2012 4:11PM
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Kind of surprised no one suggested this on here lol.
Dec 24, 2012 4:04PM
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Allso is best solution it removes coins and bills space that it takes up plastic card takes very little space.
Dec 24, 2012 4:25PM
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Theres allways a simple solution to any problem this should have been done long ago a balance kept on card for purchases in dollars and cents best cost effective way doing it that ways cents etc are still in effect but on a card.We have had the tec to do this for a long time why not do it this ways its a very simple cost effective solution,pay checks could be removed pay could be sent into an account and card would have its balance for any or all trades or purchases or etc.
Dec 24, 2012 4:09PM
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The governments could buy back all paper and coinages and use it for better uses.Things will be like that in future with cards etc as debit,cards etc are allready replacing coinage at current time anyways,so why not just remove all coinage and paper currencys and use a simple card for all purchases.
Dec 24, 2012 4:02PM
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virtual coinage is best example,a plastic card simular to credit card ,debit card etc remove all coins and paper bills and replace with a simple plastic card that can keep track of totall balance,endgame no printing costs or coinage cost to make either saves resources plus simple cost effective ways .Should have been done long ago.Wouldnt be no productive cost etc,except for the cheap card that could be replaced when worn out.As for coin machines swipe the card instead of putting in coins.Best overall solution.
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