A new report from the United States Mint highlights the challenges in using cheaper metals to make coins
Don’t expect U.S. coin compositions to change any time soon, and never for the penny. There are "no alternative metal compositions that reduce the manufacturing unit cost of the penny below its face value," according to the United States Mint 2014 Biennial Report to Congress on the research and development (R&D) of alternative metals for circulating coins.
However, there are alternatives for other denominations that could cut U.S. Mint coin production costs, with one tested alloy rising to the top of the list.
"At this juncture, there are several possible options to alter the metallic compositions that would lower the costs of United States coins, but the Mint does not recommend adopting any of these options until ongoing research is completed on a promising alternative that has the potential to duplicate the weight and EMS [electro-magnetic signature] of existing coinage," the report stated.
Released Dec. 12, the report is the second under the Coin Modernization, Oversight, and Continuity Act of 2010, Public Law 111-302. For the first report released in December 2012, the U.S. Mint had tested 29 different metal compositions. Since then, the Mint trimmed its focus down to six.
Six Metal Formulations Tested
| Material | Composition | Tested On |
|---|---|---|
| Copper-plated zinc (CPZ) | Copper plated on zinc (identical to current one cent) | Nickel |
| Tin-plated CPZ (TPCPZ) | Tin plated on copper plated on zinc | Nickel |
| Nickel-plated steel (NPS) | Nickel plated on low-carbon steel | Nickel, Quarter |
| Multi-ply-plated steel (MPPS) | Nickel plated on copper plated on nickel plated on low-carbon steel | Nickel, Quarter |
| Stainless steel | Austenitic (non-ferromagnetic) stainless steel, monolithic | Nickel |
| 80/20 cupronickel (80/20) | 80 percent copper, 20 percent nickel, monolithic | Nickel |
*80/20 alloy was only tested on the nickel, but was expected to be clad to copper for higher denominations if it passed.
Promising Alternative Composition, Modest Savings
The promising alternative is a mixture of 80 percent copper and 20 percent nickel, a variant of the 75 percent copper and 25 percent nickel composition already used today for 5-cent coins. The Mint describes the 80/20 alloy as a "seamless" material that has "no appreciable impact on the coin-accepting industry." However, the report notes, the 80/20 alloy results in only modest savings of about 3% ($5.0 million annually using 2014 production volumes).
Out of the other five metal compositions tested, only the steel-based coins demonstrated acceptable wear characteristics. They offered higher savings as well, in the range of 15-20% (about $57 million annually) compared to 2014 costs. However, steel-based coins significantly lower die life and could increase production and labor costs. Also, the savings are outweighed by too many other negatives. According to the report:
"These steel-based alternatives require the coin stakeholder industry to make changes to recognize both new and existing coin characteristics because the two types of coins would co-circulate. Significantly, the EMS range for these steel-based compositions introduces the potential use of low-value steel coins from other countries in coin acceptance machines in lieu of higher value United States denominations, particularly the quarter."
Since 2012, the U.S. Mint greatly increased its outreach to those who could be impacted by the use of alternative coin metals.
"This year’s report also reflects the tremendous effort we made to reach out to our stakeholders-the many industries, associations and entities-that rely on circulating coins for their business operations," said Richard Peterson, Deputy Director of the Mint. "Obtaining their input was critical."
According to the report, any change to the weight, shape, and electro-magnetic signature used to validate current circulating coins would require equipment changes that could potentially cost stakeholders between $2.5 billion and $6 billion.
"Many stakeholders asked that we consider the significant cost to the industry compared with the projected government savings achieved by manufacturing circulating coins with an alternative metal composition."
Stakeholders strongly recommended no change to the quarter.
Current Costs to Make and Distribute Pennies, Nickels, Dimes and Quarters
United States Mint costs decreased for all denominations in FY 2014 compared to last year as production totals jumped and metal prices fell for nickels, dimes and quarters. U.S. Mint production and distribution costs by denomination include:
- 1.66 cents per penny,
- 8.09 cents per nickel,
- 3.91 cents per dime, and
- 8.95 cents per quarter
U.S. Mint circulating coin shipments to Federal Reserve Banks in FY 2014 increased by 2.3 billion units, or 21.9%, to a total 13.0 billion coins compared to the prior year. America the Beautiful Quarters saw a marked 58.5% increase in shipments, which drove increases in both revenues and seigniorage for the Mint. Seigniorage is the difference between the face value of coins and the cost to produce and distribute them.
According to the Mint’s report, its FY 2014 circulating revenue was $783.0 million, or 35.5% higher than the $578.0 million from the previous year. Seigniorage was $289.1 million, or 110.4% higher.
The full U.S. Mint 2014 Biennial Report to Congress is available here.
It just seems inconceivable to me that the US Mint are still seeking to preserve a coin system that has far out-lived its “Fit for purpose” lifetime. The one cent coin simply has no buying power on its own in the American economy and as so many consumers continue to gravitate to an electronic method of payment, it also seems so impractical to retain a denomination which many shoppers actually refuse as change or leave on the counter. It’s cost is almost double its face value and the American Government is prepared to spend further funds to research the feasibility of this denomination? The five cent coin – from the information in this study costs a little more than three cents over its face value and still this over-run in production cost does nothing to alter the coin either in its weight & diameter and/or metal. The Dollar coin is… Read more »
Why are they even considering composition changes for the dime, quarter, and (presumably) the half dollar when their production and distribution costs are so far below face value? Leave their compositions as is. If anything, they should be finding a more expensive metal alloy to use for coins denominated $2, $5, and $10 to deter counterfeiting (a problem I’ve read that goes on with British pound coins). ATMs make people withdraw in $20 increments so it seems reasonable to conclude the $20 bill is the “dollar” of our time. Eliminate the cent, nickel, dime, $1, $2, $5, and $10 bills (replacing the lost currency denominations with like-denominated coins). I’ve seen the sales sheets in my store. The average item cost in a supermarket hovers around $2.40 and $2.60. Quarters are barely justifiable with those numbers but whatever. The cheapest items you can still buy are 25¢ Ramen noodle bricks and… Read more »
Unfortunately there are political issues with changing coins–people in Congress who want their states’ or party’s presidents to remain on the coins have spoken out on this issue. Foolish, but that is just one example of what Congress has become. Also, eliminating the penny is way overdue but would “confirm” the decline of the dollar and as well as the steady rise of inflation, which no one wants to officially admit. And of course there’s no reason to continue minting halves, but who wants to kill Kennedy’s coin? My guess is that the composition of the nickel will have to change, though it sounds like that can has been kicked down the road. Eventually the only circulating coins will be that one (for awhile at least), the dime, and the quarter. When and if one and two (remember them?) bills are no longer printed we’ll finally get one dollar and… Read more »
LOL! What needs to be replaced is the inept, corrupt, unconstitutional, and immoral politico-banker ponzi scheme that has necessitated our coinage being debased in the first place.
Every willful discussion about how we can debase our coinage to make its price more palatable is willful acceptance of the theft of your purchasing power through inflation.
I want to go in the other direction, a return to constitutional money that will reveal the largest fraud and Ponzi Scheme in the history of history.
The reason the above situation is being discussed is because a small group of very bad people have conspired to steal from you. Inflation is theft. Stop trying to find solutions for your government to rob you blind. When a penny can no longer buy so much as a gumball, don’t take it out on the gumball.
Are there any vending machines other than 75 yr old antiques that will accept 1 cent coins?
M Alexander, Vachon, Richard: YES! It’s mind-boggling that the EU was able to replace over dozen national currencies in just a few months, the UK downsized all of its coins except 1p and 2p, Australia and New Zealand replaced their pounds with dollars – – – and we’re convinced it’s impossible to revise sizes and denominations dating back to the middle of the 19th century !?!?! Why can’t we just bite the bullet and drag our coinage system kicking and screaming into the modern world? Get rid of the penny, eliminate the $1 bill and replace it with $1 coins and mint a small, easily-distinguished $2 coin. If we were going to fully dive in, no matter how sentimental people are about the quarter why should we continue to mint a coin that doesn’t fit in a standard decimal system and was only created for compatibility with Spanish pesetas? Every… Read more »
The only reason I don’t recommend changing the sizes of existing denominations is, as a collector (and thinking of potential future collectors), the older coins which are occasionally found would necessarily be lost to circulation. I think it’s one of the great testaments to this nation’s coinage system that coins more than 50 years old (and still spendable should you so wish) can still be found. The United States may even be unique in that regard. With the introduction of the Euro, Europeans hit the numismatic wall at 1999. I feel bad for those collectors whose everyday change is lacking in historical richness.
SIMPLE solution… Make a new currency where one (new) cent is worth ten of the old, one (new) nickel is worth ten of the old, etc. As the older issues disappear from circulation, new valued coins are made. Yes, to begin with, people will make mistakes. Nowadays people may be in too much of a hurry to bother trying to tell new coins from old the coins bu ONLY changing the OBV and REV designs. So – like Canada has done in the past – have 12 flat sides (think stop sign with 12 sides) on all new coins. Also radically change the OBV and REV so none of the older ones could be altered (by hammering the sides) to look like a new one. Of course there will be some who will alter the old ones and there will be some fooled by the deception. But as the older… Read more »
Revalue the system. Put it on a PM basis, and watch the problems disappear – except for those who are profiting from this fiasco money system. However, its D.C. – do we really expect logic?
Get rid of the penny. No argument here.
Steel nickels are the only durable choice, but pure nickel plating will cause allergic reactions. Use the industrial proven 88% zinc/12% nickel plating instead, though this isn’t something that’s current available by coin blank providers. We just need to educate people that these new nickels won’t work in vending machines. I doubt they’d care. Nickels will be phased out eventually and it won’t affect the vending industry.
There’s no real need to change dimes and quarters. We need to take Congress out of these decisions if anything is to get done.