US Cent and Nickel Costs Trending Lower

by Mike Unser on February 19, 2016 · 9 comments

U.S. coinage

The cost to produce U.S. coins continues to decline, but it still costs the U.S. Mint more than face value to strike cents and nickels

The cost of producing U.S. circulating coins fell for a fourth straight year, the United States Mint disclosed in its 2015 Annual Report.

That said, the price to make and distribute the nation’s two smallest coins, the Lincoln cent, and Jefferson nickel, remained well above their face values. Their metallic compositions are the main cost drivers. The U.S. Mint has studied alternative metal alloys in an effort to cut costs. Viable solutions have proven to be elusive.

For the Mint’s fiscal year ending September 30, 2015, the total unit cost to produce, administer and distribute the cent was 1.43 cents compared to 1.66 cents in 2014. Similarly, the nickel’s costs totaled 7.44 cents versus 8.09 cent from a year earlier.

"Compared to FY 2014, we reduced the per unit cost of producing the penny by 13.9 percent; the nickel by 8.0 percent; the dime by 9.5 percent; and the quarter by 5.7 percent," Rhett Jeppson, principal deputy director of the United States Mint, noted in the forward of the annual report.

Improved efficiency and lower metal prices contributed to their declines, which boosted overall gains in seigniorage. Seigniorage is the difference between the face values of coins and their costs.

"We also returned $550 million in seigniorage to the Treasury General Fund in FY 2015, more than double the amount we returned last fiscal year," Jeppson said.

The U.S. Mint made money on dimes and quarters, with their total unit costs at 3.54 cents and 8.44 cents. These compare to FY 2014 tallies of 3.91 cents and 8.95 cents.

For the FY 2015, the U.S. Mint shipped to Federal Reserve Banks a total of:

  • 9.155 billion cents;
  • 1.477 billion nickels;
  • 2.874 billion dimes; and
  • 2.645 billion quarters.

The four denominations combined to 16.151 billion coins, marking a 23.9% increase over the 13.037 billion coins delivered to Fed banks in FY 2014.

Unit Cost to Produce and Distribute Lincoln Cent

FY 2014 FY 2015
Cost of Goods Sold 0.0143 0.0125
Sales, General & Administrative 0.0021 0.0015
Distribution to Reserve Banks 0.0002 0.0003
Total Unit Cost 0.0166 0.0143

 

Unit Cost to Produce and Distribute Jefferson Nickel

FY 2014 FY 2015
Cost of Goods Sold 0.0699 0.0664
Sales, General & Administrative 0.0102 0.0068
Distribution to Reserve Banks 0.0008 0.0012
Total Unit Cost 0.0809 0.0744

 

The two smallest U.S. coins have lost money since 2006.

Unit Costs and Seigniorage for Cent and Nickel from 2005 to 2015

Fiscal Year Cent Unit Cost Nickel Unit Cost Seigniorage (in millions)
2005 0.0097 0.0484 $4.40
2006 0.0121 0.0597 ($32.90)
2007 0.0167 0.0953 ($98.60)
2008 0.0142 0.0883 ($47.00)
2009 0.0162 0.0603 ($22.00)
2010 0.0179 0.0922 ($42.60)
2011 0.0241 0.1118 ($116.70)
2012 0.0200 0.1009 ($109.20)
2013 0.0183 0.0941 ($104.50)
2014 0.0166 0.0809 ($90.50)
2015 0.0143 0.0744 ($74.40)

 

{ 9 comments… read them below or add one }

Vachon February 19, 2016 at 3:04 pm

I’m still trying to figure out why they’re looking into changing the compositions of the dime, quarter, and presumably half-dollar. Their content value is only about 10% of their face value. Even when adding in the other costs, they’re making quite a profit on them already. The Mint’s risking counterfeiting and/or the importation of cheap foreign coins if their metal and face values diverge too much.

I think the only reason Sacagawea dollars are not being widely counterfeited (metal value is only 4% face value) is because they don’t circulate.

Of course the elephant in the room are how worthless our coins are today to begin with. I feel bad for street performers and beggars whose cup of change can’t really buy anything. At least in the ’70s dimes and quarters still meant something.

Barts February 20, 2016 at 9:39 am

Simple solution, switch the composition and size of the dime and nickel. Bulk of the problem solved. Why is it so difficult for our leadership to not see the obvious? No new equipment, no costly experiments with metal alloys, simply new designs and some public education.

jim February 20, 2016 at 10:00 am

Well it’s nice to see that Jepson was able to excel in something. He certainly seems to be failing in collector coin quality and costly packaging errors that if unmentioned would have likely gone unnoticed.

Tinto February 20, 2016 at 11:08 am

I think Jepson was only “excelling” at this because of all the attention by the elected officials, mainstream media, etc. on the fact that it cost more to make the cent and nickel than they’re worth … and he’d better show results or he’d be out of a job.

If only there was such attention even a tiny fraction, to collector coins and packaging … but as long as the Mint is making money they don’t care … and until the lawmakers start asking questions it will be the same old same old screw the collector …

Munzen February 20, 2016 at 10:01 pm

Jim, Tinto: Amen to that!

My 2 cents is that eliminating the penny is the only step that wouldn’t force significant changes to the rest of our coinage system. So long as we have quarters and people refuse to use half dollars there’s no way the nickel can be retired. That would leave only two circulating denominations, one of which isn’t a multiple of the other – highly impractical for making change.

One rationalization would be to parallel New Zealand’s denominations of 10, 20, and 50 cents, and $1 and $2 coins. That would make for a truly decimal system (finally, no more compatibility with Spanish milled dollars!) and wouldn’t require reconfiguring most cash register slots (paper clips and rubber bands would have to find a new home though).

… and the chances of any full-blown coinage reform getting past Congress AND the never-change-anything crowd? Is there a temp below 0° Kelvin?

jim February 21, 2016 at 1:36 am

So looking at the numbers, I wonder if anybody questioned why it costs so much to sell (sell???) pennies and why almost 5 times as much to sell nickels. In the end they’re both coins to the mint which aside from their size, color, and metallic content should be indistinguishable from one another. I think the mint is cooking the books to justify their expenses.

Maybe someone out there is up on coinage law but I don’t remember any proposed laws to abolish the penny (and nickel?) recently for congress to take a position on and let people know how backward they are. And I continue to marvel how necessary it is to make billions of pennies every year – where do they go? They can’t possibly wear out that quickly. What do you suppose would happen if the banks no longer accepted pennies?

Seth Riesling February 21, 2016 at 1:47 pm

Munzen & other interested CoinNews readers –

We have agreed about the cent discussion before & the Crane & Co. “paper” (75% cotton, 25% linen material matrix made in the old paper pulp manufacturing method) monopoly. CNN International news cable station has a very short 5 minute news bit on the Fareed Zakaria GPS show today that replays at 2pm Central Time today Sunday, February 21 during the last 5 minutes of the 1-hour show and should be on CNN.com under “money”. Last week Harvard University issued a study about high denomination banknotes & recommended getting rid of the high face-value U.S. $100 Federal Reserve Notes & European Union 500 Euro notes since they are basically mostly used for illegal money laundering schemes around the world. Most Americans have never held a $100 FRN much less the new series note issued over 2 years ago with the wide blue ribbon with microscopic glass beads as anti-counterfeiting measures among other aspects. They mentioned that $1 million of the $100 notes weighs only 22 pounds & fits in most briefcases! Crane & Co. of Dalton, Massachusetts (a company town) makes most of its profits off this newest series of $100 FRNs special “paper” because it took years of research by the BEP to perfect its manufacturing at their R&D labs & with Crane. If this withdrawal were to happen Crane would be greatly reduced in its monopoly & maybe for the first time in over 100 years Crane wouldn’t have their 100% monopoly on the special “paper” used to print all our FRNs & other paper companies could successfully bid on this U.S. government contract!
I toured both BEP facilities on public & private tours in the late 80s & early 90s in Washington D.C. & Ft. Worth, Texas & I can tell you they feel like they would be lost without Crane & Co., which has a very strong lobby & lots of $ to spread around Washington D.C.!

On the cent & nickel circulating coin issue, Jeppson had almost NOTHING to do with reducing costs of production. The price of the base metals used for their production (copper, zinc & nickel) have been going down every year since peaking in 2011.
Credit is due almost entirely to the lower spot prices of these base metals & his taking credit for lower production costs is laughable!

-NumisDudeTX

Munzen February 21, 2016 at 2:40 pm

Seth, thanks so much for your insights. I can’t state my feelings about Jeppson any better than you have. At least based on current spot prices for Zn/Cu/Ni, the raw-metal cost of a cent has dropped to slightly less than 0.5¢ per coin, while a nickel is down to about 2.8¢. Assuming I’ve done my arithmetic correctly the rest is all manufacturing and distribution. Jeppson sounds like the fabled rooster who took credit for making the sun rise.

Based on my admittedly limited experiences here and in the EU I don’t think too many people would miss either the $100 or €500 note if they’re discontinued. Supposedly about 2/3 of all Benjamins are outside of the US, and when I was in Europe a few years ago the €500 note was called a “Bin Laden”: everybody had heard of them but nobody had ever seen one. However I was surprised to find €200 notes in regular use in the Netherlands. That’s about US$220 so I wonder if getting rid of just the 500 would make much of a dent in money-laundering. In addition, it seems to me the US would have to recall / demonetize the 100 so that the existing stock (plus fakes!) wouldn’t simply stay in use for years to come.

Your thoughts – ?

Seth Riesling February 22, 2016 at 9:28 pm

Munzen –

Your stats & comments are right on mark for sure. It may surprise most “Americans” but as you stated, 60% of all USA Federal Reserve Notes printed by both BEP factories in Washington D.C. & Ft. Worth, Texas are held outside the shores of the USA by foreign central banks & by large corporations/investment firms & by individuals in safe deposit boxes & in mostly former Eastern Bloc countries in mattresses (literally) ! This is of course because the U.S. dollar is the most stable currency in the world. If the Treasury Dept. ever decided to get rid of the $100 FRN it could not recall the ones already in circulation without causing panic among the many conspiracy theorists out there! They would simply have to slowly “retire” (shred) the ones that come back to the banks during circulation (this would take a few years, but it was done with the $10,000, $5,000, $1000 & $500 FRN notes not that long ago actually (I remember in the 1970s & early 1980s that $1000 FRNs were routinely counted out to winners on the t.v. game shows like The Price is Right & Let’s Make a Deal)! I watched t.v. in amazement at that spectacle as I had only seen such notes at high-end coin/paper money galleries. Lol. I was lucky enough in 1988 to take a private tour of the U.S. Treasury Building in Washington D.C., & the Treasurer’s office, which was closed to the public forever in the late 1970s & saw their amazing art collection & their fantastic banknote collection, including the famous $100,000 FRN notes that were used only between Federal banks usually as overnight loans or short-term loans & had to be returned with interest by courier as it was illegal for the public to own our highest denomination banknote in the history of the USA. It is still illegal to own even one sheet of the “paper” made by Crane & Co. used to print all current FRNs.
I lived in Japan for 3 years & they are as close to a cashless society as there is (some Japanese millennials have never touched a coin or banknote in their lives!). Plus, they are the King of vending machines that only take smartcards (no coins or banknotes). I lived in Germany for 3 years on a U.S. NSA base in Bavaria & can’t imagine a €500 note circulating with the illegal black market/drug trade going on! The European Union needs to get rid of it & the €200 notes you mentioned!
By the way, the BEP is now offering the new Series 2013 $2 FRN 32-note uncut sheets with the Rios/Lew signatures. You can check it out at http://www.bep.gov.

Happy collecting Munzen & all CoinNews readers!

-NumisDudeTX

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