January 21, 2014
Fabricators aren’t alone in looking for ways to cut back on material costs.
A friend recently posted a photo of a large jar of coins on his Facebook page—change from a routine purchase. In coming years, that change jar might have a different color, from the inside out.
As reported in the Wall Street Journal, “the U.S. Mint is considering a change to the mix of metals it uses to make quarters, dimes, and nickels, a study Congress mandated in 2010 to examine ways to save money. If the materials are altered for the first time in half a century or more, some coins could have new colors and weigh less.”
(Vending-machine operators aren’t happy. You can read more about their concerns in the WSJ article.)
Apparently, it now costs 1.8 cents to make a penny and 9.4 cents to make a nickel. This discrepancy between the cost to manufacture and the value of the coins cost the government about $104.5 million last year.
It’s interesting to note that these costs actually have declined over the past two years. For the previous fiscal year, the penny cost 2.00 cents and the nickel, 10.09 cents.
The Mint reportedly has spent $8.1 million over three years to develop a research-and-development facility and study different materials. Six alloys are being considered, and a final recommendation on coin content is expected by the end of 2014.
The Mint has concluded that it’s impossible to squeeze any meaningful cost reductions out of the penny, but is optimistic that other coins could be manufactured at lower costs, particularly the nickel.
The nickel currently comprises 25 percent nickel and 75 percent copper with a weight of 5.000 grams. As noted on coinupdate.com, during the fiscal year that ended September 30, 2013, the average daily market prices for copper and nickel had declined by 4.2 percent and 11.7 percent respectively.
Going forward, it appears that this trend will continue for copper and nickel for the foreseeable future, unless there is unexpected fallout from Indonesia’s nickel ore export ban.
So it remains to be seen if the final recommendation materializes by the end of the year, what future nickels will look like, and what savings can be realized from the new composition. Hopefully, it will be significant in relation to the losses realized by the Mint and those high R&D costs.
However, I don’t expect too much from a government that spends nearly $100,000 to install a single-toilet outhouse with no internal plumbing on an Alaskan trail.
Fabricators, take heart. You’re much smarter than the government. You don’t take three years to try and offset huge costs. But then again, it’s your money you’re working with, and not the taxpayers. You know there’s a limit to how much you can spend and how much you can afford to lose. Too bad you aren’t running the country.
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