Suitably Flip

Pennies Not Worth The Copper They're Printed On

And neither are nickels.

With the soaring price of copper, a melted-down penny or nickel is now worth more than it would be in its regular state at face value.

So let's get melting, right?  So long as you don't mind spending 5 years in the can.

Officials at the Mint say in recent months they have received numerous inquiries into whether or not it is illegal to melt coins.

"We are taking this action because the Nation needs its coinage for commerce," said U.S. Mint Director Edmund Moy in a statement. "Replacing these coins would be an enormous cost to taxpayers."

How big a cost? Moy told ABC News that if just 1 percent of all the nickels and pennies that are in circulation were melted down, taxpayers would have to foot a $43 million bill.

To avoid this costly coin shortage, the new regulations prohibit the melting or treatment of all 1- and 5-cent U.S. coins. 

I've just run a few numbers and I'm not so sure we need this.  Yes, it should be illegal to destroy U.S. currency, but I don't see the need to get tougher about it in response to the run-up in copper prices.  I don't have a problem with imposing strict penalties; I just think the Treasury is getting needlessly nervous.

Let's consider how lucrative a nickel melting racket might be (as they're heavier than pennies and contain a much higher concentration of copper), under optimal circumstances.  Nickels are made of a 75-25 copper-nickel alloy.  I'm assuming that's by weight.  Nickels weigh 5 grams, meaning you should have 3.75 grams of copper in each nickel.  Copper's currently going for about $6.78/kg, so if you had a perfectly efficient melting and separating operation, you could extract only 2.5 cents worth of copper per coin.  It turns out it's the nickel in the nickel that's much more valuable.  Currently trading at more than $34/kg, the nickel content works out to roughly 4 cents per coin.

Add in the production costs and the Treasury estimates each nickel to be "worth" 8 cents or so.  But the "worth" tied up in its production costs actually has negative value to the would-be melter, as there's cost to be incurred in the separation of the base metals (i.e. to undo the "worth" created when it was minted into legal tender).

If your melting/separating operation were perfectly efficient and completely cost-free, you'd clear about 1.5 cents/nickel (after the cost of buying the nickels).  That might be enough to make it worth your while, but - while I know nothing of the cost or efficiency of large-scale coin melting - I have to assume that even if the physical processes were incredibly efficient and the cost of operation were very low, it'd require an enormously large-scale operation to extract any net value from U.S. nickels at current metals prices.

As for pennies, the prospects are even worse.  With copper accounting for 2.4% of a 2.5 gram penny (it's only in the plating), the market value of its copper content would only be about 1/20th of a cent.  The zinc core on the other hand would be worth just a hair over $0.01 at current prices, meaning your net value extracted per coin would be around 1/10th of a cent (again, after the cost of buying the pennies and assuming a free and perfectly efficient melting/separating operation).

So yes, currently the metal content of both pennies and nickels are worth more than the coins' face values - ever so slightly, fractionally more.  But the Treasury's figures of 8.3 cents/nickel and 1.7 cents/penny are hugely overstated in that they bake their own cost of production into the coins' "value", a measure totally irrelevant to would-be melters or mass exporters.  (Plus, that kind of thinking really smacks of Marxism and the labor theory of value, which frankly has no place at the heart of the American monetary system.)

I'll concede that if a sufficiently efficient and low-cost, high-volume melting/separating operation could be devised, it's feasible that nickel-melting could be very thinly profitable.  But (while I'd like to see this all more thoroughly vetted by the Mythbusters) my outside guess is that the size of the operation required to reach break-even would call for more nickels than are currently in circulation.

Comments

Pennies Not Worth The Copper They're Printed On

And neither are nickels.

With the soaring price of copper, a melted-down penny or nickel is now worth more than it would be in its regular state at face value.

So let's get melting, right?  So long as you don't mind spending 5 years in the can.

Officials at the Mint say in recent months they have received numerous inquiries into whether or not it is illegal to melt coins.

"We are taking this action because the Nation needs its coinage for commerce," said U.S. Mint Director Edmund Moy in a statement. "Replacing these coins would be an enormous cost to taxpayers."

How big a cost? Moy told ABC News that if just 1 percent of all the nickels and pennies that are in circulation were melted down, taxpayers would have to foot a $43 million bill.

To avoid this costly coin shortage, the new regulations prohibit the melting or treatment of all 1- and 5-cent U.S. coins. 

I've just run a few numbers and I'm not so sure we need this.  Yes, it should be illegal to destroy U.S. currency, but I don't see the need to get tougher about it in response to the run-up in copper prices.  I don't have a problem with imposing strict penalties; I just think the Treasury is getting needlessly nervous.

Let's consider how lucrative a nickel melting racket might be (as they're heavier than pennies and contain a much higher concentration of copper), under optimal circumstances.  Nickels are made of a 75-25 copper-nickel alloy.  I'm assuming that's by weight.  Nickels weigh 5 grams, meaning you should have 3.75 grams of copper in each nickel.  Copper's currently going for about $6.78/kg, so if you had a perfectly efficient melting and separating operation, you could extract only 2.5 cents worth of copper per coin.  It turns out it's the nickel in the nickel that's much more valuable.  Currently trading at more than $34/kg, the nickel content works out to roughly 4 cents per coin.

Add in the production costs and the Treasury estimates each nickel to be "worth" 8 cents or so.  But the "worth" tied up in its production costs actually has negative value to the would-be melter, as there's cost to be incurred in the separation of the base metals (i.e. to undo the "worth" created when it was minted into legal tender).

If your melting/separating operation were perfectly efficient and completely cost-free, you'd clear about 1.5 cents/nickel (after the cost of buying the nickels).  That might be enough to make it worth your while, but - while I know nothing of the cost or efficiency of large-scale coin melting - I have to assume that even if the physical processes were incredibly efficient and the cost of operation were very low, it'd require an enormously large-scale operation to extract any net value from U.S. nickels at current metals prices.

As for pennies, the prospects are even worse.  With copper accounting for 2.4% of a 2.5 gram penny (it's only in the plating), the market value of its copper content would only be about 1/20th of a cent.  The zinc core on the other hand would be worth just a hair over $0.01 at current prices, meaning your net value extracted per coin would be around 1/10th of a cent (again, after the cost of buying the pennies and assuming a free and perfectly efficient melting/separating operation).

So yes, currently the metal content of both pennies and nickels are worth more than the coins' face values - ever so slightly, fractionally more.  But the Treasury's figures of 8.3 cents/nickel and 1.7 cents/penny are hugely overstated in that they bake their own cost of production into the coins' "value", a measure totally irrelevant to would-be melters or mass exporters.  (Plus, that kind of thinking really smacks of Marxism and the labor theory of value, which frankly has no place at the heart of the American monetary system.)

I'll concede that if a sufficiently efficient and low-cost, high-volume melting/separating operation could be devised, it's feasible that nickel-melting could be very thinly profitable.  But (while I'd like to see this all more thoroughly vetted by the Mythbusters) my outside guess is that the size of the operation required to reach break-even would call for more nickels than are currently in circulation.