Eight years ago a coin shortage became a serious possibility as the prices of copper, nickel and zinc were soaring.
The public would have found it profitable to melt nickels. Zinc cents looked like they wouldn’t be far behind.
The Treasury slapped a ban on melting these coins Dec. 14, 2006. It is still in place, though it is no longer necessary.
At current metal prices, the nickel contains 4.38 cents worth of metal. The copper-coated zinc cent contains 0.59 cent worth of metal.
Anyone trying to melt these two coins would simply guarantee himself a loss.
So why is the melting ban still in place?
It isn’t all simply government inertia.
There is still the little matter of the pre-1983 cents that are made of 95 percent copper. Some might be melted if the ban were lifted. At first glance, they would seem to be profitable to melt. The metallic content is currently worth 2.04 cents. Costs of smelting would chew up a portion of that extra 1.04 cents, but likely not all of it.
Though they might still exist by the tens of billions, the percentage of these pre-1983 cents that still are used in circulation is vanishingly small.
It can be said that the melting ban is necessary to keep some or all of these cents from the smelters and available for use in circulation, but is that a necessary public policy objective?
If the copper cents are not used, or if few are used, they have already been removed from the realm of public utility and benefit.
Melting them, if that’s what the owners would choose to do, simply would recycle copper into other uses and reward all the small hoarders out there who have been saving these coins for years.
The Mint has argued that cents that are melted would have to be replaced at a cost to the taxpayer. However, if they are not presently used, they have already been replaced by the current copper-coated zinc coins and the taxpayer has paid the price already. To register this at the time of melting as a cost is simply counting the same thing twice.
The Treasury can argue that even though metal prices are currently down, they might bounce higher again, bringing back the possibility of melting current cents and nickels.
That is a possibility. It might even be a probability. We just do not know when this might happen.
But is that enough to justify a continuation of the current melting ban? I don’t think so.
Bans signal to the public that something unusual is going on. It makes them more likely to hoard the affected coins.
Lifting the ban conversely signals a return to normal times.
But government bans once imposed often stick around for quite a while. Gold ownership was banned for 41 years. Continuation of the present melting ban for 41 years would take us to 2047. By then the newest of the copper cents in question would be 65 years old.
This article was originally printed in Numismatic News.
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