New cost explosion coming for cent?

The cost of making U.S. cents rose by almost five percent according to the United States Mint’s latest annual report.

But worse seems yet to come.

For the last 11 years it has cost more to make a cent than its face value.

The government has decided to simply eat the expense.

The latest figures show it cost 1.5 cents to make each one-cent coin.

This is up from 1.43 cents to make a cent in the year prior fiscal year.

Since 1982, cents have been made mostly of zinc.

There is a thin coating of copper to make it look like the cents of old.

In percentage terms, the coin currently is 97.5 percent zinc and 2.5 percent copper.

This is where the problem comes in.

The price of zinc is soaring.

It is up about 25 percent since the end of the Mint’s fiscal year on Sept. 30.

Back at the end of September it was just over $1 a pound.

Now it is almost $1.30.

In the period covered by the Mint’s annual report, the price of zinc actually fell by over 10 percent.

Despite this, the cost for making the one-cent coin rose to 1.5 cents.

If the price of zinc stays elevated for the rest of this fiscal year, we will be looking at far higher costs for each one-cent coin.

For example, a 25 percent increase in the price per coin for all costs would translate into a cost per coin of 1.875 cents.

That 0.375 cents per coin increase probably doesn’t seem like much in an age when people won't pick the coin up off the street.

But when you consider the fact that the Mint makes more than 9 billion cents annually, it becomes a significant sum of money.

It would work out to an additional bill of almost $34 million.

Of course, the Mint might be able to cut its overhead costs as applied to the cent in the current fiscal year.

However, this is not likely. It did not do so last year.

That is why the coin’s cost went up 5 percent despite the falling price of zinc.

It might have fully locked in its price of cent planchets for this year.

That would delay this cost increase.

So watch the price of zinc as it is reported in the weekly Numismatic News.

If zinc prices stay elevated or increase from the present $1.29 a pound, the Mint’s cost to make the one-cent coin will take a big jump when it reports results this time next year.

Does it matter?

The government will simply eat the expense for the 12th year in a row.

Buzz blogger Dave Harper has twice won the Numismatic Literary Guild Award for Best Blog and is editor of the weekly newspaper "Numismatic News."

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