Nickel, cent exceed face

If the Mint had to buy zinc, copper and nickel at current prices, it would cost 1.4 cents to strike each cent and 6.4 cents to strike each nickel, according to a letter written by U.S. Mint Deputy Director David Lebryk and sent to chairmen of the Mint

Escalating metal prices are not only pushing the cost of striking a U.S. cent above face value, but they have pushed the cost of a nickel above face value as well.

If the Mint had to buy zinc, copper and nickel at current prices, it would cost 1.4 cents to strike each cent and 6.4 cents to strike each nickel, according to a letter written by U.S. Mint Deputy Director David Lebryk and sent to chairmen of the Mint?s congressional oversight committees and other members of Congress.

Fortunately because of inventories and contracts in place, the costs by the end of the fiscal year, Sept. 30, will not average out that high. Lebryk says a nickel could cost approximately 5.73 cents to make by the end of fiscal 2006. To produce a cent, the price is expected to be 1.23 cents.

These Mint projections mean that the annual production costs would exceed revenues by approximately $20 million for the cent and $12 million for the nickel.

Currently, the Mint is studying the possibility of alternative metal alloys and rising costs are adding new urgency to the process. Metal compositions for U.S. coins are established by law.

In the fiscal year 2005, the Mint produced cents for $0.0097 apiece. The cost to produce a nickel was $0.0483.

In his letter, Lebryk told the committees that the increases in metal prices have raised the Mint?s coin production costs by 10 to 20 percent, depending on denomination.

Unit costs are the sum of four elements: metal, fabrication (pre-production metal processing), labor/overhead and transportation.

Factors that determine annual coin production costs include valuation of inventory, production volume and metal costs.

So far in 2006, the year-to-date cost of producing a cent is slightly above face value, according to Lebryk. Production costs for the nickel are slightly below face value.

Another effect of rising production costs would be less seigniorage transferred from the Mint to the Treasury. In 2005, the Mint generated $730 million for the Treasury.

What about other denominations? Lebryk told the committees that the dime and the quarter would still be minted at significantly less than face value, even with high current metal prices. However, the increased metal costs would result in approximately $45 million less in seigniorage for these coins in fiscal year 2006, compared to 2005.

If metal prices keep rising, no doubt another letter will have to be written.

NMNAuthor