Price Of A Penny

What happens if a penny is worth more than one cent?

That is an issue the U.S. Mint could soon face if the price of metals keeps rising. Already it costs the mint well more than a cent to make a penny.

This week the cost of the metals in a penny rose above 0.8 cents, more than twice the value of last fall. Because the government spends at least an additional six-tenths of a cent above and beyond the cost of the metal to make each penny, it will lose nearly half a cent on each new one it mints. advertisement

The real problem could come if metals prices rise so high that it would be economical to melt down pennies for the metals they contain.

Appearances aside, pennies no longer contain much copper. In the middle of 1982, after copper prices rose to record levels, the mint starting making pennies that consist mostly of zinc, with just a thin copper coating. But these days, zinc is popular. Rising industrial demand and speculation have sent the price rocketing. Since the end of 2003, zinc prices have tripled. Gold, by contrast, is up only about 50 percent.

Asked if the mint had a backup plan for what it will do if zinc prices rise far enough that it could pay to melt down pennies, a spokesman said that such issues are for Congress to decide. Perhaps the mint could go back to making steel pennies, as it did during World War II when copper was needed for the war effort.

Pennies, meanwhile, are in high demand. Last year, the mint made 7.7 billion of them, more than the number of all the other coins it produced. In the first three months of this year, the pace of penny production rose to an annual rate of 9 billion, the highest since 2001.

Why so many? Perhaps there is now some hoarding in expectation that metal prices will keep rising, but mostly it is an issue of sales taxes, which in most states are added to the retail price and assure that the total price of many items will require pennies to be given in change if a customer pays with dollar bills. That helps explain why the idea of eliminating the penny has gone nowhere.

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