Rising zinc price to doom the penny?

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Previous post was inside the QUOTE. Sorry.

Copper cents are not worth more than face value in zinc content. There are 182 pennies in a pound ($1.82 face), and zinc price is currently about $1/lb. So, there is only 0.55 cent worth of zinc in a cent. It costs somewhere around 1.7 cents to make a penny, but most of the cost is manufacturing, transportation, administration, etc., not metal.

Cal

 

First, zinc oxide is not "highly toxic"! It's an ingredient in diaper cream, which can have up to 40% zinc oxide. Most of the rest is petroleum jelly or some other innocuous compound to suspend the zinc oxide. Zinc oxide is also used extensively in sun-block and makeup. We wouldn't be putting something highly toxic on our faces or babies' behinds. Zinc melters would want to minimize zinc oxide production, not because it's toxic, but in order to get a maximal yield of zinc. They can do this by using pots with minimal air surface per unit volume, not heating any longer than needed (saves fuel too), or flooding the top of the pot with nitrogen or argon. Main toxicity danger to melters would be doing stupid things, which some would do, like running the melting equipment in a confined space (hypoxia, carbon monoxide poisoning) or cooking acidic foods in the melt pot (zinc ion poisoning).

The main use (55% in the U.S.) of zinc is for galvanizing steel, and that zinc can have 2% or so impurities. Melted pennies would probably work nicely. However, chunks of zinc from backyard melters would go to scrap dealers who would send it to large recycling plants to produce standard zinc ingots and other zinc products. After galvanizing, second biggest use of zinc is in alloys. Main alloy is brass, and brass is mostly a mix of zinc and copper. Zinc is also used for pot metal, often called die cast zinc. It's zinc mixed with smaller amounts of other metals, including ... you guessed it ... copper. Scrap dealers wouldn't feel a need to assay lumps of melted pennies. They'd be able to tell at a glance. At large recycling plants, they would use a handheld x-ray fluorometer, which will readout the metal composition in less than a minute. These neat gadgets (I want one!) are still $15K and up. Too much for the average collector or dealer, but a reasonable expenditure for a metal processing plant.

Back to finances: I said from the outset that melting pennies would probably not get underway until zinc price stabilized at about 10% over breakeven. Breakeven is $1.82/lb (there are 182 pennies in a pound), so going up 10% is about $2/lb. Our $10,000 in face (1million pennies which weights 2,500 kg or 5,500 lbs) will have $11,000 worth of zinc. That means if we can melt the zinc and get it to the scrap dealer for less than $1000, then we're money ahead. Even if the fuel for melting costs $200 (and it would be less than 1/10 that as I showed before), then we make $800 minus a little gas money for haulage to the nearest scrap dealer. If zinc went to $2.20/lb, then our profit more than doubles because expenses would be the same.

At current inflation rates, I'm estimating 20-30 years for zinc to go from its current $1/lb to $2/lb. So, most of us older collectors won't see it. Could go faster, depending on industrial need in developing nations. Zinc use by them was probably the main reason for the big hop in prices 2005/6. Hopefully, pennies in their current form will be discontinued in far fewer than 20-30 years.

Cal

 

I was talking about Pre-82 copper cents. People do hoard them, in anticipation to a payoff.

 

The disappearance of the cent will simply introduce a new problem. Then we'll have the nickel at the bottom of the economic food chain. This coin has an even larger cost differential than the cent. It apparently costs 9.7 cents to produce a single nickel - far more wasteful than the much more maligned cent. When I toured the Denver mint this summer, the tour guide said that all the fuss around the cent seemed confusing: the nickel is their really big loser.

So any legislation to eliminate the cent should probably be accompanied by a clause to refurbish the nickel to further reduce costs. But, the Denver tour guide added, as long as the Mint remains profitable - and it is very profitable and self-funded; they make an absolute killing on the quarter - the issue doesn't surface as critical or worthy of immediate attention.

Probably the largest factor in eliminating the cent is that it takes an act of Congress to do so. This dooms it. Lobbyists and the inevitable push for prestige probably continue to thrash this issue into the dustbin. Canada has been centless since 2012. If you visit that country, you'll find that they get along just fine without that denomination. The beaver nickel now reigns supreme. No panic ensued. No riots. No mass arrests. From what I've heard, it passed without much, or any, incident.

That said, it sounds like bills to eliminate the cent were introduced in 1990, 2001 and 2006, but all fizzled despite apparently popular support and incessant business lobbying.

 

Its name aside, nickels are 3/4 copper, and you don't have to squint at the date. Unlike cents, all nickels are and were 75% copper. So, knock back a few nickels instead.

 

Sorry again. I thought you were referring to zinc cents.

Copper cents weigh 3.1g, so there are 146 in a lb. That's way below copper price of $2.15/lb, which is less than half its price 5 years ago. But you can't get copper cents at face value except finding a few still in circulation or in rolls.

Consideration of why so many are being retained leads us into the strange lands of hoarding, speculation, and (dare I say it?) collection: inertia, ignorance, anticipation of rise in numismatic value, expectation of rise in copper price, fear of the apocalypse, fear of monetary collapse, mistaken idea that heirs would want to keep them, drive to collect (I wouldn't have a clue about that!), etc. I'm sure that if zinc hit twice face value of current cents that many millions would be hoarded rather than melted.

Cal

 

Thanks for the info in your post. Probably to make getting rid of the cent politically palatable, the nickel would have to be retained. But, as mentioned above, it could be made more cheaply by having it be smaller and consisting mostly zinc or aluminum. Inflation, even if at a low rate, will eventually doom any metallic nickel too.

I recently visited BC, a lovely place and people, and for fun, tried to pay for something with some Canadian cents I brought with me. Got a big laugh.

Cal

 

Yep, had all this discussion before. and I'm sure we will have it many more times. and thank you calcol for pointing out that zinc oxide is not toxic. also used in band-aides, and that white cream people put on their nose to block 100% of the sun and is actually sold under the name zinc oxide cream.

Yep, get rid of the nickle too.
and while we are at it, the paper dollar too. Make the dollar coin out of pre-82 coin copper. Must be small enough to be accepted in change. (smaller than current dollar)
and while we are at it, make a $100 coin too (and heavy enough so the crooks can't hide them very easily.)
Make them out of a metal that has perceived value and a workable size for today's consumer, and I believe they will get a lot more acceptance.

Right about now I expect someone to chime in with "get rid of all coin and go digital" That will be a dangerous day, and a day to mourn. There is no such thing as secure date. NO such thing.

 

Biggest loser on a per coin basis, but they make ten times as many cents as they do five cents pieces. So overall they lose more money on the cents than they do the five cent.