US Coin Production Returns to More Normal Levels. Solution to Penny Remains Elusive

The United States Mint continued to manufacture circulating coins at high levels in 2022, albeit fewer than in the two previous years, which had been characterised by coins not circulating through the economy as rapidly as before the pandemic. The drop in volumes produced and revenues for the year marked a return to a more normal pattern of demand.

The US Mint generates revenue through the sales of circulating coins to the Federal Reserve Banks, numismatic products to the public and bullion coins to authorised purchasers. It operates six facilities and employs approximately 1,600 people. Since 1996, it has operated under the Public Enterprise Fund (PEF).

In 2022 the Mint achieved revenues of $5.32 billion, compared with $5.42 billion in 2021, a decrease of 1.7%. The cost of goods sold decreased by 1.4% to $4.62 billion and selling, general, and administrative expenses increased by 6%, resulting in seigniorage of $534 million which was transferred to the Treasury General Fund.

Circulating coins

In 2022 circulating coin shipments to the FRB decreased by 2.6 billion units (-17.6%) to 12.1 billion coins. The decreases occurred in all denominations except the quarter. In term of the ‘mix’, pennies accounted for 44.5% of shipments (down by 7.3%), nickels for 11.9%, dimes for 23.5% and quarters for 20%.

Revenues from circulating coins were $1.02 billion were 2.2% lower than the previous year, accounting for 19.2% of all revenues. Of the $534 million in seigniorage, $310.2 million was from circulating coins, compared with $381.2 million in 2021.

The unit costs of all circulating coins increased compared with the previous year – the penny by 29.5%, the nickel by 22.2%, the dime by 14.6% and the quarter dollar by 15.4%. The cost per penny was 2.72 cents, and per nickel 10.41 cents, both remaining above their face value for the 17th consecutive year. One of the reasons was that the average spot prices increased by 41.4% for nickel, 6.3% for copper and 26.5% for zinc.

No answers to cost of penny

The perennial gap between costs and face value was what prompted the Coin Modernization, Oversight, and Continuity Act of 2010 to be passed, which requires the Mint to conduct R&D on alternative materials for all circulating coins and provide biennial reports to Congress on the status of production costs, trends and possible new materials or technologies for coin production.

The objective is to find alternative compositions that will be less costly and seamless to the general public, coin handling industry, and vending machine operations.

One solution, an alternative cupro nickel for the nickels, dimes and quarters, has been identified, tested and is ‘ready to go’. If adopted, it would have resulted in further seigniorage of $12 million in 2022. A number of other alternatives are also being investigated that could yield further savings.

The Mint has not, however, identified a suitable replacement for the penny. Or rather, it has – a copper plated steel composition – but the volumes required and the presence of only one potential supplier would present significant supply risks. Moreover, this alternative could potentially cost more than the existing penny. Further testing has been suspended pending more research.

Changing the metal composition of any of the coins would require authorisation by Congress, which has yet to happen. Perhaps the 2022 production costs, which for the penny and nickel were at an all-time high, might result in some movement.