The skyrocketing value of a mineral challenges the world's antiquated reliance on mints, metals, and mines.
photo © by Heinrich Pniok (www.pse-mendelejew.de) , license FAL
As of the start of this month, zinc prices have hit a historic three-year high. That’s the kind of headline that can make eyes glaze over—another story about price fluctuations, construction in the developing world, and mine closures that matter a whole lot to a few people and barely register for the rest. Yet zinc—found in things as common and vital as car tires, sunscreen, and even U.S. nickels and pennies—is a ubiquitous mineral that cannot be easily replaced. As zinc prices skyrocket, it’s not only forcing prices higher on consumer goods, but also squeezing the price of making currency itself, leading the U.S., for the first time in ages, to seriously search for alternatives to our current coinage. But if the history of metal variation in U.S. currency and the nature of the current zinc shortage tells us anything, it’s that simply changing the composition or denominations of our money will no longer be enough.
At 97.5 percent zinc with a pricey 2.5 percent copper plating, and weighing in at about 2.5 grams each, pennies (and nickels) are now more expensive to make than ever, thanks to the shortage. But they’ve actually cost more to produce than they’re worth as currency for eight years now. In 2013, it cost 1.83 cents to make a penny, down from 2.41 cents in 2011. Already, the U.S. loses over $100 million every year minting the coins, and that number is set to spike with the zinc crisis, forcing the federal government, after years of financial hemorrhage, to put provisions in the 2015 budget to reassess the future of metal currency.
Switching out zinc won’t solve all of the coins’ problems, though—zinc itself was at one point a cost-saving metallurgical change. The original pennies, minted in 1793, were a lot larger than modern versions and made of solid copper, until rising copper prices in the mid-19th century forced a shift to alloys like brass and bronze. By the 1980s, inflation was devaluing currency as ore prices increased, meaning that even the cheaper alloys had become worth more than a cent. So the U.S. Mint switched to zinc as a more economical alternative. But the same forces of inflation and ore fluctuation have now made zinc untenable, and will do the same to new replacement metals with increasing speed.
It’s not even clear if there is a good alternative metal to replace zinc. The Obama administration has been agitating for a metal change since 2012, but the Mint has failed to act, finding most alternatives unsustainable. They’ve shot down aluminum coins, a common proposal, due to the problems they’d pose for vending machines and x-rays, and rejected suggestions of iron currency or steel pennies, (as was done in Canada and the United Kingdom) citing the difficulties those countries faced during their transitions. Partially due to an active zinc lobby, the U.S. is one of the most intransigent countries when it comes to currency changes. But it also seems as if America is just plain out of durable, low-cost alternatives.
Photo by Michael Pereckas
Even if the Mint finds a replacement for zinc, it won’t solve the nickel and penny’s cost problems. People wrongly assume that the main factor driving up the cost of making a penny is the expense of the raw materials. But the zinc in these coins is still below their value as currency. The main expense is the overhead and manufacturing involved in producing, as of 2011, 4.3 billion pennies and 914 million nickels every year—administrative costs are half a cent per penny to begin with, and by the time zinc is molded for stamping it’s worth twice as much as the original raw material. Steep administrative costs and the constant loss and replacement of coins through overuse are problems that will not go away even if the switch is made to a more affordable metal. Unfortunately, it’s likely that even material change won’t make small coins cost effective.
These hard financial truths have fueled over a decade’s worth of arguments and bills pushing for the abolition of the penny. By 2006, anti-coin sentiment was so high that the Mint had to criminalize melting down pennies and nickels for their metals. But in polls, a majority of Americans reject the elimination of the penny, and the costs of rounding up to the nearest value in cash transactions would disproportionately increase prices for the poorest Americas (who use cash more often than wealthier citizens), creating an implicit poverty tax. Both sentiment and economics make killing the troublesome denominations harder than it sounds.
Zinc shortage or not, nickels and pennies and the Americans who use them are up against a wall. Perhaps the only answer to the predicament is to embrace a world in which physical currency isn’t the be-all and end-all. We’ve increasingly accepted that a penny isn’t always worth a cent, and that money can be exchanged digitally; maybe it’s time to accept a world in which currency isn’t tied to metals. Whether this means re-exploring the concept of plastic currency or promoting digital monies, the best solutions to the past, present, and future coin crises may lie beyond the mints and mines we’ve always relied upon.