High cost of coins may change composition

No more penny for your thoughts. It's 1.7 cents. And start thinking more of the nickel, because it's worth a dime.

Those are the U.S. Treasury costs of minting the penny and nickel, thanks to metal prices shooting up by as much as 450 percent since 2003. With Congress trying to right the lopsided ledger of making money, the pennies in your purse may soon be made of steel but treated to retain the copper color.

"Never before in our nation's history has the government spent more money to mint and issue a coin than the coin's legal tender value," said Edmund Moy, director of the U.S. Mint.

"With each new penny and nickel we issue, we also increase the national debt by almost as much as the coin is worth."

Changing the composition of coins could save the Treasury about $30 million a year for the penny and $70 million for the nickel, under the proposed Coin Modernization and Taxpayer Savings Act of 2008, supporters said. The bill would give the Treasury the flexibility to revamp the metal makeup of all coins in response to metal prices.

Since 2003, copper and nickel prices have shot up 300 percent and zinc up to 450 percent.

When high supply drove down prices a decade ago, mining slowed, and the dwindling supply started driving up prices, said Bart Melek, a Toronto-based global commodities strategist with BMO Capital Markets. For example, he said, zinc averaged $828 per ton in 2003, and last year, it averaged $3,249.

Developing Asian countries have been gobbling up base metals -- copper for computers and pipes, zinc as an anti-rust agent and nickel for stainless steel.

Some lawmakers are concerned about giving the Treasury full power to alter coins. Last year's version of the bill sank partly when the National Automatic Merchandising Association warned of multimillion-dollar costs to retool vending machines for new coins.

The Treasury has produced coins since 1792. In 1943, zinc-coated steel pennies were made because of huge wartime demand for copper. When industry demanded more silver, the Mint in 1965 started cladding some coins in cupro nickel. In 1982, copper prices prompted pennies to change to the current copper-plated zinc.