Is the nickel in a nickel worth more than the nickel itself?

A nickel’s not value a dime. It’s value way more than that. At least if commodity costs stay the place they’ve been this week.

On Tuesday, the price implied by the three-month futures contract for the hitherto unprecious metallic hit $100,000 per tonne.

Line chart of Price of LME benchmark nickel contract ($/tonne) showing Nickel soars to record high

While the value is unlikely to remain fairly that top, we thought it will be enjoyable to attempt to work out what the price to the US Mint, monopoly producer of the nickel, is perhaps.

The burden is just not as unhealthy fairly because the title of America’s 5 cent coin suggests. A nickel is just not solely product of nickel — in actual fact, it’s not even principally nickel. Only 1 / 4 of it’s. That 25 per cent alone, nonetheless, is sufficient to imply America’s official coinmaker takes a giant hit for every 5 cent bit it ships to the regional Federal Reserves.

The cash weigh 5 grammes, of which 1.25 grammes is nickel. Meaning the nickel in a nickel alone would, at Tuesday’s excessive, have set you again 12.5 cents. What makes issues for the Mint worse is that the opposite 75 per cent is made up of copper — the value of which has additionally surged over the previous few years.

Is there a commerce to be accomplished right here? Could all of us change into nickel extractors and make a quick buck out of some nickels? Not actually. It seems it’s unlawful to export, soften or deal with both a five-cent or one cent coin.

It’s additionally removed from the primary time the mints of the world have discovered themselves caught out by commodity worth surges. Indeed it’s been fairly widespread all through historical past for low denomination cash to value greater than they’re value to supply.

Including the 5 cent piece.

According to the US Mint’s 2021 annual report, the price of making a nickel rose by 14.8 per cent to eight.52 cents for the most recent fiscal yr — making it the sixteenth yr in a row that the face worth of the coin was value lower than the metallic in it. In complete, the losses on all the nickels produced that yr got here to $61mn. And that was when the nickel was buying and selling at $17,503 per tonne — lower than a fifth of the height it hit Tuesday.

It’s not only a case of excessive costs. Given Russia’s position as a producer of the metallic, US business might also be about to expertise shortages. The US Mint may need to resort to some foreign money debasement, changing nickel with copper, not solely to save lots of on seigniorage, however for the sake of the nation itself.

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