Return you say? Since when was a penny made from steel? Well, for any of you too young to remember (thankfully that includes me) the US minted steel pennies during the second World War. The rising cost of metals has meant the US mint is losing $100 million a year making 7.4 billion pennies and 1.2 billion nickels at considerably more than their face value. At current metal prices, it costs 1.26 cents to make a penny (97.5% zinc and 2.5% copper) and 7.7 cents to produce a nickel (75% copper and 25% nickel).  That is better  than late last year though when a penny was costing 1.67 cents and a nickel nearly a dime. It’s debatable if this money is lost as it remains in circulation but the House panel that overseas the Mint would like a debate on the merits of bringing back a predominantly steel penny and nickel according to an article in the Associated Press. It raises a bigger question why not just junk the penny altogether ” when did you last buy anything for a penny? The country could save on precious metal resources not to mention costs, if it just dropped a coin that many would argue is out of date. According to Henry Paulson getting rid of the penny made sense but wasn’t politically doable ” now is that just the kind of logic you expect from a politician?

–Stuart Burns

Is the rise in metal prices really so inevitable? We usually place considerable weight on articles appearing in Purchasing.com, but I have to take issue with a feature from yesterday which suggests metals will continue to rise on the back of power problems around the world. Certainly the first quarter of this year has seen it’s fair share of power problems, but many of them are unlikely to be repeated — nor was power the sole driver behind first quarter price rises. For example, the bad weather in China caused power problems, but it was a one in 50 year period of severe weather. Also, it is unlikely to be an issue going forward, serious as it was for aluminum, zinc and many ferro alloys. Power stations may be closed or run at reduced capacity for the Beijing Olympics, but so will the power hungry industries those power stations fed. The power problems affecting aluminum,  precious metals  and ferro alloy production in South Africa are more entrenched, but they were significantly exacerbated by heavy rains, as were the flooding of Queensland’s iron ore mines  — neither of which is likely to be of such magnitude again in the coming months. Somehow  I don’t see power being the deciding factor. It will have an influence in certain situations, but the extent to which demand continues to grow will be more of an issue.

–Stuart Burns

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