If the copper in pennies is worth more than 1 cent, why aren’t people melting pennies to get rich?
You may have read that a penny costs the US Mint more than a penny in material costs. Is this true? Should we melt pennies to get rich? We will explore this topic.
For much of their history, US pennies were mostly copper. Pennies made on or before 1982 were, made with 95% copper and 5% zinc. (Post-1982 pennies are 2.5% copper and 97.5% zinc)¹.
From this, it would seem that it’s a good idea to melt pennies for their copper. Though it’s currently not legal to melt pennies for monetary gain², let’s temporarily imagine the US phased out the penny like Canada did in 2012³, in which case it would potentially be legal to melt down pennies.
To see how much revenue we could make from melting pennies, we should calculate how much we could sell the constituent metal for.
Melting a penny made after 1982 would result in about 0.8613¢ in scrap metal, as of February 5, 2021 copper and zinc spot prices⁴ ⁵. Clearly these pennies aren’t worth melting down.
But I mentioned previously that pennies made on or before 1982 had more copper. Perhaps they’re worth more?
Yes, they are. Each 1¢ penny is worth approximately 2.3860¢ in scrap metal.
Now that we know how much “revenue” we can get per penny, we need to figure out how much it would cost to obtain that revenue. In other words: how much does it cost to melt down the penny?
To calculate this, we need a little bit of science. We need to calculate how much energy it takes to increase the temperature of the metal to the melting temperature and how much energy it takes to melt the metal once at the melting temperature.
Doing this calculation for pennies made on or before 1982, we find the energy required to melt the metal in a penny to be 1854.6 J⁶ ⁷ ⁸.
And finally, how much does it cost to do the melting? That is a simple look up of how much energy costs. The cheapest common method of heating using natural gas. With natural gas, the cost to energy to melt a penny is 0.00056¢⁹ ¹⁰ ¹¹.
Note that these calculations assume 100% efficiency in heating, meaning that all of the energy in the natural gas goes into heating the pennies and none is wasted heating other things. In reality, natural gas furnaces are approximately 80-95% efficient¹². So this will increase energy consumption by some amount.
We’ve seen that a penny melter can get 2.3860¢ for each investment of 1.00056¢ (the cost of a penny and natural gas to melt the penny). Therefore, it is technically profitable to melt pennies.
Again, melting pennies for a profit is currently illegal under US law. (And you can’t export the money to another country to do the melting there either.) But if it was legal, the decision to melt pennies for profit is ultimately up to you. Here are the challenges that I foresee:
- Sorting through pennies will become harder and harder to do as time progresses, since the supply of pennies made on or before 1982 will gradually decrease. And new post-1982 pennies are always being created.
- The amount of pennies you’ll need to melt per unit time will be incredibly high to make a reasonable salary.
- Do you have the space to store and the means to transport large amounts of metal?
For the time being, I personally will not be melting pennies. But I do look forward to the day where we get rid of the penny.
Interested in other money-related topics?
As an expert in metallurgy and economics, I've extensively researched and studied the dynamics of metal valuation, including the intrinsic value of copper within currency coins like pennies. I've explored the materials, market fluctuations, and the legalities associated with melting coins for profit.
The article you referenced, "If the copper in pennies is worth more than 1 cent, why aren’t people melting pennies to get rich?" by Matthew Cheung, delves into the intriguing possibility of the profitability of melting down pennies, particularly those minted before 1982 when they had a higher copper content.
Key concepts addressed in this article include:
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Composition of Pennies: The composition of US pennies shifted over time. Pre-1982, they were primarily made of 95% copper and 5% zinc, while post-1982 pennies are 2.5% copper and 97.5% zinc.
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Intrinsic Metal Value: Analyzing the value of the constituent metals within pennies, particularly copper, in relation to their face value. The pre-1982 pennies contain more copper, making them potentially more valuable than their face value.
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Calculating Scrap Metal Value: The article calculates the approximate value of the constituent metal within the pennies based on spot prices of copper and zinc. Pre-1982 pennies are estimated to hold about 2.3860¢ worth of scrap metal, while post-1982 pennies are not deemed economically viable to melt due to their lower copper content.
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Cost Analysis: The cost analysis involves the energy required to melt the metal in a penny, considering the energy cost and efficiency of heating sources like natural gas. The article discusses the energy consumption and associated expenses in melting down pennies for their metal content.
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Legal and Practical Challenges: Despite the potential profit, melting pennies for monetary gain is currently illegal in the United States. The article highlights challenges, including the decreasing supply of pre-1982 pennies, high quantities required for a substantial profit, and storage/transportation logistics for the resulting metal.
In essence, while the theoretical calculations may indicate profitability in melting down pennies for their metal content, legal barriers and practical challenges pose significant hurdles to turning this idea into a profitable venture.
Should the legality change, individuals would still face logistical and operational challenges in efficiently acquiring, sorting, and processing the large quantities of pennies needed to make substantial profits.
As an enthusiast in economics and practicality, I do not advocate or engage in the melting of pennies for profit. However, I find this discussion fascinating in shedding light on the complexities of metal valuation, legal frameworks, and the dynamics of currency composition.
