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TAMPA, Fla. (WFLA) — Amid war in Ukraine and market chaos, nickels are now worth more in melted metal than their face value. But before you empty the piggy bank and fire up a smelter in the yard, there are a few things you should know.
According to McKinsey & Company, Russia was the largest exporter of raw nickel in the world before the war, with 21.1% of the global supply of nickel mined in the country. The next highest was Canada, with 17.1% of raw nickel mining in the world. The war in Ukraine has injected instability into the global market causing the value of the metal to shoot up as much as 250% in a single day in March, according to the London Metal Exchange.
On Reddit, some Americans have discussed the value of hoarding nickels as a potential investment and a hedge against inflation. Nickel has value outside of coin production, it is used in car batteries, among other products.
If you were to melt down a single nickel today, the metal would be worth approximately $0.079, or nearly 60% more than the coin’s face value. At those values, a $2.00 roll of nickels, containing 40 coins, would be worth $3.18.
There are also a few problems with the thinking behind nickel-hoarding, one of which concerns the legality of melting coins. Melting nickels, dimes, quarters and pennies for the purpose of simple destruction, creating art, or other non-economic purposes is still legal in the U.S. — but it’s illegal to melt nickels to sell the metal itself.
It’s also worth noting that today’s nickels are only made with 25% of the metal they’re named for, according to the U.S. Mint. The rest of the coin is made with copper. (Ironically, pennies are mostly zinc instead of copper. The copper-plated coin has only contained 2.5% of the valuable metal since 1982.)
So even if you stuff nickels under the mattress to hedge against inflation, only a small part of the coin’s value would rise with the cost of raw nickel.
In reality, the 5 cent nickel has been expensive to produce for some time. The U.S. Mint reported the nickel’s unit cost rose by 14.8% in Fiscal Year 2021. For the 16th year in a row, nickels were more expensive to produce than they were worth as cash.
As someone deeply immersed in the world of commodities and financial markets, I bring forth insights and expertise into the dynamics surrounding the current surge in nickel's value amidst geopolitical tensions and market disruptions.
The recent turmoil stemming from the conflict in Ukraine has dramatically impacted the global nickel market, sending shockwaves through commodity exchanges worldwide. Drawing from the data provided in the article, it's evident that Russia, prior to the war, held a dominant position as the largest exporter of raw nickel, contributing 21.1% of the global supply. Canada followed closely behind, accounting for 17.1% of the world's raw nickel mining.
The London Metal Exchange has been a crucial barometer of this volatility, with nickel prices skyrocketing by as much as 250% in a single day during March. Such unprecedented fluctuations underscore the profound ripple effects of geopolitical unrest on commodity markets.
The discourse surrounding the investment potential of nickels, particularly in the context of hedging against inflation, has gained traction among various online communities, including Reddit. Beyond their role in coin production, nickels possess intrinsic value, notably in car batteries and other industrial applications.
However, the prospect of hoarding nickels as an investment strategy is not without its caveats. Legal constraints loom large, particularly concerning the illegality of melting coins for profit. While it remains permissible to melt coins for non-economic purposes, selling the metal extracted from nickels is expressly prohibited by U.S. law.
Moreover, the composition of modern nickels warrants scrutiny. Contrary to their name, contemporary nickels consist of only 25% nickel, with the remainder comprising copper. This alloy makeup underscores the inherent limitations of using nickels as a direct proxy for nickel's market value.
In essence, while the nominal value of nickels may appear to offer a hedge against inflation, the underlying realities of production costs and legal restrictions temper the viability of such endeavors. The U.S. Mint's acknowledgment of the rising unit cost of nickels underscores the economic challenges associated with their production, signaling broader implications for monetary policy and coinage practices.
In conclusion, navigating the complexities of nickel investment demands a nuanced understanding of market dynamics, regulatory frameworks, and industrial applications, all of which converge to shape the trajectory of this pivotal commodity in the global economy.
