Friday, January 6, 2012

RCM Seeks to Remove Nickel From $1 & $2 Coins, Replace With Steel

The Royal Canadian Mint has applied to change the composition from the Canadian one-dollar and two-dollar coins from nickel to steel.

Executive summary

Issue: The Canadian one-dollar and two-dollar coins are currently only authorized to be produced using nickel compositions. In recent years, nickel prices have been very volatile and have increased dramatically leading to higher production costs. Also, as an actively traded commodity, lead times to acquire nickel can fluctuate based on world supply and demand and this could result in a shortage of material required to meet Canadian coin demand.

Description: The Royal Canadian Mint (RCM) seeks an amendment to the Royal Canadian Mint Act to allow for the composition of the one-dollar and two-dollar coins to be produced using its patented multi-ply plated steel (MPPS) technology as the core material. This would result in significant cost savings and also reduce the risks associated with price volatility and availability should there ever be a shortage of nickel.

Cost-benefit statement: Producing the one- and two-dollar coins using the MPPS technology would result in an estimated annual $16 million cost savings to the Government or a present value of $107.5 million over 10 years. There would be an estimated one-time cost to the vending industry of $40 million to recalibrate its automated coin acceptance equipment to read the new coins; however, as part of the industry’s capital planning, such updates already occur on a somewhat regular basis. The cost to the nickel industry would be lowered demand for nickel which would be offset by a benefit of increased demand to the steel industry as the primary metal source used in the coins would be steel. However, the change would represent less than 0.05% of the total worldwide nickel annual demand and less than 0.00005% of the total worldwide annual steel demand so it would have very little quantifiable impact on prices or the industries as a whole.

Business and consumer impacts: The change in composition to MPPS for the production of one- and two-dollar coins would be transparent to consumers. The vending industry and other industries using automated coin acceptance and processing equipment would be required to update and recalibrate their equipment to accept the new coin composition. Also, small retailers or organizations using weight-based coin sorting or counting equipment could be affected due to the slight difference in weight of the new coins relative to the existing coins. Although this will vary from company to company, it is estimated that the overall impact would be minimal. With two versions of each coin in circulation, no capital outlay to modify equipment would be needed but a requirement of an additional process to pre-sort the one- and two-dollar coins prior to using weight-based equipment would be possible. The RCM has plans to recover, and remove from circulation, the current nickel alloy coins through its Alloy Recovery Program (ARP) to minimize these impacts as time progresses.

Domestic and international coordination and cooperation: The RCM is working closely with the vending and coin acceptance industry. Sample tokens were provided to the Canadian Automated Merchandising Association’s (CAMA) members in late 2009 and their feedback was taken into account when determining the best coin composition. The RCM regularly consults with CAMA and hosted an educational seminar at the CAMA 2010 Expo, in Calgary in late September 2010, to further educate the industry members of the change and address any concerns. Based on the success and positive feedback from the seminar, CAMA extended an invitation and the RCM will deliver another session at the CAMA 2011 Expo in MontrĂ©al to further update their members ahead of the coins being released into general circulation. The RCM has also hosted stakeholder information sessions in 2010 with invitees from the parking, transit, casino gaming, retail and pay telephone industries. The purpose of these sessions was to provide information on the change in coin compositions to the large stakeholders from the industries that handle and process a large volume of coin in order to assist them in their preparation for the transition. These sessions also allowed the RCM to address any concerns that the groups may have had with the introduction of the new one- and two-dollar coins. Based on feedback, the RCM committed to provide these industries with access to samples of the new one- and two-dollar coins a minimum of six months prior to their anticipated launch to ensure there would be enough time for all required updates and calibration to take place. In April 2011, sample coins were sent out to a variety of automated coin acceptance equipment manufacturers and suppliers for this activity to take place. The RCM will continue to accept and respond to requests from other companies requiring samples until the coins are launched into general circulation.
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