Coins, Commodities, and Cash: Why the End of the Penny Spells Opportunity in Metals

The U.S. Treasury’s decision to halt penny production by early 2026 marks a seismic shift in monetary policy—one that will ripple through global commodity markets. As the one-cent coin exits circulation, the demand for its key components, zinc and copper, will plummet. Meanwhile, the nickel, already costly to produce, faces a paradox: its usage could surge to fill the void left by pennies, driving demand for its namesake metal. For investors attuned to these dynamics, this is a moment to position for gains in nickel and consider shorting zinc.

The End of the Penny and Zinc’s Decline

Pennies, which have cost over 3.69 cents to produce since 2024, are 97.5% zinc and 2.5% copper. With 3.2 billion pennies minted in 2024 alone—over half of all U.S. coins—the abrupt halt to production will slash demand for zinc, a metal already under pressure from oversupply in battery and construction markets.

The U.S. Mint’s zinc purchases account for roughly 5% of global demand. A permanent end to penny production could reduce annual zinc demand by 200,000–30.000 tons, exacerbating a surplus already projected to hit 500,000 tons by 2025. For investors, this spells a clear opportunity to short zinc futures (e.g., ZN24) or ETFs like the iPath Series B Zinc Subindex ETN (ZNG).

Nickel’s New Role—and Risks

While pennies vanish, nickels—despite their 13.8-cent production cost—will remain in circulation. Each nickel contains 21% nickel and 79% copper, metals far more expensive than zinc. If businesses and consumers shift to rounding cash transactions to the nearest five cents, nickel demand could skyrocket.

However, the U.S. Mint’s dilemma is stark: producing 2 million–2.5 million extra nickels annually could cost over $34 million, eroding the $56 million savings from eliminating pennies. Yet, if the Mint cannot reform nickel composition or find alternatives, investors in nickel could profit.

Key plays include:
- Nickel mining stocks: Companies like Vale SA (VALE) (a major nickel producer) or Glencore (GLEN), which hold significant nickel reserves.
- Nickel ETFs: The S&P Nickel Futures Index (SPNIC) or physical holdings via the ETFS Nickel ETF (NICK).

Legislative and Market Catalysts

Bipartisan bills like the Common Cents Act (S. 2475) and Make Sense Not Cents Act (H.R. 2474) aim to codify the penny’s phase-out, creating regulatory certainty. Meanwhile, Canada’s 2012 penny elimination saw nickel usage rise briefly before stabilizing—a pattern U.S. investors should watch.

Risks and Considerations

• Composition Changes: The Mint might reduce nickel’s cost by switching to cheaper metals (e.g., aluminum), undermining nickel demand.
• Digital Payments: Cash transactions are declining, reducing the need for coins altogether.
• Global Supply Chains: Nickel prices are influenced by Indonesia’s dominance (75% of global exports) and EV battery demand.

Investment Strategy: Go Long Nickel, Short Zinc

• Nickel: Buy VALE (currently $15.70, up 12% YTD) or NICK (tracking LME nickel futures at $8.2/lb).
• Zinc: Short ZNG (down 8% YTD) or ZN24 futures, targeting a 2025 price drop to $0.90/lb from $1.10/lb.

Conclusion: Act Before the Mint’s Final Blow

The penny’s end is a done deal. Investors ignoring the metals angle risk missing a once-in-a-generation opportunity. Zinc’s demand collapse is imminent, while nickel’s fate hinges on policy and innovation. For aggressive traders, now is the time to bet on the metals that will define the post-penny era—or profit from the ones it leaves behind.

The coins in your pocket may soon be history, but the metals powering them will define the next chapter of commodity markets. Act now, or risk being left in the dust.