Derivative Financial Instruments and Related Hedging Programs (Tables)

12 Months Ended

Dec. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of material derivative positions

The following table summarizes our derivative positions at December 31, 2017:

Aluminum	Maturity Period (month/year)	Notional Amount of contracts (mmlbs)
Fixed price purchase contracts	1/18 through 12/21	165.3
Fixed price sales contracts	5/18 through 11/19	1.4
Midwest premium swap contracts1	1/18 through 12/21	163.9

Alloying Metals	Maturity Period (month/year)	Notional Amount of contracts (mmlbs)
Fixed price purchase contracts	1/18 through 6/18	2.7

Natural Gas2	Maturity Period (month/year)	Notional Amount of contracts (mmbtu)
Fixed price purchase contracts	1/18 through 12/20	3,600,000

Electricity3	Maturity Period (month/year)	Notional Amount of contracts (Mwh)
Fixed price purchase contracts	1/20 through 12/20	131,760

Euro	Maturity Period (month/year)	Notional Amount of contracts (euro)
Fixed price purchase contracts	1/18 through 4/18	301,304

_________________________

^1.  Regional premiums represent the premium over the London Metal Exchange price for primary aluminum which is incurred on our purchases of primary aluminum.

^2.  As of December 31, 2017, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 70% of the expected natural gas purchases for both 2018 and 2019, and 55% of the expected natural gas purchases for 2020.

Summary of realized and unrealized gains and losses

Realized and unrealized gain (loss) included on the Statements of Consolidated Income (Loss) associated with all derivative contracts consisted of the following for each period presented (in millions of dollars):

	Year Ended December 31,
	2017			2016			2015
Realized (gain) loss:
Aluminum	$	(20.4	)	$	2.0		$	27.3
Natural gas	0.7			5.0			5.4
Alloy Hedges	(0.9		)	—			—
Foreign currency	(0.1		)	0.1			—
Electricity	—			—			1.9
Total realized (gain) loss1	$	(20.7	)	$	7.1		$	34.6
Unrealized (gain) loss:
Aluminum	$	(20.9	)	$	(10.8	)	$	4.6
Natural gas	1.4			(7.9		)	0.5
Electricity	0.1			—			(1.7		)
Total unrealized (gain) loss2	$	(19.4	)	$	(18.7	)	$	3.4

______________________

^1.  Recorded within Cost of products sold, excluding depreciation, amortization and other items within the Fabricated Products segment.

^2.  Recorded within Unrealized (gain) loss on derivative instruments within the Fabricated Products segment.

Fair Value, Measurement Inputs, Disclosure

The following table presents our financial instruments, classified under the appropriate level of the fair value hierarchy, as of the period presented (in millions of dollars):

	December 31, 2016
	Level 1		Level 2			Level 3		Total
DERIVATIVE ASSETS:
Non-Designated Hedges:
Aluminum –
Fixed price purchase contracts	$	—	$	3.3		$	—	$	3.3
Midwest premium swap contracts	—		0.9			—		0.9
Natural gas – Fixed price purchase contracts	—		1.6			—		1.6
Total derivative assets1	$	—	$	5.8		$	—	$	5.8
DERIVATIVE LIABILITIES:
Non-Designated Hedges:
Aluminum –
Fixed price purchase contracts	$	—	$	(1.1	)	$	—	$	(1.1	)
Midwest premium swap contracts	—		(0.2		)	—		(0.2		)
Natural gas –Fixed price purchase contracts	—		(0.4		)	—		(0.4		)
Designated Hedges:
Alloying Metals – Fixed price purchase contracts	—		(0.1		)	—		(0.1		)
Total derivative liabilities2	$	—	$	(1.8	)	$	—	$	(1.8	)

The following table presents our financial instruments, classified under the appropriate level of the fair value hierarchy, as of the period presented (in millions of dollars):

	December 31, 2017
	Level 1		Level 2			Level 3		Total
DERIVATIVE ASSETS:
Non-Designated Hedges:
Aluminum –
Fixed price purchase contracts	$	—	$	22.5		$	—	$	22.5
Midwest premium swap contracts	—		1.7			—		1.7
Natural gas – Fixed price purchase contracts	—		0.2			—		0.2
Designated Hedges:
Alloying metals – Fixed price purchase contracts	—		0.9			—		0.9
Total derivative assets1	$	—	$	25.3		$	—	$	25.3
DERIVATIVE LIABILITIES:
Non-Designated Hedges:
Aluminum –
Fixed price sales contracts	$	—	$	(0.1	)	$	—	$	(0.1	)
Midwest premium swap contracts	—		(0.1		)	—		(0.1		)
Natural gas – Fixed price purchase contracts	—		(0.5		)	—		(0.5		)
Electricity – Fixed price purchase contracts	—		(0.1		)	—		(0.1		)
Designated Hedges:
Alloying metals – Fixed price purchase contracts	—		—			—		—
Total derivative liabilities2	$	—	$	(0.8	)	$	—	$	(0.8	)

Schedule of Offsetting Derivative Instruments by Counterparty

The following tables present offsetting information regarding our derivatives by type of counterparty as of December 31, 2017 (in millions of dollars):

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
									Net Amount
Counterparty (with netting agreements)	$	25.3	$	—	$	25.3	$	0.8	$	24.5
Total	$	25.3	$	—	$	25.3	$	0.8	$	24.5

	Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets			Gross Amounts Not Offset in the Consolidated Balance Sheets
												Net Amount
Counterparty (with netting agreements)	$	(0.8	)	$	—	$	(0.8	)	$	(0.8	)	$	—
Total	$	(0.8	)	$	—	$	(0.8	)	$	(0.8	)	$	—

The following tables present offsetting information regarding our derivatives by type of counterparty as of December 31, 2016 (in millions of dollars):

	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Assets Presented in the Consolidated Balance Sheets		Gross Amounts Not Offset in the Consolidated Balance Sheets
									Net Amount
Counterparty (with netting agreements)	$	3.3	$	—	$	3.3	$	1.0	$	2.3
Counterparty (with partial netting agreements)	2.5		—		2.5		0.7		1.8
Total	$	5.8	$	—	$	5.8	$	1.7	$	4.1

	Gross Amounts of Recognized Liabilities			Gross Amounts Offset in the Consolidated Balance Sheets		Net Amounts of Liabilities Presented in the Consolidated Balance Sheets			Gross Amounts Not Offset in the Consolidated Balance Sheets
												Net Amount
Counterparty (with netting agreements)	$	(1.0	)	$	—	$	(1.0	)	$	(1.0	)	$	—
Counterparty (with partial netting agreements)	(0.8		)	—		(0.8		)	(0.7		)	(0.1		)
Total	$	(1.8	)	$	—	$	(1.8	)	$	(1.7	)	$	(0.1	)

Fair Value, Assets Measured on Recurring Basis

The following table presents our other financial assets, classified under the appropriate level of the fair value hierarchy, as of December 31, 2016 (in millions of dollars):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	37.9	$	17.3	$	—	$	55.2
Short-term investments	—		231.0		—		231.0
Total	$	37.9	$	248.3	$	—	$	286.2

The following table presents our other financial assets, classified under the appropriate level of the fair value hierarchy, as of December 31, 2017 (in millions of dollars):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	23.5	$	27.6	$	—	$	51.1
Short-term investments	—		183.7		—		183.7
Total	$	23.5	$	211.3	$	—	$	234.8