Derivatives, Hedging Programs and Other Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Summary of material derivative positions

The following table summarizes our derivative positions at December 31, 2019:

Aluminum	Maturity Period (month/year)	Notional Amount of Contracts (mmlbs)
Fixed price purchase contracts	1/20 through 12/21	105.2
Fixed price sales contracts	2/20 through 11/21	0.7
Midwest premium swap contracts1	1/20 through 12/21	87.8

Alloying Metals	Maturity Period (month/year)	Notional Amount of Contracts (mmlbs)
Fixed price purchase contracts	1/20 through 12/21	16.3

Natural Gas2	Maturity Period (month/year)	Notional Amount of Contracts (mmbtu)
Fixed price purchase contracts	1/20 through 12/24	8,580,000

Electricity3	Maturity Period (month/year)	Notional Amount of Contracts (Mwh)
Fixed price purchase contracts	1/20 through 12/22	482,280

Euro4	Maturity Period (month/year)	Notional Amount of Contracts (euro)
Fixed price purchase contracts	1/20	889,155

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^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, 2019, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 80% of the expected natural gas purchases for 2020, 78% of the expected natural gas purchases for 2021, 83% of the expected natural gas purchases for each of the years ended 2022 and 2023 and 77% of the expected natural gas purchases for 2024.

^3.  As of December 31, 2019, we had derivative and/or physical delivery commitments with energy companies in place to cover exposure to fluctuations in prices for approximately 55% of the expected electricity purchases for each of the years 2020 and 2021 and 9% of the expected electricity purchases for 2022.

^4.  We are exposed to foreign currency exchange risk related to firm-price agreements for equipment purchases from foreign manufacturers. We use non-designated foreign currency forward contracts designed to line up with the timing and amounts of scheduled payments to the foreign equipment manufacturers to mitigate our exposure to currency exchange rate fluctuations on these purchases.

Summary of realized and unrealized gains and losses

The amount of loss (gain) included on the Statements of Consolidated Income associated with all derivative contracts consisted of the following for the periods presented (in millions of dollars):

	Year Ended December 31,
	2019		2018			2017
	Cost of products sold1		Cost of products sold1			Cost of products sold1			Unrealized (gain) loss on derivative instruments
Total amounts of income and expense line items presented in the Statements of Consolidated Income in which the effects of hedges are recorded	$	1,215.2	$	1,300.7		$	1,105.3		$	(19.4	)
Loss (gain) recognized in income related to cash flow hedges:
Aluminum	$	18.4	$	2.1		$	—		$	—
Alloying Metals	1.1		1.0			(0.9		)	—
Natural gas	0.2		(0.3		)	—			—
Total loss (gain) recognized in income related to cash flow hedges	$	19.7	$	2.8		$	(0.9	)	$	—
(Gain) loss recognized in income related to non-designated hedges:
Aluminum	$	—	$	—		$	(20.4	)	$	(20.9	)
Natural gas	—		—			0.7			1.4
Foreign exchange	—		—			(0.1		)	—
Electricity	—		—			—			0.1
Total gain recognized in income related to non-designated hedges	$	—	$	—		$	(19.8	)	$	(19.4	)

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¹ 

Beginning with our adoption of ASU 2017-12 effective January 1, 2018, we no longer have Unrealized (gain) loss on derivative instruments on the Statements of Consolidated Income as all of our commodity hedges are designated as cash flow hedges. As such, all Unrealized (gain) loss on derivative instruments is reported in Accumulated other comprehensive loss ("AOCI"). For the year ended December 31, 2017, Unrealized (gain) loss on derivative instruments was reclassified to Cost of products sold in the Statements of Consolidated Income to conform to the current period's presentation, for a combined total of $1,085.9 million. The amounts comprising both line items are presented separately here for comparative purposes.

Fair Value, Measurement Inputs, Disclosure

The following table presents the fair value of our derivative financial instruments as of the periods presented (in millions of dollars):

	December 31, 2019								December 31, 2018
	Derivative Assets		Derivative Liabilities			Net Amount			Derivative Assets		Derivative Liabilities			Net Amount
Cash Flow Hedges:
Aluminum –
Fixed price purchase contracts	$	1.0	$	(4.1	)	$	(3.1	)	$	0.1	$	(13.2	)	$	(13.1	)
Fixed price sales contracts	—		—			—			0.1		—			0.1
Midwest premium swap contracts	—		(1.2		)	(1.2		)	3.2		(0.5		)	2.7
Alloying Metals – Fixed price purchase contracts	0.4		(1.5		)	(1.1		)	—		(1.7		)	(1.7		)
Natural gas – Fixed price purchase contracts	—		(2.8		)	(2.8		)	0.2		(0.5		)	(0.3		)
Electricity – Fixed price purchase contracts	2.6		(1.6		)	1.0			0.7		—			0.7
Total	$	4.0	$	(11.2	)	$	(7.2	)	$	4.3	$	(15.9	)	$	(11.6	)

The following table presents the total amounts of derivative assets and liabilities on our Consolidated Balance Sheets as of the periods presented (in millions of dollars):

	December 31, 2019			December 31, 2018
Derivative assets:
Prepaid expenses and other current assets	$	2.1		$	3.4
Other assets	1.9			0.9
Total derivative assets	$	4.0		$	4.3
Derivative liabilities:
Other accrued liabilities	$	(7.6	)	$	(13.2	)
Long-term liabilities	(3.6		)	(2.7		)
Total derivative liabilities	$	(11.2	)	$	(15.9	)

Fair Value, Assets Measured on Recurring Basis

The following table classifies our other financial assets under the appropriate level of the fair value hierarchy as of December 31, 2018 (in millions of dollars):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	22.9	$	102.7	$	—	$	125.6
Short-term investments	—		36.7		—		36.7
Total	$	22.9	$	139.4	$	—	$	162.3

The following table classifies our other financial assets under the appropriate level of the fair value hierarchy as of December 31, 2019 (in millions of dollars):

	Level 1		Level 2		Level 3		Total
Cash and cash equivalents	$	28.2	$	236.1	$	—	$	264.3
Short-term investments	—		78.7		—		78.7
Total	$	28.2	$	314.8	$	—	$	343.0