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Derivative Instruments and Hedging Activities (Notes)
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments and Hedging Activities Derivative Instruments and Hedging Activities
 

Exchange rate fluctuations affect a portion of revenues and operating costs that are denominated in foreign currencies, and we use forward currency and currency option contracts to reduce our exposure to certain of these currency price fluctuations. Contracts to sell euros have not been designated as cash flow hedges for accounting purposes, and gains or losses are reported in earnings immediately in other (income) expense. Contracts to purchase Canadian dollars are designated as cash flow hedges for accounting purposes, and we record the gains and losses for the derivatives and premiums paid for option contracts in accumulated other comprehensive income (loss) until we reclassify them into cost of products sold when we recognize the associated underlying operating costs.

We are exposed to fluctuations in market prices of raw materials and energy sources. We may use cash-settled commodity price swaps and options to hedge the market risk associated with the purchase of certain of our raw materials and energy requirements. For input commodities, these derivatives are typically used for a portion of our electricity, iron ore, natural gas, nickel and zinc requirements. Our hedging strategy is to reduce the effect on earnings from the price volatility of these various commodity exposures, including timing differences between when we incur raw material commodity costs and when we receive sales surcharges from our customers based on those raw materials. Independent of any hedging activities, price changes in any of these commodity markets could negatively affect operating costs.

All commodity derivatives are recognized as an asset or liability at fair value. We record the gains and losses and premiums paid for option contracts for commodity derivatives designated as cash flow hedges of forecasted purchases of raw materials and energy sources in accumulated other comprehensive income (loss) and reclassify them into cost of products sold when we recognize earnings for the associated underlying transaction. We record all gains or losses from commodity derivatives for which hedge accounting treatment has not been elected to earnings immediately in cost of products sold. We routinely use iron ore derivatives to reduce the volatility of the cost of our iron ore purchases. These derivatives do not qualify for hedge accounting treatment. We have no collateral deposited with counterparties under collateral funding arrangements as of December 31, 2019.

Outstanding derivative contracts and the period over which we are hedging our exposure to the volatility in future cash flows are presented below:

Hedge Contracts
Settlement Dates
 
2019
 
2018
Commodity contracts:
 
 
 
 
 
Nickel (in lbs)
January 2020 to June 2020
 
150,000

 
—

Natural gas (in MMBTUs)
January 2020 to December 2021
 
37,708,000

 
39,868,000

Zinc (in lbs)
January 2020 to December 2021
 
35,550,000

 
52,150,000

Iron ore (in metric tons)
January 2020 to June 2021
 
1,495,000

 
2,125,000

Electricity (in MWHs)
January 2020 to August 2021
 
1,683,000

 
1,461,000

Foreign exchange contracts:
 
 
 
 
 
Euros (in millions)
January 2020 to January 2020
 
€
1.5

 
€
4.0

Canadian dollars (in millions)
January 2020 to December 2021
 
C$
72.6

 
C$
118.6



The fair value of derivative instruments as of December 31, 2019 and 2018, is presented below:
Asset (liability)
 
2019
 
2018
Derivatives designated as hedging instruments:
 
 
 
 
Other current assets—commodity contracts
 
$
0.1

 
$
3.4

Other non-current assets:
 
 
 
 
Commodity contracts
 
—

 
1.0

Foreign exchange contracts
 
0.1

 
0.4

Accrued liabilities:
 
 
 
 
Commodity contracts
 
(16.5
)
 
(4.7
)
Foreign exchange contracts
 
(0.5
)
 
(1.2
)
Other non-current liabilities:
 
 
 
 
Commodity contracts
 
(1.9
)
 
(1.2
)
Foreign exchange contracts
 
(0.2
)
 
(1.5
)
Derivatives not designated as hedging instruments:
 
 
 
 
Other current assets:
 
 
 
 
Commodity contracts
 
12.8

 
9.6

Foreign exchange contracts
 
—

 
0.1

Other non-current assets—commodity contracts
 
2.7

 
1.9

Accrued liabilities—commodity contracts
 
—

 
(1.2
)
Other non-current liabilities—commodity contracts
 
—

 
(0.4
)


Gains (losses) on derivative instruments for the years ended December 31, 2019, 2018 and 2017, are presented below:
Gain (loss)
 
2019
 
2018
 
2017
Derivatives designated as cash flow hedges:
 
 
 
 
 
 
Commodity contracts:
 
 
 
 
 
 
Recognized in accumulated other comprehensive income that were included in the assessment of effectiveness
 
$
(32.3
)
 
$
(0.2
)
 
$
(11.5
)
Reclassified from accumulated other comprehensive income into cost of products sold
 
(7.2
)
 
11.2

 
6.1

Foreign exchange contract:
 
 
 
 
 
 
Recognized in accumulated other comprehensive income that were included in the assessment of effectiveness
 
0.8

 
(5.4
)
 
—

Reclassified from accumulated other comprehensive income into cost of products sold
 
(1.7
)
 
(0.9
)
 
—

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
Commodity contracts—recognized in cost of products sold
 
52.2

 
(2.4
)
 
31.6

Foreign exchange contracts—recognized in other (income) expense
 
—

 
0.1

 
(1.6
)


Gains (losses) before tax expected to be reclassified into cost of products sold within the next twelve months for our existing commodity contracts that qualify for hedge accounting are presented below:
Hedge
 
 
Gains (losses)
Natural gas
 
 
$
(10.5
)
Electricity
 
 
(5.8
)
Zinc
 
 
(3.1
)
Canadian dollars
 
 
(1.3
)