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Related Party Transactions
 12 Months Ended
Dec. 31, 2011
Related Party Transactions [Abstract]  
Related Party Transactions
21.
Related Party Transactions
 
The significant related party transactions occurring during the years ended December 31, 2011, 2010 and 2009 are described below.
 
Sales to Glencore
 
We sold primary aluminum and alumina to Glencore both at spot and long-term contract basis.  See Note 20 Business Segments for additional information about the sales of primary aluminum to Glencore.
 
We sold primary aluminum under our long-term sales contracts with Glencore at prices based on the LME price for primary aluminum, as adjusted to reflect the Midwest Premium (a premium typically added for deliveries of aluminum within the U.S.). In addition, we received tolling fees from Glencore under tolling agreements that provide for delivery of primary aluminum produced at Grundartangi. The fee paid by Glencore under these tolling agreements is based on the LME price for primary aluminum, as adjusted to reflect the reduced European Union import duty paid on Icelandic primary aluminum. We believe that all of the transactions with Glencore under these contracts were at prices that approximate market.
 
We have a long-term contract to sell Glencore primary aluminum, at a variable price based on the LME, adjusted by a negotiated U.S. Midwest market premium with a cap and floor as applied to the current U.S. Midwest Premium.  In addition, we entered into a one-year contract through December 31, 2012 to sell Glencore all U.S. produced primary aluminum, less existing sales agreements and high-purity metal sales.  The term of the contract may be extended upon mutual agreement.  See Note 16 Forward contracts and financial instruments for additional information about our forward physical delivery contracts and tolling agreements with Glencore.
 
Purchases from Glencore
 
We purchased alumina from Glencore on both a spot and long-term contract basis. We believe that all of the alumina purchased under these long-term contracts was purchased at prices which approximated market. For alumina purchased from Glencore on a spot basis, we determined the market price for the spot alumina we purchased based on a survey of suppliers at the time that had the ability to deliver spot alumina on the specified terms.  Based on this survey, we believe that all of the alumina purchased on a spot basis from Glencore was purchased at prices that approximate market.
 
In 2010, we entered into an agreement to buy alumina from Glencore for Grundartangi.  Glencore agreed to supply us with 18,000 metric tons of alumina in 2010 at a fixed price.  Based on a survey of suppliers at the time that had the ability to deliver spot alumina on the specified terms, we believe that the alumina purchased from Glencore under this contract was purchased at prices that approximate market.
 
Alumina contract and amendments. We are party to a long-term alumina supply agreement with Glencore.  Glencore agreed to supply us with alumina through 2014 at prices indexed to the LME price of primary aluminum.
 
In April 2009, Glencore agreed to amend two alumina purchase agreements to reduce the amount of alumina Glencore supplied in 2009 and 2010, for an overall alumina supply reduction of 280,000 metric tons.  

 
Primary aluminum put options
 
In 2011, 2010 and 2009, we entered into primary aluminum put option contracts with Glencore.  We paid cash premium to enter into these contracts and recorded a short-term asset in due from affiliates on the consolidated balance sheets.  We determined the fair value of the put options using a Black Scholes pricing model with inputs obtained from an independent source and account for the put options as derivative financial instruments with gains and losses in the fair value of the contracts recorded on the consolidated statements of operations in net losses on forward contracts.  See Note 5 Derivative and hedging activities for additional information about the put option contracts.
 
Other Transactions with Glencore
 
As of December 31, 2011, we believe that Glencore beneficially owned, through its common stock, approximately 41.6% of our issued and outstanding common stock and, through its ownership of common and preferred stock, an overall 46.4% economic ownership of Century.
 
Transactions with BHH
 
 We own a 40% stake in BHH, a carbon anode and cathode facility located in the Guangxi Zhuang Autonomous Region of south China.  We have a long-term agreement with BHH to provide carbon anodes to Grundartangi through December 31, 2012.  This agreement is renewable through December 31, 2015.
 
Summary
 
A summary of the aforementioned related party transactions for the years ended December 31, 2011, 2010 and 2009 is as follows:

   
Year Ended December 31,
 
   
2011
  
2010
  
2009
 
Net sales to Glencore
 $564,431  $413,408  $230,909 
Purchases from Glencore
  187,691   106,381   37,683 
Purchases from BHH
  19,543   19,690   15,218 
Cash premium to Glencore for put option contracts
  2,106   6,341   7,228 
Glencore's participation in common stock offerings
  -   -   59,590 
 
See Note 5 Derivatives and hedging instruments for a discussion of our fixed-price commitments and forward financial contracts.