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Derivative and hedging instruments
 3 Months Ended
Mar. 31, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative and hedging instruments
Derivative and hedging instruments

The following table provides the fair value and balance sheet classification of our derivatives:

Fair Value of Derivative Assets and Liabilities
 
Balance sheet location
March 31, 2014
December 31, 2013
DERIVATIVE ASSETS:
 
 
 
Midwest premium contracts
Prepaid and other current assets
$
—

$
140

TOTAL
 
$
—

$
140

 
 
 
 
DERIVATIVE LIABILITIES:
 
 
 
Primary aluminum sales contract
Accrued and other current liabilities
$
—

$
140

E.ON contingent obligation – net (1)
Other liabilities
—

—

TOTAL
 
$
—

$
140


(1)
See Note 9 Debt for additional information about the E.ON contingent obligation.

Midwest premium contracts

We entered into a fixed-price forward contract that settled monthly from January 2014 to March 2014 based on the
Midwest Premium price published in the Platts Metals Week for the applicable period. Losses associated with the settlements of the U.S. Midwest premium contracts were recorded in net gain (loss) on forward and derivative contracts on the consolidated
statement of operations.
Primary aluminum sales contract
We had a contract to sell to Glencore Xstrata plc (together with its subsidiaries, "Glencore") primary aluminum produced at Mt. Holly, Hawesville and Sebree through December 31, 2013 (the "Glencore Metal Agreement"). The Glencore Metal Agreement was a physical delivery contract for primary aluminum with variable, LME-based pricing.  Under the Glencore Metal Agreement, pricing was based on market prices, adjusted by a negotiated U.S. Midwest premium with a cap and a floor as applied to the current U.S. Midwest premium.  We accounted for the Glencore Metal Agreement as a derivative instrument under ASC 815 "Derivatives and Hedging."  Gains and losses on the derivative were based on the difference between the contracted U.S. Midwest premium and actual and forecasted U.S. Midwest premiums.  Settlements were recorded in related party sales.  Unrealized gains (losses) based on forecasted U.S. Midwest premiums were recorded in net gain (loss) on forward and derivative contracts on the consolidated statements of operations.
Derivatives not designated as hedging instruments:
 
Gain (loss) recognized in income from derivatives
 
 
Three months ended March 31,
 
Location
2014
2013
E.ON contingent obligation – net
Net gain (loss) on forward and derivative contracts
$
353

$
15,722

Midwest premium contracts
Net gain (loss) on forward and derivative contracts
(1,080
)
—

Primary aluminum sales contract
Related party sales
292

355

Primary aluminum sales contract
Net gain (loss) on forward and derivative contracts
(152
)
(215
)
E.ON contingent obligation – net
Interest expense – third party
(353
)
(353
)

We had the following outstanding forward contracts that were entered into that were not designated as hedging instruments:
 
March 31, 2014
December 31, 2013
Primary aluminum sales contract premium (tonnes) (1)
84

1,782

Midwest premium contracts (tonnes)
—

6,000

(1)
Represents the remaining physical deliveries under the Glencore Metal Agreement.
Counterparty credit risk. Forward financial contracts are subject to counterparty credit risk.  However, we only enter into forward financial contracts with counterparties we determine to be creditworthy at the time of entering into the contract.  If any counterparty failed to perform according to the terms of the contract, the impact would be limited to the difference between the contract price and the market price applied to the contract volume on the date of settlement.