Kaiser Aluminum Surcharge Information
The surcharge for October shipments will be as follows:
| 6xxx: | $0.019/lb. | |
| All other alloys: | $0.029/lb. |
| 6xxx Alloys ($/lb) | |||||
|---|---|---|---|---|---|
| Month of Shipment |
Month of DOE data |
Natural Gas (a) |
Electricity (b) |
Diesel (c) |
Surcharge (a+b+c) |
| Jan-08 | Nov-07 | $0.0008 | $0.0000 | $0.0025 | $0.003 |
| Feb-08 | Dec-07 | $0.0009 | $0.0000 | $0.0022 | $0.003 |
| Mar-08 | Jan-08 | $0.0067 | $0.0000 | $0.0020 | $0.009 |
| Apr-08 | Feb-08 | $0.0100 | $0.0000 | $0.0024 | $0.012 |
| May-08 | Mar-08 | $0.0161 | $0.0000 | $0.0048 | $0.021 |
| Jun-08 | Apr-08 | $0.0208 | $0.0000 | $0.0058 | $0.027 |
| Jul-08 | May-08 | $0.0282 | $0.0003 | $0.0074 | $0.036 |
| Aug-08 | Jun-08 | $0.0371 | $0.0027 | $0.0086 | $0.048 |
| Sep-08 | Jul-08 | $0.0269 | $0.0039 | $0.0087 | $0.040 |
| Oct-08 | Aug-08 | $0.0082 | $0.0043 | $0.0068 | $0.019 |
| Other Alloys *($/lb) | |||||
|---|---|---|---|---|---|
| Month of Shipment |
Month of DOE data |
Natural Gas (a) |
Electricity (b) |
Diesel (c) |
Surcharge (a+b+c) |
| Jan-08 | Nov-07 | $0.0011 | $0.0000 | $0.0025 | $0.004 |
| Feb-08 | Dec-07 | $0.0012 | $0.0000 | $0.0022 | $0.003 |
| Mar-08 | Jan-08 | $0.0091 | $0.0000 | $0.0020 | $0.011 |
| Apr-08 | Feb-08 | $0.0136 | $0.0000 | $0.0024 | $0.016 |
| May-08 | Mar-08 | $0.0220 | $0.0000 | $0.0048 | $0.027 |
| Jun-08 | Apr-08 | $0.0284 | $0.0000 | $0.0058 | $0.034 |
| Jul-08 | May-08 | $0.0385 | $0.0008 | $0.0074 | $0.047 |
| Aug-08 | Jun-08 | $0.0506 | $0.0071 | $0.0086 | $0.066 |
| Sep-08 | Jul-08 | $0.0367 | $0.0106 | $0.0087 | $0.056 |
| Oct-08 | Aug-08 | $0.0112 | $0.0114 | $0.0068 | $0.029 |
* all 3xxx, 4xxx, 5xxx, 2xxx and 7xxx series alloys
| 2007 Average Energy Prices | |||
|---|---|---|---|
| Natural Gas ($ / mcf) |
Electricity ($ / kwh) |
Diesel ($ / gal) |
|
| 2007 Average | $7.1830 | $0.0635 | $2.8820 |
| Monthly Average Energy Prices | ||||
|---|---|---|---|---|
| Month of DOE data |
Date Recorded |
Natural Gas ($ / mcf) |
Electricity ($ / kwh) |
Diesel ($ / gal) |
| Nov-07 | Jun-30-08 | $7.3130 | $0.0622 | $3.3955 |
| Dec-07 | Jun-30-08 | $7.3212 | $0.0625 | $3.3406 |
| Jan-08 | Jun-30-08 | $8.2452 | $0.0627 | $3.3078 |
| Feb-08 | Jun-30-08 | $8.7648 | $0.0636 | $3.3770 |
| Mar-08 | Jun-30-08 | $9.7443 | $0.0636 | $3.8808 |
| Apr-08 | Jul-26-08 | $10.4863 | $0.0643 | $4.0835 |
| May-08 | Jul-26-08 | $11.6545 | $0.0655 | $4.4250 |
| Jun-08 | Jul-26-08 | $13.0707 | $0.0696 | $4.6770 |
| Jul-08 | Aug-20-08 | $11.4462 | $0.0725 | $4.7030 |
| Aug-08 | Sep-25-08 | $8.4872 | $0.0733 | $4.3020 |
Index information is reflected on date listed and is not updated with DOE revisions.
The above prices are quoted by the Department of Energy on its web site:
Diesel: http://tonto.eia.doe.gov/dnav/pet/hist/ddr001m.htm
Gas: STEO_m_gas.xls
Electricity: STEO_m_electricity.xls
Diesel: http://tonto.eia.doe.gov/dnav/pet/hist/ddr001m.htm
Gas: STEO_m_gas.xls
Electricity: STEO_m_electricity.xls
The energy surcharge reflects the increase in costs for natural gas, electricity, and diesel fuel as compared to the average prices of these costs in 2007. For example, the average prices in August 2008 and average prices for 2007 for these commodities were:
| Aug-08 | 2007 Base Price | Dollars per Unit | |
|---|---|---|---|
| Natural Gas | $8.4872 | $7.1830 | Henry Hub, 000’s of cubic feet (mcf) |
| Electricity | $0.0733 | $0.0635 | US Industrial; Kilowatt-hours (KWh) |
| Diesel | $4.3020 | $2.8820 | US retail, per gallon |
Monthly prices are available on the DOE web site approximately the middle of the following month. When known, such prices will apply to the calculation for products shipped in the next following month. For example, prices for August 2008 are posted on the DOE web site in mid-September, and such August prices will apply to the energy surcharge calculation for all scheduled shipments in October 2008.
For each commodity, the change in price for each month (compared to the 2007 base average price) will be multiplied by a usage factor for each commodity for (a) 6xxx alloys products and (b) all other alloy products. Those factors will remain constant and are:
| Usage per pound |
6xxx Alloys | Other Alloys | Units |
|---|---|---|---|
| Natural Gas | 0.0063 | 0.0086 | mcf / pound |
| Electricity | 0.4371 | 1.1704 | KWh / pound |
| Diesel | 0.0048 | 0.0048 | gallons / pound |
Continuing with the example above, orders scheduled to ship in October 2008 will reflect the following energy surcharge:
| 6xxx Alloys | Example: Aug 2008 DOE prices applied to October 2008 Orders |
|||
|---|---|---|---|---|
| Natural Gas | Electricity | Diesel Fuel | ||
| Aug 2008 Prices | $8.4872 | $0.0725 | $4.3020 | |
| Base 2007 Average Prices |
$7.1830 | $0.0635 | $2.8820 | |
| Difference | $1.3042 | $0.0090 | $1.4200 | |
| Usage Factor per lb | 0.0063 (mcf/lb) |
0.4371 (kwh/lb) |
0.0048 (gal/lb) |
|
| Dollars per pound | $0.0082 | $0.0039 | $0.0068 | Surcharge $0.019 |
| (a) | (b) | (c) | (a+b+c) | |
| Other Alloys* | Example: Aug 2008 DOE prices applied to October 2008 Orders |
|||
|---|---|---|---|---|
| Natural Gas | Electricity | Diesel Fuel | ||
| Aug 2008 Prices | $8.4872 | $0.0733 | $4.3020 | |
| Base 2007 Average Prices |
$7.1830 | $0.0635 | $2.8820 | |
| Difference | $1.3042 | $0.0098 | $1.4200 | |
| Usage Factor per lb | 0.0086 (mcf/lb) |
1.1704 (kwh/lb) |
0.0048 (gal/lb) |
|
| Dollars per pound | $0.0112 | $0.0114 | $0.0068 | Surcharge $0.029 |
| (a) | (b) | (c) | (a+b+c) | |
* all 3xxx, 4xxx, 5xxx, 2xxx and 7xxx series alloys
For convenience, the attached 
worksheet will allow the calculation of the energy surcharge for historical months or projected months, as the surcharge may apply to pounds shipped. Inputs required are the relevant monthly prices for natural gas, electricity, and diesel fuel as well as the pounds of 6xxx alloy or other alloy products.
worksheet will allow the calculation of the energy surcharge for historical months or projected months, as the surcharge may apply to pounds shipped. Inputs required are the relevant monthly prices for natural gas, electricity, and diesel fuel as well as the pounds of 6xxx alloy or other alloy products.During 2008, costs for natural gas, electricity and diesel fuel increased dramatically over the prior year. While Kaiser Aluminum has absorbed previous increases over the past several years, the escalation this year requires us to adjust our pricing accordingly via the implementation of a surcharge.
We will pass on increases in these costs above a baseline of 2007 levels and have concluded that a surcharge is the best vehicle to address this issue. We will maintain the data and tracking mechanisms used to support the surcharge on the Kaiser Aluminum Web Site to allow our customers to regularly monitor these commodity costs as they relate to their products.
For reference, the graphs below show the annual average price of the three major energy cost components from 2000 to 2008. Kaiser has absorbed the increases through 2007, but will pass on the cost increases above 2007 levels through the surcharge.
