Key points
- Move only the metal line; conversion cost stays fixed for the agreed period.
- Name the benchmark and the regional premium; a benchmark alone is not the purchase price.
- Fix a base index value, base premium and reference date in the quotation.
- State the averaging period, adjustment interval, neutral band and symmetric up and down rule.
- State the weight basis: gross shot weight or net part weight.
- Do not count yield and scrap twice; put them in the weight basis or in conversion, not both.
- Treat alloy substitution as a specification change with documented review, not a price adjustment.
- Keep tooling, engineering changes and scheduled releases outside the metal formula.
Which aluminum price the clause refers to
An aluminum price per pound or per ton is a starting point, not a purchase price. The adjustment clause has to name the layer it uses.
| Layer | What it covers | Belongs in the adjustment clause? |
|---|---|---|
| Exchange benchmark | Global primary aluminum price per metric ton (LME); excludes delivery, alloying, form and manufacturing. | Yes, as the named benchmark. |
| Regional premium | Physical delivery and regional supply; in North America, the Midwest Premium. | Yes, when it is the premium actually paid. |
| Alloy and form | Composition of the grade; ingot, billet or sheet. | Yes, only for the agreed alloy and form. |
| Finished casting | Metal plus melting loss, yield, tooling, machining, finishing, inspection. | No, this is conversion and tooling; yield needs an agreed place. |
Price per ton divided by 2,204.62 gives price per pound. That conversion changes units and does not add the premium. Most disagreements come from comparing different layers.
Split the quote into a metal line and a conversion line
The metal line prices the agreed alloy on the agreed weight basis and is the only line that follows the index. The conversion line holds the manufacturing costs: cycle time and machine size, cavities, scrap rate, heat treatment, machining (often the largest single line), finishing and masking, inspection and testing, and packing. Freight follows the Incoterm in the quotation.
The conversion line stays fixed for the agreed period. Scrap and yield sit in the weight basis or in conversion, not both. If the metal line uses gross shot weight, gates, overflows and biscuit are already in the metal weight. If it uses net part weight, conversion has to carry yield and scrap. The same scrap rate must not be charged in both places. Leak, X-ray and dimensional rejects are paid for by the good parts, so the scope of inspection and leak testing also shapes the conversion line.
Choosing the weight basis: gross shot weight vs net part weight
Choose the weight basis that matches how the metal line is calculated, and write it down. The choice changes who carries yield and scrap.
| Weight basis | What it includes | Who carries yield and scrap | What to check |
|---|---|---|---|
| Net part weight | The finished casting only. | Supplier carries yield and scrap through the conversion line. | That conversion already includes yield and scrap, with no second metal charge. |
| Gross shot weight | Part weight plus gates, overflows and biscuit. | The metal line carries the gates, overflows and biscuit; the quote should state where the cost of rejected parts sits. | That the same scrap rate is not added again in conversion. |
Process choice changes gates, overflows and biscuit and therefore the gross shot weight and yield. For process comparison before fixing the weight basis, use the squeeze vs die casting selection worksheet.
Index, base date, averaging and interval
Name the benchmark and the regional premium in the quote. The LME benchmark is a global primary aluminum price per metric ton; it excludes delivery, alloying, form and manufacturing. The premium covers physical delivery and regional supply, such as the Midwest Premium in North America. Name both.
Fix a base index value, base premium and reference date. At each agreed interval, move the metal line by the difference between the new average index plus premium and the base index plus base premium, multiplied by the weight basis. State whether the index is averaged, for example over the previous month, or read on a single day, and how often the line is adjusted. Two other common choices are a neutral band, inside which no adjustment is made, and symmetry, so the clause moves the price down as well as up. State the currency of the index and the quote, and how exchange-rate moves are handled. In China, the Shanghai Futures Exchange (SHFE) trades an aluminum contract, priced in Chinese yuan, so a dollar quotation tied to it needs an exchange-rate rule. Name the published source for both the index and the premium.
In words, the formula is:
adjusted metal line = weight basis x (new average index + new premium - base index - base premium)
Apply the result at the agreed interval and according to the agreed rules, including any neutral band and currency handling. The quoted base values and named published source let both sides recalculate.
Alloy changes are specification changes, not price adjustments
The clause covers market movement of the agreed alloy. It does not authorize a cheaper equivalent alloy. When a supplier offers an equivalent alloy, ask for a documented substitution review before changing the purchase specification; a cross-reference chart names a candidate but does not show that it meets the drawing. A name match is not the same as chemical conformity, and neither proves the finished part still meets its requirements. AlSi9Cu3(Fe) is EN AC-46000 in EN 1706. Its usual counterparts are A380 (ASTM), ADC10 (JIS) and YL112 (GB), which are close but not identical. The review should end in a recorded decision to approve within a defined scope, authorise qualification only, or reject. Use the alloy substitution approval checklist for that review.
A356.0 is the casting designation; A356.1 and A356.2 are ingot designations; A356.2 has the tightest limits, particularly on iron. "A356.2-T6" on a drawing usually means a casting poured from A356.2 ingot and heat treated to T6. A drawing that says A356.2 should state whether it specifies the ingot, the casting or both, and how each is evidenced (ingot certificate, spectrometer analysis of the melt, or both). Use the A356 and A356-T6 specification page when the alloy line depends on ingot versus casting designation. The buyer's drawing and specification decide acceptance; the clause only tracks the market price of the material they name.
What else the clause should settle
Tooling is a one-time cost, usually the largest one in a new project. The tooling quotation should state exclusions and how engineering changes are priced. A tool paid for by the buyer belongs to the buyer and is kept and maintained at the plant that runs it. Tooling sits outside the metal formula.
Where you commit to an annual quantity and call off in batches through scheduled releases, the clause also needs a timing rule. One way to set it is to agree whether an adjustment applies to orders placed in the period or to orders shipped in it. Document each recalculation with the published index value, premium, reference date and weight basis. Compare quotes with the metal price basis and adjustment clause line by line; where a supplier did not quote a line, mark it not included, not zero.
How CEX quotes cast and machined parts
CEX makes die casting and squeeze casting tooling in-house, performs heat treatment including T6 in-house, and machines castings on in-house CNC machines (company-reported). The squeeze casting alloys are A356, A356.2, A380, A383, AlSi9Mg, AlSi10Mg and AlSi9Cu3 (company-reported). CEX verifies incoming ingot and the melt by optical emission spectrometer (company-reported). For A356-T6 squeeze casting, see A356-T6 squeeze casting composition and properties.
Qingdao Dechengxin Metal Products Co., Ltd. is the manufacturing entity in Jimo District, Qingdao, and holds ISO 9001:2015 and IATF 16949:2016 in its own name. The IATF 16949 scope is manufacturing of aluminium alloy die-cast parts. CEX is a combined factory and trading company: the factory plus the trading company Qingdao Chengenxin, under the same owner. CEX has cast aluminum since 1995 and supplies industrial customers mainly in North America and Europe (company-reported).
The metal clause itself is agreed per quotation: benchmark, premium, weight basis, interval and how each recalculation is documented. When you send an inquiry, state your preferred benchmark, weight basis and adjustment interval, and use the casting RFQ checklist to list the metal price basis and adjustment clause line by line.
Related: Aluminum casting cost drivers