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How to Calculate Aluminum Melting Costs


Without a clear understanding of all the contributing factors, cost cutting efforts in one area of the melting operation may adversely affect other costs. Additionally, potential improvements may be overlooked or prioritized incorrectly.

A metalcasting melt department can measure and target five main areas for cost reduction:

  • melt loss;
  • energy;
  • labor;
  • maintenance and consumables;
  • depreciation.

Calculating Melt Loss

Any time you melt metal, losses will occur due to oxidation. Furnace practices and equipment have a major effect on these losses.

Ideally, each load charged to a furnace and each casting run should be accurately weighed. At least two out of three measurements should be made within the department: pounds in and pounds out or pounds dross. Estimations, such as conveyor loads or average charge loads, may be used in some cases. If these estimates are used, they must be rechecked periodically, as changes will occur over time.

The calculation of melt loss (pounds in minus pounds out, divided by pounds in) depends on how dross is handled. Metalcasters can sell dross (equation 1) or send it out so the aluminum can be recovered for a tolling cost (equation 2). (Note: The tolling costs in the second equation should include the costs of shipping dross out and returning the recovered aluminum. All weights are in pounds; costs are in dollars per pound.)

Eq. 1. Total Cost = % Melt Loss x Aluminum Cost – % Melt Loss x Dross Price

Eq. 1. Total Cost = % Melt Loss x Aluminum Cost + % Melt Loss x Toll Cost – % Melt Loss x % Metal Recovery x Aluminum Cost

Calculating Energy Costs

Equipment, maintenance and furnace practices all affect energy costs. While a basic cost, it is only sporadically measured within a melt department. At a minimum, the department needs a gas meter. Since each furnace is different, each process should be measured. Meters must be maintained and read at least once a month. Be aware of internal conventions, such as reporting data by calendar months, billing months or fiscal months. Ensure the time period between meter readings coincides with the measurement of the pounds and includes both melting and holding energy usage. Contact your natural gas company to obtain the heat content of the natural gas you are purchasing.

A furnace may have a combustion blower, damper blower, floor blower, baghouse blower, conveyor motors and a pump motor, and their electric costs also should be measured. Other gases used at the furnace, including nitrogen, chlorine and oxygen, can be included within this section.

Natural Gas Cost = Gas Usage (mcf/month) x Heat Content (BTU/cf) x 1,000 (cf/mcf) x Dollars per Dth / Pounds In / 1,000,000 (BTU/Dth)

Electricity Cost = Electric Usage (kWh/month) x Dollars per kWh / Pounds In

Total Energy Cost = Natural Gas Cost + Electricity Cost

Calculating Labor Costs

The labor required for the melting operation includes anyone who is charging, skimming, cleaning or casting from the furnace. Labor is sometimes reduced by automatic charging or casting equipment.

Labor Cost = Annual Labor Cost / Annual Pounds In

Calculating Maintenance and Consumables Costs

The largest consumable expense is refractory. Refractory life can be detrimentally affected by operator practice, equipment and furnace design. Other consumable items in a furnace can include pump parts, doors and thermocouples. Labor for maintenance work should be included within this calculation.

Maintenance/Consumable Cost=Average Annual Cost/Annual Pounds In

Calculating Depreciation

Deprecation of the furnace, along with related charging equipment, pumps, baghouses, etc., should be included. The values used can vary from facility to facility. For instance, many furnaces that have been fully depreciated are still running, while depreciation might alternatively be charged to the melt department for equipment that has long been removed from service. (Note: Service life should be measured in years.)

Depreciation Cost = (Furnace Cost / Service Life + Pump Cost / Service Life + Charging Equipment Cost / Service Life) / Annual Pounds In