Derivatives and Other Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2017

Schedule of Quantitative Information for Level 3 Derivative Contracts

The following table presents quantitative information related to the significant unobservable inputs described above for Level 3 derivative contracts:


	Fair value at September 30, 2017	Unobservable input	Range ($ in full amounts)
Assets:
Embedded aluminum derivative (D7)	$ —	Interrelationship of future aluminum and oil prices	Aluminum: $2,081 per metric ton in 2017 to $2,145 per metric ton in 2018 Oil: $58 per barrel in 2017 to $56 per barrel in 2018
Financial contract (D11)	222	Interrelationship of forward energy price and the Consumer Price Index and price of electricity beyond forward curve	Electricity: $76.44 per megawatt hour in 2017 to $58.78 per megawatt hour in 2021
Liabilities:
Embedded aluminum derivative (D1)	345	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $2,081 per metric ton in 2017 to $2,496 per metric ton in 2027 Electricity: rate of 4 million megawatt hours per year
Embedded aluminum derivatives (D3 through D5)	311	Price of aluminum beyond forward curve	Aluminum: $2,512 per metric ton in 2028 to $2,604 per metric ton in 2029 (two contracts) and $2,899 per metric ton in 2036 (one contract) Midwest premium: $0.0925 per pound in 2017 to $0.1050 per pound in 2029 (two contracts) and 2036 (one contract)
Embedded aluminum derivative (D8)	34	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $2,081 per metric ton in 2017 to $2,159 per metric ton in 2019 Midwest premium: $0.0925 per pound in 2017 to $0.1050 per pound in 2019 Electricity: rate of 2 million megawatt hours per year
Embedded aluminum derivative (D2)	18	Interrelationship of LME price to overall energy price	Aluminum: $2,038 per metric ton in 2017 to $2,183 per metric ton in 2019
Embedded credit derivative (D9)	28	Estimated credit spread between Alcoa Corporation and counterparty	3.51% (Alcoa Corporation – 8.07% and counterparty – 4.56%)

Schedule of Fair Values of Level 3 Derivative Instruments Recorded as Assets and Liabilities

The fair values of Level 3 derivative instruments recorded as assets and liabilities in the accompanying Consolidated Balance Sheet were as follows:


Asset Derivatives	September 30, 2017		December 31, 2016
Derivatives designated as hedging instruments:
Fair value of derivative contracts – current:
Embedded aluminum derivatives	$	—	$	29
Financial contract		93		—
Fair value of derivative contracts – noncurrent:
Embedded aluminum derivatives		—		468
Financial contract		129		—

Total derivatives designated as hedging instruments	$	222	$	497

Derivatives not designated as hedging instruments:
Fair value of derivative contracts – current:
Financial contract	$	—	$	17

Total derivatives not designated as hedging instruments	$	—	$	17

Total Asset Derivatives	$	222	$	514


Liability Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative contracts – current:
Embedded aluminum derivatives	$	81	$	17
Fair value of derivative contracts – noncurrent:
Embedded aluminum derivatives		593		187

Total derivatives designated as hedging instruments	$	674	$	204

Derivatives not designated as hedging instruments:
Fair value of derivative contracts – current:
Embedded aluminum derivative	$	23	$	10
Embedded credit derivative		4		5
Fair value of derivative contracts – noncurrent:
Embedded aluminum derivative		11		18
Embedded credit derivative		24		30

Total derivatives not designated as hedging instruments	$	62	$	63

Total Liability Derivatives	$	736	$	267

Schedule of Reconciliation of Activity for Derivative Contracts

The following tables present a reconciliation of activity for Level 3 derivative contracts:


	Assets						Liabilities
Third quarter ended September 30, 2017	Embedded aluminum derivatives			Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Opening balance – July 1, 2017	$	94		$	254		$	326		$	33
Total gains or losses (realized and unrealized) included in:
Sales		20			—			(9	)		—
Cost of goods sold		—			(13	)		—			(2	)
Other expenses, net		1			(17	)		7			(3	)
Other comprehensive loss		(114	)		(7	)		388			—
Purchases, sales, issuances, and settlements*		—			—			—			—
Transfers into and/or out of Level 3*		—			—			—			—
Other		(1	)		5			(4	)		—

Closing balance – September 30, 2017	$	—		$	222		$	708		$	28

Change in unrealized gains or losses included in earnings for derivative contracts held at September 30, 2017:
Sales	$	—		$	—		$	—		$	—
Cost of goods sold		—			—			—			—
Other expenses, net		1			(17	)		7			(3	)

*	In the 2017 third quarter, there were no purchases, sales, issuances or settlements of Level 3 derivative instruments. Additionally, there were no transfers of derivative instruments into or out of Level 3.


	Assets						Liabilities
Nine months ended September 30, 2017	Embedded aluminum derivatives			Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Opening balance – January 1, 2017	$	497		$	17		$	232		$	35
Total gains or losses (realized and unrealized) included in:
Sales		50			—			(24	)		—
Cost of goods sold		—			(18	)		—			(4	)
Other income, net		1			(9	)		15			(3	)
Other comprehensive loss		(547	)		100			496			—
Purchases, sales, issuances, and settlements*		—			119			—			—
Transfers into and/or out of Level 3*		—			—			—			—
Other		(1	)		13			(11	)		—

Closing balance – September 30, 2017	$	—		$	222		$	708		$	28

Change in unrealized gains or losses included in earnings for derivative contracts held at September 30, 2017:
Sales	$	—		$	—		$	—		$	—
Cost of goods sold		—			—			—			—
Other income, net		1			(9	)		15			(3	)

*	In January 2017, there was an issuance of a new financial contract (see D11 above). In the 2017 nine-month period, there were no purchases, sales or settlements of Level 3 derivative instruments. Additionally, there were no transfers of derivative instruments into or out of Level 3.

Schedule of Carrying Values and Fair Values of Other Financial Instruments

The carrying values and fair values of Alcoa Corporation’s other financial instruments were as follows:


	September 30, 2017				December 31, 2016
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,119	$	1,119	$	853	$	853
Restricted cash		8		8		6		6
Long-term debt due within one year		17		17		21		21
Long-term debt, less amount due within one year		1,384		1,565		1,424		1,573