Derivatives and Other Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2019

Schedule of Quantitative Information for Level 3 Derivative Contracts

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


	Fair value at March 31, 2019		Unobservable input	Range ($ in full amounts)
Assets:

Financial contract		137	Interrelationship of forward energy price and the Consumer Price Index and price of electricity beyond forward curve	Electricity: $73.13 per megawatt hour in 2019 to $55.02 per megawatt hour in 2021

Liabilities:

Embedded aluminum derivative		267	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $1,900 per metric ton in 2019 to $2,445 per metric ton in 2027 Electricity: rate of 4 million megawatt hours per year

Embedded aluminum derivatives		320	Price of aluminum beyond forward curve	Aluminum: $2,533 per metric ton in July 2029 to $2,553 per metric ton in December 2029 (two contracts) and $2,850 per metric ton in 2036 (one contract) Midwest premium: $0.1900 per pound in 2019 to $0.1850 per pound in 2029 (two contracts) and 2036 (one contract)

Embedded aluminum derivative		-	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $1,900 per metric ton in April 2019 to $1,911 per metric ton in June 2019 Midwest premium: $0.1900 per pound in April 2019 and June 2019 Electricity: rate of 2 million megawatt hours per year

Embedded aluminum derivative		7	Interrelationship of LME price to overall energy price	Aluminum: $1,857 per metric ton in April 2019 to $1,954 per metric ton in December 2019

Embedded credit derivative		21	Estimated spread between the respective 30-year debt yield of Alcoa Corporation and the counterparty	3.25% (30-year debt yields: Alcoa Corporation – 7.21% (estimated) and counterparty – 3.96%)

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:

	March 31, 2019		December 31, 2018
Asset Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Financial contract	$	69	$	70
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives		—		41
Financial contract		68		42
Total derivatives designated as hedging instruments		137		153
Total Asset Derivatives	$	137	$	153
Liability Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Embedded aluminum derivatives	$	59	$	46
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives		535		218
Total derivatives designated as hedging instruments		594		264
Derivatives not designated as hedging instruments:
Fair value of derivative instruments – current:
Embedded aluminum derivative		—		5
Embedded credit derivative		4		4
Fair value of derivative instruments – noncurrent:
Embedded credit derivative		17		16
Total derivatives not designated as hedging instruments		21		25
Total Liability Derivatives	$	615	$	289

Schedule of Reconciliation of Activity for Derivative Contracts

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

	Assets						Liabilities
First quarter ended March 31, 2019	Embedded aluminum derivatives			Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Balance at January 1, 2019	$	41		$	112		$	269		$	20
Total gains or losses (realized and unrealized) included in:
Sales		—			—			(13	)		—
Cost of goods sold		—			(42	)		—			—
Other expenses, net		—			—			(2	)		1
Other comprehensive (loss) income		(41	)		68			344			—
Other					(1	)		(4	)		—
Balance at March 31, 2019	$	—		$	137		$	594		$	21
Change in unrealized gains or losses included in earnings for derivative instruments held at March 31, 2019:
Other expenses, net	$	—		$	—		$	(2	)	$	1

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:

	March 31, 2019				December 31, 2018
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,017	$	1,017	$	1,113	$	1,113
Restricted cash		3		3		3		3
Long-term debt due within one year		1		1		1		1
Long-term debt, less amount due within one year		1,802		1,939		1,801		1,863