Derivatives and Other Financial Instruments (Tables)

9 Months Ended

Sep. 30, 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 September 30, 2019		Unobservable input	Range ($ in full amounts)
Assets:

Financial contract		$119	Interrelationship of forward energy price and the Consumer Price Index and price of electricity beyond forward curve	Electricity: $70.04 per megawatt hour in 2019 to $55.30 per megawatt hour in 2021
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: $1,708 per metric ton in October 2019 to $1,728 per metric ton in December 2019 Midwest premium: $0.1800 per pound in October 2019 and to $0.1900 per pound in December 2019 Electricity: rate of 2 million megawatt hours per year

Liabilities:

Embedded aluminum derivative		201	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $1,708 per metric ton in 2019 to $2,257 per metric ton in 2027 Electricity: rate of 4 million megawatt hours per year

Embedded aluminum derivatives		206	Interrelationship of LME and Midwest premium price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $1,708 per metric ton in 2019 to $2,365 per metric ton in December 2029 (two contracts) and $2,660 per metric ton in 2036 (one contract) Midwest premium: $0.1800 per pound in 2019 to $0.1900 per pound in 2029 (two contracts) and 2036 (one contract) Electricity: rate of 11 million megawatt hours per year

Embedded aluminum derivative		2	Interrelationship of LME price to overall energy price	Aluminum: $1,847 per metric ton in October 2019 to December 2019

Embedded credit derivative		18	Estimated spread between the respective 30-year debt yield of Alcoa Corporation and the counterparty	3.08% (30-year debt yields: Alcoa Corporation – 6.44% (estimated) and counterparty – 3.36%)

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:

	September 30, 2019		December 31, 2018
Asset Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Financial contract	$	77	$	70
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives		—		41
Financial contract		42		42
Total derivatives designated as hedging instruments		119		153
Total Asset Derivatives	$	119	$	153
Liability Derivatives
Derivatives designated as hedging instruments:
Fair value of derivative instruments – current:
Embedded aluminum derivatives	$	29	$	46
Fair value of derivative instruments – noncurrent:
Embedded aluminum derivatives		380		218
Total derivatives designated as hedging instruments		409		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		14		16
Total derivatives not designated as hedging instruments		18		25
Total Liability Derivatives	$	427	$	289

Schedule of Reconciliation of Activity for Derivative Contracts

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

	Assets				Liabilities
Third quarter ended September 30, 2019		Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Balance at July 1, 2019		$	132		$	515		$	20
Total gains or losses (realized and unrealized) included in:
Sales			—			(9	)		—
Cost of goods sold			(19	)		—			(1	)
Other expenses, net			—			—			(1	)
Other comprehensive income (loss)			7			(97	)		—
Other			(1	)		—			—
Balance at September 30, 2019		$	119		$	409		$	18
Change in unrealized gains or losses included in earnings for derivative instruments held at September 30, 2019:
Other expenses, net		$	—		$	—		$	(1	)

	Assets						Liabilities
Nine months ended September 30, 2019	Embedded aluminum derivatives			Financial contracts			Embedded aluminum derivatives			Embedded credit derivative
Opening balance – January 1, 2019	$	41		$	112		$	269		$	20
Total gains or losses (realized and unrealized) included in:
Sales		—			—			(34	)		—
Cost of goods sold		—			(78	)		—			(3	)
Other expenses, net		—			—			(2	)		1
Other comprehensive (loss) income		(41	)		89			181			—
Other		—			(4	)		(5	)		—
Closing balance – September 30, 2019	$	—		$	119		$	409		$	18
Change in unrealized gains or losses included in earnings for derivative instruments held at September 30, 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:

	September 30, 2019				December 31, 2018
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	841	$	841	$	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		1,805		1,955		1,801		1,863