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Derivatives and Other Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2022

Schedule of Detail for Level 1 and 3 Derivatives

The following tables present the detail for Level 1 and 3 derivatives (see additional Level 3 information in further tables below):

	June 30, 2022				December 31, 2021
	Assets		Liabilities		Assets		Liabilities
Level 1 derivative instruments	$	121	$	40	$	19	$	29
Level 3 derivative instruments		118		1,059		2		1,293
Total	$	239	$	1,099	$	21	$	1,322
Less: Current		224		232		14		274
Noncurrent	$	15	$	867	$	7	$	1,048

	2022					2021
Second quarter ended June 30,	Unrealized gain recognized in Other comprehensive loss		Realized loss reclassed from Other comprehensive loss to earnings			Unrealized (loss) gain recognized in Other comprehensive loss			Realized loss reclassed from Other comprehensive loss to earnings
Level 1 derivative instruments	$	332	$	(14	)	$	6		$	(3	)
Level 3 derivative instruments		850		(115	)		(394	)		(60	)
Noncontrolling and equity interest (Level 2)		2		—			(9	)		(4	)
Total	$	1,184	$	(129	)	$	(397	)	$	(67	)

For the quarter ended June 30, 2022, the realized loss of $14 on Level 1 cash flow hedges was comprised of a $13 loss recognized in Sales and a $1 loss recognized in Cost of goods sold. For the quarter ended June 30, 2021, the realized loss of $3 on Level 1 cash flow hedges was comprised of a $2 loss recognized in Sales and a $1 loss recognized in Cost of goods sold.

	2022					2021
Six months ended June 30,	Unrealized gain recognized in Other comprehensive loss		Realized loss reclassed from Other comprehensive loss to earnings			Unrealized (loss) gain recognized in Other comprehensive loss			Realized loss reclassed from Other comprehensive loss to earnings
Level 1 derivative instruments	$	99	$	(20	)	$	(8	)	$	(3	)
Level 3 derivative instruments		13		(219	)		(694	)		(115	)
Noncontrolling and equity interest (Level 2)		9		(4	)		2			(1	)
Total	$	121	$	(243	)	$	(700	)	$	(119	)

For the six months ended June 30, 2022, the realized loss of $20 on Level 1 cash flow hedges was comprised of a $18 loss recognized in Sales and a $2 loss recognized in Cost of goods sold. For the six months ended June 30, 2021, the realized loss of $3 on Level 1 cash flow hedges was comprised of a $2 loss recognized in Sales and a $1 loss recognized in Cost of goods sold.

Schedule of Outstanding Quantities of Derivative Instruments

The following table presents the outstanding quantities of derivative instruments classified as Level 1:

	Classification	June 30, 2022		June 30, 2021
Aluminum (in kmt)	Commodity forwards		438		22
Foreign currency (in millions of euro)	Foreign exchange forwards		75		114
Foreign currency (in millions of Norwegian krone)	Foreign exchange forwards		388		—
Foreign currency (in millions of Brazilian real)	Foreign exchange forwards		1,399		341

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 instruments (megawatt hours in MWh):

	June 30, 2022		Unobservable Input	Unobservable Input Range
Asset Derivatives
Financial contract		118	Interrelationship of	Electricity (per MWh)	2022: $185.58
(undesignated)			forward energy price, LME		2022: $95.22
			forward price and the	LME (per mt)	2022: $2,433
			Consumer Price Index		2022: $2,444
Total Asset Derivatives	$	118
Liability Derivatives
Power contract	$	246	MWh of energy needed	LME (per mt)	2022: $2,433
			to produce the forecasted		2027: $2,544
			mt of aluminum	Electricity	Rate of 4 million MWh per year
Power contracts		812	MWh of energy needed to produce the forecasted mt of aluminum	LME (per mt)	2022: $2,433 2029: $2,617 2036: $2,912
				Midwest premium (per pound)	2022: $0.3120 2029: $0.2820 2036: $0.2820
				Electricity	Rate of 18 million MWh per year
Power contract (undesignated)	1		Estimated spread between the 30-year debt yield of Alcoa and the counterparty	Credit spread	1.49%: 30-year debt yield spread 6.32%: Alcoa (estimated) 4.83%: counterparty
Total Liability Derivatives	$	1,059

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

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

Asset Derivatives	June 30, 2022		December 31, 2021
Derivatives not designated as hedging instruments:
Current—financial contract	$	118	$	2
Total derivatives not designated as hedging instruments	$	118	$	2
Total Asset Derivatives	$	118	$	2
Liability Derivatives
Derivatives designated as hedging instruments:
Current—power contracts	$	202	$	262
Noncurrent—power contracts		856		1,028
Total derivatives designated as hedging instruments	$	1,058	$	1,290
Derivatives not designated as hedging instruments:
Current—embedded credit derivative	$	1	$	1
Noncurrent—embedded credit derivative		—		2
Total derivatives not designated as hedging instruments	$	1	$	3
Total Liability Derivatives	$	1,059	$	1,293

Fair Value Assets Liabilities Measured On Recurring Basis Unobservable Input Reconciliation Text Block

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

	Assets			Liabilities
Second quarter ended June 30, 2022	Financial contract			Power contracts			Embedded credit derivative
April 1, 2022	$	14		$	2,023		$	1
Total gains or losses included in:
Sales (realized)		—			(115	)		—
Other income, net (unrealized/realized)		176			—			—
Other comprehensive loss (unrealized)		—			(850	)		—
Other		(9	)		—			—
June 30, 2022	$	181		$	1,058		$	1
Change in unrealized gains or losses included in earnings for derivative instruments held at June 30, 2022:
Other income, net	$	106		$	—		$	—

	Assets			Liabilities
Six months ended June 30, 2022	Financial contract			Power contracts			Embedded credit derivative
January 1, 2022	$	2		$	1,290		$	3
Total gains or losses included in:
Sales (realized)		—			(219	)		—
Other income, net (unrealized/realized)		189			—			(2	)
Other comprehensive loss (unrealized)		—			(13	)		—
Other		(10	)		—			—
June 30, 2022	$	181		$	1,058		$	1
Change in unrealized gains or losses included in earnings for derivative instruments held at June 30, 2022:
Other income, net	$	119		$	—		$	(2	)

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:

	June 30, 2022				December 31, 2021
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,638	$	1,638	$	1,814	$	1,814
Restricted cash		110		110		110		110
Short-term borrowings		75		75		75		75
Long-term debt due within one year		1		1		1		1
Long-term debt, less amount due within one year		1,725		1,650		1,726		1,865

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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