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Derivatives and Other Financial Instruments (Tables)

9 Months Ended

Sep. 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):

	September 30, 2022				December 31, 2021
	Assets		Liabilities		Assets		Liabilities
Level 1 derivative instruments	$	164	$	35	$	19	$	29
Level 3 derivative instruments		63		944		2		1,293
Total	$	227	$	979	$	21	$	1,322
Less: Current		207		167		14		274
Noncurrent	$	20	$	812	$	7	$	1,048

	2022					2021
Third quarter ended September 30,	Unrealized gain recognized in Other comprehensive loss		Realized (loss) gain 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	$	59	$	32		$	(9	)	$	(4	)
Level 3 derivative instruments		49		(67	)		(214	)		(73	)
Noncontrolling and equity interest (Level 2)		2		(2	)		1			(5	)
Total	$	110	$	(37	)	$	(222	)	$	(82	)

For the quarter ended September 30, 2022, the realized gain of $32 on Level 1 cash flow hedges was comprised of a $34 gain recognized in Sales and a $2 loss recognized in Cost of goods sold. For the quarter ended September 30, 2021, the realized loss of $4 on Level 1 cash flow hedges was recognized in Sales.

	2022					2021
Nine months ended September 30,	Unrealized gain recognized in Other comprehensive loss		Realized (loss) gain 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	$	158	$	12		$	(17	)	$	(7	)
Level 3 derivative instruments		62		(286	)		(908	)		(188	)
Noncontrolling and equity interest (Level 2)		11		(6	)		3			(6	)
Total	$	231	$	(280	)	$	(922	)	$	(201	)

For the nine months ended September 30, 2022, the realized gain of $12 on Level 1 cash flow hedges was comprised of a $16 gain recognized in Sales and a $4 loss recognized in Cost of goods sold. For the nine months ended September 30, 2021, the realized loss of $7 on Level 1 cash flow hedges was comprised of a $6 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	September 30, 2022		September 30, 2021
Aluminum (in kmt)	Commodity buy forwards		178		221
Aluminum (in kmt)	Commodity sell forwards		398		263
Foreign currency (in millions of euro)	Foreign exchange buy forwards		67		103
Foreign currency (in millions of Norwegian krone)	Foreign exchange buy forwards		87		—
Foreign currency (in millions of Brazilian real)	Foreign exchange buy forwards		1,216		836
Foreign currency (in millions of Brazilian real)	Foreign exchange sell forwards		17		—

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):

	September 30, 2022		Unobservable Input	Unobservable Input Range
Asset Derivatives
Financial contract	$	61	Interrelationship of	Electricity (per MWh)	2022: $88.79
(undesignated)			forward energy price, LME		2023: $94.90
			forward price and the	LME (per mt)	2022: $2,164
			Consumer Price Index		2023: $2,184
Power contract		2	MWh of energy needed to produce the forecasted mt of aluminum	LME (per mt)	2022: $2,164 2022: $2,161
				Midwest premium (per pound)	2022: $0.2320 2022: $0.2220
				Electricity	Rate of 2 million MWh per year
Total Asset Derivatives	$	63
Liability Derivatives
Power contract	$	213	MWh of energy needed	LME (per mt)	2022: $2,164
			to produce the forecasted		2027: $2,716
			mt of aluminum	Electricity	Rate of 4 million MWh per year
Power contracts		731	MWh of energy needed to produce the forecasted mt of aluminum	LME (per mt)	2022: $2,164 2029: $2,813 2036: $3,109
				Midwest premium (per pound)	2022: $0.2320 2029: $0.2020 2036: $0.2020
				Electricity	Rate of 18 million MWh per year
Total Liability Derivatives	$	944

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	September 30, 2022		December 31, 2021
Derivatives designated as hedging instruments:
Current—power contracts	$	2	$	—
Total derivatives designated as hedging instruments	$	2	$	—
Derivatives not designated as hedging instruments:
Current—financial contract	$	61	$	2
Total derivatives not designated as hedging instruments	$	61	$	2
Total Asset Derivatives	$	63	$	2
Liability Derivatives
Derivatives designated as hedging instruments:
Current—power contracts	$	148	$	262
Noncurrent—power contracts		796		1,028
Total derivatives designated as hedging instruments	$	944	$	1,290
Derivatives not designated as hedging instruments:
Current—embedded credit derivative	$	—	$	1
Noncurrent—embedded credit derivative		—		2
Total derivatives not designated as hedging instruments	$	—	$	3
Total Liability Derivatives	$	944	$	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
Third quarter ended September 30, 2022	Power contracts			Financial contract			Power contracts			Embedded credit derivative
July 1, 2022	$	—		$	118		$	1,058		$	1
Total gains or losses included in:
Sales (realized)		(3	)		—			(70	)		—
Other income, net (unrealized)		—			7			—			(1	)
Other comprehensive loss (unrealized)		5			—			(44	)		—
Settlements and other		—			(64	)		—			—
September 30, 2022	$	2		$	61		$	944		$	—
Change in unrealized gains or losses included in earnings for derivative instruments held at September 30, 2022:
Other income, net	$	—		$	7		$	—		$	(1	)

	Assets						Liabilities
Nine months ended September 30, 2022	Power contracts			Financial contract			Power contracts			Embedded credit derivative
January 1, 2022	$	—		$	2		$	1,290		$	3
Total gains or losses included in:
Sales (realized)		(3	)		—			(289	)		—
Other income, net (unrealized)		—			196			—			(3	)
Other comprehensive loss (unrealized)		5			—			(57	)		—
Settlements and other		—			(137	)		—			—
September 30, 2022	$	2		$	61		$	944		$	—
Change in unrealized gains or losses included in earnings for derivative instruments held at September 30, 2022:
Other income, net	$	—		$	196		$	—		$	(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, 2022				December 31, 2021
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,432	$	1,432	$	1,814	$	1,814
Restricted cash		109		109		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		1,598		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.

+ References + Details