Derivatives and Other Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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 March 31, 2015*		Unobservable input	Range ($ in full amounts)
Assets:
Embedded aluminum derivative	$	140	Interrelationship of future aluminum prices, foreign currency exchange rates, and the U.S. consumer price index (CPI)	Aluminum: $1,798 per metric ton in 2015 to $1,869 per metric ton in 2016 Foreign currency: A$1 = $0.77 in 2015 to $0.78 in 2016 CPI: 1982 base year of 100 and 231 in 2015 to 239 in 2016
Embedded aluminum derivative		—	Interrelationship of future aluminum and oil prices	Aluminum: $1,798 per metric ton in 2015 to $1,983 per metric ton in 2018 Oil: $56 per barrel in 2015 to $71 per barrel in 2018
Energy contract		8	Price of electricity beyond forward curve	Electricity: $43 per megawatt hour in 2018 to $130 per megawatt hour in 2036
Liabilities:
Embedded aluminum derivative		344	Price of aluminum beyond forward curve	Aluminum: $2,320 per metric ton in 2025 to $2,425 per metric ton in 2027
Embedded aluminum derivative		16	Interrelationship of LME price to overall energy price	Aluminum: $1,830 per metric ton in 2015 to $2,003 per metric ton in 2019
Embedded aluminum derivatives		4	Price of aluminum beyond forward curve	Aluminum: $2,320 per metric ton in 2025 to $2,533 per metric ton in 2029 (two contracts) and $2,870 per metric ton in 2036 (one contract) Midwest premium: $0.1725 per pound in 2020 to $0.1725 per pound in 2029 (two contracts) and 2036 (one contract)
Embedded credit derivative		16	Credit spread between Alcoa and counterparty	1.17% to 1.70% (1.44% median)

The fair value of embedded aluminum derivatives reflected as assets and liabilities in this table are both lower by $61 compared to the respective amounts reflected in the Level 3 table presented below. This is due to the fact that Alcoa has four derivatives that are in an asset position for the current portion but are in a liability position for the noncurrent portion, and are reflected as such on the accompanying Consolidated Balance Sheet. However, these derivatives are reflected as a net liability in this table for purposes of presenting the assumptions utilized to measure the fair value of the derivative instruments in their entirety.

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, 2015		December 31, 2014
Asset Derivatives
Derivatives designated as hedging instruments:
Prepaid expenses and other current assets:
Embedded aluminum derivatives	$	29	$	24
Other noncurrent assets:
Embedded aluminum derivative		32		73
Energy contract		8		2

Total derivatives designated as hedging instruments	$	69	$	99


Derivatives not designated as hedging instruments*:
Prepaid expenses and other current assets:
Embedded aluminum derivatives	$	94	$	98
Other noncurrent assets:
Embedded aluminum derivatives		46		71

Total derivatives not designated as hedging instruments	$	140	$	169



Total Asset Derivatives	$	209	$	268


Liability Derivatives
Derivatives designated as hedging instruments:
Other current liabilities:
Embedded aluminum derivative	$	22	$	24
Other noncurrent liabilities and deferred credits:
Embedded aluminum derivatives		403		352

Total derivatives designated as hedging instruments	$	425	$	376


Derivatives not designated as hedging instruments*:
Other current liabilities:
Embedded credit derivative	$	2	$	2
Other noncurrent liabilities and deferred credits:
Embedded credit derivative		14		16

Total derivatives not designated as hedging instruments	$	16	$	18



Total Liability Derivatives	$	441	$	394

*	See the “Other” section within Note N for additional information on Alcoa’s purpose for entering into derivatives not designated as hedging instruments and its overall risk management strategies.

Schedule of Reconciliation of Activity for Derivative Contracts

The following table presents a reconciliation of activity for Level 3 derivative contracts:


	Assets					Liabilities
First quarter ended March 31, 2015	Embedded Aluminum derivatives			Energy contract		Embedded Aluminum derivatives			Embedded credit derivative
Opening balance – January 1, 2015	$	266		$	2	$	376		$	18
Total gains or losses (realized and unrealized) included in:
Sales		6			—		(6	)		—
Cost of goods sold		(21	)		—		—			—
Other income, net		1			—		—			(2	)
Other comprehensive loss		(43	)		6		55			—
Purchases, sales, issuances, and settlements*		—			—		—			—
Transfers into and/or out of Level 3*		—			—		—			—
Foreign currency translation		(8	)		—		—			—

Closing balance – March 31, 2015	$	201		$	8	$	425		$	16


Change in unrealized gains or losses included in earnings for derivative contracts held at March 31, 2015:
Sales	$	—		$	—	$	—		$	—
Cost of goods sold		—			—		—			—
Other income, net		1			—		—			(2	)

*	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.

Schedule of Carrying Values and Fair Values of Other Financial Instruments

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


	March 31, 2015				December 31, 2014
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,191	$	1,191	$	1,877	$	1,877
Restricted cash		23		23		20		20
Noncurrent receivables		17		17		17		17
Available-for-sale securities		156		156		153		153
Short-term borrowings		80		80		54		54
Commercial paper		—		—		—		—
Long-term debt due within one year		26		26		29		29
Long-term debt, less amount due within one year		8,711		9,452		8,769		9,445