Derivatives and Other Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2016

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 June 30, 2016*		Unobservable input	Range ($ in full amounts)
Assets:
Embedded aluminum derivatives	$	718	Price of aluminum beyond forward curve	Aluminum: $2,093 per metric ton in 2026 to $2,245 per metric ton in 2029 (two contracts) and $2,540 per metric ton in 2036 (one contract) Midwest premium: $0.0775 per pound in 2021 to $0.0775 per pound in 2029 (two contracts) and 2036 (one contract)
Embedded aluminum derivative		23	Interrelationship of future aluminum prices, foreign currency exchange rates, and the U.S. consumer price index (CPI)	Aluminum: $1,631 per metric ton in July 2016 to $1,637 per metric ton in September 2016 Foreign currency: A$1 = $0.74 in 2016 (July through September) CPI: 1982 base year of 100 and 236 in 2016 (July through September)
Embedded aluminum derivative		4	Interrelationship of LME price to overall energy price	Aluminum: $1,614 per metric ton in 2016 to $1,755 per metric ton in 2019
Embedded aluminum derivative		—	Interrelationship of future aluminum and oil prices	Aluminum: $1,631 per metric ton in 2016 to $1,710 per metric ton in 2018 Oil: $49 per barrel in 2016 to $55 per barrel in 2018
Energy contract		40	Price of electricity beyond forward curve	Electricity: $48 per megawatt hour in 2019 to $116 per megawatt hour in 2036
Liabilities:
Embedded aluminum derivative		196	Price of aluminum beyond forward curve	Aluminum: $2,093 per metric ton in 2026 to $2,137 per metric ton in 2027
Embedded aluminum derivative		32	Interrelationship of LME price to the amount of megawatt hours of energy needed to produce the forecasted metric tons of aluminum	Aluminum: $1,631 per metric ton in 2016 to $1,729 per metric ton in 2019 Midwest premium: $0.0725 per pound in 2016 to $0.0775 per pound in 2019 Electricity: rate at 2 million megawatt hours per year
Embedded credit derivative		33	Credit spread between Alcoa and counterparty	3.45% to 3.81% (3.63% median)

The fair value of the energy contract reflected as an asset in this table is lower by $9 compared to the respective amount reflected in the Level 3 tables presented below. This is due to the fact that this contract is in a liability position for the current portion but is in an asset position for the noncurrent portion, and is reflected as such on the accompanying Consolidated Balance Sheet. However, this derivative is reflected as a net asset in the above table for purposes of presenting the assumptions utilized to measure the fair value of the derivative instrument in its 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:


	June 30, 2016		December 31, 2015
Asset Derivatives
Derivatives designated as hedging instruments:
Prepaid expenses and other current assets:
Embedded aluminum derivatives	$	51	$	72
Other noncurrent assets:
Embedded aluminum derivatives		671		994
Energy contract		49		2

Total derivatives designated as hedging instruments	$	771	$	1,068

Derivatives not designated as hedging instruments:
Prepaid expenses and other current assets:
Embedded aluminum derivatives	$	23	$	69

Total derivatives not designated as hedging instruments	$	23	$	69

Total Asset Derivatives	$	794	$	1,137

Liability Derivatives
Derivatives designated as hedging instruments:
Other current liabilities:
Embedded aluminum derivative	$	14	$	9
Energy contract		9		4
Other noncurrent liabilities and deferred credits:
Embedded aluminum derivative		182		160

Total derivatives designated as hedging instruments	$	205	$	173

Derivatives not designated as hedging instruments:
Other current liabilities:
Embedded aluminum derivative	$	8	$	—
Embedded credit derivative		5		6
Other noncurrent liabilities and deferred credits:
Embedded aluminum derivative		24		—
Embedded credit derivative		28		29

Total derivatives not designated as hedging instruments	$	65	$	35

Total Liability Derivatives	$	270	$	208

Schedule of Reconciliation of Activity for Derivative Contracts

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


	Assets					Liabilities
Second quarter ended June 30, 2016	Embedded aluminum derivatives			Energy contract		Embedded aluminum derivative			Embedded credit derivative			Energy contract
Opening balance – April 1, 2016	$	988		$	6	$	161		$	33		$	11
Total gains or losses (realized and unrealized) included in:
Sales		(3	)		—		(3	)		—			—
Cost of goods sold		(30	)		—		—			(2	)		—
Other income, net		(4	)		—		—			2			—
Other comprehensive loss		(215	)		37		38			—			(8	)
Purchases, sales, issuances, and settlements*		—			—		32			—			—
Transfers into and/or out of Level 3*		—			—		—			—			—
Other		9			6		—			—			6

Closing balance – June 30, 2016	$	745		$	49	$	228		$	33		$	9

Change in unrealized gains or losses included in earnings for derivative contracts held at June 30, 2016:
Sales	$	—		$	—	$	—		$	—		$	—
Cost of goods sold		—			—		—			—			—
Other income, net		(4	)		—		—			2			—

In the 2016 second quarter, there was an issuance of a new embedded derivative contained in an amendment to an existing power contract. There were no purchases, sales 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:


	June 30, 2016				December 31, 2015
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,929	$	1,929	$	1,919	$	1,919
Restricted cash		30		30		37		37
Noncurrent receivables		19		19		17		17
Available-for-sale securities		68		68		193		193
Short-term borrowings		33		33		38		38
Commercial paper		—		—		—		—
Long-term debt due within one year		774		791		21		21
Contingent payment related to an acquisition		132		132		130		130
Long-term debt, less amount due within one year		8,278		8,670		8,993		8,922