Derivatives and Other Financial Instruments (Tables)
|
12 Months Ended |
Dec. 31, 2021 |
|---|
| Fair Value Disclosures [Abstract] |
|
| Schedule of Detail for Level 1, 2 and 3 Derivatives |
The following tables present the detail for Level 1, 2 and 3 derivatives (see additional Level 3 information in further tables below):
|
|
|
2021 |
|
|
2020 |
|
|
Balance at December 31, |
|
Assets |
|
|
Liabilities |
|
|
Assets |
|
|
Liabilities |
|
|
Level 1 derivative instruments |
|
$ |
19 |
|
|
$ |
29 |
|
|
$ |
21 |
|
|
$ |
7 |
|
|
Level 3 derivative instruments |
|
|
2 |
|
|
|
1,293 |
|
|
|
- |
|
|
|
838 |
|
|
Total |
|
$ |
21 |
|
|
$ |
1,322 |
|
|
$ |
21 |
|
|
$ |
845 |
|
|
Less: Current |
|
|
14 |
|
|
|
274 |
|
|
|
21 |
|
|
|
103 |
|
|
Noncurrent |
|
$ |
7 |
|
|
$ |
1,048 |
|
|
$ |
- |
|
|
$ |
742 |
|
|
|
|
2021 |
|
|
2020 |
|
|
Year ended December 31, |
|
Unrealized loss recognized in Other comprehensive (loss) income |
|
|
Realized loss reclassed from Other comprehensive (loss) income to earnings |
|
|
Unrealized loss recognized in Other comprehensive (loss) income |
|
|
Realized loss reclassed from Other comprehensive (loss) income to earnings |
|
|
Level 1 derivative instruments |
|
$ |
(28 |
) |
|
$ |
(10 |
) |
|
$ |
8 |
|
|
$ |
(19 |
) |
|
Level 3 derivative instruments |
|
|
(759 |
) |
|
|
(279 |
) |
|
|
(374 |
) |
|
|
(88 |
) |
|
Noncontrolling and equity interest (Level 2) |
|
|
5 |
|
|
|
(6 |
) |
|
|
21 |
|
|
|
1 |
|
|
Total |
|
$ |
(782 |
) |
|
$ |
(295 |
) |
|
$ |
(345 |
) |
|
$ |
(106 |
) |
|
| Schedule of Fair Values of Level 3 Derivative Instruments Outstanding |
Level 3 derivative instruments outstanding as of December 31, 2021 are described in the table below:
|
Description |
|
Designation |
|
Contract Termination |
|
Unobservable Inputs Impacting Valuation |
|
Sensitivity to Inputs |
|
Power contracts |
|
|
|
|
|
|
|
|
|
Embedded derivative that indexes the price of power to the LME price of aluminum plus the Midwest premium |
|
Cash flow hedge of forward sales of aluminum |
|
March 2026
December 2029
February 2036 |
|
LME price, Midwest premium and MWh per year |
|
Increase in LME price and/or the Midwest premium results in a higher cost of power and an increase to the derivative liability |
|
Embedded derivative that indexes the price of power to the LME price of aluminum |
|
Cash flow hedge of forward sales of aluminum |
|
September 2027 |
|
LME price and MWh per year |
|
Increase in LME price results in a higher cost of power and an increase to the derivative liability |
|
Embedded derivative that indexes the price of power to the credit spread between the Company and the counterparty |
|
Not designated |
|
October 2028 |
|
Estimated credit spread |
|
Wider credit spread results in a higher cost of power and increase in the derivative liability |
|
|
|
|
|
|
|
|
|
|
|
Financial contract |
|
|
|
|
|
|
|
|
|
Hedge power prices |
|
Not designated |
|
June 2026 |
|
LME price and power price |
|
Lower prices in the power market or higher LME prices result in an increase in the derivative liability |
|
| 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):
|
|
|
December 31, 2021 |
|
|
Unobservable Input |
|
Unobservable Input Range |
|
Asset Derivatives |
|
|
|
|
|
|
|
|
|
|
|
Financial contracts |
|
$ |
2 |
|
|
Interrelationship of |
|
Electricity (per MWh) |
|
2022: $41.30 |
|
(undesignated) |
|
|
|
|
|
forward energy price, LME |
|
|
|
2022: $47.44 |
|
|
|
|
|
|
|
forward price and the |
|
LME (per mt) |
|
2022: $2,803 |
|
|
|
|
|
|
|
Consumer Price Index |
|
|
|
2022: $2,803 |
|
Power contract |
|
|
— |
|
|
MWh of energy needed
to produce the forecasted |
|
LME |
|
2022: $2,803
2022: $2,808 |
|
|
|
|
|
|
|
mt of aluminum |
|
Midwest premium |
|
2022: $0.3015
2022: $0.2915 |
|
|
|
|
|
|
|
|
|
Electricity |
|
Rate of 2 million MWh per year |
|
Total Asset Derivatives |
|
$ |
2 |
|
|
|
|
|
|
|
|
Liability Derivatives |
|
|
|
|
|
|
|
|
|
|
|
Power contract |
|
$ |
284 |
|
|
MWh of energy needed |
|
LME (per mt) |
|
2022: $2,803 |
|
|
|
|
|
|
|
to produce the forecasted |
|
|
|
2027: $2,287 |
|
|
|
|
|
|
|
mt of aluminum |
|
Electricity |
|
Rate of 4 million MWh per year |
|
Power contracts |
|
|
1,006 |
|
|
MWh of energy needed
to produce the forecasted
mt of aluminum |
|
LME (per mt) |
|
2022: $2,803
2029: $2,364
2036: $2,660 |
|
|
|
|
|
|
|
|
|
Midwest premium
(per pound) |
|
2022: $0.3015
2029: $0.2715
2036: $0.2715 |
|
|
|
|
|
|
|
|
|
Electricity |
|
Rate of 18 million MWh per year |
|
Power contract (undesignated) |
|
3 |
|
|
Estimated spread between
the 30-year debt yield of
Alcoa and the counterparty |
|
Credit spread |
|
1.30%: 30-year debt yield spread
4.10%: Alcoa (estimated)
2.80%: counterparty |
|
Total Liability Derivatives |
|
$ |
1,293 |
|
|
|
|
|
|
|
|
| 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 |
|
December 31,
2021 |
|
|
December 31,
2020 |
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
Current—financial contract |
|
$ |
2 |
|
|
$ |
— |
|
|
Total derivatives not designated as hedging instruments |
|
$ |
2 |
|
|
$ |
— |
|
|
Total Asset Derivatives |
|
$ |
2 |
|
|
$ |
— |
|
|
Liability Derivatives |
|
|
|
|
|
|
|
|
|
Derivatives designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
Current—power contracts |
|
$ |
262 |
|
|
$ |
94 |
|
|
Current—financial contract |
|
|
— |
|
|
|
1 |
|
|
Noncurrent—power contracts |
|
|
1,028 |
|
|
|
720 |
|
|
Total derivatives designated as hedging instruments |
|
$ |
1,290 |
|
|
$ |
815 |
|
|
Derivatives not designated as hedging instruments: |
|
|
|
|
|
|
|
|
|
Current—embedded credit derivative |
|
$ |
1 |
|
|
$ |
4 |
|
|
Noncurrent—embedded credit derivative |
|
|
2 |
|
|
|
19 |
|
|
Total derivatives not designated as hedging instruments |
|
$ |
3 |
|
|
$ |
23 |
|
|
Total Liability Derivatives |
|
$ |
1,293 |
|
|
$ |
838 |
|
|
| Schedule of Net Fair Values of Level 3 Derivative Instruments and Effect of Hypothetical Change (Increase or Decrease of 10%) in Market Prices or Rates |
The following table shows the net fair values of the Level 3 derivative instruments at December 31, 2021 and the effect on these amounts of a hypothetical change (increase or decrease of 10%) in the market prices or rates that existed as of December 31, 2021:
|
|
|
Fair value
asset (liability) |
|
|
Index change
of + / -10% |
|
|
Power contracts |
|
$ |
(1,290 |
) |
|
$ |
357 |
|
|
Embedded credit derivative |
|
|
(3 |
) |
|
|
1 |
|
|
Financial contract |
|
|
2 |
|
|
|
7 |
|
|
| Schedule of Reconciliation of Activity for Derivative Contracts |
The following tables present a reconciliation of activity for Level 3 derivative instruments:
|
|
|
Assets |
|
|
Liabilities |
|
|
2021 |
|
Financial
contract |
|
|
Power contracts |
|
|
Financial
contract |
|
|
Embedded
credit
derivative |
|
|
January 1, 2021 |
|
$ |
— |
|
|
$ |
814 |
|
|
$ |
1 |
|
|
$ |
23 |
|
|
Total gains or losses included in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (realized) |
|
|
— |
|
|
|
(277 |
) |
|
|
— |
|
|
|
— |
|
|
Cost of goods sold (realized) |
|
|
(6 |
) |
|
|
— |
|
|
|
(8 |
) |
|
|
— |
|
|
Other expenses, net (unrealized/realized) |
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
(20 |
) |
|
Other comprehensive (loss) income (unrealized) |
|
|
— |
|
|
|
753 |
|
|
|
6 |
|
|
|
— |
|
|
Other |
|
|
1 |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
December 31, 2021 |
|
$ |
2 |
|
|
$ |
1,290 |
|
|
$ |
— |
|
|
$ |
3 |
|
|
Change in unrealized gains or losses included in earnings for
derivative instruments held at December 31, 2021: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses, net |
|
$ |
5 |
|
|
$ |
— |
|
|
$ |
(1 |
) |
|
$ |
(19 |
) |
|
|
|
Assets |
|
|
Liabilities |
|
|
2020 |
|
Financial
contract |
|
|
Power contracts |
|
|
Financial
contract |
|
|
Embedded
credit
derivative |
|
|
January 1, 2020 |
|
$ |
74 |
|
|
$ |
598 |
|
|
$ |
— |
|
|
$ |
17 |
|
|
Total gains or losses included in: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales (realized) |
|
|
— |
|
|
|
(74 |
) |
|
|
— |
|
|
|
— |
|
|
Cost of goods sold (realized) |
|
|
14 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Other expenses, net (unrealized/realized) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
|
Other comprehensive (loss) income (unrealized) |
|
|
(83 |
) |
|
|
290 |
|
|
|
1 |
|
|
|
— |
|
|
Other |
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
December 31, 2020 |
|
$ |
— |
|
|
$ |
814 |
|
|
$ |
1 |
|
|
$ |
23 |
|
|
Change in unrealized gains or losses included in earnings for
derivative instruments held at December 31, 2020: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
11 |
|
|
| 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:
|
|
|
2021 |
|
|
2020 |
|
|
December 31, |
|
Carrying
value |
|
|
Fair
value |
|
|
Carrying
value |
|
|
Fair
value |
|
|
Cash and cash equivalents |
|
$ |
1,814 |
|
|
$ |
1,814 |
|
|
$ |
1,607 |
|
|
$ |
1,607 |
|
|
Restricted cash |
|
|
110 |
|
|
|
110 |
|
|
|
3 |
|
|
|
3 |
|
|
Short-term borrowings |
|
|
75 |
|
|
|
75 |
|
|
|
77 |
|
|
|
77 |
|
|
Long-term debt due within one year |
|
|
1 |
|
|
|
1 |
|
|
|
2 |
|
|
|
2 |
|
|
Long-term debt, less amount due within one year |
|
|
1,726 |
|
|
|
1,865 |
|
|
|
2,463 |
|
|
|
2,692 |
|
|