Derivatives And Other Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2011

Derivatives And Other Financial Instruments

Fair Value Of Outstanding Derivative Contracts Recorded As Assets

Asset Derivatives	September 30, 2011		December 31, 2010
Derivatives designated as hedging instruments:
Prepaid expenses and other current assets:
Aluminum contracts	$	9	$	48
Foreign exchange contracts		1		2
Interest rate contracts		8		19
Other noncurrent assets:
Aluminum contracts		9		22
Energy contracts		40		9
Interest rate contracts		41		62
Total derivatives designated as hedging instruments	$	108	$	162
Derivatives not designated as hedging instruments*:
Prepaid expenses and other current assets:
Aluminum contracts	$	1	$	3
Other noncurrent assets:
Aluminum contracts		5		—
Foreign exchange contracts		—		1
Total derivatives not designated as hedging instruments	$	6	$	4
Less margin held:
Prepaid expenses and other current assets:
Aluminum contracts	$	—	$	4
Interest rate contracts		5		13
Other noncurrent assets:
Interest rate contracts		15		2
Sub-total	$	20	$	19
Total Asset Derivatives	$	94	$	147

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

Fair Value Of Outstanding Derivative Contracts Recorded As Liabilities

Liability Derivatives	September 30, 2011		December 31, 2010
Derivatives designated as hedging instruments:
Other current liabilities:
Aluminum contracts	$	90	$	89
Other noncurrent liabilities and deferred credits:
Aluminum contracts		554		647
Total derivatives designated as hedging instruments	$	644	$	736
Derivatives not designated as hedging instruments*:
Other current liabilities:
Aluminum contracts	$	43	$	52
Energy contracts		—		62
Other noncurrent liabilities and deferred credits:
Aluminum contracts		24		33
Embedded credit derivative		33		23
Foreign currency contracts		1		—
Total derivatives not designated as hedging instruments	$	101	$	170
Less margin posted:
Other current liabilities:
Aluminum contracts	$	8	$	4
Energy contracts		—		37
Sub-total	$	8	$	41
Total Liability Derivatives	$	737	$	865

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

Derivative Contract Assets And Liabilities That Are Measured And Recognized At Fair Value On A Recurring Basis

	September 30, 2011			December 31, 2010
Assets:
Level 1	$	18		$	76
Level 2		50			81
Level 3		46			9
Margin held*		(20	)		(19	)
Total	$	94		$	147
Liabilities:
Level 1	$	68		$	35
Level 2		57			83
Level 3		620			788
Margin posted*		(8	)		(41	)
Total	$	737		$	865

* Margin held represents cash collateral received related to interest rate contracts included in Level 2 and margin posted represents cash collateral paid related to aluminum contracts included in Level 1. At December 31, 2010, margin held also represents cash collateral received related to aluminum contracts included in Level 1 and margin posted also represents cash collateral paid related to energy contracts included in Level 3. Alcoa elected to net the margin held and posted against the fair value amounts recognized for derivative instruments executed with the same counterparties under master netting arrangements.

Reconciliation Of Activity For Derivative Contracts On A Net Basis

	Third quarter ended September 30, 2011			Nine months ended September 30, 2011
Balance at beginning of period	$	796		$	779
Total gains or losses (realized and unrealized) included in:
Sales – (decrease)		(14	)		(51	)
Cost of goods sold – (increase)		(4	)		(15	)
Other expenses (income), net – (increase)		(3	)		(37	)
Other comprehensive loss – (increase)		(196	)		(97	)
Purchases, sales, issuances, and settlements*		(5	)		(5	)
Transfers into and (or) out of Level 3*		—			—
Balance at end of period	$	574		$	574
Total gains or losses included in earnings attributable to the change in unrealized gains or losses relating to derivative contracts still held at September 30, 2011:
Sales	$	—		$	—
Cost of goods sold		—			—
Other expenses (income), net – (increase)		(13	)		(10	)

* During the 2011 third quarter, there was an issuance of a Level 3 financial instrument related to a natural gas supply contract (see below). There were no purchases, sales, or settlements of Level 3 financial instruments. Additionally, there were no transfers of financial instruments into or out of Level 3.

Gain Or Loss On Hedged Items

Derivatives in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		Third quarter  ended September 30,						Nine months  ended September 30,
		2011			2010			2011			2010
Aluminum contracts	Sales	$	(100	)	$	101		$	(78	)	$	7
Interest rate contracts	Interest expense		5			43			58			79
Total		$	(95	)	$	144		$	(20	)	$	86
Hedged Items in Fair Value Hedging Relationships	Location of Gain or (Loss) Recognized in Earnings on Hedged Items	Amount of Gain or (Loss) Recognized in Earnings on Hedged Items
		Third quarter  ended September 30,						Nine months ended September 30,
		2011			2010			2011			2010
Aluminum contracts	Sales	$	102		$	(94	)	$	76		$	(8	)
Interest rate contracts	Interest expense		(5	)		(15	)		(25	)		(51	)
Total		$	97		$	(109	)	$	51		$	(59	)

Gains And Losses On Derivatives

	Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion)												Location of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)	Amount of Gain or (Loss) Reclassified from Accumulated OCI into Earnings (Effective Portion)*												Location of Gain or (Loss) Recognized in Earnings on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain or (Loss) Recognized in Earnings on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)**
	Third quarter ended September 30,						Nine months ended September 30,							Third quarter ended September 30,						Nine months ended September 30,							Third quarter ended September 30,					Nine months ended September 30,
	2011			2010			2011			2010				2011			2010			2011			2010				2011		2010			2011		2010
Aluminum contracts	$	145		$	(247	)	$	53		$	(13	)	Sales	$	(30	)	$	(19	)	$	(106	)	$	(83	)	Other expenses (income), net	$	4	$	(2	)	$	4	$	1
Energy contracts		6			1			14			(12	)	Cost of goods sold		(2	)		(7	)		(8	)		(18	)	Other expenses (income), net		—		—			—		—
Energy contracts		—			(6	)		—			(7	)	Other expenses (income), net		—			—			—			—		Other expenses (income), net		—		—			—		—
Foreign exchange contracts		2			4			4			(3	)	Sales		2			(2	)		4			(6	)	Other expenses (income), net		—		—			—		—
Interest rate contracts		(2	)		—			(2	)		—		Interest expense		(2	)		—			(2	)		—		Other expenses (income), net		—		—			—		—
Interest rate contracts		(2	)		—			(4	)		—		Other expenses (income), net		—			—			(2	)		—		Other expenses (income), net		—		—			—		—
Total	$	149		$	(248	)	$	65		$	(35	)		$	(32	)	$	(28	)	$	(114	)	$	(107	)		$	4	$	(2	)	$	4	$	1

* Assuming market rates remain constant with the rates at September 30, 2011, a loss of $22 is expected to be recognized in earnings over the next 12 months.

** For both the third quarter and nine months ended September 30, 2011, the amount of gain or (loss) recognized in earnings represents $(1) related to the ineffective portion of the hedging relationships. There was also $5 recognized in earnings related to the amount excluded from the assessment of hedge effectiveness for both the third quarter and nine months ended September 30, 2011. For the third quarter and nine months ended September 30, 2010, the amount of gain or (loss) recognized in earnings related to the ineffective portion of the hedging relationships.

Outstanding Forward Contracts That Were Entered Into Hedge Forcasted Transactions

	September 30, 2011		December 31, 2010
Aluminum contracts (kmt)		1,237		1,285
Energy contracts (electricity - megawatt hours)		100,578,295		100,578,295
Foreign exchange contracts	$	5	$	20

Fair Value Gains And Losses On Derivatives Contracts

Derivatives Not Designated as Hedging Instruments	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Amount of Gain or (Loss) Recognized in Earnings on Derivatives
		Third quarter  ended September 30,						Nine months  ended September 30,
		2011			2010			2011			2010
Aluminum contracts	Sales	$	(10	)	$	7		$	(9	)	$	3
Aluminum contracts	Other expenses (income), net		18			(33	)		7			(18	)
Embedded credit derivative	Other expenses (income), net		(13	)		1			(10	)		(8	)
Energy contract	Other expenses (income), net		16			(12	)		47			(31	)
Foreign exchange contracts	Other expenses (income), net		(7	)		2			(3	)		1
Total		$	4		$	(35	)	$	32		$	(53	)

Carrying Value And Fair Values Of Other Financial Instruments

	September 30, 2011				December 31, 2010
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,332	$	1,332	$	1,543	$	1,543
Restricted cash		1		1		1		1
Noncurrent receivables		23		23		23		23
Available-for-sale securities		93		93		93		93
Short-term borrowings		57		57		92		92
Commercial paper		107		107		—		—
Long-term debt due within one year		489		489		231		231
Long-term debt, less amount due within one year		8,658		9,138		8,842		9,882