Derivatives and Other Financial Instruments (Tables)

6 Months Ended

Jun. 30, 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 June 30, 2015*		Unobservable input	Range ($ in full amounts)
Assets:
Embedded aluminum derivatives	$	557	Price of aluminum beyond forward curve	Aluminum: $2,660 per metric ton in 2025 to $2,460 per metric ton in 2029 (two contracts) and $2,756 per metric ton in 2036 (one contract) Midwest premium: $0.0920 per pound in 2020 to $0.0920 per pound in 2029 (two contracts) and 2036 (one contract)
Embedded aluminum derivative		119	Interrelationship of future aluminum prices, foreign currency exchange rates, and the U.S. consumer price index (CPI)	Aluminum: $1,668 per metric ton in 2015 to $1,761 per metric ton in 2016 Foreign currency: A$1 = $0.77 in 2015 to $0.77 in 2016 CPI: 1982 base year of 100 and 234 in 2015 to 241 in 2016
Embedded aluminum derivative		—	Interrelationship of future aluminum and oil prices	Aluminum: $1,668 per metric ton in 2015 to $1,910 per metric ton in 2018 Oil: $62 per barrel in 2015 to $72 per barrel in 2018
Liabilities:
Embedded aluminum derivative		294	Price of aluminum beyond forward curve	Aluminum: $2,260 per metric ton in 2025 to $2,353 per metric ton in 2027
Embedded aluminum derivative		—	Interrelationship of LME price to overall energy price	Aluminum: $1,802 per metric ton in 2015 to $1,935 per metric ton in 2019
Embedded credit derivative		19	Credit spread between Alcoa and counterparty	1.65% to 1.95% (1.80% median)
Energy contract		9	Price of electricity beyond forward curve	Electricity: $43 per megawatt hour in 2018 to $130 per megawatt hour in 2036

* The fair value of embedded aluminum derivatives reflected as assets and liabilities in this table are both lower by $4 compared to the respective amounts reflected in the Level 3 table presented below. This is due to the fact that Alcoa has one derivative that is in an asset position for the current portion but is in a liability position for the noncurrent portion, and is reflected as such on the accompanying Consolidated Balance Sheet. However, this derivative is reflected as a net liability in the above table for purposes of presenting the assumptions utilized to measure the fair value of the derivative instrument 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:

	June 30, 2015		December 31, 2014
Asset Derivatives
Derivatives designated as hedging instruments:
Prepaid expenses and other current assets:
Embedded aluminum derivatives	$	49	$	24
Other noncurrent assets:
Embedded aluminum derivative		512		73
Energy contract		—		2
Total derivatives designated as hedging instruments	$	561	$	99
Derivatives not designated as hedging instruments*:
Prepaid expenses and other current assets:
Embedded aluminum derivatives	$	95	$	98
Other noncurrent assets:
Embedded aluminum derivatives		24		71
Total derivatives not designated as hedging instruments	$	119	$	169
Total Asset Derivatives	$	680	$	268
Liability Derivatives
Derivatives designated as hedging instruments:
Other current liabilities:
Embedded aluminum derivative	$	17	$	24
Other noncurrent liabilities and deferred credits:
Embedded aluminum derivatives		281		352
Energy contract		9		—
Total derivatives designated as hedging instruments	$	307	$	376
Derivatives not designated as hedging instruments*:
Other current liabilities:
Embedded credit derivative	$	3	$	2
Other noncurrent liabilities and deferred credits:
Embedded credit derivative		16		16
Total derivatives not designated as hedging instruments	$	19	$	18
Total Liability Derivatives	$	326	$	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 tables present a reconciliation of activity for Level 3 derivative contracts:

	Assets						Liabilities
Second quarter ended June 30, 2015	Embedded aluminum derivatives			Energy contract			Embedded aluminum derivatives			Embedded credit derivative		Energy contract
Opening balance – April 1, 2015	$	201		$	8		$	425		$	16	$	—
Total gains or losses (realized and unrealized) included in:
Sales		7			—			(5	)		—		—
Cost of goods sold		(24	)		—			—			—		—
Other income, net		(2	)		—			—			3		—
Other comprehensive income		494			(8	)		(122	)		—		9
Purchases, sales, issuances, and settlements*		—			—			—			—		—
Transfers into and/or out of Level 3*		—			—			—			—		—
Foreign currency translation		4			—			—			—		—
Closing balance – June 30, 2015	$	680		$	—		$	298		$	19	$	9
Change in unrealized gains or losses included in earnings for derivative contracts held at June 30, 2015:
Sales	$	—		$	—		$	—		$	—	$	—
Cost of goods sold		—			—			—			—		—
Other income, net		(2	)		—			—			3		—

* 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.

	Assets						Liabilities
Six months ended June 30, 2015	Embedded aluminum derivatives			Energy contract			Embedded aluminum derivatives			Embedded credit derivative		Energy contract
Opening balance – January 1, 2015	$	266		$	2		$	376		$	18	$	—
Total gains or losses (realized and unrealized) included in:
Sales		13			—			(11	)		—		—
Cost of goods sold		(45	)		—			—			—		—
Other income, net		(1	)		—			—			1		—
Other comprehensive loss		451			(2	)		(67	)		—		9
Purchases, sales, issuances, and settlements*		—			—			—			—		—
Transfers into and/or out of Level 3*		—			—			—			—		—
Foreign currency translation		(4	)		—			—			—		—
Closing balance – June 30, 2015	$	680		$	—		$	298		$	19	$	9
Change in unrealized gains or losses included in earnings for derivative contracts held at June 30, 2015:
Sales	$	—		$	—		$	—		$	—	$	—
Cost of goods sold		—			—			—			—		—
Other income, net		(1	)		—			—			1		—

* 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:

	June 30, 2015				December 31, 2014
	Carrying value		Fair value		Carrying value		Fair value
Cash and cash equivalents	$	1,311	$	1,311	$	1,877	$	1,877
Restricted cash		29		29		20		20
Noncurrent receivables		17		17		17		17
Available-for-sale securities		157		157		153		153
Short-term borrowings		50		50		54		54
Commercial paper		—		—		—		—
Long-term debt due within one year		26		26		29		29
Long-term debt, less amount due within one year		8,713		9,215		8,769		9,445