Alcoa 2012 Annual Report Download - page 73

improved by 189 kmt, mainly the result of the previously mentioned restarted capacity at Massena East, Ferndale, and
Wenatchee, as well as higher production at the Avilés smelter, where production had been previously halted due to
torrential flooding in 2010.
Third-party sales for the Primary Metals segment dropped 10% in 2012 compared with 2011, mainly due to a 12%
decline in average realized prices, driven by 16% lower average LME prices, slightly offset by higher buy/resell
activity. The U.S. capacity restarted in 2011 contributed positively to third-party sales in 2012, but was completely
offset by the curtailments of European capacity in 2012. Third-party sales for this segment improved 17% in 2011
compared with 2010, primarily due to a 12% rise in average realized prices, driven by 10% higher average LME prices,
higher volumes, largely attributable to the previously mentioned restarted U.S. capacity, and increased revenue from
the sale of excess power.
Intersegment sales for the Primary Metals segment decreased 10% in 2012 compared with 2011, principally due to a
decline in realized prices, driven by a lower LME. Intersegment sales for this segment rose 23% in 2011 compared
with 2010, mainly the result of an improvement in realized prices, driven by the higher LME, and an increase in buy/
resell activity.
ATOI for the Primary Metals segment dropped $172 in 2012 compared with 2011, principally related to the previously
mentioned decrease in realized prices; higher costs, particularly labor and other raw materials; and an unfavorable
impact as a result of business interruption and repair costs related to a fire in March 2012 at the Massena West, NY
cast house ($21); partially offset by a gain on the sale of Tapoco (see above); lower costs for alumina and energy; net
favorable foreign currency movements due to a stronger U.S. dollar, particularly against the euro and Brazilian real;
and net productivity improvements.
ATOI for this segment declined $7 in 2011 compared with 2010, primarily caused by significantly higher input costs,
including carbon, alumina, and energy, and net unfavorable foreign currency movements due to a weaker U.S. dollar,
virtually offset by improved realized prices, net productivity improvements, and higher excess power sales.
In 2013, pricing is anticipated to follow a 15-day lag on the LME and net productivity improvements are expected to
continue. Also, Alcoa’s share of start-up costs for the smelter in Saudi Arabia will negatively impact results.
Additionally, planned maintenance for power plants during the first half of the year and higher energy costs are
expected. Furthermore, in January 2013, Alcoa applied for and was granted rights to sell power interruption services
from its San Ciprian, Avilés, and La Coruña smelters in Spain for a one-year period. As a result, Alcoa has commenced
the restart of a portion (25 kmt combined for Avilés and La Coruña) of the capacity previously curtailed in the first half
of 2012 in order to meet the requirements of the interruption services (see the Earnings Summary section above for
additional information).
Global Rolled Products
2012 2011 2010
Third-party aluminum shipments (kmt) 1,867 1,780 1,658
Third-party sales $7,378 $7,642 $6,277
Intersegment sales 163 218 180
Total sales $7,541 $7,860 $6,457
ATOI $ 358 $ 266 $ 220
This segment represents Alcoa’s midstream operations, whose principal business is the production and sale of
aluminum plate and sheet. A small portion of this segment’s operations relate to foil produced at one plant in Brazil.
This segment includes rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer
market and is used to produce aluminum beverage cans. Seasonal increases in RCS sales are generally experienced in
the second and third quarters of the year. This segment also includes sheet and plate used in the aerospace, automotive,
commercial transportation, and building and construction markets (mainly used in the production of machinery and
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