Alcoa 2011 Annual Report Download - page 30

pipeline transportation are procured to provide increased flexibility and reliability. Contract pricing for gas is typically
based on a published industry index or New York Mercantile Exchange (NYMEX) price. The company may choose to
reduce its exposure to NYMEX pricing by hedging a portion of required natural gas consumption.
Australia – Natural Gas
Alcoa of Australia (AofA) holds a 20% equity interest in a consortium that bought the Dampier-to-Bunbury natural gas
pipeline in October 2004. This pipeline transports gas from the northwest gas fields to Alcoa’s alumina refineries and
other users in the Southwest of Western Australia. AofA uses gas to co-generate steam and electricity for its alumina
refining processes at the Kwinana, Pinjarra and Wagerup refineries. Approximately 85% of AofA’s gas supplies are
under long-term contract out to 2020. AofA is progressing multiple supply options to replace expiring contracts,
including investing directly in projects that have the potential to deliver cost-based gas.
Patents, Trade Secrets and Trademarks
The company believes that its domestic and international patent, trade secret and trademark assets provide it with a
significant competitive advantage. The company’s rights under its patents, as well as the products made and sold under
them, are important to the company as a whole and, to varying degrees, important to each business segment. The
patents owned by Alcoa generally concern particular products or manufacturing equipment or techniques. Alcoa’s
business as a whole is not, however, materially dependent on any single patent, trade secret or trademark.
The company has a number of trade secrets, mostly regarding manufacturing processes and material compositions that
give many of its businesses important advantages in their markets. The company continues to strive to improve those
processes and generate new material compositions that provide additional benefits.
The company also has a number of domestic and international registered trademarks that have significant recognition
within the markets that are served. Examples include the name “Alcoa” and the Alcoa symbol for aluminum products,
Howmet metal castings, Huck®fasteners, Kawneer®building panels and Dura-Bright®wheels with easy-clean surface
treatments. The company’s rights under its trademarks are important to the company as a whole and, to varying
degrees, important to each business segment.
Competitive Conditions
Alcoa is subject to highly competitive conditions in all aspects of its aluminum and non-aluminum businesses.
Competitors include a variety of both U.S. and non-U.S. companies in all major markets. Price, quality, and service are
the principal competitive factors in Alcoa’s markets. Where aluminum products compete with other materials – such as
steel and plastics for automotive and building applications; magnesium, titanium, composites, and plastics for
aerospace and defense applications – aluminum’s diverse characteristics, particularly its light weight, recyclability, and
flexibility are also significant factors. For Alcoa’s segments that market products under Alcoa’s brand names, brand
recognition, and brand loyalty also play a role. In addition Alcoa’s competitive position depends, in part, on the
company’s access to an economical power supply to sustain its operations in various countries.
Research and Development
Alcoa, a technology leader in the aluminum industry, engages in research and development programs that include
process and product development, and basic and applied research. Expenditures for research and development (R&D)
activities were $184 million in 2011, $174 million in 2010, and $169 million in 2009.
Most of the major process areas within the company have a Technology Management Review Board (TMRB) or
Center of Excellence (CoE) consisting of members from various worldwide locations. Each TMRB or CoE is
responsible for formulating and communicating a technology strategy for the corresponding process area, developing
and managing the technology portfolio and ensuring the global transfer of technology. Alternatively, certain business
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