Alcoa 2015 Annual Report Download - page 162

Primary Metals. This segment represents a portion of Alcoa’s upstream operations and consists of the Company’s
worldwide smelting system. Primary Metals purchases alumina, mostly from the Alumina segment (see Alumina
above), from which primary aluminum is produced and then sold directly to external customers and traders, as well as
to Alcoa’s midstream operations and, to a lesser extent, downstream operations. Results from the sale of aluminum
powder, scrap, and excess energy are also included in this segment, as well as the results of aluminum derivative
contracts and buy/resell activity. Primary aluminum produced by Alcoa and used internally is transferred to other
segments at prevailing market prices. The sale of primary aluminum represents approximately 90% of this segment’s
third-party sales. Buy/resell activity occurs when this segment purchases metal and resells such metal to external
customers or the midstream and downstream operations in order to maximize smelting system efficiency and to meet
customer requirements.
Global Rolled Products. This segment represents Alcoa’s midstream operations and produces aluminum sheet and
plate for a variety of end markets. Approximately one-half of the third-party shipments in this segment consist of sheet
sold directly to customers in the packaging end market for the production of aluminum cans (beverage, food, and pet
food). Seasonal increases in can sheet sales are generally experienced in the second and third quarters of the year. This
segment also includes sheet and plate sold directly to customers and through distributors related to the aerospace,
automotive, commercial transportation, building and construction, and industrial products (mainly used in the
production of machinery and equipment and consumer durables) end markets. A small portion of this segment also
produces aseptic foil for the packaging end market. While the customer base for flat-rolled products is large, a
significant amount of sales of sheet and plate is to a relatively small number of customers.
Engineered Products and Solutions. This segment represents a portion of Alcoa’s downstream operations and
produces products that are used mostly in the aerospace (commercial and defense), commercial transportation, and
power generation end markets. Such products include fastening systems (titanium, steel, and nickel alloys) and
seamless rolled rings (mostly nickel alloys); and investment castings (nickel super alloys, titanium, and aluminum),
including airfoils and forged jet engine components (e.g., jet engine disks), all of which are sold directly to customers
and through distributors. More than 70% of the third-party sales in this segment are from the aerospace end market. A
small part of this segment also produces various forging and extrusion metal products for the oil and gas, industrial
products, automotive, and land and sea defense end markets. Seasonal decreases in sales are generally experienced in
the third quarter of the year due to the European summer slowdown across all end markets.
Transportation and Construction Solutions. This segment represents a portion of Alcoa’s downstream operations
and produces products that are used mostly in the nonresidential building and construction and commercial
transportation end markets. Such products include integrated aluminum structural systems, architectural extrusions, and
forged aluminum commercial vehicle wheels, which are sold directly to customers and through distributors. A small
part of this segment also produces aluminum products for the industrial products end market.
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