Alcoa 2015 Annual Report Download - page 92

purchased scrap metal from third-parties) that were either divested or permanently closed in December 2014 (see
Global Rolled Products below). Intersegment sales for this segment improved 12% in 2014 compared with 2013,
principally due to an increase in average realized price, driven by higher regional premiums, and higher demand from
the midstream and downstream businesses.
ATOI for the Primary Metals segment decreased $439 in 2015 compared with 2014, primarily caused by both the
previously mentioned lower average realized aluminum price and lower energy sales, higher energy costs (mostly in
Spain as the 2014 interruptibility rights were more favorable than the 2015 structure), and an unfavorable impact
related to the curtailment of the São Luís smelter. These negative impacts were somewhat offset by net favorable
foreign currency movements due to a stronger U.S. dollar against most major currencies, net productivity
improvements, the absence of a write-off of inventory related to the permanent closure of the Portovesme, Point Henry,
and Massena East smelters ($44), and a lower equity loss related to the joint venture in Saudi Arabia, including the
absence of restart costs for one of the potlines that was previously shut down due to a period of instability.
ATOI for this segment climbed $614 in 2014 compared with 2013, principally related to a higher average realized
aluminum price; the previously mentioned energy sales in Brazil; net productivity improvements; net favorable foreign
currency movements due to a stronger U.S. dollar against all major currencies; lower costs for carbon and alumina; and
the absence of costs related to a planned maintenance outage in 2013 at a power plant in Australia. These positive
impacts were slightly offset by an unfavorable impact associated with the 2013 and 2014 capacity reductions described
above, including a write-off of inventory related to the permanent closure of the Portovesme, Point Henry, and
Massena East smelters ($44), and higher energy costs (particularly in Spain), labor, and maintenance.
In 2016, aluminum production will be approximately 450 kmt lower and third-party sales will reflect the absence of
approximately $400 both as a result of the 2015 curtailment and closure actions. Also, energy sales in Brazil will be
negatively impacted by a decline in energy prices, while net productivity improvements are anticipated.
Global Rolled Products
2015 2014 2013
Third-party aluminum shipments (kmt) 1,775 1,964 1,905
Alcoa’s average realized price per metric ton of aluminum* $3,514 $3,743 $3,730
Third-party sales $6,238 $7,351 $7,106
Intersegment sales 125 185 178
Total sales $6,363 $7,536 $7,284
ATOI $ 244 $ 245 $ 292
* Generally, average realized price per metric ton of aluminum includes two elements: a) the price of metal (the underlying base
metal component plus a regional premium – see the footnote to the table in Primary Metals above for a description of these two
components), and b) the conversion price, which represents the incremental price over the metal price component that is
associated with converting primary aluminum into sheet and plate. In this circumstance, the metal price component is a pass-
through to this segment’s customers with limited exception (e.g., fixed-priced contracts, certain regional premiums).
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. In this circumstance, the sales and costs and
expenses of this segment are transacted in the local currency of the respective operations, which are mostly the U.S.
dollar, the euro, the Russian ruble, the Brazilian real, and the British pound.
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