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OFFON

ALCOA CORPORATION

(AA)
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ALCOA : Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

07/29/2021 | 04:35pm EDT

(dollars in millions, except per-share amounts, average realized prices, and average cost amounts; dry metric tons in millions (mdmt); metric tons in thousands (kmt))


Business Update

Coronavirus

In response to the ongoing coronavirus (COVID-19) pandemic, Alcoa implemented
comprehensive measures to protect the health of the Company's workforce, prevent
infection in our locations, mitigate impacts, and safeguard business continuity.
As a result of these measures and the aluminum industry being classified as an
essential business, all of Alcoa's bauxite mines, alumina refineries, and
aluminum manufacturing facilities continue to remain in operation. The Company
continues, through its operations leadership team and global crisis response
team, to ensure that each location's preparedness and response plans are up to
date.

The Company has not experienced any significant interruption from its supply
sources, and the Company's locations have had minimal contractor- and
employee-related disruptions to date. The magnitude and duration of the COVID-19
pandemic continues to be unknown. The pandemic could have adverse future impacts
on the Company's business, financial condition, operating results, and cash
flows. Further adverse conditions or prolonged deterioration of conditions could
negatively impact our financial condition and result in asset impairment
charges, including long-lived assets or goodwill, or affect the realizability of
deferred tax assets.

As a result of the pandemic's impact on the macroeconomic environment,
management evaluated the future recoverability of the Company's assets,
including goodwill and long-lived assets, and the realizability of deferred tax
assets while considering the Company's current market capitalization. Management
concluded that no asset impairments and no additional valuation allowances were
required through June 30, 2021.

Key Actions


In June 2021, the Company completed the sale of the previously closed Eastalco
aluminum smelter site in the state of Maryland in a transaction valued at $100.
Upon closing of the transaction, the Company received $94 in cash and recorded a
gain of $90 in Other (income) expenses, net ($90 pre- and $89 after-tax) on the
Statement of Consolidated Operations.

On November 30, 2020, the Company entered into an agreement to sell its rolling
mill located at Warrick Operations (Warrick Rolling Mill), an integrated
aluminum manufacturing site near Evansville, Indiana (Warrick Operations), to
Kaiser Aluminum Corporation (Kaiser). On March 31, 2021, the Company completed
the sale for total consideration of approximately $670, which includes the
assumption of $66 in other postretirement benefit liabilities (after
post-closing adjustment which lowered the amount by $6 in the second quarter of
2021). The Company recorded a gain of $27 in Other (income) expenses, net (pre-
and after-tax) on the Statement of Consolidated Operations upon closure in the
first quarter of 2021. During the second quarter of 2021, the Company recorded
an additional net gain of $3 in Other (income) expenses, net related to working
capital, other postretirement benefit liabilities, and site separation costs.
The consideration and gain amounts are subject to further customary post-closing
adjustments.

Alcoa retains ownership of the site's 269 kmt aluminum smelter and its
electricity generating units at Warrick Operations with a market-based metal
supply agreement with Kaiser. In the first quarter of 2021 the Company recorded
estimated liabilities of approximately $70 for future site separation
commitments and remaining transaction costs associated with the sales agreement.
Approximately half of the obligation is expected to be spent within the next 12
months, with the remainder to be spent through 2023.

In March 2021, ANHBV, a wholly-owned subsidiary of Alcoa Corporation, issued
$500 aggregate principal amount of 4.125% Senior Notes due 2029 (the 2029 Notes)
in a private transaction exempt from the registration requirements of the
Securities Act of 1933, as amended (the Securities Act). The net proceeds of
this issuance were approximately $493 reflecting a discount to the initial
purchasers of the 2029 Notes, as well as issuance costs. The Company used the
proceeds, together with cash on hand, to contribute $500 to its U.S. defined
benefit pension plans applicable to salaried and hourly employees on April 1,
2021, and to redeem in full $750 aggregate principal amount of the Company's
outstanding 6.75% Senior Notes due 2024 (the 2024 Notes) on April 7, 2021, and
to pay transaction-related fees and expenses.

On March 18, 2021, the Company signed 5-year agreements to repower the Portland
Aluminum Smelter in the State of Victoria, Australia. The agreements with three
separate providers will commence on August 1, 2021. Further, the Australian
Federal Government has committed, subject to approval, to provide up to $15
(A$19) per year for four years to underwrite the smelter's participation in the
Reliability and Emergency Reserve Trader (RERT) scheme. The arrangement will
recognize the smelter's ability to rapidly shed load when required to help
protect the power grid from unexpected interruptions when it is under duress.

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See the below sections for additional details on the above described actions.

Spain Matters


San Ciprián-In January 2021, May 2021 and July 2021, the Company reached
agreements with the workers' representatives to temporarily suspend the labor
strike at its San Ciprián alumina refinery and aluminum smelter in Spain. The
July 2021 agreement suspended the strike until August 2, 2021.

The Company had been actively engaged in an exclusive sale process with Sociedad
Estatal de Participaciones Industriales (SEPI), a Spanish government-owned
entity. To date, SEPI has not confirmed its role as potential buyer of the San
Ciprian smelter. The Company is continuing to evaluate potential solutions for
the smelter.

The refinery and smelter have continued operations and the Company remains open
to an agreement to further extend the strike suspension period. Although the
ultimate outcome is currently unknown, the reactivation of the strike may
negatively affect the Company's operating and financial results due to reduced
refinery production and metal shipments.

CO2 Compensation Credits-Separately, in June 2021, the Spanish Ministry of
Industry, Trade and Tourism (the Ministry) initiated the process to request
repayment of $41 (€34) in CO2 compensation credits related to 2018 for $14 (€11)
and 2019 for $27 (€23), which were subject to a three-year clawback provision
based on continued operations and employment. The request for repayment is
related to Alcoa's communication of the decision to implement the collective
dismissal process and its potential impact on operations and employment at San
Ciprián. Alcoa disagrees with the Ministry's position as the collective
dismissal process was not concluded and operations and employment at San Ciprián
have been maintained. Accordingly, the Company has filed an appeal.

Spain has a compensatory mechanism for the indirect cost of CO2 and provides
associated carbon credits. Such CO2 compensation credits are typically recorded
as a reduction to Costs of goods sold. Upon receipt of the credits in each of
the applicable years, the Company recorded the cash received as deferred income
(liability) due to the clawback provisions. Further, Alcoa did not receive CO2
compensation credits earned in 2020 based on the same circumstances.

Avilés and La Coruña-During 2019, the Company completed the divestiture of the
Avilés and La Coruña (Spain) aluminum facilities to PARTER Capital Group AG
(PARTER) in a sale process endorsed by the Spanish government and supported by
the workers' representatives following a collective dismissal process. In
connection with the divestiture, Alcoa committed to make financial contributions
to the buyer of up to $95; $78 has been paid to date. In 2020, PARTER sold its
majority stake in the facilities to an unrelated party. Alcoa had no knowledge
of the subsequent transaction prior to its announcement and on August 28, 2020,
Alcoa filed a lawsuit with the Court of First Instance in Madrid, Spain
asserting that the sale was in breach of the sale agreement between Alcoa and
PARTER.

Related to this divestiture, certain claims and investigations have been
initiated by or at the request of the employees of the facilities against their
current employers, the owners of the current employers, and Alcoa, alleging that
the agreements of the collective dismissal process remain in force and that
Alcoa remains liable for related social benefits to the employees. One of the
claims is a collective case before the Spanish National Court, filed on November
10, 2020, where the workers' representatives and employees are seeking for the
terms of the Collective Dismissal Agreement signed with the workers in January
2019 to be fulfilled or, alternatively, payment of severance corresponding to an
unfair dismissal.

On June 15, 2021, the Spanish National Court ruled that the collective dismissal
agreement for the divested Avilés and La Coruña aluminum facilities is still in
effect and that Alcoa is liable for related employee severance. Alcoa has not
recorded a reserve related to the matter, has started the process to file an
appeal with the Spanish Supreme Court and will continue to defend this matter
and pursue all available legal resolution methods.

While the ultimate financial impact is uncertain at this time, Alcoa had reached
agreement with the workers' representatives on behalf of the smelter employees
at the Avilés and La Coruña facilities in January 2019 on severance, early
retirement, and relocation provisions prior to the curtailment of the smelters.
The agreement included estimated payments of $60 to $70 to the approximately 480
smelter employees, a range dependent on early retirement and relocation
elections. Because the facilities were subsequently sold and employment was
maintained by the buyer, in part due to the financial contributions made by
Alcoa to PARTER, such amounts were not paid to the employees. The approximately
200 employees of the facilities' casthouses and paste plant were not considered
in this agreement as those facilities remained in operation and are not included
in the above estimate.

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Alcoa continues to believe it acted in good faith, in full compliance with the
law and with all of the terms that it committed to in the contract for the sale
of the Avilés and Coruña facilities to PARTER and in the agreements that it
entered into with the representatives of the workers of both facilities.

Results of Operations


In accordance with the recently adopted amendments to Item 303 of Regulation
S-K, Management has updated its comparison of interim periods to compare the
results of the most recent quarter against the results of the immediately
preceding sequential quarter in an effort to provide a more meaningful analysis,
as we are not a seasonal business, and to align the discussion with how
management reviews the results of the Company. The Company will continue to
present a comparison of the most recent year-to-date period and the
corresponding year-to-date period of the preceding fiscal year.

Selected Financial Data:

                                              Quarter ended                 Six months ended
                                               Sequential                     Year-to-date
                                        June 30,        March 31,       June 30,        June 30,
Statement of Operations                   2021            2021            2021            2020
Sales                                  $     2,833$     2,870$     5,703$     4,529
Cost of goods sold (exclusive of
expenses below)                              2,156           2,292           4,448           3,957
Selling, general administrative, and
other expenses                                  54              52             106             104
Research and development expenses                6               7              13              12
Provision for depreciation,
depletion, and amortization                    161             182             343             322
Restructuring and other charges, net            33               7              40              39
Interest expense                                67              42             109              62
Other (income) expenses, net                  (105 )           (24 )          (129 )           (81 )
Total costs and expenses                     2,372           2,558           4,930           4,415
Income before income taxes                     461             312             773             114
Provision for income taxes                     111              93             204             125
Net income (loss)                              350             219             569             (11 )
Less: Net income attributable to
noncontrolling interest                         41              44              85             106
Net income (loss) attributable to
Alcoa Corporation                      $       309$       175$       484$      (117 )




                                              Quarter ended                 Six months ended
                                        June 30,        March 31,       June 30,        June 30,
Selected Financial Metrics                2021            2021            2021            2020
Diluted income (loss) per share
attributable to Alcoa

Corporation common shareholders $ 1.63$ 0.93 $

   2.56     $     (0.63 )
Third-party shipments of alumina
(kmt)                                        2,437           2,472           4,909           4,780
Third-party shipments of aluminum
products (kmt)                                 767             831           1,598           1,514
Average realized price per metric
ton of alumina                         $       282$       308$       295$       274
Average realized price per metric
ton of primary aluminum                $     2,753$     2,308$     2,533$     1,835
Average Alumina Price Index (API)(1)   $       279$       301$       290$       268
Average London Metal Exchange (LME)
15-day lag(2)                          $     2,360$     2,060     $    

2,210 $ 1,612

(1) API (Alumina Price Index) is a pricing mechanism that is calculated by the

Company based on the weighted average of a prior month's daily spot prices

published by the following three indices: CRU Metallurgical Grade Alumina

      Price; Platts Metals Daily Alumina PAX Price; and Metal Bulletin
      Non-Ferrous Metals Alumina Index.

(2) LME (London Metal Exchange) is a globally recognized exchange for commodity

trading, including aluminum. The LME pricing component represents the

underlying base metal component, based on quoted prices for aluminum on the

      exchange.



                                       30
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                  Sequential Period Comparison         Year-to-date Comparison
Overview        Net income attributable to Alcoa  Net income attributable to Alcoa
                Corporation increased $134        Corporation increased $601
                primarily as a result of:         primarily as a result of:
                •Higher aluminum prices           •Higher aluminum and alumina
                •Gain on the sale of the former   prices
                Eastalco site                     •Gain on the sale of the former
                Partially offset by:              Eastalco site
                •Lower alumina prices             •Gain on the sale of the Warrick
                •Higher restructuring expense,    Rolling Mill
                primarily for a settlement charge Partially offset by:
                related to the U.S. pension plan  •Unfavorable currency movements
                •Higher production and raw        as the U.S. dollar weakened
                material costs                    against most major currencies
                •Absence of a gain on the sale of •Higher energy costs mainly in
                the Warrick Rolling Mill          our Australian refineries due to
                •Higher interest expense          a new gas contract
                primarily related to the early    •Absence of a gain related to the
                redemption of 6.75% Senior Notes  divestiture of the Gum Springs
                                                  waste treatment facility
Sales           Sales decreased $37 primarily as  Sales increased $1,174 primarily
                a result of:                      as a result of:
                •Impacts of the sale of the       •Higher realized prices for
                Warrick Rolling Mill              aluminum and alumina
                •Lower realized alumina prices    •Restart of the

Bécancour smelter

                •Lower shipments from San Ciprián •Higher shipments 

due to the end

                as inventory accumulated during   of the strike at the San Ciprián
                the November 2020 to January 2021 smelter
                strike was sold in first quarter  Partially offset by:
                Partially offset by:              •Impacts of the sale of the
                •Higher realized prices for       Warrick Rolling Mill
                aluminum                          •Curtailment of the Intalco
                                                  smelter
Cost of goods   Cost of goods sold as a           Cost of goods sold as a
sold            percentage of sales decreased     percentage of sales decreased
                3.8% primarily as a result of:    9.4% primarily as a result of:
                •Higher realized prices for       •Higher realized prices for
                aluminum                          aluminum and alumina
                Partially offset by:              Partially offset by:
                •Higher production and raw        •Higher energy costs at the
                material costs                    Australia alumina refineries due
                                                  to a new gas contract
                                                  •Unfavorable currency movements
                                                  as the U.S. dollar weakened
                                                  against most major currencies
Selling,        Selling, general administrative,  Selling, general administrative,
general         and other selling expense         and other selling expense
administrative, increased $2 primarily as a       increased $2 primarily as a
and other       result of:                        result of:
expenses        •Higher labor and variable        •Higher labor and variable
                compensation costs                compensation costs
                                                  •Net unfavorable currency
                                                  movements mainly against the
                                                  Australian dollar
                                                  Partially offset by:
                                                  •Lower travel costs due to
                                                  pandemic travel limitations
                                                  •Absence of increase of bad debt
                                                  reserve

Provision for   Depreciation decreased $21        Depreciation increased $21
depreciation,   primarily as a result of:         primarily as a result of:
depletion, and  •Lower depreciation at the        •Higher depreciation at the
amortization    Australian mines due to           Australian mines due to
                completion of mine moves in the   completion of mine moves
                prior quarter                     •Unfavorable currency movements
                                                  as the U.S. dollar weakened
                                                  against most major currencies
                                                  Partially offset by:
                                                  •Lower depreciation due to the
                                                  sale of the Warrick Rolling Mill


                                       31
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                Sequential Period Comparison         Year-to-date Comparison
Interest      Interest expense increased $25    Interest expense increased $47
expense       primarily as a result of:         primarily as a result of:
              • Higher expense related to the   •Higher expense related to the
              early redemption of 6.75% Senior  early redemption of 6.75% Senior
              Notes                             Notes
              •Additional interest on the $500  •Additional interest on the $750
              notes that were issued in March   notes that were issued in July
              2021 at a rate of 4.125%          2020 at a rate of $5.5%
              Partially offset by:              •Additional interest on the $500
              •Absence of interest on $750      notes that were issued in March
              6.75% Senior Notes which were     2021 at a rate of 4.125%
              redeemed early in April           Partially offset by:
                                                •Absence of interest on $750
                                                6.75% Senior Notes that were
                                                redeemed early in April
Other         Other (income) expenses, net      Other (income) expenses, net
(income)      increased $81 primarily as a      increased $48 primarily as a
expenses, net result of:                        result of:
              •Gain on the sale of the former   •Gain on the sale of the former
              Eastalco site                     Eastalco site
              •Higher equity earnings primarily •Gain on the sale of the Warrick
              from the Ma'aden aluminum joint   Rolling Mill
              venture due to higher aluminum    •Favorable mark-to-market results
              prices                            on embedded derivatives in energy
              Partially offset by:              contracts
              •Absence of a gain on the sale of •Higher equity earnings primarily
              the Warrick Rolling Mill          from the Ma'aden aluminum joint
              •Unfavorable currency revaluation venture due to higher aluminum
              impacts from sequential weakening prices
              of the U.S. dollar                •Lower non-service costs related
                                                to pension and OPEB
                                                •Favorable currency revaluation
                                                impacts
                                                Partially offset by:
                                                •Absence of a gain related to the
                                                divestiture of the Gum Springs
                                                waste treatment facility
Restructuring In the second quarter of 2021,    In the six-month period of 2021,
and other     the Company recorded net charges  the Company recorded net charges
charges, net  of $33 which were primarily       of $40 which were primarily
              related to $39 for the settlement related $39 for the

settlement of

              of certain pension benefits and   certain pension benefits, 

$9 in

              $3 for take or pay energy         settlements and 

curtailments of

              contracts curtailed locations,    certain other 

postretirement

              partially offset by asset         benefits related to the sale of
              retirement obligation adjustments the Warrick Rolling Mill; $9
              at closed locations of $10.       related to additional take or pay
                                                energy contract costs at the
              In the first quarter of 2021, the curtailed Intalco and Wenatchee
              Company recorded net charges of   smelters; and $22 of reversals
              $7 which were primarily related   for environmental and asset
              to $9 in settlements and          retirement obligation reserves at
              curtailments of certain other     closed locations.
              postretirement benefits related
              to the sale of the Warrick        In the six-month period of 2020,
              Rolling Mill; $6 related to take  Alcoa Corporation recorded net
              or pay contract costs at the      charges of $39 which were
              curtailed Intalco and Wenatchee   primarily related to $27 of costs
              smelters; $3 related to           related to the curtailment of the
              remediation costs at a former     Intalco smelter and $13 for take
              facility; and a $12 reversal of   or pay energy contract costs
              remaining environmental and asset related to the curtailed
              retirement obligation reserves at Wenatchee smelter.
              a previously closed Tennessee
              site due to the completion of
              demolition and the determination
              that remaining site remediation
              is no longer required.


                                       32
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                 Sequential Period Comparison         Year-to-date Comparison
Provision for  The Provision for income taxes in The Provision for income taxes in
income taxes   the second quarter of 2021 was    the six-month period of 2021 was
               $111 on income before taxes of    $204 on income before taxes of
               $461 or 24.1%. In comparison, the $773 or 26.4%. In

comparison, the

               first quarter of 2021 Provision   six-month period of 2020
               for income taxes was $93 on       Provision for income taxes was
               income before taxes of $312 or    $125 on income before taxes of
               29.8%.                            $114 or 109.6%.

               The increase in taxes is          The increase in taxes is
               attributable to the higher income primarily attributable to the
               before taxes noted above, as well overall higher income before
               as the distribution of earnings   taxes noted above.

Additionally,

               between tax jurisdictions. In the in the six-month period in 

2021,

               current quarter, the Company had  the Company had

significantly

               higher income in lower taxed      higher income in the
               jurisdictions bringing the        jurisdictions where is pays taxes
               effective tax rate down from the  and lower losses in the
               prior period.                     jurisdictions where it maintains
                                                 a full tax valuation reserve.
                                                 This change in composition of
                                                 taxable income significantly
                                                 reduced the effective tax rate
                                                 from the prior period.
Noncontrolling Net income attributable to        Net income attributable to
interest       noncontrolling interest was $41   noncontrolling interest was $85
               in the second quarter of 2021     in the six-month period of 2021
               compared with $44 in the first    compared with $106 in the
               quarter of 2021. These amounts    six-month period of 2020.
               are entirely related to Alumina
               Limited's 40% ownership interest  Net income attributed to
               in several affiliated operating   non-controlling interest
               entities.                         decreased due to higher energy
                                                 costs at the Australia alumina
               In the second quarter of 2021,    refineries due to a new gas
               these combined entities,          contract, unfavorable currency
               generated slightly lower net      impacts as the U.S. dollar
               income compared with the first    weakened mainly against the
               quarter of 2021. The slight       Australian dollar, partially
               decrease in earnings was mainly   offset by higher alumina prices.
               driven by lower alumina prices
               and higher production costs.





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Segment Information


Alcoa Corporation is a producer of bauxite, alumina, and aluminum products. The
Company's operations consist of three worldwide reportable segments: Bauxite,
Alumina, and Aluminum. Segment performance under Alcoa Corporation's management
reporting system is evaluated based on a number of factors; however, the primary
measure of performance is the Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) of each segment. The Company calculates Segment
Adjusted EBITDA as Total sales (third-party and intersegment) minus the
following items: Cost of goods sold; Selling, general administrative, and other
expenses; and Research and development expenses. Alcoa Corporation believes that
the presentation of Adjusted EBITDA is useful to investors because such measure
provides both additional information about the operating performance of Alcoa
Corporation and insight on the ability of Alcoa Corporation to meet its
financial obligations. The presentation of Adjusted EBITDA is not intended to be
a substitute for, and should not be considered in isolation from, the financial
measures reported in accordance with GAAP. Alcoa Corporation's Adjusted EBITDA
may not be comparable to similarly titled measures of other companies.

Bauxite


Business Update. During the second quarter, the segment achieved strong
production rates but continues to realize lower internal bauxite pricing.
Further, the Company successfully relocated the Willowdale mining operations in
the prior quarter and have recognized costs related to the move in the second
quarter. Additional costs to finalize the move are anticipated through the third
quarter of 2021.

Production in the below table can vary from Total shipments due primarily to
differences between the equity allocation of production and off-take agreements
with the respective equity investment. Operating costs in the table below
includes all production-related costs: conversion costs, such as labor,
materials, and utilities; depreciation, depletion, and amortization; and plant
administrative expenses.

                                              Quarter ended                   Six months ended
                                         June 30,        March 31,       June 30,         June 30,
                                           2021            2021            2021             2020
Production (mdmt)                              12.2            11.9            24.1             23.8
Third-party shipments (mdmt)                    1.1             1.5             2.6              3.0
Intersegment shipments (mdmt)                  10.8            10.5            21.3             21.3
Total shipments (mdmt)                         11.9            12.0            23.9             24.3
Third-party sales                      $         39     $        58$        97$       137
Intersegment sales                              179             185             364              480
Total sales                            $        218$       243$       461$       617
Segment Adjusted EBITDA                $         41     $        59$       100$       251
Operating costs                        $        206$       237$       443$       422
Average cost per dry metric ton of
bauxite                                $         17     $        20$        19$        17




                    Sequential Period Comparison         Year-to-date Comparison
Production        Production increased 3% primarily Production increased 1% primarily
                  as a result of:                   as a result of:
                  •Slightly higher production       •Higher production across most
                  across most of the portfolio due  Alcoa operated mines
                  to strong operational performance
                  combined with stabilization of
                  production at Willowdale
                  following the mine move
                  •One more day in the period
Third-party sales Third-party sales decreased $19   Third-party sales decreased $40
                  primarily as a result of:         primarily as a result of:
                  •Lower sales volumes partially    •Lower average realized prices
                  related to port delays in Western •Lower sales volumes partially
                  Australia                         related to port delays in Western
                  •Lower freight revenue on fewer   Australia
                  shipments                         •Lower royalties due to the
                                                    absence of a favorable true-up
                                                    that occurred in the first
                                                    quarter of 2020


                                       34
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               Sequential Period Comparison         Year-to-date Comparison
Intersegment Intersegment sales decreased $6   Intersegment sales decreased $116
sales        primarily as a result of:         primarily as a result of:
             •Lower intersegment price on      •Lower average realized prices on
             sales to the San Ciprián refinery sales with the Alumina segment
             to reflect market pricing
             Partially offset by:
             •Higher sales volumes
Segment      Segment adjusted EBITDA           Segment adjusted EBITDA
Adjusted     decreased $18 primarily as a      decreased $151 primarily as a
EBITDA       result of:                        result of:
             •Lower average realized prices    •Lower average realized prices
             •Higher production costs          •Lower royalties due to the
             Partially offset by:              absence of a favorable true up in
             •Higher earnings from equity      the first quarter of 2020
             investments                       •Unfavorable currency
impacts due
                                               to a weaker U.S. dollar mainly
                                               against the Australian dollar


Forward Look. For the third quarter of 2021 in comparison to the second quarter,
Bauxite segment results are expected to be consistent with the second quarter of
2021.



Alumina

Business Update. During the second quarter of 2021, the average API trended
unfavorably, reflecting a 7% decrease from the first quarter of 2021. During the
six-month period of 2021, the average API trended favorably, reflecting an 8%
improvement over the same period of 2020. The Alumina segment also experienced
lower internal bauxite costs which were partially offset by higher energy costs
in both periods.

At June 30, 2021, the Alumina segment had base capacity of 12,759 kmt with 214
kmt of curtailed refining capacity. There were no changes to base or curtailed
capacity during 2020 or through the first six months of 2021.

Total shipments include metric tons that were not produced by the Alumina
segment. Such alumina was purchased to satisfy certain customer commitments. The
Alumina segment bears the risk of loss of the purchased alumina until control of
the product has been transferred to this segment's customer. Additionally,
operating costs in the table below includes all production-related costs: raw
materials consumed; conversion costs, such as labor, materials, and utilities;
depreciation and amortization; and plant administrative expenses.

                                              Quarter ended                 Six months ended
                                        June 30,        March 31,       June 30,        June 30,
                                          2021            2021            2021            2020
Production (kmt)                             3,388           3,327           6,715           6,669
Third-party shipments (kmt)                  2,437           2,472           4,909           4,780
Intersegment shipments (kmt)                 1,054           1,101           2,155           2,062
Total shipments (kmt)                        3,491           3,573           7,064           6,842
Third-party sales                              688             760           1,448     $     1,310
Intersegment sales                             343             364             707             625
Total sales                            $     1,031$     1,124$     2,155$     1,935
Segment Adjusted EBITDA                $       124$       227$       351$       281
Average realized third-party price
per metric ton of alumina              $       282$       308$       295$       274
Operating costs                        $       908$       886$     1,794$     1,632
Average cost per metric ton of
alumina                                $       260$       248$       254$       238





                                       35
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               Sequential Period Comparison         Year-to-date Comparison

Production Production increased 2% primarily Production increased 1% primarily

             as a result of:                   as a result of:
             •Slightly higher production       •Slightly higher

production

             across most of the portfolio due  across most of the portfolio 

due

             to better operational performance to better operational

performance

             •One more day in the period       Partially offset by:
                                               •One less day in the 

period

Third-party Third-party sales decreased $72 Third-party sales increased $138 sales primarily as a result of: primarily as a result of:

             •Lower average realized price of  •Higher third-party 

shipments of

             $26/ton principally driven by a   129 kmt
             lower average API (on a 30-day    •Higher average realized price of
             lag)                              $21/ton principally driven by a
             •Lower third-party shipments of   higher average API (on a 30-day
             35kmt                             lag)
             •Net unfavorable currency
             movements due to a weaker U.S.
             dollar
Intersegment Intersegment sales decreased $21  Intersegment sales increased $82
sales        primarily as a result of:         primarily as a result of:
             •Lower average realized price     •Higher average realized price
             •Slightly lower shipments due to  •Slightly higher

shipments due to

             timing                            timing
Segment      Segment adjusted EBITDA decreased Segment adjusted EBITDA increased
Adjusted     $103 primarily as a result of:    $70 primarily as a result of:
EBITDA       •Lower average realized price of  •Higher average realized price of
             $26/ton                           $21/ton
             •Slightly higher energy prices    •Lower costs for raw materials
             across the portfolio due to       Partially offset by:
             higher spot market prices         •Higher energy prices in
             •Net unfavorable currency         Australia due to a new gas
             movements due to a weaker U.S.    contract
             dollar mainly against the         •Net unfavorable currency
             Brazilian real                    movements due to a weaker U.S.
             •Higher production costs          dollar mainly against the
             Partially offset by:              Australian dollar
             •Lower raw material costs

Forward Look. For the third quarter of 2021 in comparison with the second quarter, we expect stable operations (except as noted below) with higher raw material and energy costs.

In July 2021, one of two ship un-loaders at the Alumar refinery sustained structural damage, reducing the amount of bauxite that can be unloaded. The refinery has reduced production by one-third, to about 7 kmt per day, until full unloading capacity is restored.

Aluminum


Business Update. During the second quarter, metal prices increased and demand
for value-added products continued the trend of improvements period-over-period.
The sale of the Warrick Rolling Mill in the first quarter led to a reduction in
aluminum shipments and lower sales in the second quarter.

Total aluminum third-party shipments and total primary aluminum shipments
include metric tons that were not produced by the Aluminum segment. Such
aluminum was purchased by this segment to satisfy certain customer commitments.
The Aluminum segment bears the risk of loss of the purchased aluminum until
control of the product has been transferred to this segment's customer. Total
aluminum information includes flat-rolled aluminum while Primary aluminum
information does not. Operating costs includes all production-related costs: raw
materials consumed; conversion costs, such as labor, materials, and utilities;
depreciation and amortization; and plant administrative expenses.

The average realized third-party price per metric ton of primary aluminum
includes three elements: a) the underlying base metal component, based on quoted
prices from the LME; b) the regional premium, which represents the incremental
price over the base LME component that is associated with the physical delivery
of metal to a particular region (e.g., the Midwest premium for metal sold in the
United States); and c) the product premium, which represents the incremental
price for receiving physical metal in a particular shape (e.g., billet, slab,
rod, etc.) or alloy.

                                       36
--------------------------------------------------------------------------------
                                              Quarter ended                 Six months ended
                                        June 30,        March 31,       June 30,        June 30,
Total Aluminum information                2021            2021            2021            2020
Third-party aluminum shipments (kmt)           767             831           1,598           1,514
Third-party sales                      $     2,102$     2,047$     4,149$     3,073
Intersegment sales                               3               2               5               5
Total sales                            $     2,105$     2,049$     4,154$     3,078
Segment Adjusted EBITDA                $       460$       283$       743$        28

                                              Quarter ended                 Six months ended
                                        June 30,        March 31,       June 30,        June 30,
Primary Aluminum information              2021            2021            2021            2020
Production (kmt)                               546             548           1,094           1,145
Third-party shipments (kmt)                    767             748           1,515           1,362
Third-party sales                      $     2,112$     1,727$     3,839$     2,499
Average realized third-party price
per metric ton                         $     2,753$     2,308$     2,533$     1,835
Total shipments (kmt)                          767             773           1,540           1,393
Operating costs                        $     1,672$     1,494$     3,166$     2,633
Average cost per metric ton            $     2,179$     1,933$     2,056$     1,890




               Sequential Period Comparison         Year-to-date Comparison

Production Primary production was flat as a Production decreased 4% primarily

             result of:                        as a result of:
             •Production was consistent across •Curtailment of Intalco 

completed

             most of the portfolio             in the third quarter 2020
                                               Partially offset by:
                                               •ABI restart completed in the
                                               third quarter 2020

Third-party Third-party sales increased $55 Third-party sales increased sales primarily as a result of: $1,076 primarily as a result of:

             •Higher average realized price of •Increase in LME
             $445/ton principally driven by a  •Restart of the Bécancour 

smelter

             higher average LME (on a 15-day   •Higher shipments due to 

the end

             lag)                              of the strike at the San 

Ciprián

             •Higher product premium revenue   smelter
             Partially offset by:              •Increase in value-add 

primary

             •Impacts from the divestiture of  aluminum sales
             the Warrick Rolling Mill          Partially offset by:
                                               •Curtailment of the Intalco
                                               smelter
                                               •Unfavorable impacts from the
                                               divestiture of the Warrick
                                               Rolling Mill
Segment      Segment adjusted EBITDA increased Segment adjusted EBITDA increased
Adjusted     $177 primarily as a result of:    $715 primarily as a result of:
EBITDA       •Increase in realized metal       •Increase in realized metal
             prices                            prices
             Partially offset by:              •Favorable impacts from the
             •Higher production and input      curtailment of Intalco and ABI
             costs                             restart
                                               Partially offset by:
                                               •Unfavorable currency movements
                                               as the U.S. dollar weakened
                                               against most major currencies


                                       37

--------------------------------------------------------------------------------

The following table provides consolidated capacity and curtailed capacity (each in kmt) for each smelter owned by Alcoa Corporation:

                                         June 30, 2021                      March 31, 2021                      June 30, 2020
Facility            Country      Capacity (1)       Curtailed       Capacity (1)       Curtailed        Capacity (1)       Curtailed
Portland            Australia              197               30               197               30                197               30
São Luís (Alumar)   Brazil                 268              268               268              268                268              268
Baie Comeau         Canada                 280                -               280                -                280                -
Bécancour (3)       Canada                 310                -               310                -                310               25
Deschambault        Canada                 260                -               260                -                260                -
Fjarðaál            Iceland                344                -               344                -                344                -
Lista               Norway                  94                -                94                -                 94                -
Mosjøen             Norway                 188                -               188                -                188                -
San Ciprián         Spain                  228                -               228                -                228                -
Intalco (2)         U.S.                   279              279               279              279                279              209
Massena West        U.S.                   130                -               130                -                130                -
Warrick             U.S.                   269              108               269              108                269              108
Wenatchee           U.S.                   146              146               146              146                146              146
                                         2,993              831             2,993              831              2,993              786



(1) These figures represent Alcoa Corporation's share of the facility Nameplate

Capacity based on its ownership interest in the respective smelter.

(2) On April 22, 2020, Alcoa announced the curtailment of the remaining 230 kmt

of smelting capacity at the Intalco smelter. The full curtailment of 279

kmt, which includes 49 kmt of earlier-curtailed capacity, was completed

     during the third quarter of 2020.


(3)  Curtailed capacity at the Bécancour (Canada) smelter decreased by 25 kmt

from the second quarter 2020 as a result of the restart process. The restart

completed during the third quarter of 2020.



Forward Look. For the third quarter of 2021 in comparison to the second quarter,
we expect sustained strong shipments and demand for value-add products,
partially offset by anticipated inflation in raw material and energy costs.
Further, the Company anticipates improved results at the Brazilian hydroelectric
facilities driven by both increased price and volume, but expects those
improvements to be almost entirely offset by higher energy costs in Spain.

Reconciliation of Certain Segment Information

Reconciliation of Total Segment Third-Party Sales to Consolidated Sales



                                        Quarter ended                Six months ended
                                   June 30,       March 31,      June 30,       June 30,
                                     2021           2021           2021           2020
Bauxite                           $       39$        58$      97$      137
Alumina                                  688             760         1,448          1,310
Aluminum:
Primary aluminum                       2,112           1,727         3,839          2,499
Other(1)                                 (10 )           320           310            574
Total segment third-party sales        2,829           2,865         5,694          4,520
Other                                      4               5             9              9
Consolidated sales                $    2,833$     2,870$   5,703$    4,529

(1) Other includes third-party sales of flat-rolled aluminum and energy, as well

as realized gains and losses related to embedded derivative instruments

designated as cash flow hedges of forward sales of aluminum. Following the

sale of the Warrick Rolling Mill on March 31, 2021, Other no longer includes

     the sales of flat-rolled aluminum.


                                       38

--------------------------------------------------------------------------------

Reconciliation of Total Segment Operating Costs to Consolidated Cost of Goods
Sold



                                              Quarter ended                 Six months ended
                                        June 30,        March 31,       June 30,        June 30,
                                          2021            2021            2021            2020
Bauxite                                $       206$       237$       443$       422
Alumina                                        908             886           1,794           1,632
Primary aluminum                             1,672           1,494           3,166           2,633
Other(1)                                        68             374             442             626
Total segment operating costs                2,854           2,991           5,845           5,313
Eliminations(2)                               (560 )          (544 )        (1,104 )        (1,132 )
Provision for depreciation,
depletion, amortization(3)                    (154 )          (176 )          (330 )          (309 )
Other(4)                                        16              21              37              85

Consolidated cost of goods sold $ 2,156$ 2,292 $

  4,448     $     3,957




(1)  Prior to the sale of the Warrick Rolling Mill on March 31, 2021, Other
     largely relates to the Aluminum segment's flat-rolled aluminum product
     division.

(2) Represents the elimination of cost of goods sold related to intersegment

sales between Bauxite and Alumina and between Alumina and Aluminum.

(3) Depreciation, depletion, and amortization is included in the operating costs

used to calculate average cost for each of the bauxite, alumina, and primary

aluminum product divisions (see Bauxite, Alumina, and Aluminum above).

However, for financial reporting purposes, depreciation, depletion, and

amortization is presented as a separate line item on Alcoa Corporation's

Statement of Consolidated Operations.

(4) Other includes costs related to Transformation and certain other items that

impact Cost of goods sold on Alcoa Corporation's Statement of Consolidated

Operations that are not included in the operating costs of segments (see

footnotes 1 and 3 in the Reconciliation of Total Segment Adjusted EBITDA to

Consolidated Net Income (Loss) Attributable to Alcoa Corporation below).

Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net Income (Loss) Attributable to Alcoa Corporation

© Edgar Online, source Glimpses

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