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August 29, 1997

Alcoa Sets New Litho Three-Point Pricing Policy

DAVENPORT, IA--August 29, 1997-- Confirming its commitment to the lithographic sheet market, Alcoa has announced a new three-point pricing policy. Alcoa's lithographic sheet prices now will include the cost of metal, a metal premium and a $0.65 per pound base conversion margin.

John Weaver, Alcoa's market manager - Lithographic Products, cited the prolonged erosion of conversion margins in the marketplace as one of the primary motivating factors behind the institution of the new pricing policy. He stated, "Litho conversion margins are currently at a five-year low having declined by 30%, a rate of nearly 7% annually since 1992."

Pat Hassey, president, Alcoa Aerospace/Commercial Rolled Products business unit, reinforcing this firm, new policy said, "Litho margins have fallen to levels which no longer support new industry capital investment in this business segment." He added, "During the past decade, Alcoa has invested millions of dollars into its manufacturing operations for state-of-the-art equipment to become the highest quality, lowest cost producer of lithographic sheet."

Under this new three-point plan, the cost-per-pound will be the cost of metal on the London Metal Exchange (LME), plus a metal premium (based on the U.S. Midwest price differential with the LME), plus a $0.65 per pound base conversion margin. Mr. Weaver stated that Alcoa was taking this action to reverse the company's declining conversion margins and reconfirm Alcoa's long term commitment to the lithographic market.

The new lithographic sheet pricing policy is effective immediately on all new orders and contracts. Current supply contracts will not be affected.