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v3.23.3

Financial and capital risk management | 6 Months Ended
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Jun. 30, 2023
Notes and other explanatory information [abstract] |
Financial and capital risk management |
| 18. | Financial and capital risk management
a) Effects of derivatives on the statement of financial position
Schedule of derivatives effects on statement of financial position |  |
| June 30, 2023 | December 31, 2022
| Assets | Liabilities | Assets | Liabilities
Foreign exchange and interest rate risk |  |  |  |
CDI & TJLP vs. US$ fixed and floating rate swap | 90 | 30 | 11 | 144
IPCA swap | - | 41 | - | 63
Dollar swap and forward transactions | 868 | - | 407 | 7
LIBOR swap | 8 | - | 7 | -
| 966 | 71 | 425 | 214
Commodities price risk |  |  |  |
Gasoil, Brent and freight | 70 | 71 | 78 | 56
Energy Transition Metals | 45 | - | 35 | 1
| 115 | 71 | 113 | 57
Other | - | 3 | - | 5
Total | 1,081 | 145 | 538 | 276
b) Net exposure
| June 30, 2023 | December 31, 2022
Foreign exchange and interest rate risk |  |
CDI & TJLP vs. US$ fixed and floating rate swap | 60 | (133)
IPCA swap | (41) | (63)
Dollar swap and forward transactions | 868 | 400
LIBOR swap (i) | 8 | 7
| 895 | 211
Commodities price risk |  |
Gasoil, Brent and freight | (1) | 22
Energy Transition Metals | 45 | 34
| 44 | 56
Other | (3) | (5)
Total | 936 | 262
(i) | In March 2021, the UK Financial Conduct Authority (“FCA”), the financial regulator in the United Kingdom, announced the discontinuation of the LIBOR rate for all terms in pounds, euros, Swiss francs, yen and for terms of one week and two months in dollars at the end of December 2021 and the other terms at the end of June 2023. Vale has finalized the negotiations for the replacement of the reference interest rate of its financial contracts from LIBOR to Secured Overnight Financing Rate ("SOFR"), with spread adjustments to match the transaction costs. The Company does not expect material impacts on the cash flows of these operations.
c) Effects of derivatives on the income statement
Schedule of effects of derivatives on the income statement |  |  |  |
| Gain (loss) recognized in the income statement
| Three-month period ended June 30, | Six-month period ended June 30,
| 2023 | 2022 | 2023 | 2022
Foreign exchange and interest rate risk |  |  |  |
CDI & TJLP vs. US$ fixed and floating rate swap | 144 | (121) | 188 | 269
IPCA swap | 23 | (11) | 30 | 66
Dollar swap and forward operations | 376 | (163) | 538 | 198
LIBOR swap | 2 | 7 | 5 | 42
Forwards | 13 | - | 13 | -
| 558 | (288) | 774 | 575
Commodities price risk |  |  |  |
Gasoil, Brent and freight | 4 | 10 | (20) | 25
Energy Transition Metals | - | 16 | (1) | 9
| 4 | 26 | (21) | 34
Other | 1 | (8) | 2 | (18)
Total | 563 | (270) | 755 | 591
d) Effects of derivatives on the cash flows
| Financial settlement inflows (outflows)
| Three-month period ended June 30, | Six-month period ended June 30,
| 2023 | 2022 | 2023 | 2022
Foreign exchange and interest rate risk |  |  |  |
CDI & TJLP vs. US$ fixed and floating rate swap | (4) | (17) | (8) | (43)
IPCA swap | 2 | 8 | 3 | 11
Dollar swap and forward operations | 98 | 54 | 118 | 84
LIBOR swap | 4 | - | 4 | (1)
Forwards | 13 | - | 13 | -
| 113 | 45 | 130 | 51
Commodities price risk |  |  |  |
Gasoil, Brent and freight | 1 | 6 | 3 | 9
Energy Transition Metals | 20 | (93) | 39 | (178)
| 21 | (87) | 42 | (169)
Total | 134 | (42) | 172 | (118)
e) Market risk - Foreign exchange and interest rates Protection programs for the R$ denominated debt instruments and other liabilities
Schedule of protection program |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | June 30, 2023 | December 31, 2022 | Index | Average rate | June 30, 2023 | December 31, 2022 | June 30, 2023 | June 30, 2023 | 2023 | 2024 | 2025+
CDI vs. US$ fixed rate swap |  |  |  |  | 88 | (83) | (7) | 23 | 8 | 16 | 64
Receivable | R$ 5,696 | R$ 6,356 | CDI | 100.13% |  |  |  |  |  |  |
Payable | US$ 1,320 | US$ 1,475 | Fix | 1.77% |  |  |  |  |  |  |
TJLP vs. US$ fixed rate swap |  |  |  |  | (28) | (50) | (1) | 3 | (1) | (3) | (24)
Receivable | R$ 743 | R$ 814 | TJLP + | 1.05% |  |  |  |  |  |  |
Payable | US$ 186 | US$ 204 | Fix | 3.45% |  |  |  |  |  |  |
|  |  |  |  | 60 | (133) | (8) | 26 | 7 | 13 | 40
IPCA swap vs. US$ fixed rate swap |  |  |  |  | (41) | (63) | 3 | 5 | - | (6) | (35)
Receivable | R$ 1,186 | R$ 1,294 | IPCA + | 4.54% |  |  |  |  |  |  |
Payable | US$ 293 | US$ 320 | Fix | 3.88% |  |  |  |  |  |  |
|  |  |  |  | (41) | (63) | 3 | 5 | - | (6) | (35)
R$ fixed rate vs. US$ fixed rate swap |  |  |  |  | 791 | 318 | 43 | 64 | 265 | 291 | 235
Receivable | R$ 19,307 | R$ 20,854 | Fix | 7.61% |  |  |  |  |  |  |
Payable | US$ 3,665 | US$ 3,948 | Fix | 0.00% |  |  |  |  |  |  |
Forward | R$ 2,186 | R$ 4,342 | B | 5.24 | 77 | 82 | 75 | 6 | 33 | 34 | 10
|  |  |  |  | 868 | 400 | 118 | 70 | 298 | 325 | 245
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of sensitivity analysis of these derivative financial instruments |  |  |  |
Instrument | Instrument's main risk events | Fair value | Scenario I (∆ of 25%) | Scenario II (∆ of 50%)
CDI vs. US$ fixed rate swap | R$ depreciation | 88 | (229) | (546)
| US$ interest rate inside Brazil decrease | 88 | 46 | -
| Brazilian interest rate increase | 88 | 56 | 24
Protected item: R$ denominated liabilities | R$ depreciation | n.a. | - | -
TJLP vs. US$ fixed rate swap | R$ depreciation | (28) | (72) | (116)
| US$ interest rate inside Brazil decrease | (28) | (33) | (40)
| Brazilian interest rate increase | (28) | (36) | (43)
| TJLP interest rate decrease | (28) | (34) | (40)
Protected item: R$ denominated debt | R$ depreciation | n.a. | - | -
IPCA swap vs. US$ fixed rate swap | R$ depreciation | (41) | (112) | (183)
| US$ interest rate inside Brazil decrease | (41) | (50) | (60)
| Brazilian interest rate increase | (41) | (54) | (67)
| IPCA index decrease | (41) | (47) | (53)
Protected item: R$ denominated debt | R$ depreciation | n.a. | - | -
R$ fixed rate vs. US$ fixed rate swap | R$ depreciation | 791 | (57) | (906)
| US$ interest rate inside Brazil decrease | 791 | 728 | 663
| Brazilian interest rate increase | 791 | 666 | 548
Protected item: R$ denominated debt | R$ depreciation | n.a. | - | -
Forward | R$ depreciation | 77 | (8) | (93)
| US$ interest rate inside Brazil decrease | 77 | 73 | 68
| Brazilian interest rate increase | 77 | 68 | 60
Protected item: R$ denominated liabilities | R$ depreciation | n.a. | - | -
Protection program for LIBOR floating interest rate US$ denominated debt
Schedule of protection program |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | June 30, 2023 | December 31, 2022 | Index | Average rate | June 30, 2023 | December 31, 2022 | June 30, 2023 | June 30, 2023 | 2023 | 2024
LIBOR vs. US$ fixed rate swap |  |  |  |  | 8 | 7 | 4 | - | 4 | 4
Receivable | US$ 150 | US$ 150 | LIBOR | 0.85% |  |  |  |  |  |
Payable | US$ 150 | US$ 150 | Fix | 0.85% |  |  |  |  |  |
|  |  |  |  | 8 | 7 | 4 | - | 4 | 4
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of sensitivity analysis of these derivative financial instruments |  |  |  |  |  |  |  |
Instrument |  | Instrument's main risk events |  | Fair value |  | Scenario I (∆ of 25%) |  | Scenario II (∆ of 50%)
LIBOR vs. US$ fixed rate swap |  | US$ LIBOR decrease |  | 8 |  | 7 |  | 6
Protected item: LIBOR US$ indexed debt |  | US$ LIBOR decrease |  | n.a. |  | (7) |  | (6)
Protection for American treasury volatility related to tender offer transaction To reduce the volatility of the premium paid to investors on the tender offer transaction issued in June 2023, treasury lock transactions were implemented and have already been settled as of June 30, 2023.
Schedule of protection for american treasury volatility |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | June 30, 2023 | December 31, 2022 | Index | Average rate | June 30, 2023 | December 31, 2022 | June 30, 2023 | June 30, 2023 | 2023
Forwards | - | - | B | - | - | - | 13 | - | -
f) Protection program for product prices and input costs
Schedule of protection program |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | June 30, 2023 | December 31, 2022 | Bought / Sold | Average strike (US$) | June 30, 2023 | December 31, 2022 | June 30, 2023 | June 30, 2023 | 2023 | 2024
Brent crude oil (bbl) |  |  |  |  |  |  |  |  |  |
Call options | 31,139,250 | 22,600,500 | B | 95 | 68 | 74 | - | 15 | 6 | 62
Put options | 31,139,250 | 22,600,500 | S | 62 | (71) | (51) | - | 16 | (23) | (48)
Forward Freight Agreement (days) |  |  |  |  |  |  |  |  |  |
Freight forwards | 960 | 2,085 | B | 13,791 | 2 | (1) | 3 | 1 | 2 | -
|  |  |  |  | (1) | 22 | 3 | 32 | (15) | 14
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of sensitivity analysis of these derivative financial instruments |  |  |  |
Instrument | Instrument's main risk events | Fair value | Scenario I (∆ of 25%) | Scenario II (∆ of 50%)
Brent crude oil (bbl) |  |  |  |
Options | Price input decrease | (3) | (288) | (759)
Protected item: Part of costs linked to fuel oil prices | Price input decrease | n.a. | 288 | 759
Forward Freight Agreement (days) |  |  |  |
Forwards | Freight price decrease | 2 | (2) | (5)
Protected item: Part of costs linked to maritime freight prices | Freight price decrease | n.a. | 2 | 5
g) Other derivatives, including embedded derivatives in contracts
Schedule of other derivatives |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | June 30, 2023 | December 31, 2022 | Bought / Sold | Average strike (US$/ton) | June 30, 2023 | December 31, 2022 | June 30, 2023 | June 30, 2023 | 2023+
Fixed price nickel sales protection (ton) |  |  |  |  |  |  |  |  |
Nickel forwards | 2,580 | 766 | B | 20,842 | - | 7 | 3 | 3 | -
Hedge program for products acquisition for resale (ton) |  |  |  |  |  |  |  |  |
Nickel forwards | - | 384 | S | - | - | (1) | 2 | - | -
|  |  |  |  | - | 6 | 5 | 3 | -
Embedded derivative (pellet price) in natural gas purchase (volume/month) |  |  |  |  |  |  |  |  |
Call options | 746,667 | 746,667 | S | 233 | (3) | (5) | - | 2 | (3)
|  |  |  |  | (3) | (5) | - | 2 | (3)
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of sensitivity analysis of these derivative financial instruments |  |  |  |
Instrument | Instrument's main risk events | Fair value | Scenario I (∆ of 25%) | Scenario II (∆ of 50%)
Fixed price sales protection (ton) |  |  |  |
Forwards | Nickel price decrease | - | (14) | (27)
Protected item: Part of nickel revenues with fixed prices | Nickel price decrease | - | 14 | 27
Hedge program for products acquisition for resale (ton) |  |  |  |
Forwards | Nickel price increase | - | - | -
Protected item: Part of revenues from products for resale | Nickel price increase | - | - | -
Embedded derivative (pellet price) in natural gas purchase agreement (volume/month) |  |  |  |
Embedded derivatives - Gas purchase | Pellet price increase | (3) | (8) | (16)
h) Hedge accounting
Schedule of effects of derivatives on other comprehensive income |  |  |  |
| Gain (loss) recognized in the other comprehensive income
| Three-month period ended June 30, | Six-month period ended June 30,
| 2023 | 2022 | 2023 | 2022
Net investments hedge | 96 | (145) | 145 | 74
Cash flow hedge | (5) | 312 | 14 | 8
Cash flow hedge
Schedule of cash flow hedge |  |  |  |  |  |  |
| Notional (ton) |  |  | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | June 30, 2023 | December 31, 2022 | Bought / Sold | Average strike (US$/ton) | June 30, 2023 | December 31, 2022 | June 30, 2023 | June 30, 2023 | 2023
Nickel revenue hedge program |  |  |  |  |  |  |  |  |
Forward | (3,150) | 6,300 | S | 34,929 | 45 | 28 | 34 | 4 | 45
|  |  |  |  | 45 | 28 | 34 | 4 | 45
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of derivative financial instruments |  |  |  |
Instrument | Instrument's main risk events | Fair value | Scenario I (∆ of 25%) | Scenario II (∆ of 50%)
Nickel Revenue Hedging Program |  |  |  |
Forward | Nickel price increase | 45 | 29 | 13
Protected item: Part of nickel revenues with fixed sales prices | Nickel price increase | n.a. | (29) | (13)
i) Financial counterparties’ ratings The transactions of derivative instruments, cash and cash equivalents as well as short-term investments are held with financial institutions whose exposure limits are periodically reviewed and approved by the delegated authority. The financial institutions credit risk is performed through a methodology that considers, among other information, ratings provided by international rating agencies. The table below presents the ratings in foreign currency as published by Moody’s regarding the main financial institutions used by the Company to contract derivative instruments, cash and cash equivalents transaction.
Schedule of ratings published by Moody's regarding the main financial institutions |  |
| June 30, 2023 | December 31, 2022
| Cash and cash equivalents and investment | Derivatives | Cash and cash equivalents and investment | Derivatives
Aa1 | 36 | - | 32 | -
Aa2 | 726 | - | 342 | 5
Aa3 | 190 | - | 239 | -
A1 | 1,602 | 139 | 1,746 | 97
A2 | 736 | 296 | 938 | 145
A3 | 713 | 52 | 918 | 62
Baa1 | - | - | - | -
Baa2 | 51 | - | 7 | -
Ba2 (i) | 798 | 426 | 411 | 174
Ba3 (i) | 177 | 168 | 164 | 54
| 5,029 | 1,081 | 4,797 | 538
(i) | A substantial part of the balances is held with financial institutions in Brazil and, in local currency, they are deemed investment grade.

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