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Financial and capital risk management | 12 Months Ended
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Dec. 31, 2023
Notes and other explanatory information [abstract] |
Financial and capital risk management | 20. Financial and capital risk management The Company is exposed to several financial and capital risk factors that may impact its performance and equity position. The evaluation of the exposure to financial and capital risks is performed periodically to support decision making process regarding the risk management strategy. The Company's policy aims at establishing a capital structure that will ensure the continuity of our business in the long term. Within this perspective, the Company has been able to deliver value to shareholders through dividend payments and capital gain, and at the same time maintain a debt profile suitable for its activities, with an amortization well distributed over the years, thus avoiding a concentration in one specific period. The Board of Directors establishes and supervises the management of financial risks with the support of the Capital Allocation and Project Advisory Committee that ensures that Company's financial activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with the Company's policies and objectives. The Company has developed its strategy through an integrated view of the risks to which it is exposed, considering not only the risk, generated by variables traded in the financial market (market risk) and the liquidity risk, but also the risk arising from obligations assumed by third parties to the Company (credit risk), among others. The Company uses derivative financial instruments to protect its exposure to these market risks arising from operating, financing, and investment activities, so that Vale does not engage in derivative operations that result in leverage exceeding the nominal value of its contracts. The financial instruments portfolio is reassessed monthly, allowing the monitoring of financial results and their impact on cash flow. The Company applies hedge accounting to its net investment in foreign operation and nickel revenue program.
Risks |  | Origin of the exposure |  | Management
Market Risk - Exchange Rate |  | Financial instruments and other financial liabilities that are not denominated in US$ |  | Swap and forward operations
Market risk - Interest rate |  | Loans and financing indexed to different interest rates including, but not limited to, SOFR and CDI |  | Swap operations
Market risk - Product and input prices |  | Volatility of commodity and input prices |  | Forward operations and option contracts
Credit Risk |  | Receivables, derivative transactions, guarantees, advances to suppliers and financial investments |  | Portfolio diversification and policies for monitoring counterparty solvency and liquidity indicators
Liquidity risk |  | Contractual or assumed obligations |  | Availability of revolving credit lines
a) Method and techniques for valuation of derivatives The risk of the derivatives instruments is measured using the delta-Normal parametric approach and considers that the future distribution of the risk factors and its correlations tends to present the same statistic properties verified in the historical data. The value at risk estimate considers a 95% confidence level for a one-business daytime horizon. The derivative financial instruments were evaluated using the curves and market prices that impact each instrument on the calculation dates. For the pricing options, the Company generally uses the Black & Scholes model. In this model, the fair value of the derivative is obtained as a function of the volatility and price of the underlying asset, the exercise price of the option, the risk-free interest rate and the term to maturity of the option. In the case of options where the result is a function of the average price of the underlying asset in a certain period of the option’s life, known as Asian options, the Company uses the Turnbull & Wakeman model. In this model, in addition to the factors that influence the option price in the Black & Scholes model, the average price formation period is considered. In the case of swaps, both the present value of the paying and receiving amounts are estimated by discounting the cash flows by the interest rates in the corresponding currencies. The fair value is obtained by the difference between the present value of the paying and receiving amounts of the swap in the reference currency. In the case of swaps linked to Brazilian long-term interest rate (“TJLP”), the fair value calculation considers the current TJLP, i.e., projections of future cash flows in reais are made considering the last TJLP disclosed. Forward and future contracts are priced using the futures curves of the respective underlying assets. These curves are usually obtained from the exchanges where these assets are traded, such as the London Metals Exchange (“LME”), the Commodities Exchange (“COMEX”) or other market price providers. When there is no price for the desired maturity, the Company uses interpolations between the available maturities. a.i) Effects of derivatives on the statement of financial position
Schedule of derivatives effects on statement of financial position |  |  |  |  |
|  | December 31, 2023 | December 31, 2022
| Reference | Assets | Liabilities | Assets | Liabilities
Foreign exchange and interest rate risk |  |  |  |  |
CDI & TJLP vs. US$ fixed and floating rate swap | 20(b.i) | 109 | 30 | 11 | 144
IPCA swap | 20(b.i) | - | 41 | - | 63
Dollar swap and forward transactions | 20(b.i) | 650 | - | 407 | 7
LIBOR & SOFR swap | 20(b.ii) | 4 | 28 | 7 | -
|  | 763 | 99 | 425 | 214
Commodities price risk |  |  |  |  |
Gasoil, Brent and freight | 20(b.iv) | 52 | 22 | 78 | 56
Energy Transition Metals | 20(c) | - | 8 | 35 | 1
|  | 52 | 30 | 113 | 57
Other | 20(d) | - | 2 | - | 5
Total |  | 815 | 131 | 538 | 276
a.ii) Net exposure
Schedule of net exposure |  |  |
| Reference | December 31, 2023 | December 31, 2022
Foreign exchange and interest rate risk |  |  |
CDI & TJLP vs. US$ fixed and floating rate swap | 20(b.i) | 79 | (133)
IPCA swap | 20(b.i) | (41) | (63)
Dollar swap and forward transactions | 20(b.i) | 650 | 400
LIBOR & SOFR swap (i) | 20(b.ii) | (24) | 7
|  | 664 | 211
Commodities price risk |  |  |
Gasoil, Brent and freight | 20(b.iv) | 30 | 22
Energy Transition Metals | 20(c) | (8) | 34
|  | 22 | 56
Other | 20(d) | (2) | (5)
Total |  | 684 | 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. a.iii) Effects of derivatives on the income statement
Schedule of effects of derivatives on income statement and cash flow |  |  |  |
|  | Gain (loss) recognized in the income statement
|  | Year ended December 31,
| Reference | 2023 | 2022 | 2021
Foreign exchange and interest rate risk |  |  |  |
CDI & TJLP vs. US$ fixed and floating rate swap | 20(b.i) | 214 | 394 | (155)
IPCA swap | 20(b.i) | 28 | 74 | 28
Eurobonds swap |  | - | - | (28)
Dollar swap and forward operations | 20(b.i) | 667 | 628 | (20)
LIBOR & SOFR swap | 20(b.ii) | (23) | 34 | 16
Treasury Hedge (Forward) | 20(b.ii) | 14 | - | -
|  | 900 | 1,130 | (159)
Commodities price risk |  |  |  |
Gasoil, Brent and freight | 20(c) | 15 | 25 | 127
Energy Transition Metals | 20(d) | (15) | 18 | (2)
|  | - | 43 | 125
Other | 20(d) | 3 | (19) | 11
Total |  | 903 | 1,154 | (23)
a.iv) Effects of derivatives on the cash flows
Schedule of effects of derivatives on cash flows |  |  |  |
|  | Financial settlement inflows (outflows)
|  | Year ended December 31,
| Reference | 2023 | 2022 | 2021
Foreign exchange and interest rate risk |  |  |  |
CDI & TJLP vs. US$ fixed and floating rate swap | 20(b.i) | (1) | (98) | (142)
IPCA swap | 20(b.i) | 1 | 56 | (18)
Eurobonds swap |  |  | - | (29)
Dollar swap and forward operations | 20(b.i) | 454 | 164 | (79)
LIBOR & SOFR swap | 20(b.ii) | 8 | 46 | (2)
Treasury Hedge (Forward) (i) | 20(b.iii) | 14 | (8) | -
|  | 476 | 160 | (270)
Commodities price risk |  |  |  |
Gasoil, Brent and freight | 20(b.iv) | 7 | 9 | 205
Energy Transition Metals | 20(c) | (1) | 10 | -
|  | 6 | 19 | 205
Derivatives designated as cash flow hedge accounting |  |  |  |
Nickel | 20(e) | 85 | (277) | (67)
Palladium | 20(e) | - | 15 | 5
Coal |  | - | - | (70)
|  | 85 | (262) | (132)
Total |  | 567 | (83) | (197)
(i) In 2023, the Company carried out and settle the protection program for US interest rate volatility related to both the issuance and repurchase of bonds. b) Market risk - Foreign exchange and interest rates The Company’s cash flow is exposed to the volatility of several currencies against the U.S. dollar. While most of our product prices are indexed to U.S. dollars, most of our costs, expenses and investments are indexed to currencies other than the U.S. dollar, principally the Brazilian real and the Canadian dollar. The Company implements hedge transactions to protect its cash flow against the market risks that arises from its debt obligations and other liabilities – mainly currency volatility. The hedges cover most of the debt denominated in Brazilian real. The Company uses swap and forward transactions to convert debt and financial obligations linked to Brazilian real into U.S. dollar, with volumes, flows and settlement dates similar to those of the debt instruments and financial obligations - or sometimes lower, subject to market liquidity conditions. Hedging instruments with shorter tenors are renegotiated through time, so that their final maturity matches - or becomes closer - to the debt and financial obligations final maturity. At each settlement date, the results of the swap and forward transactions partially offset the impact of the foreign exchange rate in the Company’s obligations, contributing to stabilize the cash disbursements in U.S. dollar. b.i) Protection programs for the R$ denominated debt instruments and other liabilities To reduce cash flow volatility, swap and forward transactions were implemented to convert into US$ the cash flows from certain liabilities denominated in R$ with interest rates linked mainly to Brazilian Interbank Interest rate (“CDI”), TJLP and consumer price index (“IPCA”). In those swaps, the Company pays fixed rates in US$ and receives payments in R$ linked to the interest rates of the protected liabilities. The swap and forward transactions were negotiated over-the-counter and the protected items are the cash flows from debt instruments and other liabilities linked to R$.
Schedule of protection program |  |  |  |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | December 31, 2023 | December 31, 2022 | Index | Average rate | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2023 | 2024 | 2025+
CDI vs. US$ fixed rate swap |  |  |  |  | 107 | (83) | 1 | 20 | 23 | 84
Receivable | R$ 5,162 | R$ 6,356 | CDI | 100.00% |  |  |  |  |  |
Payable | US$ 1,196 | US$ 1,475 | Fix | 2.00% |  |  |  |  |  |
TJLP vs. US$ fixed rate swap |  |  |  |  | (28) | (50) | (2) | 3 | (3) | (25)
Receivable | R$ 694 | R$ 814 | TJLP + | 1.06% |  |  |  |  |  |
Payable | US$ 173 | US$ 204 | Fix | 3.46% |  |  |  |  |  |
|  |  |  |  | 79 | (133) | (1) | 23 | 20 | 59
IPCA swap vs. US$ fixed rate swap |  |  |  |  | (41) | (63) | 1 | 4 | (5) | (36)
Receivable | R$ 1,078 | R$ 1,294 | IPCA + | 4.54% |  |  |  |  |  |
Payable | US$ 267 | US$ 320 | Fix | 3.88% |  |  |  |  |  |
|  |  |  |  | (41) | (63) | 1 | 4 | (5) | (36)
R$ fixed rate vs. US$ fixed rate swap |  |  |  |  | 600 | 318 | 340 | 40 | 333 | 267
Receivable | R$ 12,660 | R$ 20,854 | Fix | 7.36% |  |  |  |  |  |
Payable | US$ 2,431 | US$ 3,948 | Fix | 0.00% |  |  |  |  |  |
Forward | R$ 1,209 | R$ 4,342 | B | 5.19 | 50 | 82 | 114 | 3 | 39 | 11
|  |  |  |  | 650 | 400 | 454 | 43 | 372 | 278
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of sensitivity analysis of 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 | 107 | (189) | (485)
| US$ interest rate inside Brazil decrease | 107 | 74 | 38
| Brazilian interest rate increase | 107 | 80 | 52
Protected item: R$ denominated liabilities | R$ depreciation | n.a. | - | -
TJLP vs. US$ fixed rate swap | R$ depreciation | (28) | (68) | (109)
| US$ interest rate inside Brazil decrease | (28) | (32) | (37)
| Brazilian interest rate increase | (28) | (34) | (40)
| TJLP interest rate decrease | (28) | (32) | (37)
Protected item: R$ denominated debt | R$ depreciation | n.a. | - | -
IPCA swap vs. US$ fixed rate swap | R$ depreciation | (41) | (106) | (171)
| US$ interest rate inside Brazil decrease | (41) | (47) | (55)
| Brazilian interest rate increase | (41) | (51) | (61)
| IPCA index decrease | (41) | (45) | (50)
Protected item: R$ denominated debt | R$ depreciation | n.a. | - | -
R$ fixed rate vs. US$ fixed rate swap | R$ depreciation | 600 | 31 | (538)
| US$ interest rate inside Brazil decrease | 600 | 564 | 526
| Brazilian interest rate increase | 600 | 525 | 453
Protected item: R$ denominated debt | R$ depreciation | n.a. | - | -
Forward | R$ depreciation | 50 | - | (49)
| US$ interest rate inside Brazil decrease | 50 | 48 | 46
| Brazilian interest rate increase | 50 | 46 | 43
Protected item: R$ denominated liabilities | R$ depreciation | n.a. | - | -
b.ii) Protection program for interest rate US$ denominated debt The Company has also exposure to interest rates risks over loans and financings. The US Dollar floating rate debt in the portfolio consists mainly of loans including export pre-payments, commercial banks and multilateral organizations loans. To reduce the cash flow volatility, swap transactions were implemented to convert interest rate indexed to SOFR from certain debt instruments into fixed interest rate. In those swaps, the Company received floating rates and paid fixed rates in US$.
Schedule of protection program for interest |  |  |  |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | December 31, 2023 | December 31, 2022 | Index | Average rate | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2023 | 2024 | 2025+
LIBOR vs. US$ fixed rate swap |  |  |  |  | - | 7 | 4 | - | - |
Receivable | - | US$ 150 | LIBOR | 0.00% |  |  |  |  |  |
Payable | - | US$ 150 | Fix | 0.00% |  |  |  |  |  |
SOFR vs. US$ fixed rate swap |  |  |  |  | (24) | - | 4 | 10 | 4 | (28)
Receivable | US$ 2,300 | - | SOFR | 0.00% |  |  |  |  |  |
Payable | US$ 2,300 | - | Fix | 3.60% |  |  |  |  |  |
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of sensitivity analysis |  |  |  |  |  |  |  |
Instrument |  | Instrument's main risk events |  | Fair value |  | Scenario I (∆ of 25%) |  | Scenario II (∆ of 50%)
SOFR vs. US$ fixed rate swap |  | US$ SOFR decrease |  | (25) |  | (67) |  | (111)
Protected item: SOFR US$ indexed debt |  | US$ SOFR decrease |  | n.a. |  | 67 |  | 111
b.iii) 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 2023, treasury lock transactions were implemented and have already been settled as of December 31, 2023.
Schedule of protection American treasury volatility |  |  |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial Settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | December 31, 2023 | December 31, 2022 | Index | Average rate | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2023 | 2024
Treasury Hedge (Forward) | - | - | B | - | - | - | 14 | - | -
b.iv) Protection program for product prices and input costs The Company is also exposed to market risks associated with the price volatility of commodities and inputs, especially freight and fuel costs. In line with its risk management policy, risk mitigation strategies involving commodities are used to reduce cash flow volatility. These mitigation strategies incorporate derivative instruments, predominantly forward, futures and options.
Schedule of protection program for product price |  |  |  |  |  |  |  |  |
| Notional |  |  | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | December 31, 2023 | December 31, 2022 | Bought / Sold | Average strike (US$) | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2023 | 2024
Brent crude oil (bbl) |  |  |  |  |  |  |  |  |
Call options | 19,907,250 | 22,600,500 | B | 91 | 45 | 74 | - | 11 | 45
Put options | 19,907,250 | 22,600,500 | S | 58 | (22) | (51) | - | 5 | (22)
Forward Freight Agreement (days) |  |  |  |  |  |  |  |  |
Freight forwards | 1,210 | 2,085 | B | 14,248 | 7 | (1) | 7 | 1 | 7
|  |  |  |  | 30 | 22 | 7 | 17 | 30
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of sensitivity analysis 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 | 23 | (111) | (399)
Protected item: Part of costs linked to fuel oil prices | Price input decrease | n.a. | 111 | 399
Forward Freight Agreement (days) |  |  |  |
Forwards | Freight price decrease | 7 | 1 | (5)
Protected item: Part of costs linked to maritime freight prices | Freight price decrease | n.a. | (1) | 5
Brent Crude Oil - To reduce the impact of fluctuations in fuel oil prices on the hiring and availability of maritime freight and, consequently, to reduce the Company’s cash flow volatility, hedging operations were carried out through options contracts on Brent Crude Oil for different portions of the exposure. The derivative transactions were traded over-the-counter and the protected item is part of the costs linked to the price of fuel oil used on ships. The financial settlement inflows/outflows are offset by the protected items’ losses/gains. In 2023, the Company renewed the program related to its brent crude oil hedge strategy for 2024. Freight derivative - To reduce the impact of maritime freight price volatility on the Company’s cash flow, freight hedging transactions were implemented, through Forward Freight Agreements (FFAs). The protected item is part of the costs linked to maritime freight spot prices. The financial settlement inflows/outflows of the FFAs are offset by the protected items’ losses/gains due to freight price changes. The FFAs are contracts traded over the counter and can be cleared through a Clearing House, in this case subject to margin requirements. c) 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 | December 31, 2023 | December 31, 2022 | Bought / Sold | Average strike (US$/ton) | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2023 | 2024+
Fixed price nickel sales protection (ton) |  |  |  |  |  |  |  |  |
Nickel forwards | 3,322 | 766 | B | 19,207 | (8) | 7 | (3) | 3 | (8)
Hedge program for products acquisition for resale (ton) |  |  |  |  |  |  |  |  |
Nickel forwards | - | 384 | S | - | - | (1) | 2 | - | -
|  |  |  |  | (8) | 6 | (1) | 3 | (8)
Embedded derivative (pellet price) in natural gas purchase (volume/month) |  |  |  |  |  |  |  |  |
Call options | 746,667 | 746,667 | S | 233 | (2) | (5) | - | 2 | (2)
|  |  |  |  | (2) | (5) | - | 2 | (2)
The sensitivity analysis of these derivative financial instruments is presented as follows:
Schedule of Sensitivity analysis of other derivatives 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 | (8) | (21) | (35)
Protected item: Part of nickel revenues with fixed prices | Nickel price decrease | n.a. | 21 | 35
Hedge program for products acquisition for resale (ton) |  |  |  |
Forwards | Nickel price increase | n.a. | - | -
Protected item: Part of revenues from products for resale | Nickel price increase | n.a. | - | -
Embedded derivative (pellet price) in natural gas purchase agreement (volume/month) |  |  |  |
Embedded derivatives - Gas purchase | Pellet price increase | (2) | (6) | (13)
Fixed price sales protection - The Company started an operational program to protect nickel sales, converting fixed price commercial contracts with customers to floating price, therefore maintaining the Company’s exposure to price fluctuations. The transactions usually carried out in this program are nickel purchases for future settlement. Hedge program for products acquisition for resale - The Company started a hedge program with forward transactions with the objective of reducing the risk of price mismatch between the period of purchase and sale of products to third parties. Embedded derivative (pellet price) in natural gas purchase agreement - The Company has a natural gas purchase agreement in which the amount charged to Vale changes based on the pricing level of the pellets sold by the Company to the market. d) Hedge accounting
Schedule of effects of derivatives on other comprehensive income |  |  |
| Gain (loss) recognized in the other comprehensive income
| Year ended December 31,
| 2023 | 2022 | 2021
Net investments hedge | 139 | 81 | (118)
Cash flow hedge | (19) | 19 | 3
Net investment hedge - The Company uses hedge accounting for foreign exchange risk arising from Vale S.A.’s net investments in Vale International S.A. and Vale Holding BV. With the hedge program, the Company's debt with third parties denominated in United States dollars and euros serves as a hedge instrument for investments in these subsidiaries. In March 2021, the Company redeemed all its euro bonds (note 10). As a result, the amount of debt designated as a hedge instrument for this investment is US$2,711 as of December 2023. As a result of the hedge program, the impact of the exchange rate variation on the debt denominated in dollars and euros is now partially recorded in other comprehensive income, as “Translation adjustments”. e) Cash flow hedge
Schedule of cash flow hedge |  |  |  |  |  |
|  | Fair value | Financial settlement Inflows (Outflows) | Value at Risk | Fair value by year
Flow | Bought / Sold | December 31, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2023 | 2024
Nickel revenue hedge program |  |  |  |  |  |
Forward | S | - | 28 | 85 | - | -
|  | - | 28 | 85 | - | -
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 | - | - | -
Protected item: Part of nickel revenues with fixed sales prices | Nickel price increase | n.a. | - | -
Cash flow hedge (Nickel) - To reduce the cash flow volatility due to nickel price fluctuations, the Company implemented the Nickel Revenue Hedge Program in 2019. In this program, hedging operations were executed, through option contracts, to protect a portion of the projected volume of sales at floating, highly probable realization prices, guaranteeing prices above the average unit cost of nickel production for the protected volumes. The contracts are traded on the London Metal Exchange or over-the-counter market and the hedged item's P&L is offset by the hedged item’s P&L due to Nickel price variation. f) Credit risk management The Company is exposed to credit risk that arises from trade receivables, derivative transactions, guarantees, down payment for suppliers and cash investments. The credit risk management process provides a framework for assessing and managing counterparties’ credit risk and for maintaining our portfolio risk at an acceptable level. For the commercial credit exposure, which arises from sales to final customers, the risk management area, in accordance with the current delegation level, approves or requests the approval of credit risk limits for each counterparty. Vale attributes an internal credit risk rating for each counterparty using its own quantitative methodology for credit risk analysis, which is based on market prices, external credit ratings and financial information of the counterparty, as well as qualitative information regarding the counterparty’s strategic position and history of commercial relations. Based on the counterparty’s credit risk, risk mitigation strategies may be used to manage the Company’s credit risk. The main credit risk mitigation strategies include non-recourse sale of receivables, insurance instruments, letters of credit, corporate and bank guarantees, mortgages, among others. f.i) Accounts receivable portfolio Vale has a diversified accounts receivable portfolio from a geographical standpoint, with Asia, Europe and Brazil as the regions with more significant exposures. According to each region, different guarantees can be used to enhance the credit quality of the receivables. Historically, the expected credit loss on the Company’s accounts receivable portfolio is immaterial (note 11). f.ii) Financial instruments, except for accounts receivable To manage the credit exposure arising from cash investments and derivative instruments, credit limits are approved to each counterparty with whom the Company has credit exposure. Furthermore, the Company controls the portfolio diversification and monitors different indicators of solvency and liquidity of the different counterparties that were approved for trading. The carrying amount of the financial assets that represent the exposure to credit risk is presented below:
Schedule of carrying amount of the financial assets that represent the exposure to credit risk |  |  |  |
| Notes | December 31, 2023 |  | December 31, 2022
Cash and cash equivalents | 23 | 3,609 |  | 4,736
Short-term investments | 23 | 51 |  | 61
Restricted cash |  | 4 |  | 77
Judicial deposits | 28 | - |  | 1,215
Derivative financial instruments |  | 815 |  | 538
Investments in equity securities | 14 | 45 |  | 7
|  | 4,524 |  | 6,634
f.iii) 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.
Summary of ratings published by Moody's regarding the main financial institutions |  |  |  |
| December 31, 2023 | December 31, 2022
| Cash and cash equivalents and investment | Derivatives | Cash and cash equivalents and investment | Derivatives
Aa1 | - | - | 32 | -
Aa2 | 338 | - | 342 | 5
Aa3 | 42 | - | 239 | -
A1 | 2,022 | 50 | 1,746 | 97
A2 | 309 | 293 | 938 | 145
A3 | 186 | 22 | 918 | 63
Baa1 | 2 | - | - | -
Baa2 | 16 | - | 7 | -
Ba1 (i) | 85 | - | - | -
Ba2 (i) | 287 | 314 | 411 | 174
Ba3 (i) | 373 | 136 | 164 | 54
| 3,660 | 815 | 4,797 | 538
(i) A substantial part of the balances is held with financial institutions in Brazil which are deemed investment grade in local currency. g) Liquidity risk management The liquidity risk arises from the possibility that Vale might not perform its obligations on due dates, as well as face difficulties to meet its cash requirements due to market liquidity constraints. The available revolving credit facilities are intended to assist short term liquidity management and to enable more efficiency in cash management and were provided by a syndicate of several global commercial banks. The Company has two revolving credit facilities, in the amount of US$5,000, for which US$3,000 have maturity date in 2024 and US$2,000 in 2026. As of December 31, 2023, these lines were not drawn. Accounting policy The Company uses financial instruments to hedge its exposure to certain market risks arising from operational, financing and investing activities. Derivatives are included within financial assets or liabilities at fair value through profit or loss unless they are designated as effective hedging instruments (hedge accounting). At the beginning of the hedge operations, the Company documents the type of hedge, the relation between the hedging instrument and hedged items, its risk management objective and strategy for undertaking hedge operations. The Company also documents, both at hedge inception and on an ongoing basis that the hedge is expected to continue to be highly effective. The Company has elected to adopt the new general hedge accounting model in IFRS 9 and designates certain derivatives as either: Cash flow hedge - The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognized in equity within "Unrealized fair value gain (losses)". The gain or loss relating to the ineffective portion is recognized immediately in the income statement. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized in profit or loss when the transaction is recognized in the income statement. Net investment hedge - Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognized in equity within "Cumulative translation adjustments". The gain or loss relating to the ineffective portion is recognized immediately in the income statement. Gains and losses accumulated in equity are included in the statement of income when the foreign operation is partially or fully disposed of or sold. Derivatives at fair value through profit or loss - Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any of these derivative instruments are recognized immediately in the income statement. Critical accounting estimates and judgments The fair values of financial instruments that are not traded in active markets are determined using valuation techniques. Vale uses its own judgment to choose between the various methods. Assumptions are based on the market conditions, at the end of the year. An analysis of the impact if actual results are different from management's estimates is present under “Sensitivity analysis of derivative financial instruments”.

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