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FINANCIAL INSTRUMENTS | 12 Months Ended
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Dec. 31, 2022
Financial Instruments |
FINANCIAL INSTRUMENTS | 14. FINANCIAL INSTRUMENTS
| 14.a) | Identification and valuation of financial instruments
The Company may operate with several financial instruments, with emphasis on cash and cash equivalents, including financial investments, marketable securities, accounts receivable from customers, accounts payable to suppliers and borrowings and financing. Additionally, the Company may also operate with derivative financial instruments, such as swap of exchange or interest and commodities derivatives. Considering the nature of these instruments, their fair values are basically determined by the use of quotations in the capital markets in Brazil and the Mercantile and Futures Exchange. The amounts recorded in current assets and liabilities have immediate liquidity or maturity, mostly in the short term. Considering the terms and characteristics of these instruments, the carrying amounts approximate the fair values.
| · | Classification of financial instruments
Schedule of financial instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | Consolidated
Consolidated |  |  |  |  |  | 12/31/2022 |  |  |  | 12/31/2021
| Notes |  | Fair value through profit or loss |  | Measured at amortized cost |  | Balances |  | Fair value through profit or loss |  | Measured at amortized cost |  | Balances
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | 4 |  |  |  | 11,991,356 |  | 11,991,356 |  |  |  | 16,646,480 |  | 16,646,480
Short-term investments |  | 5 |  | 1,184,895 |  | 271,590 |  | 1,456,485 |  | 2,383,059 |  | 261,673 |  | 2,644,732
Trade receivables |  | 6 |  |  |  | 3,233,164 |  | 3,233,164 |  |  |  | 2,597,838 |  | 2,597,838
Dividends and interest on equity |  | 9 |  |  |  | 77,377 |  | 77,377 |  |  |  | 76,878 |  | 76,878
Trading securities |  | 9 |  | 9,596 |  |  |  | 9,596 |  | 12,028 |  |  |  | 12,028
Loans - related parties |  | 9 |  |  |  | 5,383 |  | 5,383 |  |  |  | 4,511 |  | 4,511
Total |  |  |  | 1,194,491 |  | 15,578,870 |  | 16,773,361 |  | 2,395,087 |  | 19,587,380 |  | 21,982,467
Non-current |  |  |  |  |  |  |  |  |  |  |  |  |  |
Investments |  | 5 |  |  |  | 156,185 |  | 156,185 |  |  |  | 147,671 |  | 147,671
Other trade receivables |  | 9 |  |  |  | 8,059 |  | 8,059 |  |  |  | 2,345 |  | 2,345
Eletrobrás compulsory loan |  | 9 |  |  |  | 58,030 |  | 58,030 |  |  |  | 859,607 |  | 859,607
Receivables by indemnity |  | 9 |  |  |  | 974,863 |  | 974,863 |  |  |  | 534,896 |  | 534,896
Loans - related parties |  | 9 |  |  |  | 1,384,773 |  | 1,384,773 |  |  |  | 1,143,228 |  | 1,143,228
Investments |  | 10 |  | 94,700 |  |  |  | 94,700 |  | 190,321 |  |  |  | 190,321
Total |  |  |  | 94,700 |  | 2,581,910 |  | 2,676,610 |  | 190,321 |  | 2,687,747 |  | 2,878,068
Total Assets |  |  |  | 1,289,191 |  | 18,160,780 |  | 19,449,971 |  | 2,585,408 |  | 22,275,127 |  | 24,860,535
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |  |  |  |  |  |  |
Borrowings and financing |  | 13 |  |  |  | 5,269,952 |  | 5,269,952 |  |  |  | 5,532,736 |  | 5,532,736
Leases |  | 15 |  |  |  | 177,010 |  | 177,010 |  |  |  | 119,047 |  | 119,047
Trade payables |  | 16 |  |  |  | 6,596,915 |  | 6,596,915 |  |  |  | 6,446,999 |  | 6,446,999
Trade payables - drawee risk |  | 17 |  |  |  | 5,709,069 |  | 5,709,069 |  |  |  | 4,439,967 |  | 4,439,967
Dividends and interest on capital |  | 17 |  |  |  | 611,307 |  | 611,307 |  |  |  | 1,206,870 |  | 1,206,870
Derivative financial instruments |  |  |  | 416,935 |  |  |  | 416,935 |  |  |  |  |  |
Total |  |  |  | 416,935 |  | 18,364,253 |  | 18,781,188 |  |  |  | 17,745,619 |  | 17,745,619
Non-current |  |  |  |  |  |  |  |  |  |  |  |  |  |
Borrowings and financing |  | 13 |  |  |  | 36,170,996 |  | 36,170,996 |  |  |  | 27,221,914 |  | 27,221,914
Leases |  | 15 |  |  |  | 516,836 |  | 516,836 |  |  |  | 492,504 |  | 492,504
Trade payables |  | 16 |  |  |  | 46,269 |  | 46,269 |  |  |  | 98,625 |  | 98,625
Derivative financial instruments |  | 17 |  | 69,472 |  |  |  | 69,472 |  | 101,822 |  |  |  | 101,822
Total |  |  |  | 69,472 |  | 36,734,101 |  | 36,803,573 |  | 101,822 |  | 27,813,043 |  | 27,914,865
Total Liabilities |  |  |  | 486,407 |  | 55,098,354 |  | 55,584,761 |  | 101,822 |  | 45,558,662 |  | 45,660,484
| · | Fair value measurement
The following table shows the financial instruments recorded at fair value through profit or loss, classifying them according to the fair value hierarchy:
Schedule of financial instruments at fair value through profit or loss |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  |  |  |  | 12/31/2022 |  |  |  |  |  | 12/31/2021
| Level 1 |  | Level 2 |  | Balances |  | Level 1 |  | Level 2 |  | Balances
Assets |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |  |  |  |  |
Financial investments |  | 1,184,895 |  |  |  | 1,184,895 |  | 2,383,059 |  |  |  | 2,383,059
Trading securities |  | 9,596 |  |  |  | 9,596 |  | 12,028 |  |  |  | 12,028
Non-current |  |  |  |  |  |  |  |  |  |  |  |
Investments |  | 94,700 |  |  |  | 94,700 |  | 190,321 |  |  |  | 190,321
Total Assets |  | 1,289,191 |  |  |  | 1,289,191 |  | 2,585,408 |  |  |  | 2,585,408
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial instruments |  |  |  | 416,935 |  | 416,935 |  |  |  |  |  |
Non-current |  |  |  |  |  |  |  |  |  |  |  |
Derivative financial instruments |  |  |  | 69,472 |  | 69,472 |  |  |  | 101,822 |  | 101,822
Total Liabilities |  |  |  | 486,407 |  | 486,407 |  |  |  | 101,822 |  | 101,822
Level 1 - Data prices are quoted in an active market for items identical to the assets and liabilities being measured. Level 2 - Consider inputs observable in the market, such as interest rates, exchange rates, etc., but are not prices negotiated in active markets. Level 3 - There are no assets and liabilities classified as level 3.
| 14.b) | Financial risk management
The Company uses risk management strategies with guidance on the risks incurred on the business. The nature and general position of financial risks are regularly monitored and managed in order to assess results and the financial impact on cash flow. Credit limits and hedge quality of counterparties are also reviewed periodically. Market risks are hedged when is considered necessary to support the corporate strategy or when it is necessary to maintain the level of financial flexibility. The Company is exposed to exchange rate, interest rate, market price and liquidity risks. The Company may manage some of the risks through the use of derivative instruments not associated with any speculative trading or short selling.
| · | Exchange rate risk
The exposure arises from the existence of assets and liabilities denominated in Dollar or Euro, since the Company’s functional currency is substantially the Real and is referred to as natural exchange exposure. The net exposure is the result of the offsetting of the natural exchange exposure by the instruments of hedge adopted by CSN. The consolidated net exposure as of December 31, 2022 is shown below:
Schedule of foreign exchange exposure |  |  |  |
|  |  |  | 12/31/2021
Foreign Exchange Exposure |  | (Amounts in US$’000) |  | (Amounts in US$’000)
Cash and cash equivalents overseas |  | 1,191,036 |  | 1,656,271
Trade receivables |  | 315,920 |  | 212,424
Financial investments |  | 26,930 |  | 23,748
Borrowings and financing |  | (4,594,471) |  | (3,866,290)
Trade payables |  | (366,149) |  | (613,961)
Others |  | (23,079) |  | (149,532)
Natural Gross Foreign Exchange Exposure (assets - liabilities) |  | (3,449,813) |  | (2,737,340)
Cash flow hedge accounting |  | 4,409,760 |  | 2,655,350
Exchange rate swap CDI x Dollar |  | (67,000) |  | (67,000)
Exchange rate swap Real x Dollar |  | (115,000) |  |
Net foreign exchange exposure |  | 777,947 |  | (148,990)
CSN uses Hedge Accounting strategy, as well as derivative financial instruments to protect future cash flows. Sensitivity analysis of derivative financial instruments and consolidated foreign exchange exposure The Company considered scenarios 1 and 2 to be 25% and 50% deterioration for currency volatility, using the exchange rate closing rate as of December 31, 2022, as a reference. The currencies used in the sensitivity analysis and their respective scenarios are shown below:
Schedule of scenarios |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  | 12/31/2022
Currency |  | Exchange rate |  | Probable scenario |  | Scenario 1 |  | Scenario 2
USD |  | 5.2177 |  | 5.2070 |  | 6.5221 |  | 7.8266
EUR |  | 5.5694 |  | 5.5580 |  | 6.9618 |  | 8.3541
USD x EUR |  | 1.0674 |  | 1.0674 |  | 1.3343 |  | 1.6011
The effects on the result, considering scenarios 1 and 2, are shown below:
Schedule of sensitivity analysis effects on income statement |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  | 12/31/2022
Instruments |  | Notional |  | Risk |  | Probable scenario (*) R$ |  | Scenario 1 R$ |  | Scenario 2 R$
Gross exchange position |  | (3,449,813) |  | Dollar |  | 36,913 |  | (4,500,022) |  | (9,000,045)
Cash flow hedge accounting |  | 4,409,760 |  | Dollar |  | (47,184) |  | 5,752,201 |  | 11,504,402
Exchange rate swap CDI x Dollar |  | (67,000) |  | Dollar |  | 717 |  | (87,396) |  | (174,793)
Exchange rate swap Real x Dollar |  | (115,000) |  | Dollar |  | 1,230 |  | (150,009) |  | (300,018)
Net exchange position |  | 777,947 |  | Dollar |  | (8,324) |  | 1,014,774 |  | 2,029,546
(*) |  | The probable scenarios were calculated considering the following variations for the risks: Real x Dollar – valuation of the Real by 0.21% / Real x Euro - valuation of the Real by 0.20% / Euro x Dollar - no variation. Source: Central Bank of Brazil and European Central Bank quotations on March 1, 2023.
| · | Interest rate risk
This risk arises from financial investments, borrowings and financing and debentures linked to the fixed and floating interest rates of the CDI, TJLP and LIBOR, exposing these financial assets and liabilities to interest rate fluctuations as shown in the sensitivity analysis table below. With the modification of the global financial market in recent years and in line with the recommendations of international regulatory bodies, the market began to transition from the Libor rate (London Interbank Offered Rate) to the SOFR (Secured Overnight Financing Rate) as of 2022. The Company has not yet migrated its contracts to SOFR, as it is awaiting guidance from the financial market to transition the rate of its contracts. Sensitivity analysis of changes in interest rates We present below the sensitivity analysis for interest rate risks. The Company considered scenarios 1 and 2 to be 25% and 50% deterioration for interest rate volatility using the closing rate as of December 31, 2022, as a reference. The interest rates used in the sensitivity analysis and their scenarios are shown below:
Schedule of sensitivity analysis of interest rates |  |  |  |  |  |
|  |  |  |  |  | 12/31/2022
Interest |  | Interest rate |  | Scenario 1 |  | Scenario 2
CDI |  | 13.65% |  | 17.06% |  | 20.48%
TJLP |  | 7.20% |  | 9.00% |  | 10.80%
LIBOR |  | 5.14% |  | 6.42% |  | 7.71%
SELIC |  | 13.75% |  | 17.19% |  | 20.63%
The effects on profit and loss, considering scenarios 1 and 2, are shown below:
Schedule of effects on profit and loss |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  | Consolidated
Changes in interest rates |  | % p.a |  | Assets |  | Liabilities |  | Probable scenario (*) |  | Scenario 1 |  | Scenario 2
CDI |  | 13.65 |  | 5,026,521 |  | (14,249,092) |  | (10,481,452) |  | (10,796,172) |  | (11,110,892)
TJLP |  | 7.20 |  |  |  | (1,044,833) |  | (1,120,061) |  | (1,138,868) |  | (1,157,675)
Libor |  | 5.14 |  |  |  | (6,936,984) |  | (7,293,466) |  | (7,382,586) |  | (7,471,707)
Selic |  | 13.75 |  |  |  | (14,596) |  | (16,603) |  | (17,105) |  | (17,606)
(*) |  | The sensitivity analysis is based on the premise of maintaining the market values as of December 31, 2022 as a probable scenario recorded in the company´s assets and liabilities.
| · | Market price risk
The Company is also exposed to market risks related to the volatility of commodity and input prices. In line with its risk management policy, risk mitigation strategies involving commodities can be used to reduce cash flow volatility. These mitigation strategies may incorporate derivative instruments, predominantly forward transactions, futures, and options. Below are the instruments for price risk protection, as shown in the following topics: a) Cash flow hedge accounting - “Platts” index The Company has derivative operations for iron ore, contracted by the subsidiary CSN Mineração, with the objective of reducing the volatility of its exposure to the commodity. In order to better reflect the accounting effects of the Platts hedge strategy in the result, CSN Mineração opted to make the formal designation of the hedge and consequently adopted hedge accounting of the iron ore derivative as a hedge accounting instrument of its highly probable future iron ore sales. With this, the mark-to-market resulting from the volatility of Platts will be temporarily recorded in shareholders' equity and will be taken to the result when the referred sales occur according to the contracted period of assessment, thus allowing the recognition of the volatility of Platts on the sales of iron ore to be recognized at the same moment. The table below shows the result of the derivative instrument until December 31, 2022:
Schedule of dollar x Euro swap |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  | 12/31/2022 |  | 12/31/2022 |  | 12/31/2021 |  | 12/31/2022 |  | 12/31/2021 |  | 12/31/2022 |  | 12/31/2021
|  |  |  | Appreciation (R$) |  | Fair value (market) |  | Other income and expenses (note 27) |  | Other comprehensive income |  | Exchange variation
Maturity |  | Notional |  | Asset position |  | Liability position |  | Amounts receivable / (payable) |  |  |
02/02/2021 to 10/02/2021 (Settled) |  | Platts |  |  |  |  |  |  |  |  |  | (27,728) |  |  |  |  |  |  |  | 16,790
05/31/2022 (Settled) |  | Platts |  |  |  |  |  |  |  | 23,374 |  |  |  |  |  |  |  | (1,087) |  |
12/01/2022 to 12/31/2022 |  | Platts |  | 797,721 |  | (873,385) |  | (75,664) |  | (75,664) |  |  |  |  |  |  |  | 667 |  |
01/01/2023 to 01/31/2023 |  | Platts |  | 1,098,354 |  | (1,218,934) |  | (120,580) |  |  |  |  |  | 120,580 |  |  |  | (1,484) |  |
02/01/2023 to 02/28/2023 |  | Platts |  | 1,087,106 |  | (1,197,361) |  | (110,255) |  |  |  |  |  | 110,255 |  |  |  | (1,244) |  |
03/01/2023 to 03/31/2023 |  | Platts |  | 696,149 |  | (770,062) |  | (73,913) |  |  |  |  |  | 73,913 |  |  |  | (938) |  |
04/01/2023 to 04/30/2023 |  | Platts |  | 372,109 |  | (385,572) |  | (13,463) |  |  |  |  |  | 13,463 |  |  |  | (131) |  |
05/01/2023 to 05/31/2023 |  | Platts |  | 392,861 |  | (404,946) |  | (12,085) |  |  |  |  |  | 12,085 |  |  |  | (81) |  |
06/01/2023 to 06/30/2023 |  | Platts |  | 396,961 |  | (407,934) |  | (10,973) |  |  |  |  |  | 10,973 |  |  |  | (35) |  |
|  |  |  | 4,841,261 |  | (5,258,194) |  | (416,933) |  | (52,290) |  | (27,728) |  | 341,269 |  |  |  | (4,333) |  | 16,790
The changes in the amounts related to cash flow hedge accounting - Platts index recorded in shareholders' equity on December 31, 2022, are shown as follows:
Schedule of fair value of cash flow accounting platts, net |  |  |  |  |  |  |
| 12/31/2021 |  | Movement |  | Realization |  | 12/31/2022
Cash flow hedge accounting – “Platts” |  |  | 393,559 |  | (52,290) |  | 341,269
Income tax and social contribution on cash flow hedge accounting |  |  | (133,810) |  | 17,779 |  | (116,031)
Fair Value of cash flow accounting - Platts, net |  |  | 259,749 |  | (34,511) |  | 225,238
The cash flow hedge accounting - Platts index - has been fully effective since the derivative instruments were contracted. To support the above-mentioned designations, the Company prepared formal documentation indicating how the designation of cash flow hedge accounting - Platts index is aligned with CSN's risk management objective and strategy, identifying the hedge instruments used, the hedge object, the nature of the risk to be protected and demonstrating the expectation of high effectiveness of the relations designated. Iron ore derivative instruments (“Platts” index) were designated in amounts equivalent to the portion of future sales, comparing the amounts designated with the amounts expected and approved in the Management and Board budgets. Sensitivity analysis for Platts price risks We present below the sensitivity analysis for Platts price risks. The Company considered scenarios 1 and 2 to be 25% and 50% devaluation in the share price using the closing rate on December 31, 2022, as a reference. The effects on the result, considering probable scenarios 1 and 2, are shown below:
Schedule of sensitivity analysis for platts price risks |  |  |  |  |  |
|  | 12/31/2022
Maturity |  | Probable scenario R$ |  | Scenario 1 R$ |  | Scenario 2 R$
01/01/2023 to 01/31/2023 |  | (187,669) |  | (362,057) |  | (654,139)
02/01/2023 to 02/28/2023 |  | (187,132) |  | (359,922) |  | (649,327)
03/01/2023 to 03/31/2023 |  | (129,814) |  | (241,817) |  | (429,410)
04/01/2023 to 04/30/2023 |  | (44,186) |  | (100,637) |  | (195,186)
05/01/2023 to 05/31/2023 |  | (47,457) |  | (107,165) |  | (207,171)
06/01/2023 to 06/30/2023 |  | (44,919) |  | (104,839) |  | (205,199)
|  | (641,177) |  | (1,276,437) |  | (2,340,432)
b) Cash flow hedge accounting Foreign exchange hedge The Company and its subsidiary CSN Mineração formally designates relations of hedge of cash flows to protect highly probable future flows exposed to the dollar related to sales made in dollars. With the objective of better reflecting the accounting effects of the hedge exchange rate in the result, CSN and its subsidiary CSN Mineração designated part of their dollar liabilities as an instrument of future hedge exports. As a result, the exchange rate variation resulting from the designated liabilities will be temporarily recorded in shareholders’ equity and will be reflected in the income statement when said exports occur, thus allowing the recognition of dollar fluctuations on liabilities and on exports to be recorded at the same time. It is noteworthy that the adoption of this hedge accounting does not imply the contracting of any financial instrument. The table below presents a summary of the relations of hedge as of December 31, 2022:
Schedule of hedging instruments |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2022
Designation Date |  | Hedging Instrument |  | Hedged item |  | Type of hedged risk |  | Hedged period |  | Exchange rate on designation |  | Designated amounts (US$’000) |  | Amortizated part (USD'000) |  | Effect on Result (*) (R$'000) |  | Impact on Shareholders' equity (R$'000)
07/23/2015 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | August 2018 - October 2022 |  | 3.2850 |  | 30,000 |  | (30,000) |  | (11,832) |  |
07/24/2015 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | August 2018 - October 2022 |  | 3.3254 |  | 100,000 |  | (100,000) |  | (39,382.00000) |  | -
07/27/2015 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | August 2018 - October 2022 |  | 3.3557 |  | 25,000 |  | (25,000) |  | (1,583.00000) |  | -
07/27/2015 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | August 2018 - October 2022 |  | 3.3557 |  | 70,000 |  | (70,000) |  | (26,068.00000) |  | -
07/27/2015 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | August 2018 - October 2022 |  | 3.3557 |  | 30,000 |  | (30,000) |  | (20,038.00000) |  | -
07/28/2015 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | August 2018 - October 2022 |  | 3.3815 |  | 30,000 |  | (30,000) |  | (11,253.00000) |  | -
3/8/2015 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | July 2018 - October 2022 |  | 3.3940 |  | 355,000 |  | (355,000) |  | (22,356) |  | -
2/4/2018 |  | Bonds |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | July 2018 - February 2023 |  | 3.3104 |  | 1,170,045 |  | (1,093,045) |  | (389,596) |  | 290,375
07/31/2019 |  | Bonds and Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | January 2020 - April 2026 |  | 3.7649 |  | 1,342,761 |  | (829,661) |  | (770,870) |  | 745,432
10/1/2020 |  | Bonds |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | March 2027 - January 2028 |  | 4.0745 |  | 1,416,000 |  | (1,287,000) |  | (67,766) |  | 1,362,073
01/28/2020 |  | Bonds |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | March 2027 - January 2028 |  | 4.2064 |  | 1,000,000 |  | - |  | - |  | 1,011,300
1/6/2022 |  | Bonds and Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | June 2022 - April 2032 |  | 4.7289 |  | 1,145,300 |  | (62,200) |  | (32,290) |  | 529,419
1/6/2022 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | June 2022 - May 2033 |  | 4.7289 |  | 878,640 |  | (61,080) |  | (33,265) |  | 399,623
1/12/2022 |  | Bonds |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | December 2022 - June 2031 |  | 5.0360 |  | 490,000 |  |  |  |  |  | 89,033
1/12/2022 |  | Advance on foreign exchange contract |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | December 2022 - November 2023 |  | 5.1643 |  | 60,000 |  |  |  |  |  | 3,204
1/12/2022 |  | Advance on foreign exchange contract |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | December 2022 - December 2025 |  | 5.2565 |  | 100,000 |  |  |  |  |  | (3,880)
1/12/2022 |  | Advance on foreign exchange contract |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | December 2022 - January 2024 |  | 5.2660 |  | 50,000 |  |  |  |  |  | (2,415)
1/12/2022 |  | Advance on foreign exchange contract |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | December 2022 - November 2023 |  | 5.3270 |  | 20,000 |  |  |  |  |  | (2,186)
1/12/2022 |  | Export prepayments in US$ to third parties |  | Part of the highly probable future monthly iron ore exports |  | Foreign exchange - R$ vs. US$ spot rate |  | December 2022 - June 2027 |  | 5.0360 |  | 70,000 |  |  |  |  |  | 12,719
Total |  |  |  |  |  |  |  |  |  |  |  | 8,382,746 |  | (3,972,986) |  | (1,426,299) |  | 4,434,697
(*) |  | The realization of Hedge accounting cash flow is recognized in Other operating income and expenses, note 27.
The net balance of amounts designated and already amortized in dollars totals US$4,409,760. In the hedging relationships described above, the amounts of the debt instruments were fully designated for equivalent iron ore export portions. As of December 31, 2022, the hedging relationships established by the Company were effective according to the retrospective and prospective tests performed. Thus, no reversal for cash flow hedge accounting ineffectiveness was recognized. c) Net investment hedge in foreign subsidiaries The information related to the net investment hedge did not change in relation to that disclosed in the Company's financial statements as of December 31, 2021. The balance recorded as of December 31, 2022 and December 31, 2021 is R$6,293. d) Hedge accounting movements The changes in the amounts related to cash flow hedge accounting recorded in shareholders’ equity as of December 31, 2022 are shown as follows:
Schedule of hedge accounting movements |  |  |  |  |  |  |
|  |  |  |  |  |  | Consolidated
| 12/31/2021 |  | Movement |  | Realization |  | 12/31/2022
Cash flow hedge accounting | 5,763,400 |  | 97,596 |  | (1,426,299) |  | 4,434,697
Income tax and social contribution on cash flow hedge accounting | (1,959,556) |  | (33,183) |  | 484,942 |  | (1,507,797)
Fair Value of cash flow accounting, net taxes | 3,803,844 |  | 64,413 |  | (941,357) |  | 2,926,900
| · | Credit risk
The exposure to credit risks of financial institutions considers the parameters established in the financial policy. The Company practices a detailed analysis of the financial situation of its customers and suppliers, the determination of a credit limit and the permanent monitoring of its outstanding balance. With regard to financial investments, the Company only invests in institutions with low credit risk assessed by credit rating agencies. Since part of the funds is invested in repo operations that are backed by Brazilian government bonds, there is also exposure to the credit risk of the country. As for the exposure to credit risk in accounts receivable and other receivables, the Company has a credit risk committee, in which each new customer is analyzed individually regarding their financial condition, before granting the credit limit and payment terms, and periodically reviewed based on procedures and circumstances of each business area.
| · | Liquidity risk
It is the risk that the Company may not have sufficient net funds to honor its financial commitments as a result of the mismatch of term or volume between expected receipts and payments. Future receipt and payment premises are established to manage cash liquidity in domestic and foreign currencies, which are monitored on a day-to-day basis by the Treasury Department. The payment schedules for long-term installments of borrowings, financing and debentures are shown in note 13. The following are the contractual maturities of financial liabilities including interest.
Schedule of contractual maturities of financial liabilities including interest |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  | Consolidated
At December 31, 2022 | Less than one year |  | From one to two years |  | From two to five years |  | Over five years |  | Total
Borrowings, financing and debentures (note 13) | 5,269,952 |  | 3,874,476 |  | 11,087,002 |  | 21,209,518 |  | 41,440,948
Lease Liabilities (note 15) | 177,010 |  | 155,938 |  | 139,118 |  | 221,780 |  | 693,846
Derivative financial instruments (note 14 a) | 416,935 |  | 69,472 |  |  |  |  |  | 486,407
Trade payables (note 16) | 6,596,915 |  | 27,838 |  | 18,411 |  | 20 |  | 6,643,184
Trade payables - Drawee Risk (note 17) | 5,709,069 |  |  |  |  |  |  |  | 5,709,069
Dividends and interest on equity (note 17) | 611,307 |  |  |  |  |  |  |  | 611,307
| 18,781,188 |  | 4,127,724 |  | 11,244,531 |  | 21,431,318 |  | 55,584,761
IV - Fair values of assets and liabilities in relation to the book value Financial assets and liabilities measured at fair value through profit or loss are recorded in current and non-current assets and liabilities and gains and losses are recorded as financial income and expenses, respectively. The amounts are recorded in the financial statements at their book values, which are substantially similar to those that would be obtained if they were traded on the market. The fair values of other long-term assets and liabilities do not differ significantly from their book values, except for the amounts below. The estimated fair value for certain consolidated long-term borrowings and financing was calculated at current market rates, considering the nature, term and risks similar to those of the registered contracts, as follows:
Schedule of Fair values of assets and liabilities in book value |  |  |  |  |  |  |
|  |  | 12/31/2022 |  |  |  | 12/31/2021
| Closing Balance |  | Fair value |  | Closing Balance |  | Fair value
Fixed Rate Notes | 15,656,088 |  | 13,782,836 |  | 15,617,091 |  | 15,700,276
(*) |  | Source: Bloomberg
| 14.c) | Derivative financial instruments portfolio position
Swap exchange rate Dollar x Euro The subsidiary Lusosider Produtos Siderúrgicos S.A. has derivative transactions to hedge its dollar exposure against the euro. The operation was settled in 2021. Swap exchange rate CDI x Dollar The Company has derivative transactions to protect its debt in NCE raised in September 2019 with maturity in October 2023 in the amount of US$67 million (equivalent to R$278 million) at a cost compatible with that usually practiced by the Company. Swap exchange rate Real x Dollar The subsidiary CSN Cimentos, after contracting a borrowing in foreign currency of US$115,000, contracted derivative operations to protect its exposure to the dollar, maturing on June 10, 2027. Swap exchange rate CDI x IPCA The subsidiaries CSN Mineração and CSN Cimentos issued debentures during 2021 and 2022, respectively, and entered derivative transactions to hedge their exposure to the IPCA. CSN Mineração's contracts have maturities scheduled from 2031 to 2037, while CSN Cimentos' contracts mature in 2032. Below is the position of the derivatives:
Schedule of position of the derivatives |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  | 12/31/2022 |  | 12/31/2021 |  | 12/31/2020
|  |  |  |  |  |  |  | Appreciation (R$) |  | Fair value (market) |  | Impact on financial income (expenses) (note 28)
Instrument |  | Maturity |  | Functional Currency |  | Notional amount |  | Asset position |  | Liability position |  | Amounts receivable / (payable) |
Exchange rate swap |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Exchange rate swap Dollar x Euro |  | Settled |  | Dollar |  |  |  |  |  |  |  |  |  |  |  | 7,119 |  | (9,672)
Exchange rate swap Dollar x Real |  | Settled |  | Dollar |  | 100,000 |  |  |  |  |  |  |  | 176,991 |  | 37,322 |  |
Exchange rate swap CDI x Dollar |  | 10/02/2023 |  | Dollar |  | 67,000 |  | 297,020 |  | (355,025) |  | (58,005) |  | 43,817 |  | (9,960) |  | (106,143)
Exchange rate swap Real x Dollar |  | 10/6/2027 |  | Dollar |  | 115,000 |  | 622,776 |  | (634,243) |  | (11,467) |  | (11,467) |  |  |  |
Total Swap |  |  |  |  |  | 282,000 |  | 919,796 |  | (989,268) |  | (69,472) |  | 209,341 |  | 34,481 |  | (115,815)
Interest rate swap |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate (Debentures) CDI x IPCA |  | 07/15/2031 |  | Real |  | 576,448 |  | 612,994 |  | (649,635) |  | (36,641) |  | (67,471) |  | (17,432) |  |
Interest rate (Debentures) CDI x IPCA |  | 07/15/2032 |  | Real |  | 745,000 |  | 813,924 |  | (850,497) |  | (36,573) |  | (36,571) |  |  |  |
Interest rate (Debentures) CDI x IPCA |  | 07/15/2036 |  | Real |  | 423,552 |  | 449,550 |  | (492,040) |  | (42,490) |  | (25,057) |  | (17,488) |  |
Interest rate (Debentures) CDI x IPCA |  | 07/15/2037 |  | Real |  | 655,382 |  | 691,974 |  | (717,553) |  | (25,579) |  | (25,579) |  |  |  |
Interest rate (Debentures) CDI x IPCA |  | 02/16/2032 |  | Real |  | 600,000 |  | 657,792 |  | (666,223) |  | (8,431) |  | (24,089) |  |  |  |
Interest rate (Debentures) CDI x IPCA |  | 12/2/2032 |  | Real |  | 600,000 |  | 658,086 |  | (666,351) |  | (8,265) |  | (79,130) |  |  |  |
Total interest rate (Debentures) CDI x IPCA |  |  |  |  |  | 3,600,382 |  | 3,884,320 |  | (4,042,299) |  | (157,979) |  | (257,897) |  | (34,920) |  |
|  |  |  |  |  |  |  | 4,804,116 |  | (5,031,567) |  | (227,451) |  | (48,556) |  | (439) |  | (115,815)
| · | Classification of derivatives in the balance sheet and income statement
Schedule of balance sheet and statement of income |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 12/31/2022 |  | 12/31/2021 |  | 12/31/2020
Instruments |  | Liabilities |  | Financial income (expenses), net (note 28)
| Non-current |  | Total |
Exchange rate swap (NDF) Dollar x real (settled) |  |  |  |  |  | 176,991 |  | 37,322 |  |
Exchange rate swap Dollar x Euro (Settled) |  |  |  |  |  |  |  | 7,119 |  | (9,070)
Exchange rate swap GBP x Euro |  |  |  |  |  |  |  |  |  | (602)
Exchange rate swap CDI x Dollar |  | (58,005) |  | (58,005) |  | 43,817 |  | (9,960) |  | (106,143)
Interest rate swap CDI x IPCA |  | (157,979) |  | (157,979) |  | (257,897) |  | (34,920) |  |
|  | (227,451) |  | (227,451) |  | (48,556) |  | (439) |  | (115,815)
Derivative instruments SWAP CDI x IPCA are fully classified in the borrowings and financing group, since they are linked to debentures in order to protect exposure to the IPCA.
| 14.d) | Investments in securities measured at fair value through profit or loss
The Company has common shares (USIM3), preferred shares (USIM5) of Siderúrgica de Minas Gerais S.A. (“Usiminas”) and shares of Panatlântica S.A. (PATI3), which are designated as fair value through profit or loss. Usiminas shares are classified as current assets in financial investments and Panatlântica shares are classified as non-current assets under the investment line item. They are recorded at fair value, based on the market price quote in B3. In accordance with the Company’s policy, the gains and losses arising from the variation in the share price are recorded directly in the income statement as financial result in the case of financial investments, or as other operating income and expenses in the case of long-term investments.
Schedule of other operating income and expenses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Class of shares |  | 12/31/2022 |  | 12/31/2021 |  | 12/31/2022 |  | 12/31/2021 |  | 12/31/2020
| Quantity |  | Equity interest (%) |  | Share price |  | Closing Balance |  | Quantity |  | Equity interest (%) |  | Share price |  | Closing Balance |  | Profit or loss (notes 27 and 28)
USIM3 |  | 106,620,851 |  | 15.12% |  | 7.41 |  | 790,061 |  | 106,620,851 |  | 15.12% |  | 14.51 |  | 1,547,069 |  | (757,008) |  | (121,593) |  | 623,652
USIM5 |  | 55,144,456 |  | 10.07% |  | 7.16 |  | 394,834 |  | 55,144,456 |  | 10.07% |  | 15.16 |  | 835,990 |  | (441,156) |  | 506,890 |  | 566,837
|  |  |  |  |  |  |  | 1,184,895 |  |  |  |  |  |  |  | 2,383,059 |  | (1,198,164) |  | 385,297 |  | 1,190,489
PATI3 |  | 2,705,726 |  | 11.31% |  | 35.00 |  | 94,700 |  | 2,705,726 |  | 11.31% |  | 70.34 |  | 190,321 |  | (95,620) |  | 109,254 |  | 12,579
|  |  |  |  |  |  |  | 1,279,595 |  |  |  |  |  |  |  | 2,573,380 |  | (1,293,784) |  | 494,551 |  | 1,203,068
| · | Stock market price risks
The Company is exposed to the risk of changes in the stock price due to the investments measured at fair value through profit or loss that have their quotations based on the market price on the B3. Sensitivity analysis for stock price risks We present below the sensitivity analysis for the stock price risks. The Company considered scenarios 1 and 2 with 25% and 50% devaluation in the stock price using as reference the closing price on December 31, 2022. The probable scenario considered a 5% devaluation in the stock price. The effects on the result, considering probable scenarios, 1 and 2 are demonstrated below:
Schedule of sensitivity analysis for stock price risks |  |  |  |  |  |
|  |  |  | 12/31/2022
Class of shares |  | Probable scenario |  | Scenario 1 |  | Scenario 2
|  | 5% |  | 25% |  | 50%
USIM3 |  | (39,503) |  | (197,515) |  | (395,030)
USIM5 |  | (19,742) |  | (98,709) |  | (197,417)
PATI3 |  | (4,735) |  | (23,675) |  | (47,350)
| 14.e) | Capital management
The Company seeks to optimize its capital structure in order to reduce its financial costs and maximize the return to its shareholders. The table below shows the evolution of the Company’s consolidated capital structure, with financing by equity and third-party capital:
Schedule of capital management |  |  |  |
Thousands of reais |  | 12/31/2022 |  | 12/31/2021
Shareholder's equity (equity) |  | 21,907,929 |  | 23,374,389
Borrowings and Financing (Third-party capital) |  | 40,918,742 |  | 32,507,522
Gross Debit/Shareholder's equity |  | 1.87 |  | 1.39
Accounting Policy
The Company’s financial instruments are classified according to the definition of the business model adopted by the Company and the characteristics of the cash flow, in the case of financial assets. Upon initial recognition, financial assets can be classified into three categories: assets measured at amortization cost, fair value through profit or loss and fair value through other comprehensive income. Financial assets are derecognized when the rights to receive cash flows have expired or have been transferred; in the latter case, provided that the Company has substantially transferred all risks and rewards of ownership. If the company substantially holds all the risks and rewards of ownership of the financial asset, it must continue to recognize the financial asset. Financial liabilities are classified as amortized cost or fair value through profit or loss. Management determines the classification of its financial liabilities upon initial recognition. Financial liabilities are derecognized only when they are extinguished, that is, when the obligation specified in the contract is settled, canceled, or expires. The Company also derecognizes a financial liability when the terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognized at fair value. Financial assets and liabilities are offset and the net amount presented in the balance sheet when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle them on a net basis, or realize the asset and settle the liability simultaneously. Derivative Financial Instruments and Hedging Activities Initially, derivatives are recognized at fair value on the date that a derivative contract is entered and are subsequently measured at fair value with the changes recorded in the income statement in the caption Financial Result in the income statement. Hedge accounting: The Company adopts hedge accounting and designates certain financial liabilities as a hedging instrument for foreign exchange risk and price risk (“Platts” index) associated with cash flows arising from forecasted and highly probable exports (cash flow hedge). The Company documents, at the inception of the transaction, the relationships between the hedging instruments and the hedged items (expected exports), as well as the risk management objectives and strategy for undertaking various hedging transactions. In addition, it documents its assessment, both at the hedge's inception and on an ongoing basis, that the hedge transactions are highly effective in offsetting changes in cash flows of hedged items. The effective portion of the changes in the fair value of financial liabilities designated and qualifying as cash flow hedge is recognized in equity, under “Hedge Accounting”. Gains or losses related to the ineffective portion are recognized in other operating expenses/income, when applicable. Gains and losses from cash flow hedge accounting of debt financial instruments and iron ore derivative financial instruments will not immediately affect the Company's result, but only to the extent that exports are realized. The amounts accumulated in equity are realized in the operating result in the periods when the forecast exports affect the result. When a hedge instrument expires or is settled early, or when the hedge relationship no longer meets the criteria for hedge accounting, or when Management decides to discontinue hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity, and from that time onwards the foreign exchange variations are recorded in the financial result. When the forecast transaction is realized, the gain or loss is reclassified to operating income. When a forecast transaction is no longer expected to take place, the cumulative gain or loss that had been reported in equity is immediately transferred to the income statement under “Other operations”. Investment hedge: The Company designates for net investment hedge a portion of its financial liabilities as a hedging instrument of its investments abroad with functional currency different from the Group's currency in accordance with IAS 39 and IFRS 9. This relationship occurs because financial liabilities are related to investments in the amounts necessary for the effective relationship. The Company documents, at the inception of the transaction, the relationships between hedging instruments and hedged items, as well as the risk management objectives and strategy for undertaking hedging transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, that the hedging transactions are highly effective in offsetting changes in the hedged items. The effective portion of changes in the fair value of financial liabilities that are designated and qualify as net investment hedges is recognized in equity under Hedge Accounting. The gains or losses related to the ineffective portion are recognized in Other Operations, when applicable. If at any time during the hedge relationship the debt balance is greater than the investment balance, the exchange variation on the excess debt is reclassified to the income statement as other operating income/expenses (hedge ineffectiveness). The amounts accumulated in the equity will be realized in the income statement by the disposal or partial disposal of the foreign operation.

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