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FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2024
Notes and other explanatory information [abstract]  
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

 

                               
                                Consolidated
            12/31/2024       12/31/2023
  Ref.   Fair value through profit or loss   Measured at amortized cost   Balances   Fair value through other comprehensive income   Fair value through profit or loss   Measured at amortized cost   Balances
               
Assets                                
Current                                
Cash and cash equivalents   3     23,310,197    23,310,197         16,046,218    16,046,218
Financial investments   4    860,591   50,787   911,378        1,493,204    39,800    1,533,004
Trade receivables   5    181,262   2,719,736    2,900,998         3,269,764    3,269,764
Dividends and interest on equity   8     201,436   201,436          185,178   185,178
Derivative financial instruments   8    152,967       152,967       32,211        32,211
Trading securities   8    2,947        2,947        7,198        7,198
Loans - related parties   22.a     5,315    5,315         5,316    5,316
Total        1,197,767   26,287,471    27,485,238      1,532,613   19,546,276    21,078,889
                                 
Non-current                                
Financial investments   4     169,977   169,977        251,299   251,299
Other trade receivables         1,888    1,888        10,406    10,406
Eletrobrás compulsory loan   8     51,012    51,012        62,913    62,913
Receivables by indemnity   8     790,914   790,914       992,577    992,577
Loans - related parties   22.a     1,903,028    1,903,028       1,659,412    1,659,412
Investments   9             78,737        78,737
Total         2,916,819    2,916,819     78,737   2,976,607    3,055,344
                                 
Total Assets        1,197,767   29,204,290    30,402,057      1,611,350   22,522,883    24,134,233
                                 
Liabilities                            
Current                                
Borrowings and financing    13     8,902,558    8,902,558       7,701,796    7,701,796
Lease liabilities   15     206,323   206,323        137,638   137,638
Trade payables   16     7,030,734    7,030,734       7,739,520    7,739,520
Trade payables - Forfaiting   16.a     2,902,593    2,902,593       4,209,434    4,209,434
Dividends and interest on capital   17     61,965    61,965        80,624    80,624
Derivative financial instruments   17            672,280   263,747       936,027
Total         19,104,173    19,104,173    672,280   263,747   19,869,012    20,805,039
                                 
Non-current                                
Borrowings and financing    13     48,656,020    48,656,020       37,772,116    37,772,116
Lease liabilities   15     633,982   633,982        596,123   596,123
Trade payables   16     43,263    43,263        31,060    31,060
Derivative financial instruments   14.c    157,857       157,857     60,468        60,468
Concessions to be paid   17     78,728    78,728        74,177    74,177
Total        157,857   49,411,993    49,569,850     60,468   38,473,476    38,533,944
                                 
Total Liabilities        157,857   68,516,166    68,674,023    672,280   324,215   58,342,488    59,338,983

 

·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:

 

                         
Consolidated           12/31/2024           12/31/2023
  Level 1   Level 2   Balances   Level 1   Level 2   Balances
Assets                        
Current                        
Financial investments   860,591       860,591   1,493,204        1,493,204
Trade receivables, net   181,262       181,262   576,538       576,538
Derivative financial instruments       152,967   152,967   32,211       32,211
Trading securities   2,947       2,947   7,198       7,198
Non-current                        
Investments               78,737       78,737
Total Assets   1,044,800   152,967    1,197,767   2,187,888    -     2,187,888
                         
Liabilities                        
Current                        
Derivative financial instruments                   263,747   263,747
Non-current                        
Derivative financial instruments       157,857   157,857       60,468   60,468
Total Liabilities    -    157,857   157,857    -    324,215   324,215

 

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 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 using derivative instruments not associated with any speculative trading or short selling.

 

i)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, 2024 is shown below:

 

     
    12/31/2024 12/31/2023
Foreign Exchange Exposure   (Amounts in US$’000)   (Amounts in US$’000)
Cash and cash equivalents overseas    1,951,025    2,228,736
Trade receivables    58,296   292,028
Financial investments    270,038    15,597
Borrowings and financing    (5,983,492)   (5,615,893)
Trade payables   (284,843)   (524,622)
Others   (37,185)   (42,474)
Natural Gross Foreign Exchange Exposure (assets - liabilities)   (4,026,161)   (3,646,628)
Derivative financial instruments (*)    5,098,257    3,979,979
Net foreign exchange exposure    1,072,096   333,351
(*) Total notional value of derivative and non-derivative financial instruments used for exchange risk management.

 

The Company uses Hedge Accounting as a 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 evaluated two different scenarios for the analysis of the exchange rate impact: Scenario 1 projects a horizon of increased currency volatility, and Scenario 2 predicts a horizon of currency appreciation. The calculation is based on the closing exchange rate on December 31, 2024, using assumptions based on a variance calculation that considers both historical exchange rate fluctuations and management's projections.

 

The currencies used in the sensitivity analysis and their respective scenarios are shown below:

 

               
                12/31/2024
Currency   Exchange rate   Probable scenario   Scenario 1   Scenario 2
USD    6.1923   5.7779   6.2560   5.0799
EUR    6.4363   6.0656   6.4654   5.3780
USD x EUR    1.0394   1.0498   1.0471   0.8606

 

The effects on profit or loss, considering scenarios 1 and 2, are shown below:

 

                   
                    12/31/2024
Instruments   Notional amount   Risk   Probable scenario (*) R$   Scenario 1 R$   Scenario 2 R$
Cash and cash equivalents overseas   1,951,025   Dollar   (139,931)   19,862    (427,219)
Trade receivables   58,296   Dollar   (4,181)    593    (12,765)
Financial investments   270,038   Dollar   (19,368)   2,749    (59,131)
Borrowings and financing     (5,983,492)   Dollar    429,145    (60,913)    1,310,215
Trade payables    (284,843)   Dollar    20,429    (2,900)   62,373
Others    (37,185)   Dollar    2,667   (379)    8,142
Derivative financial instruments   5,098,257   Dollar   (365,655)   51,902   (1,116,374)
Impact on profit or loss           (76,894)   10,914    (234,759)
(*) The probable scenarios were calculated considering the following variations for the risks: Real x Dollar - appreciation of 6.69% / Real x Euro - appreciation of the real by 5.76% / Euro x Dollar - depreciation of the dollar by 1.00%. Source: Central Bank of Brazil on February 26, 2025.

 

ii)Interest rate risk

 

This risk stems from financial investments, loans, and financing and debentures in short and long terms linked to pre-fixed and post-fixed interest rates of CDI, TJLP, SOFR, exposing these financial assets and liabilities to interest rate fluctuations as demonstrated in the sensitivity analysis chart below.

 

With the modification of the global financial market in debt instruments in recent years and in line with recommendations from international regulatory bodies, the market began transitioning from LIBOR (London Interbank Offered Rate) to SOFR (Secured Overnight Financing Rate) starting in 2022. On September 30, 2023, all contracts were migrated to SOFR, as evidenced in the interest rate sensitivity analysis.

 

Sensitivity analysis of interest rate changes

 

Below, we present the sensitivity analysis to risks related to interest rates. The Company considered two different scenarios to assess the impact of variations in these rates: Scenario 1 predicts a horizon of rising interest rates, and Scenario 2 projects a reduction horizon. The closing rates at December 31, 2024 were used as a reference for the calculation, based on a dispersion model that takes into account not only historical interest rate fluctuations but also detailed management projections.

 

This approach allows a comprehensive and precise assessment of potential economic impacts arising from interest rate fluctuations.

 

           
            Consolidated
            12/31/2024
Interest   Interest rate   Scenario 1   Scenario 2
CDI   12.15%   13.72%   10.56%
TJLP   7.43%   8.11%   6.72%
IPCA   4.83%   5.60%   4.27%
SOFR 6M   4.25%   5.31%   0.51%
SOFR   4.49%   5.28%   0.30%
EURIBOR 3M   2.71%   4.22%   1.73%
EURIBOR 6M   2.57%   4.19%   2.27%

 

The effects on profit or loss, considering scenarios 1 and 2, are shown below:

 

               
                Impact on balances on 12/31/2024
Changes in interest rates   % p.a   Assets   Liabilities   Probable scenario (*)   Scenario 1   Scenario 2
CDI   12.15%   9,268,751    (11,116,328)   (224,481)    (253,426)    (195,057)
TJLP   7.43%        (775,705)   (57,635)    (62,871)    (52,115)
IPCA   4.83%        (18,703)   (903)   (1,047)    (799)
SOFR 6M   4.25%       (4,411,472)   (187,488)    (234,120)    (22,423)
SOFR   4.49%       (3,992,233)   (179,251)    (210,660)    (12,141)
EURIBOR 3M   2.71%        (289,634)   (7,861)    (12,214)   (5,017)
EURIBOR 6M   2.57%        (19,550)   (502)    (819)    (445)
                (658,121)    (775,157)    (287,997)
(*) The sensitivity analysis is based on the premise of maintaining as a probable scenario the market values as of December 31, 2024 recorded in the Company's assets and liabilities.

 

iii)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 had iron ore derivative operations, contracted by the subsidiary CSN Mineração, with the objective of reducing the volatility of its exposure to the commodity. These contracts were settled in June 2024.

 

To better reflect the accounting effects of the "Platts" hedge strategy on the result, CSN Mineração opted to formally designate the hedge and, consequently, adopted hedge accounting for the iron ore derivative as a hedge accounting instrument for its highly probable future iron ore sales. As a result, the mark-to-market arising from the "Platts" volatility will be temporarily recorded in shareholders' equity and will be taken to the income statement when the sales occur according to the contracted evaluation period. This allows the recognition of "Platts" volatility on iron ore sales to be recognized at the same time.

 

The Company has periodically reviewed market scenarios to assess its exposure to iron ore price risk to ensure adequate coverage of market price fluctuations. This process involves monitoring fluctuations and trends in global prices, in addition to considering economic and geopolitical factors that may impact the value of this commodity.

 

The table below shows the profit or loss of the derivative instrument up to December 31, 2024:

 

                           
        12/31/2024   12/31/2023   12/31/2024   12/31/2023   12/31/2024   12/31/2023
        Other income and expenses (note 27)   Other comprehensive income   Impact on financial income/(expenses)
 Maturity    Notional      
11/01/2023 to 11/30/2023 (Settled)    Platts      (527,076)         (11,844)
12/01/2023 to 12/31/2023 (Settled)    Platts      (263,853)         599
01/01/2024 to 01/31/2024 (Settled)    Platts    (202,702)       (288,501)    (719)    4,477
02/01/2024 to 02/28/2024 (Settled)    Platts    (39,977)       (189,472)    (133)    3,370
03/01/2024 to 03/31/2024 (Settled)    Platts     248,710       (91,419)    5,132   889
04/01/2024 to 04/30/2024 (Settled)    Platts     192,625       (63,825)    9,922   789
05/01/2024 to 05/31/2024 (Settled)    Platts     81,139       (33,867)    5,244   365
06/01/2024 to 06/30/2024 (Settled)    Platts     173,111       (5,196)      32
         452,906   (790,929)   -    (672,280)    19,446   (1,323)

 

The reconciliation of the amounts related to cash flow hedge accounting - "Platts" index recorded in equity as of December 31, 2024 is demonstrated as follows:

 

               
  12/31/2023   Movement   Realization   12/31/2024
Cash flow hedge–“Platts”  (672,280)   1,125,186   (452,906)    
 Income tax and social contribution on cash flow hedge 228,575   (382,563)    153,988    
Fair Value of cash flow hedge - Platts, net  (443,705)    742,623   (298,918)    

 

The cash flow hedge - "Platts" index was fully effective since the contracting of derivative instruments.

 

To support the designations, the Company prepared formal documentation indicating how the cash flow hedge accounting designation - "Platts" index aligns with CSN's risk management objective and strategy, identifying the protection instruments used, the hedge object, the nature of the risk to be protected, and demonstrating the expectation of high effectiveness of the designated relationships. Iron ore derivative instruments ("Platts" index) were designated in amounts equivalent to the portion of future sales, comparing the designated amounts with the expected and approved amounts in the budgets of the Management and Board.

 

b) Cash flow hedge accounting

 

Foreign Exchange Hedge

 

The Company and its subsidiary CSN Mineração formally designate cash flow hedge relationships 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 foreign exchange hedge strategy in the results, CSN and its subsidiary CSN Mineração designated part of their dollar liabilities as a hedge instrument for their future exports. As a result, the exchange rate variation from designated liabilities will be temporarily recorded in shareholders' equity and will be transferred to the income statement when the respective exports occur, thus allowing the recognition of dollar fluctuations on the liability and exports to be recorded at the same time. It is emphasized that the adoption of this hedge accounting does not imply the contracting of any financial instrument.

 

The table below presents the summary of hedging relationships as of December 31, 2024:

 

                                   
                                    12/31/2024
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$'000)
07/31/2019   Bonds and Export prepayments in US$ 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   (871,761)        (1,143,305)
01/10/2020   Bonds   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    March 2020 to November 2025 until December 2050    4.0745    1,416,000    (1,404,021)        (1,348,422)
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            (1,985,900)
06/01/2022   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   (237,210)   (121,533)    (1,328,899)
12/1/2022   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   (37,000)       (523,804)
12/01/2022   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            (93,580)
05/16/2024   Export Prepayments in US$ with third parties, ACC and Bonds   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    September 2024 - March 2035    5.1270    1,202,000   (119,761)   (103,407)    (1,153,260)
06/06/2024   Advance on foreign exchange contract   Part of the highly probable future monthly iron ore exports   Foreign exchange - R$ vs. US$ spot rate    June 2024 - February 2025    5.2700    30,000            (27,669)
06/25/2024    Advance on foreign exchange contract     Part of the highly probable future monthly iron ore exports     Foreign exchange - R$ vs. US$ spot rate     June 2024 - February 2025    5.4405    10,000            (7,518)
12/01/2022   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   (50,000)    17,240    
06/01/2022   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   (157,810)   (33,700)    (1,054,796)
12/01/2022   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            (80,951)
05/16/2024   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 2025 - March 2035    5.1270   208,717           (222,346)
Total    7,943,418    (2,877,563)   (241,400)    (8,970,450)
(*) The realization of cash flow hedge accounting is recognized in Other operating revenues and expenses, in note 27.

 

The net balance of amounts designated and already amortized in US dollars totals US$ 2,877,563.

 

In the hedge relationships described above, the values of the debt instruments were fully designated for equivalent portions of iron ore exports.

 

As of December 31, 2024, the hedge relationships established by the Company were effective, according to the prospective and retrospective tests performed. Thus, no reversal due to ineffectiveness of cash flow hedge accounting was recorded.

 

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, 2023. The balance recorded as of December 31, 2024 and December 31, 2023 is R$ 6,292,800.

 

d) Hedge accounting transactions

 

The reconciliation of values related to cash flow hedge accounting recorded in equity as of December 31, 2024, is demonstrated as follows:

 

             
              Consolidated
  12/31/2023   Movement   Realization   12/31/2024
Cash flow hedge (2,509,225)   (6,702,625)    241,400   (8,970,450)
Income tax and social contribution on cash flow hedge 853,137    2,278,893    (82,076)    3,049,954
Fair Value of cash flow accounting, net taxes (1,656,088)   (4,423,732)    159,324   (5,920,496)

 

iv)Credit risk

 

The exposure to credit risks of financial institutions observes the parameters established in the financial policy. The Company's practice is the detailed analysis of the equity and financial situation of its customers and suppliers, the establishment of a credit limit and the permanent monitoring of its outstanding balance.

 

Regarding financial investments, the Company only makes investments in institutions with low credit risk assessed by rating agencies. Since part of the resources is invested in repurchase agreements that are backed by Brazilian government securities, there is also exposure to the credit risk of the Brazilian State.

 

Regarding credit risk exposure in trade and other receivables, the Company has a credit risk committee where each new customer is individually analyzed for their financial condition before credit limits and payment terms are granted. This is periodically reviewed according to the procedures specific to each business area.

 

v)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:

 

                       
                        Consolidated
At December 31, 2024   Ref.   Less than one year   From one to two years   From two to five years   Over five years   Total
Borrowings and financing   13.b    8,902,558    13,252,184    13,466,746    21,937,090    57,558,578
Lease liabilities   15    206,323    258,881    124,395    250,706   840,305
Derivative financial instruments   14.c          157,857   157,857
Trade payables   16    7,030,734    2,284    40,509   470    7,073,997
Trade payables - Forfaiting   16.a    2,902,593          2,902,593
Dividends and interest on capital   17    61,965          61,965
Concessions to be paid   17    1,706    3,411    3,411    70,200    78,728
         19,105,879    13,516,760    13,635,061    22,416,323    68,674,023

 

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 any gains and losses are recorded as financial income and expense, respectively.

The amounts are recorded in the financial statements at their book value, which are substantially similar to those that would be obtained if they were traded in the market. The fair values of other long-term assets and liabilities do not differ significantly from their carrying amounts, except for the amounts below.

 

The estimated fair value for certain consolidated long-term loans and financing were calculated at current market rates, considering the nature, term and risks similar to those of the registered contracts, as follows:

 

             
      12/31/2024       12/31/2023
  Closing Balance   Fair value   Closing Balance   Fair value
Fixed Rate Notes (*)  22,204,604    19,584,985    15,030,441    12,825,475
(*) Source: Bloomberg

 

14.c)Derivative financial instruments portfolio position

 

Position of the derivative financial instruments portfolio

 

Currency swap Dollar x Euro

 

The subsidiary Lusosider Projectos Siderúrgicos S.A. had a derivative operation to protect its exposure to the dollar, which was settled in November 2024.

 

Foreign exchange swap CDI x Dollar

 

In October 2023, the Company entered into a new swap agreement with the purpose of mitigating the risk associated with an External Credit Note (NCE) acquired during the same period, whose maturity is scheduled for October 2028, and which has a principal amount of R$ 680,000.

 

Real x dollar foreign exchange swap

 

The CSN Cimentos Brasil subsidiary, after raising a foreign currency loan in the amount of US$ 115,000, contracted derivative instruments with the objective of protecting its foreign exchange exposure to the dollar, with maturity on June 10, 2027.

 

On July 2024, CSN Cimentos Brasil, again, after obtaining a foreign currency loan in the amount of US$ 50,000, contracted derivative operations to hedge its exposure to the dollar, maturing in July 2027.

 

Interest swap CDI x IPCA

 

CSN Mineração, CSN Cimentos Brasil and CSN issued debentures during the years 2021, 2022 and 2023, respectively, and contracted derivative operations to protect their exposure to IPCA. The CSN Mineração contracts have staggered maturities between 2031 and 2037, the CSN Cimentos contracts mature in 2038, and CSN's between 2030 and 2038.

 

Below is the position of the derivatives:

 

                               
                                Consolidated
                            12/31/2024   12/31/2023
                Appreciation (R$)   Fair value (market)   Financial income (expenses), net (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    Euro                     9,567
Exchange rate swap CDI x Dollar    Settled    Dollar                     31,469
Exchange Dollar x Real swap   06/10/2027    Dollar    115,000   719,109   (624,533)    94,576    129,972   (96,602)
Exchange rate swap Dollar x Real   07/07/2027    Dollar     50,000   551,303   (492,911)    58,392   58,392  
Exchange rate swap CDI x Dollar    10/04/2028    Real    680,000   734,317   (892,174)    (157,857)   (146,529)    12,122
Total Exchange rate Swap            845,000    2,004,729    (2,009,618)   (4,889)   41,835   (43,444)
Interest rate swap                          
Interest rate (debentures) CDI x IPCA   07/15/2031    Real    576,448   624,835   (635,788)   (10,953)   (106,533)    55,829
Interest rate (debentures) CDI x IPCA   07/15/2032    Real    745,000   806,323   (848,805)   (42,482)   (118,657)    5,842
Interest rate (debentures) CDI x IPCA   07/15/2036    Real    423,552   440,113   (480,919)   (40,806)    (77,496)    49,964
Interest rate (debentures) CDI x IPCA   07/15/2037    Real    655,000   716,016   (773,952)   (57,936)   (104,307)   (53,027)
Interest rate (debentures) CDI x IPCA   02/16/2032    Real    600,000   661,747   (663,497)   (1,750)    (98,304)    22,690
Interest rate (debentures) CDI x IPCA   12/02/2032    Real    600,000   663,534   (658,028)    5,506    (74,648)    16,462
Interest rate (debentures) CDI x IPCA   07/15/2030    Real    325,384   332,208   (355,458)   (23,250)    (37,523)    8,806
Interest rate (debentures) CDI x IPCA   07/15/2033    Real    183,185   187,780   (204,702)   (16,922)    (27,086)    7,153
Interest rate (debentures) CDI x IPCA   07/14/2038    Real    203,620   211,479   (233,285)   (21,806)    (42,472)   (1,025)
Interest rate (debentures) CDI x IPCA   04/14/2039    Real    157,074   157,372   (173,927)   (16,555)    (19,453)  
Interest rate (debentures) CDI x IPCA   04/14/2034    Real    643,095   638,351   (689,473)   (51,122)    (62,630)  
Interest rate (debentures) CDI x IPCA   11/14/2039    Real     62,585   63,488    (66,374)   (2,886)    (2,885)  
Interest rate (debentures) CDI x IPCA   11/14/2034    Real     37,415   37,383    (39,157)   (1,774)    (1,774)  
Interest rate (debentures) CDI x IPCA   11/14/2034    Real    200,000   200,560   (209,740)   (9,180)    (9,180)  
Interest rate (debentures) CDI x IPCA   11/14/2034    Real    200,000   200,311   (209,300)   (8,989)    (8,989)  
Total interest rate (debentures) CDI x IPCA            5,612,358    5,941,500    (6,242,405)    (300,905)   (791,937)    112,694
                                 
                 7,946,229    (8,252,023)    (305,794)   (750,102)    69,250

 

Classification of derivatives in the balance sheet and income statement

 

                       
                    12/31/2024   12/31/2023
Instruments   Assets   Liabilities   Financial income (expenses), net (note 28)
  Current   Total   Current   Total  
Iron ore derivative                   19,446  
Exchange rate swap Dollar x Euro                       9,567
Exchange rate swap CDI x Dollar            157,857   157,857    (146,528)   43,591
Exchange rate swap CDI x IPCA (1)           300,908   300,908    (791,938)   112,694
Exchange Dollar x Real swap    152,967    152,967           188,364    (96,602)
     152,967    152,967   458,765   458,765    (730,656)   69,250
(1) The SWAP CDI x IPCA derivative instruments are fully classified in the borrowings and financing group, since they are linked to debentures with the purpose of protecting against IPCA exposure.

 

14.d)Investments in securities measured at fair value through profit or loss

 

The Company holds common shares (USIM3), preferred shares (USIM5) of Usiminas Siderúrgica de Minas Gerais S.A. ("Usiminas") and the shares of Panatlântica S.A. (PATI3), which were designated as fair value through profit or loss, are now recognized through the equity method, as there was an increase in participation, as described in explanatory note 9. Investments.

 

Usiminas shares are classified as current assets in financial investments and at fair value, based on the market price quotation on B3.

 

According to the Company's policy, gains and losses resulting from changes in stock prices are recorded directly in the income statement under financial income for shares classified as financial investments and under other operating income and expenses for shares classified as investments.

 

vi)Stock market price risks

 

                                       
                                         
Class of shares   12/31/2024   12/31/2023   12/31/2024   12/31/2023
  Quantity   Equity interest (%)   Share price   Closing Balance   Quantity   Equity interest (%)   Share price   Closing Balance   Profit or loss (note 27)
USIM3    106,620,851   15.12%   5.32   567,222    106,620,851   15.12%    9.20    980,912   (413,689)    190,851
USIM5    55,144,456   10.07%   5.32   293,369    55,144,456   10.07%    9.29    512,292   (218,923)    117,458
                860,591               1,493,204   (632,612)    308,309
PATI3                  2,705,726   11.31%   29.10   78,737   -    (15,963)
                860,591               1,571,941   (632,612)    292,346

 

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 risks related to the stock price variation. The Company evaluated two distinct scenarios for the impact of price fluctuations: Scenario 1 (extreme pessimistic) considers a horizon of deterioration in price volatility, and Scenario 2 (extreme optimistic) forecasts a horizon of price appreciation. The calculation was based on the closing price of the shares on December 31, 2024, using assumptions based on both the dispersion of historical variations in prices and projections prepared by management.

 

The effects on the profit or loss, considering the probable scenarios, 1 and 2 are shown below:

 

                   
                    12/31/2024
Class of shares   Quantity   Share price in 12/31/2024   Closing Balance   Extreme Optimistic Scenario   Extreme Pessimistic Scenario
                     
 USIM3    106,620,851   5.32    567,222   219,454   (35,258)
 USIM5     55,144,456   5.32    293,369   108,868   (20,930)
             860,591   328,322   (56,188)

 

14.e)Capital management

 

The Company seeks to optimize its capital structure with the purpose of reducing its financial costs and maximizing return to its shareholders. The following chart demonstrates the evolution of the Company's consolidated capital structure, with financing through equity and third-party capital:

 

       
Thousands of reais   12/31/2024   12/31/2023
Shareholder's equity (equity)    15,459,116    19,684,838
Borrowings and Financing (Third-party capital)    56,914,621    44,859,075
Gross Debit/Shareholder's equity    3.68    2.28

 

Accounting Policy

 

The Company's financial instruments are classified based on the definition of the Company's business model and, in the case of financial assets, cash flow characteristics.

On 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 written off when the rights to receive cash flows have expired or have been transferred in the latter case, provided that the Company has significantly transferred all risks and benefits of ownership.

 

If the company substantially holds all the risks and benefits of the financial asset's ownership, 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 at initial recognition.

 

Financial liabilities are written off only when they are extinguished, that is, when the obligation specified in the contract is settled, cancelled, or expires. The Company also extinguishes 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 is reported 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 when the realization of the asset and settlement of the liability occur simultaneously.

 

Derivative instruments and hedging activities

 

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently measured at fair value with variations recorded against profit or loss under Financial Income in the income statement.

 

Hedge accounting: The Company adopts hedge accounting and designates certain financial liabilities as a hedge instrument for exchange rate risk and price risk (Platts index) associated with cash flows from forecast and highly probable exports (cash flow hedge).

 

At the beginning of the operation, the Company documents the relationships between the hedging instruments and the hedged items (expected exports), as well as the objectives of risk management and the strategy for carrying out various hedging operations.

 

Furthermore, it documents its assessment, both at the beginning of the hedge and on an ongoing basis, that hedging operations are highly effective in offsetting variations in the cash flows of hedged items.

 

The effective portion of changes in the fair value of financial liabilities designated and qualified as cash flow hedges is recognized in equity, under the heading "Hedge Accounting". Gains or losses related to the non-effective portion are recognized in other operating expenses/revenues, when applicable.

 

The 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 income, but only as exports are realized.

 

The accumulated amounts in equity are realized in the operating result in the periods when the projected exports affect the result.

 

When a hedging instrument expires or is settled early, or the hedging relationship no longer meets the criteria for Hedge Accounting, or when Management decides to discontinue Hedge Accounting, any accumulated gain or loss existing in equity at that time remains recorded in shareholders' equity and, from that point forward, exchange variations are recorded in financial income. When the forecasted transaction is carried out, the gain or loss is reclassified to operating income. When a forecasted operation is no longer expected to occur, the cumulative gain or loss that had been presented in equity is immediately transferred to the income statement under the heading "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.