| Financial and capital risk management |
18. Financial and capital risk management
Effects of derivatives on the statement of financial
position
| Schedule of derivatives effects on statement of financial position |
|
|
|
|
| |
June 30, 2025 |
December 31, 2024 |
| |
Assets |
Liabilities |
Assets |
Liabilities |
| Foreign exchange and interest rate risk |
646 |
169 |
52 |
601 |
| Commodities price risk |
57 |
59 |
16 |
23 |
| Embedded derivatives |
– |
– |
– |
1 |
| Total |
703 |
228 |
68 |
625 |
Net exposure
| Schedule of net exposure |
|
|
| |
June 30, 2025 |
December 31, 2024 |
| Foreign exchange and interest rate risk |
477 |
(549) |
| Commodities price risk |
(2) |
(7) |
| Embedded derivatives |
– |
(1) |
| Total |
475 |
(557) |
Effects of derivatives on the income statement
| Schedule of effects of derivatives on income |
|
|
|
|
| |
Gain (loss) recognized in the income statement |
| |
Three-month period ended June 30, |
Six-month period ended June 30, |
| |
2025 |
2024 |
2025 |
2024 |
| Foreign exchange and interest rate risk |
557 |
(455) |
1,321 |
(469) |
| Commodities price risk |
(9) |
(18) |
(9) |
(1) |
| Embedded derivatives |
– |
2 |
1 |
1 |
| Total |
548 |
(471) |
1,313 |
(469) |
Effects of derivatives on the cash flows
| Schedule of effects of derivatives on cash flows |
|
|
| |
Financial settlement inflows (outflows) |
| |
Six-month period ended June 30, |
| |
2025 |
2024 |
| Foreign exchange and interest rate risk |
297 |
115 |
| Commodities price risk |
(14) |
9 |
| Total |
283 |
124 |
a) Market risk
a.i) Foreign exchange and interest rates
| Schedule of foreign exchange and interest rates volatility |
|
|
|
|
|
|
|
| |
Notional |
Fair value |
Fair value by year |
| Flow |
June 30, 2025 |
December 31, 2024 |
June 30, 2025 |
December 31, 2024 |
2025 |
2026 |
2027+ |
| Foreign Exchange and Interest Rate Derivatives |
US$ 9,719 |
US$ 11,490 |
477 |
(549) |
222 |
165 |
90 |
The sensitivity analysis of these
derivative financial instruments is presented as follows:
| Schedule of sensitivity analysis financial instruments |
|
|
|
| Instrument's main risk events |
Fair value |
Scenario I (∆ de 25%) |
Scenario II (∆ de 50%) |
| R$ depreciation |
477 |
(1,125) |
(2,728) |
| US$ interest rate inside Brazil decrease |
477 |
316 |
130 |
| Brazilian interest rate increase |
477 |
89 |
(227) |
| TJLP interest rate decrease |
477 |
475 |
472 |
| IPCA index decrease |
477 |
236 |
26 |
| SOFR interest rate decrease |
477 |
442 |
405 |
| US Treasury rate increase |
477 |
478 |
478 |
a.ii) Protection program for product prices and input
costs
| Schedule of protection program for product price |
|
|
|
|
|
|
|
| |
Notional |
Fair value |
Fair value by year |
| Flow |
June 30, 2025 |
December 31, 2024 |
June 30, 2025 |
December 31, 2024 |
2025 |
2026 |
2027+ |
| Brent crude oil (bbl) |
|
|
|
|
|
|
|
| Options |
18,954,750 |
24,050,625 |
6 |
11 |
(10) |
16 |
– |
| |
|
|
|
|
|
|
|
| Forward Freight Agreement (days) |
|
|
|
|
|
|
|
| Freight forwards |
4,380 |
3,240 |
(5) |
(11) |
(4) |
(1) |
– |
| |
|
|
|
|
|
|
|
| Fixed price nickel sales protection (ton) |
|
|
|
|
|
|
|
| Nickel forwards |
3,478 |
4,978 |
(3) |
(7) |
(3) |
– |
– |
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%) |
| Brent crude oil (bbl) |
Decrease in fuel oil price |
6 |
(139) |
(390) |
| Forward Freight Agreement (days) |
Decrease in freight price |
(5) |
(25) |
(45) |
| Hedge for fixed-price nickel sales (tons) |
Decrease in nickel price |
(3) |
(16) |
(29) |
a.iii) Embedded derivatives in contracts
| Schedule of embedded derivatives |
|
|
|
|
|
|
|
| |
Notional |
Fair value |
Fair value by year |
| Flow |
June 30, 2025 |
December 31, 2024 |
June 30, 2025 |
December 31, 2024 |
2025 |
2026 |
2027+ |
| Embedded derivative (pellet price) in natural gas purchase (volume/month) |
|
|
|
|
|
|
|
| Call options |
746,667 |
746,667 |
– |
(1) |
– |
– |
– |
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
(∆ de 25%) |
Scenario II
(∆ de 50%) |
| Embedded derivative (pellet price) in natural gas purchase agreement (volume/month) |
|
|
|
|
| Embedded derivatives - Gas purchase |
Pellet price increase |
– |
– |
(1) |
a.iv) Hedge accounting
| Schedule of effects of derivatives on other comprehensive income |
|
|
|
|
| |
Gain (loss) recognized in the other comprehensive income |
| |
Three-month period ended June 30, |
Six-month period ended June 30, |
| |
2025 |
2024 |
2025 |
2024 |
| Net investments hedge |
115 |
(202) |
286 |
(258) |
b) Credit risk management
b.i) Financial counterparties’ ratings
The transactions of derivative instruments,
cash and cash equivalents, as well as short-term investments are held with financial institutions whose exposure limits are periodically
reviewed and approved by the delegated authority. The financial institutions credit risk is performed through a methodology that considers,
among other information, ratings provided by international rating agencies.
The table below presents the ratings
in foreign currency as published by Moody’s regarding the main financial institutions used by the Company to contract derivative
instruments, cash and cash equivalents transaction.
| Schedule of ratings published by Moody's regarding the main financial institutions |
|
|
|
|
| |
June 30, 2025 |
December 31, 2024 |
| |
Cash and cash equivalents and investment |
Derivatives |
Cash and cash equivalents and investment |
Derivatives |
| Aa2 |
592 |
6 |
391 |
1 |
| A1 |
1,944 |
155 |
1,874 |
28 |
| A2 |
491 |
87 |
520 |
13 |
| A3 |
994 |
50 |
709 |
2 |
| Baa1 |
– |
– |
1 |
– |
| Baa2 |
6 |
– |
4 |
– |
| Ba1 (i) |
765 |
221 |
719 |
18 |
| Ba2 (i) |
904 |
184 |
788 |
6 |
| |
5,696 |
703 |
5,006 |
68 |
(i) A substantial part of the balances
is held with financial institutions in Brazil which are deemed investment grade in local currency.
|