National Steel Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 13, 2026

Key Takeaways

  • Negative Sentiment: Adjusted EBITDA fell to BRL 1.87 billion, as weaker iron ore prices and higher freight costs squeezed mining margins. Mining EBITDA was BRL 380 million, while steel EBITDA was BRL 576 million at a 10% margin.
  • Negative Sentiment: Free cash flow was negative BRL 3.5 billion, net debt reached BRL 44.9 billion, and leverage rose to 4.23x. Management did not reaffirm the year-end 3x leverage target, saying it is still assessing asset-sale proceeds and other measures.
  • Positive Sentiment: CSN agreed to sell CSN Cimentos for an enterprise value of BRL 12.7 billion and is progressing with the SWT sale for EUR 550 million. The transactions could provide about BRL 16.1 billion toward deleveraging, though they remain subject to approvals and closing timelines.
  • Positive Sentiment: Management said the P15 mining project is expected to begin operating in mid-2028 and reach full operation in 2029, potentially adding about US$40 per ton to iron ore sales and reducing exposure to lower-quality ore.
  • Neutral Sentiment: CSN plans steel price increases to offset higher input costs, but executives acknowledged that customer acceptance and market conditions vary. The company also cited resilient logistics results, with BRL 533 million in EBITDA and a 44% margin.
AI Generated. May Contain Errors.
Earnings Conference Call
National Steel Q3 2026
00:00 / 00:00

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Operator

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to CSN's conference call to present the results for the third quarter of 2026. Today, we have with us the company's executive officers. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After the company's remarks are over, there will be a question-and-answer session when further instructions will be provided. The event today can be accessed at the CSN IR site, csn.com.br/ir, where the presentation is also available. The replay of this event will be available soon after the closing. Before proceeding, please bear in mind that some of the forward statements made herein are mere expectations or trends based on the current assumptions and opinions of the company management.

Operator

These events may differ materially from those expressed herein, and therefore, they do not constitute projections. In fact, actual results, performance, or events may differ materially from those expressed or implied by forward-looking statements as a result of several factors such as general and economic conditions in Brazil and other countries, interest rates and exchange rate levels, future rescheduling or prepayment of debt denominated in foreign currencies, protectionist measures in the U.S., Brazil, and other countries, changes in law and regulations, and general competitive factors both globally, regionally, or nationally. I would now like to turn over the floor to Mr. Fabio Schvartsman, the company's CEO, who will present the financial and operating highlights of CSN. You may proceed, Mr. Schvartsman.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

A good day to all of you. This is the first opportunity that I have of coming into contact with the investors. As you well know, I have been at CSN for a little more than two months, and since I took on this position, I wanted to conclude the negotiations that were underway for the assets that are under sale and learn about the company. In this call specifically, I would like to proceed in the following way. I will turn the floor over to Pedro Oliva, who will present the results. After this, we will go on to the question-and-answer session. Of course, your questions will be of prime importance to allow me to understand what it is that you would like me to share with you, which is what I will do.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

For the time being, Pedro Oliva will present the results, and we will then go on to the Q&A session.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

Good morning, everybody. I will begin the presentation with the highlights for the third quarter 2026. Adjusted EBITDA reached BRL 1.87 billion, down 32% and 43% year-on-year, with a margin of 17%. This performance reflects the more challenging price and freight conditions in mining and the negative seasonality in the foreign market for steel sales and vacation period in Europe. Higher raw material costs in cement and steel production leverage reached 4.23x pressured by a combination of lower EBITDA, higher volume of debt amortizations, and iron ore prepayment contract.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

However, the signing of the SWT term sheet and the sale of CSN Cimentos reinforce the efforts being made to improve the capital structure. Instead of going through all of this information, I will simply refer to the figures on the following slide. Adjusted EBITDA totaled BRL 1.876 billion, and this drop is reflected because of the margin compression in mining.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

Now, you can see the drop in the price of iron ore and an increase in maritime freight, accounting for the weakness in the period. We had an extraordinary Jacuí effect in energy the previous quarter also contributing to this decline. In the following slide, we have data on investment. CapEx of BRL 1.38 billion with a reduction of 2% in the quarter, with a greater optimization of maintenance investments offsetting the full acceleration in CapEx for the P15. Regarding working capital, net working capital totaled BRL 2.2 billion, down 27.7% quarter-on-quarter. The reduction mainly reflects a strategy of lowering inventory to optimize operations and release working capital. The lower accounts receivable balance in line with a reduced commercial activity also contributed to the result.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

Now, the free cash flow was negative at BRL 3.5 billion in the third quarter, reversing the positive result of the previous quarter. Weaker operating performance and a concentration of debt amortizations and iron ore prepayment more than offset the release of working capital and the initiatives being implemented to reduce cash burn. Consolidated net debt reached BRL 44.9 billion in the third quarter, and leverage rose to 4.23x. Lower last 12 months EBITDA, especially due to the margin compression in mining and the concentration of amortization, have pressured the indicator. In this regard, progress on asset sale projects, the binding term sheet for the full divestment of the subsidiary SWT, and the sale agreement of CSN Cimentos to Huaxin are solid evidence of all the efforts being made to improve the group's capital structure.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

When it comes to the indebtedness profile, CSN continues to act towards lengthening the maturities and adjust its capital structure. In the third quarter 2026, the main development was a successful note exchange offer aimed to extend by two years the maturity of BRL 1.3 billion originally due in 2028. This transaction had more than 77% acceptance and allowed the company to significantly extend its expected amortization profile for the coming years. In the next slide, we can highlight the advance of the asset sale process. On November 8, CSN announced the signing of the agreement of the sale of CSN Cimentos. This shows the company's commitment to financial discipline and a focus on deleveraging.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

I am a witness that this was a core issue for investors throughout the year since the company in January announced its plan of deleveraging between 16 billion and 18 billion, and the progress of all of this shows that the company is executing what it has set forth to do and is ready to do whatever it has to reach the deleveraging it desires. Regarding CSN Cimentos, the enterprise value was BRL 12.7 billion, with an equity value of BRL 9 billion, 8.1x EV/EBITDA, higher than other companies in the same sector. Now, this represents 100% of stake. It was mentioned that it would be up to 100%. The company decided to carry out an integral sale to reduce the leverage. The operation, of course, is subject to regulatory approvals that are underway and advancing. There is a possibility that the closing will happen still during this year.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

If this does not happen, there is an initiative to anticipate a relevant part of the equity value in 2026 to take advantage of these fiscal losses anticipated. The closing could also happen in 2027, and this context will become ever more important. In the transaction of SWT, the transaction value is EUR 550 million, EV/EBITDA 11.2x. Due diligence and negotiation documents are ongoing. Expected closing, December of 2026. We are awaiting the regulatory approval with the antitrust agency in Germany. This has already begun, and the documents have been submitted. The impact of these two transactions represents BRL 16.1 billion, which shows you that the company has delivered what it set forth to do at the beginning of the year. Let's go on to the highlights of the year with steel.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

In the domestic market, we had stable sales in the quarter, but up 5.8% year-on-year, despite the resurgence of imports, especially in September. In the foreign market, down 14.7% in the quarter due to seasonality, but up 10% year-on-year as a result of better steel consumption in the European market. In the following slide, the slab production reached 776,000 tons in the third quarter, the best result for the year, reflecting the greater efficiency of the productions process across UPV. Plate costs remained stable at BRL 3,394 per ton, even in a quarter with raw material cost pressures. On the following slide, we see the financial performance where the steel mill net revenue reached BRL 5.75 billion, a drop of 5.3% in the quarter, reflecting seasonality and foreign operations. On a year-on-year basis, revenue rose 8.6%.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

Adjusted EBITDA was BRL 576.1 million, with a 10% margin, very similar to that of the previous quarter. Going on to mining, we had production of iron ore, including third-party purchases of 9.9 million tons, a 9% decline due to higher rainfall volumes and a temporary reduction in the lower-quality dry ore because of the market conditions. Sales, on the other hand, were practically stable despite lower production in the period, showing that the company has advanced in its inventory reduction efforts to sustain the volume. TECAR shipped 10.373 million tons in the period, up 6.4%, reinforcing the efficiency of its logistics structure. In financial performance of mining, net revenue was BRL 2.308 billion, a drop of 18% quarter-on-quarter.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

Lower iron ore prices and their impact on provisional price, along with higher freight costs, reduced unit revenue to $40, a reduction of $9 vis-à-vis the previous quarter. Adjusted EBITDA, in turn, was BRL 380 million, with a 16% margin in the third quarter. In adjusted EBITDA, reconciliation of EBITDA, we see which are the offenders, and the price per se explained BRL 417 million of drop in EBITDA in mining. Going on to cement, sales volume reached 3.444 million tons in the quarter, the highest volume of the year, up 10% vis-à-vis the previous quarter. The effective commercial policy of CSN sustained performance even in a period marked by heavy rainfall and fewer business days.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

Regarding the financial performance, net revenue reached BRL 1.45 billion, up 4.7% in the quarter and 8.8% year-on-year, as a result of intense commercial activity and price readjustments implemented throughout the year. Adjusted EBITDA was BRL 385 million, a 9.7% decline, with a 26% margin. Higher raw material costs and freight costs pressured the profitability in the period. This is the impact of pet coke that increased 99% compared with the first quarter of this year. Regarding logistics, we go to the financial performance. Net revenue of 1.2 billion was practically in line with recent quarters, with the rail and port segments offsetting the weaker performance of multimodal logistics. Adjusted EBITDA was BRL 533 million, a slight decline of 2%, with a 44% margin. I would like to highlight the resilience of performance in logistics.

Pedro Oliva
CFO and Investor Relations Officer at CSN Mineração

Despite a more adverse scenario of iron ore, they continue to deliver margins above 40% and EBITDA higher than BRL 500 million. Going on to energy, we had net revenue of BRL 176 million in the third quarter, a 55% decline, reflecting the normalization of results after the extraordinary Jacuí effect in the second quarter. Adjusted EBITDA, in turn, reached BRL 45 million, with a margin of 25%. With this, we conclude the presentation. We can now go on to the question-and-answer session.

Operator

Well, thank you. We will now go on to the question-and-answer session for investors and market analysts. Should you have a question, please click on the raise hand icon or send your question through the Q&A icon. Our first question comes from Rodolfo De Angele from JPMorgan. Your microphone has been unmuted, sir. You may proceed.

Rodolfo De Angele
Rodolfo De Angele
Analyst at JPMorgan

Good morning, and thank you. Fabio, congratulations for your entry into the company. I have a single question for you, Fabio. I would like for you to discuss with us which was the motivation for you to join and by your say, short term, and how all of this will play out. Thank you.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Well, thank you for your question, Rodolfo. It's a good beginning, explaining why I have come to the company. Well, first of all, we need to respect and praise the fact that my predecessor and main shareholder in the company, Benjamin, decided to pass all of this on to me. He thought it was a moment to carry out this change because this allows the company to do what it has to do with speed and precision. Personally, there's a very interesting issue, which is the following.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

There is a certain parallelism with my passage through Klabin that you followed up on, and nobody outside of the company or the family had ever managed Klabin until I took on that position. Klabin was also undergoing a very difficult moment. I looked at that, and during the period in which I remained there, and after the first six months, I was able to see an improvement in results, and they continued to improve quarter on quarter until I left. After I left the company, the results continued to improve continuously, showing that this is not ephemeral work. It was something that had transformed the company in the way that it should be changed. I would be very satisfied if I am able to do something similar in CSN. There needs to be a change in that direction.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

It's too early on to say what will be done and which will be the sequence of changes. I remind you that in the last two months, my focus has been on doing what had to be done to settle the sale of assets operation that would allow for an initial rebalancing of the company's structure. Based on that, we could begin our work for a review of how the company operates. I also draw your attention to what was mentioned in the results release, both for mining and here, that we have a short-term problem in mining. It's the extremely low price of iron ore and the high and steep price of freight. We have no control whatsoever of what happens with prices.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

In the case of CSN, that has mines of excellent quality, CSN is working on the P15 project that should be completed and be in full operation in 2029. That is to say, in two years, where we will fully see the results of our investment, and this will change the dependence of CSN on the mining and freight cycles. We're speaking of a short horizon that needs to be overcome so that we can begin working in a completely different way regarding the other businesses of the group. As you have observed, they're relatively stable. We have no immediate problems that require a solution. Now, to continue with this long-winded answer, I always thought that managing was doing the obvious things right, and there's nothing different here. This is what we will do here.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

We will do whatever we need to do to ensure that the company can gain a rebalance and present the potential results it could present. Finally, part of my learning in the company is to get to know and acknowledge the quality of the assets that CSN has, allows us to have strong expectations going forward, and after the work that we need to carry out, the company will reach another level. Almost certainly, we'll reach another level. Thank you.

Rodolfo De Angele
Rodolfo De Angele
Analyst at JPMorgan

Thank you very much, and the best of luck.

Operator

Our next question comes from Daniel Sasson from Itaú BBA. Your microphone has been unmuted. You may proceed.

Daniel Sasson
Analyst at Itaú BBA

Good morning, everybody. A good day. Thank you for taking my questions. Welcome, Fabio, and good luck with this challenge. My first question refers to the guidance for the final leverage of the year of 3x compared to 4.3x in the third quarter. The closing or the sale of cement is expected only for 2027. So, this 3x guidance for the end of the year, is this still standing? How will you reduce the 4.3x to only 3x leverage?

Daniel Sasson
Analyst at Itaú BBA

There must be pressure on the last 12 months EBITDA in the last quarter. So, are you going to review that guidance considering the novel conditions? Still referring to the restructuring of assets, Fabio, you spoke about the quality of the assets at CSN. You were able to conclude the sale of cement as SWT expected by the market. If you could comment on the result of a minority sale of the infrastructure business. How are you going to structure this, the contracts between TECAR and CSN Mining, so that the entry of a third party will not transfer all of the cost to CSN, impacting the EBITDA? These are my questions. Thank you.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Thank you very much, Daniel. First of all, at this point in time, it is still not possible to state if an operation will be necessary in that case because of the indebtedness guidance. We are assessing the impacts of the sale of the cement plant, and in truth, additionally, we are structuring things in such a way that we can anticipate the reception as part of this exercise. This process is ongoing. It has not been concluded. I cannot state if that will happen, in fact.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Consequently, we have to wait for the conclusion of this work to have a better idea of which will be the guidance that the company will offer in terms of leverage. Once this work is carried out, we will inform the market. Your question refers to the infrastructure assets. What I was able to observe so far is that the idea of selling a minority stake in infrastructure is not the best way to monetize the company's assets. If we continue along those lines, we will sell the assets off individually. Of course, we are not speaking of all assets. Some are more strategic than others, so each one will be a case apart. Notwithstanding this, more importantly than this is to state that we are progressing at present in the sale of other assets.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

As you can imagine, given the fact that these are negotiations underway, I cannot explain to you which they are. I don't have that liberty. Our expectation is to have responses in the short term regarding these additional negotiations. Obviously, all of this will be part of the guidance that we will set forth in the future.

Daniel Sasson
Analyst at Itaú BBA

Thank you, Fabio. That was very clear.

Operator

Our next question comes from Mr. Leo Correa from BTG Pactual. Your audio has been unmuted. You may proceed.

Leo Correa
Leo Correa
Analyst at BTG Pactual

Is everything okay? Good afternoon to all of you. Fabio, I would also like to begin that I have been following on your career for many years, and to hear you once again and speak to you once again allows me to wish you much luck in this new stage. The topic is somewhat difficult, so I will focus my questions on leverage.

Leo Correa
Leo Correa
Analyst at BTG Pactual

It's very clear, Fabio, that the short-term scenario is highly challenging because of what happens with iron ore. This may be cyclical. The fact is that the company is burning BRL 2 billion-BRL 3 billion in cash per quarter, which means that part of the sale of assets will be put at risk. That target of BRL 18 billion in the sale of assets was based on a scenario of a different EBITDA vis-à-vis the present-day scenario. My question, therefore, in those short two months in which you have come and looking at the scenario, which is a change in your deleveraging and asset sale goal, can you share anything with us? This would be very helpful for us.

Leo Correa
Leo Correa
Analyst at BTG Pactual

A natural question that arises is that if, Casa de Pedra mine has always been the jewel of the crown, it was being put aside in this investment plan that was focusing on cement. I would like to hear about you, about this new environment, and if that will come back to the table for a new negotiation. We know that Itochu is one of your partners, or perhaps others could get involved in this sale. A second question, Fabio. The CSN amortization schedule was shared with us, and it is very evident that the large company disbursements are with local banks. Approximately BRL 1.5 billion still this year, and almost BRL 6 billion in banking debts maturing the coming year in 2027. As far as I understand this debt has no warranties so far. How are your negotiations proceeding with local banks in terms of rolling this debt?

Leo Correa
Leo Correa
Analyst at BTG Pactual

These are my two questions. Thank you.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Well, thank you for your comments and for the questions. Let us begin with the second question, the rolling of a debt, and I would like to go back to a comment I made at the beginning. When I entered the company, I focused on selling off the assets that were under sale for the good of the company, and this has been done. Obviously, that meant I was devoted to negotiations with bank about rolling the debt or similar issues. It is evident, nevertheless, that we are now talking about negotiating with the banks to roll the debts, an extension of term, and a reduction in the interest rate for the company. This has to be the focus, and this is what we will do going forward.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Managing is to do the obvious things, and for things to work, we focus on one thing per time. If we try to do everything together, we end up doing nothing. The next focus is exactly this one. Personally, I will devote myself to that, and we will do whatever is necessary to allow this to proceed. What we will receive for the sale of assets and if cement is part of this process or not, as I mentioned, at this stage, I cannot mention which are the negotiations underway. I can state once again that we will do whatever is necessary. This includes the sale of assets to reach a stable level in the financial structure of the company. It is obvious that we have no other alternative.

Leo Correa
Leo Correa
Analyst at BTG Pactual

That is very clear. Thank you, Fabio.

Operator

Our next question comes from Ricardo Monegaglia from Safra. Your microphone has been unmuted.

Ricardo Monegaglia
Analyst at Safra

Good morning to everybody. Thank you for taking our question, and congratulations for the announcement of the sale of cement. I think this is very important to have a healthier leverage. I am going to focus less here on the objective parts of leveraging. I would like to hear from you how you are going to add your expertise in mining to the assets at cement and the steel plant. We are undergoing difficult moments in both segments, but the doubt perhaps that is pending is, and as you mentioned, with iron ore and freight, we have no control over that. What is it that we can expect from the operations that changes to have a healthier level of results without thinking about commodities, CapEx efficiency, others that are not part of your focus?

Ricardo Monegaglia
Analyst at Safra

We could have an interesting discussion once the company ends up in a healthier position in terms of leverage. I don't know if this is a coincidence or not. We have noticed that the buybacks had a very short time, and then they ceased. How do you consider the buyback strategy at cement at present? Is this something that we might see if the scenario of freighting is better, or are you not intending to structure this going forward? If you're truly going to focus on deleveraging everywhere that is possible, and the rolling of the debt, and to focus on lower-cost debts, the same point and the same question, are you already interacting with the bank owners?

Ricardo Monegaglia
Analyst at Safra

We have a market that, well, you could access once again if the global credit situation improves. Is there anything that you can share about these initial contacts with bondholders, especially the foreigners?

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Well, thank you for your question, Ricardo. Once again, beginning with the last one, I hadn't even spoken to the investors yet, and of course, I haven't spoken to the bondholders up to present. We have to do first things first, of course. First of all, we're focusing on the financial structure of the company, and eventually, I will be able to converse with bondholders and speak about the topic you mentioned. There's no problem regarding that. Now, the buyback, it relates directly to the price of share and company results. Company results at this point do not recommend holding a buyback.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

If the results recover and if the price of shares do not recover, the buyback opportunity will still be there, and we will make the most of it, especially because we're selling off assets, which means we're receiving cash that allows us to do positive things for the company based on that cash. I'm sorry, which was your first question?

Ricardo Monegaglia
Analyst at Safra

Which are the opportunities that you see to bring in your expertise in mining and business for the other assets where the results are under pressure, and perhaps to only depend on the commodities will not bring about the enhancement that you expect?

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Once again, I'm going to say something that is very obvious, and I apologize for this. The price of a commodity and freight, this is what controls the results of any company, whether it is Vale, CSN, or any other mining company. As a consequence, CapEx efficiency or OpEx management, of course, they're all very helpful, but they have a marginal effect in the results we need to obtain. To speak very frankly and clearly, which is how I normally proceed in these issues, CSN has a beautiful project, the P15, that will be ready in a very short time. It will radically change the condition of the company when it comes to producing results. This is the focus, to ensure P15 will come in and as soon as possible. By doing that, we will have very good news to disclose.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

The rest are minor things that will not significantly alter anything. Price, iron ore, and freight, they are either cyclical or impacted by the geopolitical scenario. Yes, they will have changes going forward. Nobody has a crystal ball to say when this will happen, but that's the nature of the business. I have already seen this in mining and pulp and paper. That's how those scenarios operate. There's not very much that you can do. You have to be steadfast, do what has to be done during that period, which is what we will do here. Thank you.

Ricardo Monegaglia
Analyst at Safra

Thank you very much. Success, Fabio. I wish you success.

Operator

Our next question comes from Henrique Marques from Goldman Sachs. You may proceed, sir. Your microphone has been unmuted.

Henrique Marques
Henrique Marques
Analyst at Goldman Sachs

Good morning, everybody. Thank you for taking my question. A follow-up in terms of the company's financial structure that has been discussed at length here. We see the company following the steps of the strategic plan set forth at the beginning of the year. How far will this financial restructuring go? Which is the target that you would like to reach to get to that point where you say, "We have done what had to be done"? Is there a gross profit target, a leverage target? Another question, moving away a bit from the plan and speaking about the market situation, especially in steel. We see that the demand continues to be resilient. Imports are better behaved than one year ago.

Henrique Marques
Henrique Marques
Analyst at Goldman Sachs

Whatever has now been approved seems to have worked. Now, changes at those levels, will they help? The outlook of most of the steel mills is a flat outlook. Which is the great detractor of that industry? Is it the inventories that are too high, readjustment, indirect imports? And which is the solution for all of this? Because eventually, anti-dumping measures for direct imports are very tiresome, and they take forever. For steel companies, how can they go back to the levels of profitability that they had last year, for example, and the expectation for 2027?

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Now, things will work in a process when it comes to our main goal. Our main goal is to deliver P15 up and running in mid-2028 so that it could come into full operation in 2029. Now, to define what the deleveraging level is, gross debt, and much more, all relates to whatever is necessary to attain our goal, and this is how we will proceed. I have no figures to give you regarding this situation. We're working on this, and that is our priority at present, as I mentioned. Regarding the steel mill, I will give the floor to whoever understands this, Mr. Martinez, who will speak about his vision going forward for steel. Steel, anticipating what Martinez will say, has more upsides than downsides at present. Martinez, please.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Thank you, Fabio. Henrique, allow me five minutes to give you an overview of what is happening worldwide and how we address this issue of profitability. It's not only for steel mills in Brazil. We're going to see what is happening globally. First of all, and these are facts that I'm going to repeat, U.S. has had full success of the anti-dumping measures, the 232. Demand is strong. The machines are working full steam. We look at the results of American plants, and we can't ignore what is happening there. There's a Nucor in the third quarter with 20%, SDI with 18%, and this is the best mirror that we can have to observe the market in Brazil to try to find something similar.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Now, to give you an idea, if we don't redress the situation in Brazil, if we don't do what needs to be done, we have room for some exports to the U.S.A. vis-à-vis the present-day prices in the American market. This is a situation of the U.S.A. In Europe, the most important thing done presently was to reduce 50% the quotas for other countries, and the immediate impact is that prices increased EUR 120, EUR 130 during the period. Now, some of these solutions are hateful. In Europe, they're working with a margin of 8%, others with a margin of 6%. So, these are the portraits of situations that are completely different, and we see Europe going towards the situation we have in the U.S.A.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Finally, when we go to China, and China has important things to mention, the real estate market, this is no novelty, represents 30% of the GDP. It has had a huge fall. The price of the cement ton that was $50 is now around $25-$30. On the other hand, China decided to grow expressively in manufactured products. The largest exports of China are in indirect and finished products, obviously going into all of the value chains throughout the world. To give you an idea, in Korea, profitability of a Hyundai is 7% and Nippon Steel 11% or 9%. These are margins of countries that brilliantly are resisting the invasion by the Chinese. When we look at prices worldwide, we see China with BQ prices of $480, $500, U.S.A. with a price of $1,500, and Europe with the increases I just mentioned of $850.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

In this scenario, there's no way not to impact what will happen in Brazil. I tend to convey optimistic views. We're getting to the point where we're going to have to turn the key. Despite the retraction and apparent consumption in the country of 2%-3%, domestic sales have increased 3%, and CSN this year will grow 8%-10% in terms of volume. When we look at the sectors, in truth, we're looking at the automotive sector. There is strong imports. Manufactured products are doing well, white line, 3%-5%. Now, where the market is more difficult, it's in agriculture implements and machinery suffering somewhat more because of the interest rates and funding, and you can fully understand what is happening there in imports that you mentioned as well. This is interesting data. Look at the paradox we have reached here.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

The largest steel importers from China have become the greatest exporters of steel to Brazil. This shows you how fragile Brazil is in terms of its commercial policy and valuing its own industry. We have two countries, Vietnam and Korea, who are practically occupying the position of China in some products. Another important fact, despite the imports of steel dropping 18%-20% per year, 4 million approximately, it grew 20% are the exports of China in terms of manufactured products. This is more than 5 million of steel here, and there are examples that are also interesting, 185% growth in cars, and two that I captured here to show you how aggressive that purpose is of a country like China, along with other Asian nations. We are receiving in Brazil 79% more packaging, empty cans, and 40% of gas bottles, also empty.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

This clearly shows you how unprepared we are for changes of policy in terms of what is happening worldwide. When we speak about the risk of imports nowadays, because of the anti-dumping activities against the Chinese, it is no longer worthwhile bringing products from China. We are awaiting the decision of the government that should take place at the end of this month or in December, the implementation of anti-dumping of hot-rolled plates. Nowadays, the risk of imports is a reasonable risk, 10%-15%, that we can work with here because of the risk of service, risk of exchange rate. From the viewpoint of a commercial defense, the point you mentioned is important. We have a very strong schedule of commercial defense. As I said, we implemented all of the anti-dumping policies.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

We are working for the one of BQ, and in the case of CSN, at the end of November and December, anti-dumping for tinplate from Germany, the Netherlands, and Japan. This should also help us positively. Regarding the commercial defense, geopolitical defense, and what happens worldwide, Brazil needs to have the project of a nation, Mexico, for example, looking at the upstream industries and trying to create a competitive isonomy between them. The last point I would like to mention is cost. To give you an idea, the cost of raw material has a direct impact. For example, coal and pet coke with increases of $190 to $250, it is inevitable not to have a price correction in the market. We have covered cost. There is the issue of the dollar. We considered it at BRL 4.95. It is presently BRL 5.65. The value chains and imports.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Based on that scenario, what do we believe? I believe that this is going to happen whether we like it or not. There is a mandatory correction of prices of 14%-16% on November 9th. We had an increase in the distribution channels, civil construction, the assembly industry, an increase of 7.5% for December, another increase between 5%-7.5% to redress this ridiculous difference in terms of raw material. For assembly lines of the white line, automobiles for the beginning of the year, when we renew contracts, we will begin negotiations with a 10% of correction. This will include exchange rate and raw material. The demand scenario is not fully favorable, but it is possible because domestic sales are growing. This is a price correction governed by cost, and this is what rules in the market at present.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

I hope to have given you a vision of what is happening here in Brazil.

Henrique Marques
Henrique Marques
Analyst at Goldman Sachs

That was excellent. Very clear. Thank you.

Operator

Our next question comes from Mr. Arthur from UBS. Your microphone has been unmuted. You may proceed.

Analyst at UBS

Thank you for taking my question. I have a question that is more strategic regarding cement. CSN now is losing an asset with high margins, with a more predictable cash generation, and when we look at mining, which is the main asset of the group, they become ever more exposed to iron ore and freight. How are you going to reduce the volatility of cash generation going forward after the sale of CSN Cimentos without further increasing the impact on mining? My second question, in the steel mill, you need capital for streamlining, as was mentioned. You have margins pressured by imports, low utilization, and costs.

Analyst at UBS

Which is the minimum return that the management should demand from the segment, and if this return cannot be reached organically, if the company will reduce the exposure of the steel mills, look for a strategic partner, and perhaps separate the business. Thank you.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Wow, that is a question and some. How to reduce the volatility of a cyclical business. There are some normal instruments that can be used, closing the freight beforehand, work with iron ore protection. This can produce savings if this is done correctly. Now, from the viewpoint of mining, what will change substantially the exposure, as I mentioned, is the P15. We have the expectation of an additional of $40 per ton in whatever is sold as iron ore going through P15. This is substantial and will significantly alter the volatility of the company, but that is in two years.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Therefore, before those two years, there's no way to significantly change the volatility. Regarding the steel mill, it may need investments, large investments in the long term, but it is presently in a stable condition. It can produce good results as is with minor investments, which is what we will continue to do. Now, regarding strategic changes in the company, I confirm, as you already know, but I can state that this is also my opinion after joining the company, that we have very good assets that will be used to benefit the deleveraging of the company. I cannot and don't want to go in further details at this point, but in a relatively short term, you will see these changes. A substantial change in the company strategy cannot be achieved overnight.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

It would not be realistic to think that we're going to do a 180% shift in the company immediately. We are going to build something solid through time, as I was able to do in the former companies where I worked. Here, the situation will not be different. We have very good assets at the start, and the prices may be very low because of the present-day situation, but these situations come and go. Consequently, the price of assets will appear, and this will be reflected positively in the company. The only good news in all of this is that we're at the bottom of the well, and there's only one path possible for the moment, which is upwards and out of this.

Operator

Thank you. Our next question comes from [Paula Athanassakis] from Citi. Your audio has been unmuted.

Analyst at Citi

Thank you. Thank you for taking our questions. I'd like to ask a question about the fourth quarter. In the third quarter, you released your working capital, and you mentioned that you had carried out significant efforts towards decreasing the inventory. Now, for the fourth quarter, can we also expect another release of working capital because of the inventory, or has the main effort already been done in this quarter? A question about steel. You commented on the increases you will have in November, and once again, further price increases in December. Which has been the feedback of the customers so far? If we consider that the situation is not simple, and the cost pressure, could you give us an idea of which is the increase you would have in steel? Thank you. Thank you very much.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Thank you for the question, Paula. I will answer the first and then give the floor to Martinez regarding working capital. You are right. The best result has already been achieved since January up to present. We reduced BRL 1.9 billion from January to September, but we still foresee some opportunities going forward, especially in the steel mill. There are some elements that we can work with to further reduce inventory, and we are quantifying that opportunity to add BRL 900 million until the end of the year. Martinez?

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Paula, I am going to repeat what I said in the last question, basically. To look at the efficacy of a price increase, it will be easier or more difficult according to the value chain. We have a price correction that needs to be carried out because of the cost, because of the exchange rate. It is BRL 5.65 at present compared to BRL 4.95, a huge gap.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Now the premium for the nationalized imports, perhaps they are weakened in terms of the long steel. The result is almost negative there. On the 9th, we implemented an increase. There was no negotiation here. There is not very much we can do with this first increase. I consider the increase implemented on November 9. We still have included chains that have a semestral contract. For December, we do have that challenge of conversing with the value chain, speaking about what is happening in terms of cost, and for you to maintain the profitability that we have set forth. It is also mandatory to correct prices when it comes to cost.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Although we have KPIs under control, we have an enormous project for operational excellence at the plant to reduce cost, to work with a lower cost for coke, to work with less residues, to get to a cost, despite the increase in raw material. This increase is mandatory to reach those margins of 15%, which is what I set forth as a target going forward.

Operator

Our next question comes from Mr. Guilherme Nippes from XP. You can proceed with your question, sir.

Guilherme Nippes
Analyst at XP

Good afternoon. Thank you for taking my questions. Fabio, a great deal of success in this new challenge. My first question, going back to cash generation. I am sorry to insist on this. What we have observed here is that that increase of pace in cash burn in the last quarters because of the operational situation under pressure.

Guilherme Nippes
Analyst at XP

I would like to know if there is another alternative to reduce that cash burn in the short term, if there is a limit to the reduction of this cash burn, and other alternatives to release cash. In the past, you had mentioned monetization of assets, a sale of real estate, working capital, as you mentioned now, more space for working capital. If there are other alternatives we can think about to improve the cash context that is under pressure. This would help us a great deal. My second question, a follow-up of the previous question, with the cost of the steel mill, to see if everything is clear, your expectation for the fourth quarter. The expectation is relatively flat costs. Is that it, or is there something different? Thank you.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Allow me to speak about the short-term things we are doing, controlling and reducing CapEx to the necessary minimum in all of the companies. These are factors that produce cash. They have been producing cash constantly, and we cannot change the logic that the results are being pressured because of the situation of the commodities. As I mentioned before, we have very good assets, and we are going to use these assets to help us improve the company's situation in this period of greater turbulence. Besides that, there are no novelties. Obviously, everything that we can do in terms of cost-cutting has been done as we speak. All of these traditional measures are all underway.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

Guilherme, to speak a bit more about the steel mill, I reiterate what has already been done in the last few years. Enormous efforts towards operational excellence, and we have worked successfully our expectation for the cost of plates. Despite the increase in raw material, we work with a stable cost for slabs, plates. When it comes to inventories that we mentioned, this year we have reduced BRL 1 billion in finished products until the end of the year. Regarding cash, the idea is to work with a minimum stock of finished products and intermediate products. The goal for cash, it is something we will continue to pursue. From the viewpoint of EBITDA, there is no simple equation. The price has to increase and the cost has to remain the same to have an EBITDA margin that is higher than 10% or 15%.

Luis Martinez
Executive Director at Companhia Siderúrgica Nacional

I truly believe that every time we have a significant cost issue, the steel mill manages to come out somewhat better in terms of a price realignment in the market. Thank you for the question.

Guilherme Nippes
Analyst at XP

Well, thank you. Thank you.

Operator

We would like to remind you that should you wish to pose a question, please click on the raise hand icon or send your question through the Q&A icon. As we have no further questions, I will return the floor to Mr. Fabio Schvartsman, the CEO of the company, for the closing remarks.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

Well, thank you so much for your time and attention. This is the first call that I take part in, and I would like to reinforce with you that what truly matters is that the company will do everything it needs to do to reach that position of financial balance.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

This, I think, has been demonstrated by the recent actions adopted by the company, the substitution of the leadership, the sale of assets, and the company is showing that it will act in a very rational way, in an appropriate way to face the problems. The great benefit that this company has is the quality of its assets, and they pose several alternatives for us. We will work with them, and the company has a background, a very good relationship with its customers, with the financial system, and we will put this to good use to reach that balance. The company has shown to me that capacity to have a quick reaction and to change decisively to face the momentary difficulties, the difficulties due to the present-day scenario. In mining, we have a structural solution that is being built. It will be ready soon.

Fabio Schvartsman
CEO at Companhia Siderúrgica Nacional

In the other businesses, we do not have short-term problems. Quite the contrary, they all have more upsides than downsides, and we continue to have more good assets than anything else in the company. You can count on me so that the company will do the necessary work going forward to present to you a better scenario, the best positive scenario. Thank you all for your attention.

Operator

Thank you. The earnings call for CSN ends here. Have a very good day.

Analysts
    • Fabio Schvartsman
      CEO at Companhia Siderúrgica Nacional
    • Pedro Oliva
      CFO and Investor Relations Officer at CSN Mineração
    • Rodolfo De Angele
      Analyst at JPMorgan
    • Daniel Sasson
      Analyst at Itaú BBA
    • Leo Correa
      Analyst at BTG Pactual
    • Ricardo Monegaglia
      Analyst at Safra
    • Henrique Marques
      Analyst at Goldman Sachs
    • Luis Martinez
      Executive Director at Companhia Siderúrgica Nacional
    • Analyst at UBS
    • Analyst at Citi
    • Guilherme Nippes
      Analyst at XP
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