Companhia Siderurgica Nacional SA (SID) 2008 Q1 法說會逐字稿

Good morning to all. Thank you all for being here for joining us in our earnings conference of the first quarter of '08. Just like the other events provided by the Company, the earnings presentation will be followed by a brief presentation by each of one of the Executive Directors regarding the investments being made by the Company, this time highlighting the industrial activities and logistics activities.

Let's start with the highlights of the first quarter. The Company reported a net income of BRL767m. Stable compared to the first quarter of '07 when we had non-recurring gains of BRL255m related to the Corus auction. Net income is 51% higher than the net income reported by the Company in the fourth quarter of '07.

We sold 1.4m tonnes of steel products, a new period record. 17% up year on year and stable in relation to the fourth quarter of '07.

BRL3b net revenue, a quarterly record for the Company 22% higher than the first quarter of '07 and slightly higher than the figure reported in the fourth quarter of '07.

EBITDA of BRL1.3b, 26% higher than the first quarter of '07. And again stable vis-à-vis the fourth quarter of '07. The EBITDA margin slightly over 42% presented a 1.5 percentage point increase compared to the first quarter of '07. 1 percentage point higher than the result of the fourth quarter of '07.

The Company's market share in the flat steel domestic market reached 38%. And finally, we've had a healthy share performance in the beginning of the year, which resulted in a good Company's market share $35b, the fifth highest of all the world's steelmakers.

Let's move to the next slide, the net revenue and sales volume by market. We start with the chart on the left. As stated before, the 1.4m tonnes is a record for the Company. A significant improve in sales, 80% of sales in the domestic market, 20% in international market. Sales volume in the domestic market of 1.1m tonnes, that is a 55% increment vis-à-vis the domestic market sales in the first quarter of '07. 10% higher than the sales in the domestic market in the fourth quarter of '07.

In the month of March we sold 413,000 tonnes in the domestic market. 84% of consolidated sales, or 93% of the sales of the parent company in the domestic market.

Let's move to the chart on your right. Net revenue of BRL3b, as stated before, is a historic record for the Company. However, it does not reflect the price increases announced by the Company for this several steel products. It does not yet reflect the significant increase in iron ore sales that we're going to have as at the second half of the year, when we have improvements in the Sepetiba Port which will allow for a total export volume of 30m tonnes annually. This record is going to be successively broken in the next quarters and in the coming years.

Now let's see sales volume by product and market segment. Let's see the market share by industrial segment. Our market share in Distribution is 42%, Civil Construction 47%, white line Home Appliance and OEM 36%, and Automotive 21% with a great potential for growth.

Moving clockwise, on your left at the bottom corner, market share by product. Start with the tin plate 99%, a 1 percentage point increase, Galvanized 49%, a 4 percentage point increment in market share, cold rolled to 26%, a 6% market share increase, and hot rolled to 34%, a 3% market share increase.

On the left, on the upper hand corner, sales by product. We see a decrease in the share of Galvanized, the tin plate in the portfolio of products sold by the Company. And a significant increase of hot rolled, which represented 19% of the total volume sold by the Company in the first quarter of '07. In the first quarter of '08 they accounted for 36% of all products sold by the Company.

Finally, on the right upper hand corner, net revenue by segment. Steel still dominates with 83% of the net sales revenue reported by the Company. Mining 8% still in the first quarter, or we exported in the first quarter. We sold 2.8 tonnes of iron ore to other countries. We sold locally 800,000 tonnes to customers domestically, netting 1.8m tonnes consumed in the Presidente Varga steel plant.

The next slide we show you production costs of the parent company. Production costs showed a 3.7 decrease about BRL50m. Production costs [recovered] to BRL1.1b. We had a decrease in raw materials costs of approximately BRL80m, particularly in zinc, reflecting a decrease in the price of that commodity in the international market and also reflecting the foreign exchange appreciation.

A decrease in coal reflecting only the Real appreciation, compensated partially but increase in coke due to an increase in the use of this pit stock in the first quarter. About BRL80m in raw material costs compensated by higher expenses and depreciation BRL20m resulting from a revaluation of the assets of the Company, and labor costs reflecting the union agreement in 2007, and an increase in our headcount directly involved in production of the Company.

I think that it is important to highlight that the average cost of coal is BRL254 per tonne. We have inventory for the next two years. The average coke cost is BRL461 per tonne. In our inventory we have a three month inventory.

Let's move now to EBITDA and EBITDA margin. This is a stamp of the accompanying the management commitment to report to shareholders, margins above 40% along the economic cycle. It is important to highlight that for seven years now the Company has been reporting margins above 40%. The projected margin for -- projected for the Mining business are substantially up above the historic 40% of the Company.

Let's now talk about debt trends and amortization schedule. We start with the chart on the left. There's a continuous decrease from BRL1.56m to BRL0.93m the net debt over EBITDA ratio, which puts us at ease to invest.

Moving to the chart on the right, the average maturity of CSN's gross debt is now 10 years, and cash balance and cash equivalents are sufficient to pay debt principals that have a maturity in 2011, and part of the debt with maturity in 2012.

Moving to the consolidated and net income of the first quarter of '08. In the first quarter of '07 we had BRL508b. We've had additions for IPI tax credits of BRL391m. This is a non-recurring event. Therefore, it was not seen in the first quarter of '08.

We had other operating and non-operating expenses of BRL39m related to low fixed assets, and also related to the discontinuation of a product -- of the [Lonteiceto] line, gross profit of BRL31m. And although we reported a financial result in the first quarter of '08 of approximately BRL200m, the financial result was lower than the results presented in the fourth quarter of '07 by BRL86m, financial result. Whereas, more profitability in more taxes collected BRL69m.

In expense with a premium amortization particularly in acquiring CFM BRL31m. So that is in the category of interest. A greater sales effort domestically, and greater general and sales expenses of BRL17m. So first quarter of '08 BRL767m.

Now net debt. In the fourth quarter of '07 I had BRL4.8m and a consolidated EBITDA of BRL1.3b. We had a cost of the debt at BRL200m [sic. see presentation]. We had BRL100m in working capital, cost of debt at BRL200m. We also paid dividends and IoE of BRL800m in the first quarter, based on the balance sheet of the first quarter of '07. This was decided by the Board who had total investments of BRL400m and we collected a total of BRL400m taxes. The net debt remains stable in the first quarter in spite of all the investments made, taxes collected, and payment of dividends and interest on equity.

Now moving to share profitability and market cap. We consider with the left upper hand corner. In the first quarter of '08 our shares had the fifth greatest depreciation in BOVESPA. Clockwise, our NYSE ADRs had the eighth highest appreciation in the first quarter of '08 among all Latin American companies ADRs. And finally, as stated before, our market cap $35b, the fifth highest in worldwide steelmakers.

I close the presentation of our results. I'll give the floor to the Executive Director of Logistics, Infrastructure and Energy, Mr. Isaac Popoutchi. Thank you very much.

Good morning. Usually in meetings of this nature we have introduced to you all of our business areas related to steel milling and mining and also cement. But today I would like to focus in a business area that has become one of the most promising and also most important areas at CSN. And that's where the Company has its most precious assets. And I will talk about one of the projects that is still being developed. We have some works that are now being hired and some others are in the process of obtaining a license. But altogether they will represent a very broad logistic platform in the region of Itaguai.

CSN has two important assets that are now located in the Itaguai port. The Itaguai port was built between the '70s and the '80s. And the intention was to make Itaguai the largest port in the south east of the country. Its location is very unique because it's located between -- in the state of Rio de Janeiro. It's closer to Rio but very also close to Sao Paolo in the Paraiba Valley. And it is strategically located in terms of logistics because it has very good access to Minas Gerais and other areas. So it's a very privileged location.

It's also due to the space in the port. Itaguai has very deep waters which allows us to exploit a very good ports terminal at optimal conditions with very good access channels, very deep waters, very close to high seas, which allows us to have important cost savings in terms of the operation of the vessels.

Right at first Itaguai port, which at first inaugurated with a different name called Sepetiba, so the intention at the time was to make that port a large hub for vessels. Today the vessels that come to Brazil have to stop twice. Once in the port of Rio. At least in the past they had to make a stop in the port of Rio, and also the port of Santos which even today it is the largest Brazilian port. But Sepetiba Itaguai will be able -- it will be able to reduce the stops. So we will only have one stop in Itaguai or Sepetiba. We'll reduce the name of stops. And for some shipbuilders this is an advantage because the vessels will no longer have to stop in either Rio or Santos.

CSN operates Tecon which is a terminal for steel milling products in containers at the Sepetiba port. And also we operate Tecar which is our largest iron ore export platform. CSN also has on the long side -- alongside this entire complex, an area of 1.4m square meters. So it's a very large area along the banks of the Sepetiba port. The area is used for the construction of our new Itaguai steel mill which will occupy approximately 60% to 70% of the area.

For the remaining area we are conducting two logistics terminals. One will be to cope with the entire demand of iron ore and steel milling products from CSN. And in the future we want that area to become the largest logistics terminal for the entire south east of Brazil.

I have here a map that shows the location of the port. So you see the state of Minas Gerais which is right in front of the Sepetiba bay and Sao Paolo to the left and Rio to the right. And I forgot to mention as well that this area is also supported by a world class railway in Brazil. And that railway leads to Sao Paolo, Rio and Minas and also it spreads out into the interior of Sao Paolo. And that makes a connection with ELL which is another important railroad.

This project also foresees some limited growth. We have an adjacent area in this new private terminal. And today that is estimated in 1.2 square meters (sic -- see presentation). And that is probably the largest adjacent area around a Brazilian port.

It may be occupied in many different forms throughout its existence because of the characteristics of the drawings and the project and also the geography is very favorable.

The other advantage of that complex is that it's very far away from the urban areas which is something very unique because all Brazilian ports grew a lot. They spread around. And the cities also grew. And if you take, for instance, the port of Rio, there is no open area, or no divide between the port and the city, because now that the port is inside the city. And the same thing happened with Santos and the same thing happened with one of the banks of the port of Santos which is located in the municipality of Guaruja. So the urban areas are getting very close to the port. And in turn that is a limiting factor because it limits the areas where the ports could keep containers and other things that are used for exports and imports.

So at this particular port we foresee large synergies and important investments in the terminals that are being operated by CSN. We will reach certain capacity while the private port is being developed.

There is another basic feature of a private terminal and that is its operational cost. The port is located in a private land. The land belongs to CSN. And therefore it is not included in the legal rule scheme that has to be followed by public ports. Therefore, we will have our own personnel, our own labor. And that in turn means that we will not have to pay the high prices of the public ports which make up for the high Brazil costs that we face today. And therefore our port will be highly competitive in terms of certainly [increasing] profit.

The picture that you see here will be shown several times during the presentation. And on the left hand side of the picture you'll see the current terminal in operation which is Tecon. It is being operated by another subsidiary of CSN which is Sepetiba Tecon. The berth right in front, the berth is where we operate load -- that's our loading operation for solids like coal, coke and other products. And we are now also loading iron ore. Therefore we have an expansion project for that area.

On the right hand side you see a grey spot. And that is the location of the stockyard for iron ore and also other bulk materials. And on the right that bridge is the new terminal that we are introducing to you first hand.

This terminal is already in the initial licensing phase. We have already sent the project to the port authorities for approval. Particularly we've sent it to [Antaki] and Companhia Docas, other port authorities etc. We have already submitted the project to the environmental agencies of Brazil. We're hoping to get the first approval. We're now developing the engineering drawings and environmental projects etc. And the other phases, as you will see further on, we are in different stages depending on the scope of the projects.

This platform consists basically in the expansion of Sepetiba Tecon. One of the port terminals, the picture that you see on the wall is a very good picture because the first berth is a metallic structure berth. It's all made of metallic structures. The first picture at the top is the Tecon terminal. The berth was built on a temporary basis, but we will build the final one so as to have more than 800 meters of continuous berth. This is phase one.

And then phase two we will expand it so that we can adapt it to the new topology of grain vessels. Some vessels that are now being built, they will be able to transport more than 8,000 tonnes and they will be more than 300 meters long, that's why they need a larger dock to unload. That's why we have to expand the berth.

This particular terminal is being expanded to accommodate exports of iron ore. The construction is following the schedule. And Juarez I'm sure will be able to give you more details about the tonnage. Approximately, currently it's 30m tonnes, but we will reach 45m tonnes by the end of this year.

The logistics support area means that every port activity requires additional operations for stockyards, parking lot for trucks and a space for truck drivers, etc. That's why we are also forecasting another area in that map that will be at the end of the metropolitan arc. And this will be the link to the other areas or to the other roads that leads to Rio and to the port of Sepetiba. This area will be adjacent to the MRS yard and that's why I say that this will be a very large logistic platform that will give important support to the port. And that area will have very unique and innovative features.

We will have 800,000 square meters for -- which is the area for that logistic platform. And we are operating in the format of a port condominium. And the different operators will be able to build their own facility in that area. We will talk a little bit more about it later. And then we will have a private port which we named as Lago da Pedra which is the translation of the Indian word Itaguai. Ita meaning stone and guai, water. So that's a very suggestive and very unique name for such a complex port.

And before we get into the details of the project, I would like to tell you a little bit about our growth outlook and the growth outlook for ocean transportation, or ocean freight. And because of this projection, we can immediately see that our port will be very successful because the Brazilian infrastructure is still very poor. We have problems of a different nature. So we think that with this new project we will be able to solve lots of problems. And we will cope with the sustainable pace of growth in the years to come.

The chart down below, I think, the line in orange indicates the growth of the world's GDP. And the average growth estimated between '06 and '08 is 8.6%. And we still project a similar growth until 2010.

World trade, according to figures provided by the World Bank and the IMF, have increased by 12%, or 11.8% a year. That is represented by the yellow curve. And what's also very important to note is that this world trade has increased substantially throughout the different seas because products have circulated in different areas. Raw materials go from here to China, so the transoceanic transportation and trade has increased substantially.

Not only that, but the way by which the products are being transported is unique because products are more and more being shipped in containers. Automobiles, steel milling products and many other traditional products are now being traded and transported in containers, including sugar and coffee and even liquid bulk materials or commodities. And the growth rate of the container volume has also increased at the pace of 12.5% a year. And we do believe that this increase will be even higher in the future.

Now let's take a look at the Brazilian economic growth. Our GDP from 2001 to '07 has increased, on average, 3.7% a year, the estimated growth. I think you know the figures better than I do, but in the chart we indicated 4.5%. And that is indicated by, I think, the red line or orange I would say, orange line.

In the chart below you also have the growth figures for containers. That is indicated by the yellow line. Then we have the volume of containers in Brazil. Containers in the world, as I said before is growing at 12% and in Brazil between '03 and '07 that growth rate has been 16%. I think our people have been very conservative because they put a worldwide growth, I don't think it will be a lot higher, but they indicated that it was 12.8% and that is represented by the green line.

What's also very important is growth of ocean freighting or transportation in Brazil, coastal freight in Brazil, coastal navigation, that has increased particularly more significantly in the last few years. But between '02 and -- '08 and 2010 the growth rate will be approximately 15%.

To give you an idea, Sepetiba Tecon has -- playing the role of a Brazilian head port. More than 40% of the loads are coastal, coastal transportation. There are large vessels that leave their cargo at Sepetiba and then the loads are transported in smaller vessels to other locations. So 40% of the vessels carry coastal containers that will then -- are large containers that are then transported in smaller vessels to other locations. So this kind of transportation will increase and will increase particularly because of a port like that.

So what is the domestic infrastructure? I think you're all very familiar with our infrastructure. The infrastructure is very outdated. And it's not -- and it does not cope with the pace of business. In terms of the investments that are forecasted for the future, we believe that the investments will not be enough to cope with the ocean freight or the ocean transportation required in the future. We do not have other areas to expand around the ports because the areas that we have are not safe enough around the ports. And the ports do not have a good enough capacity. They need draining capacity. And also they need also other important investments. The draught is low in some of these ports.

Well Benjamin said that my time is over. So now I would like to ask Davi, who is our Director for Port and Logistics to talk a little bit more about our projects. Thank you.

Good morning. Such a big project has some very important prerequisites. Isaac talked about the world market, the domestic market and he talked about some issues like geographic location, road or land and maritime access and management. Well I will talk about these advantages and give you some more details about our projects.

Sepetiba Tecon is a container and general cargo terminal. It has 400,000 square meters. The location of the project is strategic because now we are in a radius of a minimum 500 kilometers away from the big Brazilian GDP.

We are not close to urban centers, which is the case of our main Brazilian port. This is a deep water region. And in the case of container ships and due to the geographic location of this terminal, we can avoid additional scale of container ships.

Itaguai Port is about 70 kilometers away from Rio de Janeiro Port. This is about 300 kilometers away from the Santos Port. In terms of maritime distance, this is not so long. However, it brings an additional cost if we have another stop.

Further still logistics cost, the privileged location Itaguai Port has not only land access but maritime access that are very privileged to one.

Rio Santos the highway is already being widened. This connects to Brazil Avenue. You see this is at Brazil Avenue. This stretch in red is the Rio Santos highway works. It passes by Itaguai Port and goes all the way to Ita Cruza. In here, we have a specific and special access to Itaguai Port.

Besides the Metropolitan area, this is a project that is part of the BAC, the accelerated growth program. And we have signed a contract to start civil work. And the civil work is scheduled to begin in the first fortnight of May.

The Metropolitan Arch includes Niteroi. The R101 north connects the 04C Rio, connected to Belo Horizonte, includes [Tutra] highway connecting Rio and Sao Paulo, and Itaguai Port.

Then along the Metropolitan, what we call Metropolitan Loop there are several projects connected to the petrochemical industry and other regions -- and other industries in the region.

In the case of the land infrastructure, I can tell you this is the most well served terminal. MRS has a project completed in widening works. And MRS trains, both for the bulk terminal and for the Sepetiba Tecon general cargo terminal. So the 200 meters all the way very close to the water line. I particularly don't know any other terminal with this kind of competitive edge.

Maritime infrastructure. This port as I said is a deep water port. The access channel has 18.5, or is 18.5 meters deep. But we can talk ships over 500,000 tonnes of iron re and contain -- it can often accommodate container ships against the (inaudible) region as Sepetiba becomes a natural tendency to be called a hub port. And it was conceived thinking of that.

It is important to think that drainage has been contracted. Our Company has won the bid and they will drain the channel even more so that it will be 20 meters deep. And a small part of the channel that requires some widening, 200 meters. This work is budgeted in BRL64m. And it will take -- it's scheduled to take 13 months. The work is scheduled to begin in the end of the month of May.

It is important to remember that this is one of the drainage work that has the highest cost benefit ratio in the area of Brazilian ports.

Another important piece of information is that until 24 years ago the region had about 500 ships docking per year. Now there are more than 1,000 ships docking per year and will probably be receiving 2,000 ships in the next 53 years. For there's a project underway to widen, or to double the width of the access to the port.

Draining will not be so important but will need ultralitic signage which means that smaller, lower draught ships that can use an alternative channel that is not so deep. The bigger ships which require higher depth and high draught will use the existing channel.

This is a project that is in its final planning stage and will probably be a very cheap project.

Another important advantage is that CSN, as the owner of Sepetiba Tecon, a terminal of containers and terminal cargo, has been operating this terminal since 1999. In other words, we've had a learning curve but we have a consolidated experience in managing general cargo and container shipment, especially in the terminal of coal and bulk.

We've been operating Tecar in the region since 1997. And I'd like to remind you that the iron ore project started operating February 2007. These are very high productivity terminals, with modern infrastructures, state of the art equipment. And a very experienced and well prepared management.

I am going to give you some Tecon figures. Tecon is growing a lot more than the figures presented by Isaac. Bigger than the worldwide and Brazilian figures. This is a new terminal, but it's growing quite fast. It's been growing on an average 75% per annum since the 2003.

Although it started operating in 1999, in 2003, only in 2003 did the container related figures become more significant. We're talking about 300,000 TEUs in 2007. This is the biggest terminal in the state of Rio de Janeiro. Rio de Janeiro has three container terminals, Sepetiba Tecon, a multi-terminaized terminal and a lever terminal. These two are older. They are located inside the city of Rio of Janeiro and they face all the difficulties that a city port faces.

And Tecon is the largest terminal in the State. We move 1m tonnes of steel products per annum and we can reach 2m tonnes with the current infrastructure.

And project loads now. This is interesting because Brazil in general, and the south eastern region of Brazil more specifically, have been having expansion projects or greenfield projects -- industrial projects. And we are importing a lot of project equipment therefore. Containers in general cargo terminal offices they have a specialized equipment are used for the import of this kind of cargo. So this additional revenue to Sepetiba Tecon.

In the case of Tecar, Tecar is a terminal that CSN has been operating since 1997. It is specialized in importing and exporting solid oak. So far from February last year to now we have exported more than 10m tonnes of iron ore in this terminal. The second phase of the iron ore project is complete. It is operational. This is a second phase and that will increase to 30m tonnes per annum for Tecar this year. Our forecast is 24m tonnes until December.

Tecar also moves other bulk cargo, particularly in import. About 4m tonnes of coal and others every year.

Coke, coal, coke. In Tecar the terminal of cargo has the capacity to double from 4m tonnes to 8m tonnes.

Other significant advantages are that this is a project that combines consolidated projects with all its advantages. Geographic location advantage, accessibility, management, etc, in the expansion of these terminals Sepetiba Tecon and Tecar. And the expansion of these existing terminals and greenfield projects Lago de Pedra, for example, which is a private port.

The Logistics Support project in Lago de Pedra, a private port, are projects that are modular and demand driven. And in the case of the Logistic Support Center, particularly devoted to contain general cargos with many prospects, clients. This can be done on demand depending on the needs of the customers. The project has a basic concept and it is modular. We can work with vehicle refrigerated cargo and so on and so forth depending on the customers' needs.

This is not a regional product -- project. In our opinion it is a national project. And we have our own cargo. There's a discussion about private port, public port. In our case, this is not a problem. We have iron ore. We have steel products and feed stocks for the steel industry that will have to go through our private port anyway.

Now I give you some details about the project. Let's start with the expansion of Sepetiba Tecon. Sepetiba Tecon is a port that is part of the public port of 400,000 square meters of area. And this is our first main target related to containers and general cargo.

This is the location in the Itaguai region. 540 meters of continuous pier. And this is a metal platform. In the previous animation I think you could see. This is an interesting photo of that. This is the metal platform. You might not see so well from the back of the room, but all this area, all the berths will be the same. 540 meters of continuous pier to 810 meters of dockable berth.

The draughts have been drained to 14.5 meters deep. And we can dock the biggest container ships from anywhere in the world. We are not having these ships yet because they're not coming to Brazil. But when necessary they can be docked there.

$63m investment. We are moving 2m tonnes per annum and we can increase that to 6m per annum.

The environmental permit here is very easy to get. It's practically the same concept as the other piers. That project is ready. We are in the phase of signing a contract. This is scheduled to last two and a half years.

This is the second phase of Sepetiba Tecon in front of the last berth 301, 2, 3. The terminal will be increased another 260 meters. The reason for that is that ships are becoming bigger and bigger and we need to expand the pier.

I know that some papers have been written in the country dated seven, eight years ago when they asked the main container builders if the big ships would ever come to Brazil. And they said, no, they will be in the east, west, Asia, U.S., the U.S. west coast. But in less than four years they were proven wrong and we have ships of 6,000 TEUs container ships. And these are 280 meter long ships.

So here we have a terminal to receive -- to dock simultaneously two 240 meter long ships. This project will take Sepetiba Tecon upon -- we would have the same draught. We would get 8,000 TEU ships. $103m dollar project. The current capacity is 600,000 TEUs and will be increased to 1,300,000 TEUs.

Then we talk a little bit about Tecar explanation. This has been talked about. This has been announced by the Mining Department. Tecar has [occupancy] of 30m tonnes per annum. And in the Pier project it's conceptually ready.

We are asking for the license for this draining project and to build pier 103, 2 or 3.

At the completion of the project, the iron ore export capacity will increase to 100m tonnes, and 8m tonnes of coal, which is the Tecar capacity.

This project has phases three, four, five and six. And at the end of 2012, the terminal will be -- will have an ability -- a capacity to -- for 100m tonnes.

I'd like to highlight that this is ongoing -- this is an ongoing project. The Tecon and Tecar expansion projects are ongoing. They're underway.

Now this Logistic Support Center is a greenfield project. It will support not only Sepetiba Tecon but also the future private port.

This project is focused on containers and general cargo. It is four kilometers away from Sepetiba Tecon. Away from the organized port. It is located in an area that is owned by CSN as Isaac has mentioned before. It will take about 800,000 meters. It is a modular project. And today that's just a matter of ports close to cities which is an issue for Brazil.

We see many urban ports facing difficulties because they're right there in the middle of the cities. It's just not a maritime issue, a lack of dockable piers. The problem is the back area or support area. If we get photos of this urban port you immediately see that 200 meters, 300 meters. By the port we see a lot of houses, buildings. So there's no back area, support area for these urban ports. Not here. This has been a greenfield project. It will be located in land -- our own land. We just have to define the details. How we are going to exploit the area with a simple, environmental permit, which Sepetiba Tecon already have. And we can immediately serve the market.

Again, the area is owned by CSN. It is outside the organized port.

Let's move ahead please.

Again, fantastic logistics involved here. This dark part is the MRS Highway. It moves towards [Aquiba] Island. And here this access to Companhia Docas Tecar. And this is very close to our future project.

This is the access road, the Rio Santos highway which I mentioned before which is being widened. And this is the stretch inside Itaguai Port. Fantastic road access in other words. Again, it's -- we can never over emphasize that this kind of port, this kind of project is in the south eastern region of Brazil.

Here, we see some detail. This is conceptual, but we would have a large parking lot for trucks, institutional, administrative buildings. We can have the IRS. We can have the cargo clearance staff. Here an example of a distribution center container terminal and several other types of activities, which are required in the standard ports.

This is an 850,000 square meters area. You can move 900,000 TEUs there. Investment of BRL202m. It's programmed and modular according to the needs. And we can use it to support the industry.

I've been in this business for a while and I can tell you this is in everyone's wish list.

Every now and then people come to us and -- but these projects require an internal maturity. And so there are now -- some people say did you have a project [in that area]? Why don't you do this kind of project? People come to me all the time and I'm sure that this is going to be a very successful project.

Next slide. All right. I believe this is the most interesting project of all. This is a private port, Lago da Pedra. This has contributed to the region in Itaguai. You know, some people wonder if Itaguai means stone lagoon, stone lake. But this is the thing attributed to the geographic location that this is a private port outside the organized port. It's important to highlight that. It is planned and designed to be a store port and linked to our back area, the port area.

I don't know if Isaac or I said that but it's -- we can never over emphasize that it has a 1,000 hectares. And 1,000 hectares approximately 10m square meters.

In the case of logistics -- of the Logistic Support Center we are going to occupy 850,000 at the end of the project 850,000 square meters.

In the case of the back support area, 1.2m square meters. We still have 8m square meters that is left. It's not going to be left untouched for too long because Eneas has a project for that. Of this 6m that I mentioned we still have 4m square meters for expansions, environmental conservation, etc.

Well then the port has a bridge. Fred please. We have -- there are piers, an access bridge which is 4 kilometers long. Two docking piers with four berths.

Here we have low -- not so deep. This is the docking station one. The first berth is for general cargo ships. They normally require more shallow waters than the second docking station for container ships.

This is a pier that is more than 800 meters long with 100 meters wide because of the type of cargo that is going to be moved there. General cargo and containers.

Again, it was designed for the largest container ships in the world because now ships are growing a lot more laterally and in length than in depth. They have 14.5 meters draught but this pier is designed to dock these ships.

The inner dock for Panamax ships above 8,000 TEUs. And in pier two the inner side will be used for import of bulk product - coal, coke, and feed stock ships. State sized ships. And the outer pier for iron ore where we need more deep waters for ships 200 VLOC.

Right, it is a port that will move our own cargos. All cargos, steel products, coal, coke, etc. Investment of about BRL800m. That involved the bridge and the piers.

Then I'm going to show you the back support area for this port. The back support area for the port has -- or is partly used for the pit car projects, 100m tonnes. That has been announced. This project is being designed.

Another part dedicated to iron ore. More or less the same size is to iron ore and coal for the private port. Then another support area supporting the private port related to containers and general cargo.

We would use a total area of 10m square meters. Of this we would use 1.2m square meters. Investment of BRL283m.

And my final slide. This is a summary. Here I am including a summary of all projects. So the end capacity of the logistic applied from Itaguai would be a 160m tonnes of iron ore. 100m tonnes Tecar, 60m tonnes in the private port, or private terminal.

Coal and coke, 20m million tonnes. 8m tonnes in Tecar. 12m in the private terminal.

Containers. 2.3m TEUs. 1.3m TEUs in Sepetiba Tecon. 1m in the private terminal.

General cargo and steel products about 17m tonnes. Every year 11m in the private port, 6m in Sepetiba Tecon.

Total investment $2.2b. Of this, $230m have been invested in Tecar.

In this $2.2b or $2.3b. We have $790m used for the iron ore project of Tecar.

This is the summary of the deadlines. I would like to emphasize that, particularly regarding the Logistic Support Center and the private ports, the projects are modular and done on a demand basis. Built to suit projects.

And my final slide, I believe that CSN I'm sure will have such higher quality assets. And with our historic competence and with our time in the market, with our own logistic for bulk, steel products. And with our acquired competence in the last decade with container and general road terminal operations. And particularly with the assets that we own, I think that CSN has to enjoy this positive moment of our country. We believe that this is a project that has a great appeal, not only for now but for the future of the country. We are very excited and I -- we are sure that the market will love this announcement.

Thank you very much.

I have two things to say. I'm not going to really follow the presentation because I'll try to save up some time because Eneas already used a lot of my time. But I have some things to tell you.

First the good news. We are, in terms of our iron ore project, I have to say that, as we said before, the expansion of the 30m tonnes at the Itaguai Port has been concluded. It's -- well it's almost concluded.

In the first quarter you saw shipments of about 3m tonnes. And the bulk of that was already shipped in March. In March we were operating at almost full capacity, 3m tonnes of capacity and in the last month 8m tonnes.

In April and in early May we are just concluding the railway tracks inside the terminal. We are finishing the construction of the railway tracks. But in April we already operated with 18m tonnes a year and for May we will ship about 25m tonnes. The first week has operated at this level and we hope that by the end of the quarter we will be able to ship approximately 28m to 30m tonnes a year. That is the pace of shipment.

In terms of iron ore exports by CSN to Itaguai in the quarter, there is between 5m to 6.5m tonnes. And this will be -- people are telling me to speak a little bit slower because of the translation -- so we would have, by the end of the quarter, something close to the capacity that has been anticipated for that phase and we are also working very hard and preparing the ports to operate approximately 40m to 50m tonnes next year. This is the pace. We are delivering according to the schedule but we hope that by the second quarter of '08 we will get excellent results from iron ore, not only in terms of our sales volume but also in terms of price increment because prices will change in the second quarter. And then you can just imagine what is about to come. We will have to double the number of shipments. And we will have to almost double our pricing. And that means something around three or four times more than we had in the past in terms of iron ore.

So this is the good news. The other one is not bad news but it's just a comment about what was mentioned so far. In CSN we've been very careful in terms of communicating only those projects that we are sure that we will be able to deliver and also in tune with the schedule. A few years ago we made a few mistakes because probably we were not experienced enough and we thought that we would be able to implement projects faster than we had first anticipated. And so we talked about project schedules that are more flexible. And we are delivering a lot faster. But we have already acquired a lot of experience -- experience from the real world. And today we can certainly tell you that all of the schedules that we put forth to you in terms of the ports will be fulfilled.

A lot of what Davi said, especially concerning iron ore, are things that we have already accomplished. The licenses are already in our hands. All we have to do is to initiate the construction. And once again CSN -- we always talked a lot about Casa de Pedra. First we talked about 30m and then 40 and then 50 and then 70m. But I had the opportunity to talk about this with a lot of serious people, people that are knowledgeable in terms of the project. And we were able to prove that we can deliver that project according to schedule. I am talking about Casa de Pedra in particular because the mineral resources amount to 8b tonnes. And we have heard a lot about 1b tonnes and 2b tonnes resources but we have 8b tonnes in terms of resources at Casa de Pedra. And we were only using a very small portion of that amount. And the main reason was that we did not have enough -- good enough logistics for exports and the available logistics for exporting that -- the ore was through Itaguai and that was limited to 100m tonnes.

And today Davi just showed us all what we are doing in the Company and that shows that we are opening a big window to export 60m tonnes as of 2018. In the midst of 2013 and towards the end of 2013 150m tonnes. So that means that the mineral resources of Casa de Pedra will increase. We will add more things. So you can expect a growth and we are working towards that end. And very soon we will announce more things because considering this new logistics capacity that will be in operation by 2013 we will be able to add more capacity to Casa de Pedra.

But mining is not only something that is closely related to logistics because there are other things at stake and we are already working towards solving the other problems. And I think the most critical factor here relates to the disposal of waste. We have been working a lot to find out other means of disposing waste. We are doing some conceptual studies currently to verify the capacity for these areas so we do believe that in the next three or four months we will finalize this new evaluation related to the growth potential of Casa de Pedra. So we will be able to give you new figures. There's still upside -- there's still some upsides in our Casa de Pedra project but soon enough we will be able to announce to you the visibility of the projects in a very secure fashion.

On the other hand we are also working very seriously with our Namisa project. The Namisa project is a project where we want to incorporate new resources and new reserves at Namisa. We are working towards that end and we already have a very aggressive project to increase the capacity at Namisa. So if you put together the growth potential of Casa de Pedra and the growth potential at Namisa so I think that very soon we will be able to announce a 95 occupancy rate of those two locations.

So I think these were the main highlights, the main news and certainly we find ourselves in a very privileged position vis-à-vis any other company. And maybe I would even venture to say that I feel like I am a very large player and we usually put ourselves in the fourth place in the ranking but I think we can move forward in the ranking in terms of the size of the Company and the operations of iron ore. So in the next four or five years or five or six years we may reach significant levels of exports vis-à-vis when we compare ourselves to the major worldwide producers.

And all of our logistic problems are being solved. I may even say that in the area of Itaguai, and the other exporters of iron ore they depend more on us than we will depend on others because this whole thing about increasing and expanding ports and the railroads are occurring in the surrounding areas of CSN. And any growth would require a previous authorization from CSN.

So the news I had for you in terms of iron ore and logistics is that we are extremely well positioned and we will take advantage of our privileged position because we want to translate that into new figures and new projects. Thank you very much.

Good morning. I have a brief presentation on steel milling. And I'm sure we have to talk about that and today steel milling accounts for 87% of our gains and our revenue. And when we compare that to the other business areas we have to keep steel milling in a good outstanding position inside CSN in the world.

And I will briefly talk about steel milling. I only five slides. And what I have to do is to show you the path that we are following. The idea here is to keep an increased productivity so as to generate more value to our Company.

So let's talk about competitiveness. The Company is absolutely integrated, it's completely integrated. CSN has something very unique because we have our own mines. We have iron ore, limestone and tin of very high quality. The mines are increasing their productive capacity and something very interesting is that the capacity in the mills has increased and this has also happened to other steel milling projects. Sometimes some companies do improve quality, they let go of the quality of iron ore. We also have good logistics which ensures low cost and operational security. And we are self-sufficient in terms of electric power. That gives us lower cost and a very good operational pace. We have already consolidated and we master our technology. We have vocation towards steel milling and we have entrepreneurship.

Operational performance, we have a permanent focus on cost reduction. We strive to keep continuous improvement in performance. We have investment programs to improve the operational performance. We have -- we are developing products exploiting the high levels of expertise of our Company and the investment program is for BRL11.7m in the next two years.

So now let's talk about short-term projects. This shows that we do have something to show in terms of maximizing value for the Company. We have GalvaSud and in CSN Parana we have many different mines which are very modern when compared to the best technologies available in the world. We also have a big target which is something very peculiar in Brazil when we can exploit that vis-à-vis our competitors. We can maximize the production of galvanized. In GalvaSud we have strong sources of coal and coke. We are also entering the market of long steel's new applications of pre-painted plates.

And we have also medium-term projects. We are reconstructing Bateria III. And what would that give us? That would give us self-sufficient in coke. We will increase the generation of electric power plant. We will reduce consumption of natural gas. We will be able to modernize LTF-3 and that will allow us to be more in tune with the automobile industry. And we will be an important steel supplier to the automobile industry.

We will also modernize the furnaces for LTQ, for long, and this will allow us to increase to 4m -- to increase the production. We will also improve the productivity of Casa de Pedra and we will improve the field rate. We are modernizing LTF at CSN LLC and we will expand and modernize the service center.

What are the expansion plans? How do we want to expand capacity? Our capacity because of our product mix is 5.6m. UPV longs in 2009 we are adding 600,000 tonnes. We also have a product for 2011 which involves 1.5m tonnes of longs to reach 7.7m tonnes. Congonhas is another product for 2012 which will add 4.5m tonnes which will allow us to have 12.2m tonnes by the end of 2013. And by 2014 we will add the Itaguai project which will add 4.5m tonnes of flat and 16.7m tonnes will be the final result by 2015. So basically this is what we have for you. And our objective is to work towards having a very competitive Company. We want to be a steel milling company that produces at lower cost. We want to produce high added value products and that in turn will increase the value -- the total value of the company. Thank you very much.

A very good afternoon. I will also be very brief -- going to be very brief because a lot of what's going on in the markets is not really new so it's just a select group of S&Ds.

Basically I'm going to tell you about what's happening in the international market. I will give you a quick idea of what's happening domestically and give you an idea of the market share of CSN. I'm going to tell you a little bit about prices, our pricing strategy, and what we believe may happen in the coming months.

We want to stress our growing market share. And I'm going to quickly talk about a product that we are launching for civil construction. In the international market a very high demand, prices are recovering. Yesterday Arcelor Mittal disclosed that as of July and August they will not sell [big can] in Europe with prices lower than EUR700 or EUR650. Nippon Steel disclosed increases in prices of about $300 per tonne in DQ. And that shows the price recovery in iron ore, coal and other raw materials.

Another important piece of data has to do with exports rate. After China last week India also increased their export of hot coils by 15%. The economies of these countries are trying to keep all the DQs or hot coils -- DQ hot coils which is making the international market very competitive.

We are doing quite well internationally and if we look at all the scenarios possible for the coming year the steel market tends to continue growing everywhere in the world. This is a quick overview of the international market that can be summarized in this way.

Domestically, the growth of the industry is clear. In all industries never did we have such high capacity in the automotive industry, in the white line industry, in the packaging industry. Sales record and record production in all industrial sectors generally speaking.

And an important piece of data. We have about 12m to 15m new consumers in the C, D and E social classes. They're coming to the market now. They're buying cars. They're buying stoves. They're buying refrigerators. And now in our case they're consuming more can packages. These are new consumers out there and that is why we imagine that CSN will recover a market share in this market. Market share that we had lost to other alternatives like glass and end plastic and PET.

Marcus Assumpcao from Merrill Lynch in the last earnings conference asked what is the maximum domestic market for CSN. And I'd say we are getting very close to the maximum market share. In the parent Company we have about almost 94% directed to the domestic market. So what we are exporting is high value, high added value products or a little bit of tin plate for Latin America at very attractive prices. And we are also rolling slabs that are largely used in the domestic market but we are selling those through Lusosider in Europe. But these are very small amounts.

So today CSN is very close to reaching the mix for the domestic and internal market -- international market. The other important thing that I mentioned for tin plates with this new consumption trend, since we have idle capacity for tin plates the plan is that we are going to be producing more tin plate in our product mix.

Another important point for the model that you have is our pricing. CSN, on March 18, published increases in hot band 13.6, 6.5 in cold band and in tin plate 6%. All these price increases have been implemented and that will be reflected in the earnings and results for the second quarter.

In May the Company disclosed on May 14 we announced and are implementing since then a new 15% price increase in hot band, cold band 11%, zinc products 6.5 and tin plate 11%. If we follow the logic of these price increases, there would be some room for price realignments as of July and August. This is something we're working on. This will be analyzed considering imported products coming to Brazil which fortunately is decreasing. Imported material has dropped because of international prices. We're going to be considering the capacity of the production chains to absorb and pass on this increase to consumers. And some cost issues were left behind in the price increases of March and April.

As of -- for market share, today, CSN is the absolute leader in Distribution, Civil Construction and white Line. And we're the only supplier of tin plate.

Where can we improve our portfolio of products and markets? We have some idleness in GalvaSud and to complement Eneas' points, this is our new quantum leap. We're going to enjoy this good moment of the automotive industry where we have the lowest market share, about 26%. And we're going to enjoy this good moment of the automotive industry, greater demand domestically to capture the increasing volumes of the automotive industry via GalvaSud. Besides, there's something else very important that CSN is doing together with INAL. We should increase a lot our capital areas in the market through new service centers, new distribution stations. And we want to better supply the markets -- the pulverized markets.

Some years ago Benjamin mentioned during a breakfast that we should act like Avon resellers, Natura resellers. We should have like shielded sales. In other words have a lot of customers not relying so much on this and that industry and having lots of people selling our products in the market. Yesterday we launched a product for civil construction called CSN Steel Colors. It's going to be competing with aluminum, granite to -- for building cladding. And it's going to compete directly with these materials that I mentioned with one difference. CSN is not supplying steel, CSN is supplying a solution. Through INAL and some other CSN distributors out there in the market we will be able to sell CSN Steel Colors with a force team of about 300 people.

This makes CSN slightly different from our competitors. Our idea in sales is to make what we did yesterday obsolete. If our competitor is going to increase capacity we're going to take one step further in the chain to make their lives a little bit more difficult. And in Civil Construction and Distribution CSN is putting a lot of effort because they are directly linked to our product portfolio, to our vocation of working in a spot market. And our vocation to have the sales force focused on these markets that will follow the growth in the long carbon steel market.

I think that the Civil Construction effort fits the strategy of the Company. We will have long steel and cement playing a role. And the idea is that in a year or two we'll be able to sell to the end customer a beam pre-painted product, cement, rebore, all our portfolio of products. This is going to be a differential about CSN vis-à-vis our competitors, obviously investing in production capacity. CSN is investing in people. The sales force of INAL has practically doubled and we're still hiring. And that's what will make us different. We'll be more agile, more flexible and more -- and very fast to market.

Thank you very much. Have a good day.

We are going to show you the new institutional video for CSN followed by the words of Benjamin Steinbruch, our CEO. And in the end we're going to have a Q&A session that hopefully is going to be very interactive.

CSN is known as a big steel company. In the past it had a presence in history because as of its creation Brazil became more industrialized. Currently, CSN is a modern and competitive steel complex active all along the steel production chain.

CSN activities range from iron ore extraction all the way to production and sales of high added value steel products including administration of port terminals besides interests in railroads and energy generation assets.

Steel complex. However, what not everybody knows is that as we speak, CSN is writing a new page of its history and of the history of Brazil.

Investments, expansion. CSN continues to invest in the expansion of all of its units and it's starting now a new phase diversifying its business.

Casa de Pedra. Private work. The mineral resources of Casa de Pedra are abundant. More than 8b tonnes. With the expansion project which is underway CSN will raise their current ore production from 16m to 70m tonnes per year. Added to the production of its subsidiary Namisa and to the ore acquired from the third parties, CSN will reach the extraordinary mark of 100m tonnes.

As of the end of 2012 CSN will be the fourth largest iron ore mining company. The mining company of CSN involves investments of around $3.2b which include building the pelletization plant, incrementing the production capacity of Namisa and the expansion of the Itaguai port.

Ore which is not used to manufacture steel by CSN will go to Itaguai port to be exported. Transport will be in the hands of MRS where CSN has an interest or a stockholding provision.

CSN also has an operator to maritime terminals in the Itaguai port in the space of Rio de Janeiro. Since 2007 the solid bulk terminal of CSN also became a terminal exporting iron ore. In the past year more than 5m tonnes have been exported; the hallmark of a project that wants to move 100m tonnes every year.

Besides exporting iron ore and importing coal CSN also operates a container in general cargo terminal in the port of Itaguai. In 2007 $15m were invested in the acquisition of two portainers for Panamax and two transtainers over wheels. With that, the capacity was raised to move 400,000 containers every year.

The CSN terminal is, or will be, the largest container terminal in the State of Rio de Janeiro and one of the largest in the country in its segment.

CSN Cement. In 2008 CSN will launch in the market a new endeavor. CSN Cement will be a totally integrated company with the production of clinker in Minas Gerais and cimenta -- and cement in Rio de Janeiro. The cement plant located in Volta Redonda is in its final stage of construction and this week the Company diversified CSN activities enjoying synergies. Whilst manufacturing of steel generates slag, one of the most important raw materials for the manufacturing of cement, the new Rio de Janeiro unit will produce in its initial stage 1.3m tonnes per year.

Long steel. And investments don't stop there. Work has started for CSN's long steel. Using the by-products of the steel process and enjoying synergies with the Presidente Vargas steel mill CSN long steel will produce 600,000 tonnes of rebar and wire rod -- high quality wire rod. CSN again in another important steel market in Brazil.

CSN is one of the most competitive integrated steel complexes in the world. CSN has one of the lowest manufacturing costs and one of the highest margins of the steel industry worldwide. CSN is among the top steel complexes -- top high-profitability steel complexes. CSN is the proof that manages its businesses with agility and innovation which strongly invests in technology, production processes, professional training, product quality, expansion and business diversification.

Robust. CSN builds daily a competitive in margin company which is in constant transformation.

CSN turning ore in steel, steel in wealth and development for Brazil.

Good morning to all. Thank you all for being here. Basically I think that this is a great innovation because in all previous presentations I have started talking, trying to convince my skeptical colleagues that what I was saying was possible. And now with my colleagues' presentations they show me that what was supposed to be done was done and was possible. So I think that very soon I'll be able to leave. If we deliver everything that we started doing five years ago. These projects and these ideas are just the results of ideas that came up in 2002/2003.

As for the results of the quarter, we had an impressive result of BRL767m which compares to the quarter of the previous year. Net of course the option effect when we sold the shares amounting to 250 break up fee. I think that the results were quite good for the second quarter. I believe we're going to have the best quarter in the history of CSN.

All basic raw materials have been purchased at old prices. These inventories will last until June/July. The new prices that we have the new sales records were iron ore and steel. So I believe that if everything goes smoothly we are going to have the best quarter in the history of CSN because of these new variables, low cost of raw materials and higher sales price of our products. As said here before, we directed our production basically to meet the domestic market. 94% of CSN production is being directed to the domestic market. We are trying to have added value products, something which differentiates us from other steel makers. Right now is that we are the only steel maker which has idle capacity for high added value products for the white line market, for the automotive industry. We just received news that our competitors have to import these products from their headquarters.

What it's possible to do in terms of market share. However, it will not bring positive results -- profits. So I believe that CSN will do quite well this year if we continue. And I believe that if this growth -- the automotive industry growth trend continues and the white line market continues to grow I think that CSN will benefit from that because we have some idle capacity in Presidente Vargas our plant in GalvaSud in CSN.

Now as for the mid and long haul, I would say that we are being practically pushed or driven by what was implemented before. CSN today has a great advantage and a great differential which is we live of ourselves. In other words, all of the projects mentioned here, for mining, for logistics, for steel, all of these projects are developed on our own land. For mining for example we don't need to have extraordinary acquisitions of mines that are far away with no logistics around them to supply what we expect to have in terms of increased production capacity of iron ore. Our own mines are indeed 8b tonnes reserves which we have known about for so long.

We can have investments made in our reserves to increase production in our own mines. We can invest in our own logistics so that we can make an increased export a reality.

In terms of Mining, what was the challenge? What was seen by some as something very difficult to implement. Well it is being overcome. It is only up to us to respond fast and to complete these projects very fast. It is in our hands. We don't rely on anybody else.

In terms of Logistics the same applies. Obviously we have some bureaucratic issues. Environmental permits have to be granted. But this is valid for everyone. Since it is in our own land, in our own business I think that we can get these permits very quickly.

I firmly believe that we will be able to execute the mining project in -- faster than what was initially proposed by us. I'm convinced that the iron ore market will remain strong, at least until 2012. And I firmly believe that our decision to sell part of Namisa will place us in the right position to invest, develop, grow and appreciate our Company in a very differentiated way.

The sale of Namisa means in and of itself an important financial deleveraging for us. With the sale of minority -- of a minority share of Namisa we'll be able to pay our debts. We'll have some cash left and we'll just have to decide on investment plans.

As you have just heard, I believe that in terms of goals and objectives we're very close to achieving what we were set to do years ago. The challenge to us now, to me and to my senior executives, is that in the next earnings presentation to you we will be ranking second in market cap. What separates us from Posco which the second is $3b. We are ranked fifth and I believe that with the results, with our second quarter performance, in the presentation -- in the earnings presentation in July, this when we're going to have the presentation of the earnings of the second quarter '08 -- we want to be the second in terms of market cap. It's not a matter of being very creative, intelligent or differentiated. This will be just the materialization of the investments made. As Juarez said, we are doubling the ore production this year and we are doubling the price. So it's a multiple of four.

In the steel industry with the price increases that have been made, there is the second price increase to be expected in the second quarter, that altogether will give us a margin which is historically known to the whole market but that will only increase.

Our concern is to give our shareholders, or to offer to our shareholders prices that will not go against our history. Our difficulty is not buying. Our difficulty is not investing in other segments or developing differentiated internal projects. Our difficulty is having these projects with the same historic margin as we've always had.

When we talk about Namisa, we have a margin of 60. When we talk about Casa de Pedra, the margin is 70%. When we talk about steel making the margin is between 40% and 50%. I think that it creates the difference. What the market is going to value about CSN is if we implement all these growth projects but maintaining these high margins. This is our major challenge for CSN management.

CSN allows us to do anything and everything. Our key differentiator, our hallmark is the EBITDA margin which is something we have to preserve.

I want to continue to grow CSN's business at the pace that you saw here, but maintaining these margins. That is the key business. I am sure that all of these projects presented here, if I maintaining our margin, will increase our margin.

In the steelmaking industries Eneas mentioned we have the long steel, 600,000 tonnes in Volta Redonda.

In the discussion of blast furnace 4 where we originally had Blast Furnace 1. In the Company we have always discussed using the infrastructure, the basic infrastructure of blast furnace 1 which was limiting us in terms of quantity to 1.5 tonnes. We are internally discussing now whether if it would be possible to have a bigger blast furnace in Volta Redonda. However, not using the infrastructure of blast furnace 1 because then our limitation would be one of logistics. And then the infrastructure of Blast Furnace 1, if we abandon that we can have in the Volta Redonda a plant -- a 2.5 or 3m tonne or 1.3 or 3 tonne blast furnace for long steel. We can use the existing infrastructure and materials logistics that we have in Volta Redonda.

Again the challenge is that in the very short term we can decide on the size of the blast furnace to be built in Volta Redonda.

And also the investment in Congonhas, as you heard, 4.5m tonnes and Itaguai which is a project -- 4.5m tonne project. All of these projects carried out on land belonging to CSN and logistics and management by CSN.

Well what else? As for cement, we are investing now. In November we should start bringing our product to market. The CSN Steel Colors, we have two clinker plants acquired in China. It is impossible to do better with the growth and civil construction. As you have followed, both our projects, both cement and long steel are maturing exactly on the right timing. Despite our iron ore project there would be no better time to mature this project. So I believe that besides working very hard we also have the luck effect. We were lucky to be delivering these projects at the moment where the demand for these projects is quite significant internationally in the case of iron ore and domestically in the case of long steel and cement.

CSN is a Pandora's Box and -- but I want to convey to you that I'm completely confident in CSN. Because everything that we say, everything that we think is put into practice in CSN, by CSN, using our assets, using our asset value, using our own logistics. And one thing leads to another you see because this project increase our power generation capacity. We can even have a power surplus eventually. As you know, we are independent from the energy model of the country. We have our own infrastructure, with our own infrastructure, our own raw material. It is up to us not to make too many mistakes.

So I am telling you, it is not just a miracle. It's not just luck. This is work that has started back in 2002. We've always been saying the same thing. We deliver to our promises. CSN's history is a successful one because we deliver our projects. When I told you that the iron ore issue would not be an issue back in 2002/3/4/5, most of you were skeptical. But there you are, we delivered to our promise. This year we are producing 30m tonnes we're shipping, we're selling. We increased our iron ore production capacity. We're working with the [navy] logistics. In our case it doesn't really require any miracle. We don't have to move mountains. We don't have to build differentiated logistics. Everything is in our hands basically.

As Juarez mentioned, expansion is also in our hands. Steel making expansion is in our hands. Davi and Isaac talked about logistics, and that too is in our hands. I arrived late but I think that Otavio talked about the financial figures. It's also in our hands.

In spite of the debt of BRL4 -- what's our debt, Otavio? BRL4.8b, we have the financial revenue. We have our ability to manage our cash, our treasury, so that we can have financial revenues to pay the expenses and to have surplus. I can tell you work is very serious for us. We're very determined and as always we're very transparent. We sell to the market what we believe in. We never sell illusions. We never sell ideas that we do not think are possible to be executed. And I think that this has been the hallmark of CSN until today, and this will continue to be our hallmark in the next quarter. What I'm telling you is no secret. Our sales prices are all disclosed to market. Raw material is stored in our inventory. And God help, if nothing different happens in the second quarter of '08, we're going to have the best quarter in the history of CSN. Thank you very much.

We will now initiate our Q&A session. I just want to interact with you a little bit more.

My name is Marcos Assumpcao from Merrill Lynch. Benjamin, my first question is addressed to you. Can you please give us an overview about what is your strategy for the ore business at CSN? You talked about the sale of maybe part of or the whole of Namisa. And in terms of the IPO that we've been hearing about it for a while, that may also include sales part of Casa de Pedra. Last year and in the previous years your main objective, the main objective of the management of the Company was to include the value of assets of CSN in the shares. So could you tell me, could you elaborate a little bit about that?

Every time I want to say something, Otavio says no, you cannot say that and every time I do say it, so I speak my mind. I have nothing against you, please don't take me wrong. Don't take it personal. In terms of the ore business we always emphasize that we believed, as we still believe, that the Iron Ore business of CSN is just as large as the Steel Milling business, and that it was up to us to convince the market and to show the market the good quality of our mining products. And the idea that we'll pursue is still the same idea that we pursued in the past. That means to say that we want and we must try to appreciate the shares the most we can.

We believe that the separate shares of CSN is worth more than the whole. So what we're doing with iron ore is eventually what will be done with the other areas of expertise of CSN. The Logistics project that we just showed you a few moments ago is one of the things that will merit equal treatment. And the same thing applies for steel milling, cement and energy. So the idea in mind is that CSN with time will be appreciated in its entirety, even if we have to separate the main parts, if we are indeed convinced that in separate they are worth more than whole.

What we're doing with Namisa is just an opportunity to separate a small part of mining that was purchased through CSN. And also other reserves and contracts that we have for iron ore. We want to go to market to monetize part of that amount.

Then if you ask me what is my priority I will say that the priority is to sell a minority stakeholding of Namisa. And with that idea in mind it's just to pay all debts of CSN yet still have some money left. Why is it not convincing to me that we should sell the entirety of the company? Because a business that is giving me 60% of profitability, to internalize the money, I do not have a lot of investment options, not good enough that it would allow me to have a 60% return rate. But what makes me more excited is that I'll have the opportunity to pay off the debt of CSN, even because people blame me for being an adventurer and to take a lot of risks. But to have a parent company and CSN with no debt, that is a summer night's dream. And I just wish I could materialize that next winter. So in a very short run it's advisable that we experience a moment with no leveraging.

Otavio usually tells me that working with no leverage is not wise enough. And the market will call me dumb. I may agree with that but I want people to call me dumb because I want CSN to have zero debt and the idea is to get there through the sale of Namisa. But what I said before is still underway because our idea is to do the same thing, right after the Namisa issue. You know that Namisa is on the market. We already hired a bank that will be in charge of the partial sale of that asset. And therefore we believe that that can become feasible in a very short run. We are riding in the momentum. You have access to -- in fact the potential investors have access to all of the information. But I think at 42m tonnes are putting available with its own logistics and part of also our own equity, the company's own equity. And I am very sure that we will get a lot of interest. Many buyers have already expressed their position. And I do not completely discard the total sale of the asset.

But I think that makes more sense because of the excessive liquidity that we will generate in the Company. And maybe we will be forced to present better projects to shareholders because -- and that will be difficult because 60% is very hard to match. Or maybe we will have a lot of liquidity surplus which will bring about a more aggressive distribution of dividends.

And in my view that doesn't make sense either because you look at our history and you look at the appreciation we had in the last five years. And so therefore I believe that our shareholders are pleased and they're willing to bat further in the Company. So in fact this issue of Namisa is just a nice marriage. The Company will then have zero debt level and we'll be able to make new investments and we will also be able to monetize part of the amount. And that amount we believe is not being fully recognized by the market. Namisa will then be a very important asset for Casa de Pedra as a whole.

I would just like to add a few words to what Benjamin said when he talked about Casa de Pedra. What I want to tell you is that I think that now the reasons that led us to take a long time to move forward with the project is because there we can be more clear. There are two upsides that -- or two things we still have to work more to improve your upside.

First of all, things improved quite a lot in terms of our perception of the pricing of iron ore in the market which was very different than your view. We believe the iron ore already has, for a while up, more room to grow in terms of pricing because the market was pretty a pre-judgment and I do believe that the price adjustment level was low. I wouldn't say too low, or a lot lower than our expectations, but there are many people that are knowledgeable in the market who think that there was room for more. And the Australians are here to demonstrate that they weren't happy and therefore they're sticking for more. This is one thing.

And we feel that there's still other, more upsides, more than what the market is perceiving today. And I see that this is still something very flexible and your perception is moving as well.

And the other thing is it has been mentioned here that internally we knew that we had much better logistic conditions than the ones we were publicizing now. So Casa de Pedra can still accommodate additional production because of our reserves. And we can't just have 100% of everything because it gives us the enemy of the excellent. But we still have a lot of things to lay on the table vis-à-vis Casa de Pedra. And we do not want to anticipate things. And I believe that now in the next three, four, five months we will be able to conclude this new phase of the Casa de Pedra application in view of their major logistics project. And that's when we will be much closer to what we fancy as being ideal. We will be able to take advantage of the upside of the business, right.

Raphael Biderman, Bradesco. I have two or three questions. My first question refers to the commercialization of iron ore from Casa de Pedra. We know that the Supreme Court or Minister Helen Grace has given you a favorable opinion. And you have already received a letter from CADE saying that you no longer need to give right of preference to CVRD. But CVRD is still demanding indemnization. Helen Grace, Chief Justice Helen Grace, in one of her opinions, said that CVRD cannot use that lawsuit as a legal pretext to get in the way of the commercialization because they are forced to follow CADE's recommendation.

But now, correct me if I'm wrong, I want to know whether you indeed are free from that contract once and for all, and in that production that you're getting into, I want to know whether you are selling iron ore exempt from that problem or whether there's still some things spending that can probably cause any problems looking forward. Are you selling iron ore in the stock market, market price? Or a little bit of each?

And my last question refers to what Benjamin said. He said that he believes that the iron ore market will still be very good until 2012, which is similar to what we think. But after 2012 there are large projects involving iron ore, not only in Brazil but also in Africa and Australia because of the number of new entrants. How do you see the issue of new entrants?

In terms of iron ore, my evaluation, my assessment, is that just like other raw materials we are going through a virtual cycle of high demand and high prices. And I think that the demand from China is what prevails in the market. And I don't see how China can stop growing. And the same thing goes for India, Russia and other countries or emerging markets. And so that's why I believe that we are embarking on a very consistent growing cycle. And if -- even if China grows last, it will be just as good. And I do believe also that this high demand will persist for a long time. And the same thing goes for the commodity prices until 2012. But this is a prevailing notion in the market.

But if we look at all of the projects underway and also the growth of the market we see that there is an important mismatch until 2012. From then onwards I think that the projects that have a higher price will be left along the way. And as you know, there are a lot of people that say that they can work miracles. They buy reserves that had no value because of the low concentration of ore. And today some projects can be made feasible with only 20% or 30% of ferrous content with an additional cost of working the ore or putting the right concentrations in, also pelletizing and transportation, because at times logistics can be very complicated. So these projects that are occurring because of this momentum.

Once the market goes down these will be the first companies to be affected. And they will be out of the game. So the only ones that can -- those that work at low cost, they will probably absorb those in the future. I think that most of the projects that will be initiated after 2012 may not have the same feasibility as ours with margins around 60% or 70%. I could even say that not only in terms of iron ore, but also if we look at other commodities, we have that firm belief that until 2012 that same trend will persist. And from then onwards I think what will prevail will be the more rational projects, projects that have a good business rationale and low cost. I think that companies that operate at lower cost, they will end up by absorbing those companies that operate at higher costs.

Now in terms of the other question, it will be answered by Juarez. But adding to what Juarez said, in my opinion what we have on the table is a 30% increase in iron ore. And I believe and I was sure that that increase would be around 100%, but in fact it was 68%, I think. That was the average. In my opinion, what we have on the table is 30% for sure. And later on with increases in coal that came about, and you are all very familiar with that, what we have left now is a large part of the increase of iron ore for this year.

Before I tackle the other subject I would like to even add to what Benjamin said. When you look, we are always thinking that China will stop growing, or maybe their production will be segmented. But I do not believe in that. China has a lot of infrastructure to grow and the population is too large and there are still a lot of people that will have to be included in that consumption basket.

But when you look at the other countries of BRIC, look at India or look at Brazil because I think for the first time we are more seriously thinking that Brazil will be able to achieve long, consistent growth and our steel capacity is absolutely depleted. If you look at steel projects in Brazil, many of them were at first geared towards exports. But now they are focusing on the domestic market so there is a lot of growth internally. And when we look at Russia, that's another place.

When we leave the countries of BRIC we look to the Middle East. Middle East will certainly grow a lot because of the accumulated capital stemming from the sale of oil. If you visit the Middle East today, you become really -- you are very surprised. I went to Dubai. I've been there four years ago and Dubai was just an avenue. But today it's a totally different world. A builder in Dubai told me that 25% of all bridge cranes, all the cranes in the world, 25% of the total cranes in the world are in Dubai. And the whole -- that whole part of that world will grow at astonishing levels. And even when you go to Asia, honestly I can tell you, sometimes we do not want to talk with a good degree of certainty after medium term. But I believe that after 2012 the consumption of iron ore will still grow at high levels.

The second thing is that this market and the merit should be given to CVRD because Council of Asia was something that was really started by CVRD and they consolidated the assets of Good River and others. This market is mostly concentrated in the hands of three major companies. And they really know how to do their math. They know that increasing capacity by losing price, it is better -- you have to do the math and you can rest assured that they are doing their math every day. And nobody is mad enough to throw away money. So I believe in the intelligence of those that are in the forefront of this market. And I'm talking about the three major producers of iron ore. And I think that if you look at the level of concentration and even with the new capacity that is yet to come, they will still remain highly concentrated. And probably they may think a lot in terms of new development and new investments because they may run the risk of losing a lot of margin. This is my opinion. I do not want to say that I have a crystal ball. I am just talking about the new levels of concentration in the market.

What about CADE? For the purpose of CVRD, this discussion CADE and CVRD is history already. We have been prohibited. We and CVRD are prohibited to talk about it. It's obvious we cannot talk about preference rights from now on. And maybe this year the figures are not going to be too clear because exports of iron ore from Casa de Pedra, great part of that is being sold to CVRD. The bulk of the exports from Casa de Pedra are geared towards CVRD. And so things are back to normal.

Now, in terms of the Chief Justice decision, Helen Grace, in practical terms what was being argued is that there was a suit, a legal suit from CVRD, where CVRD wanted to have preference rights after CSN paid a pretense indemnization that CVRD thinks that they are entitled to. But what CADE said, in the documentation and then the Courts decided, is that you cannot mix a private issue with a public issue.

A public issue is the antitrust issue. So this issue has been already solved by CADE. But in terms of the private lawsuit, the Courts decided that if there is any intention of receiving indemnization on the part of CVRD they should go to Court. Both companies are solid -- sound enough that if the Courts decide that there should be some amount to be paid for indemnization, CSN theoretically would pay because we have to comply with the Court's decision. So that's what is at stake now. The issue of the preference -- the rights of preference is over. The other lawsuit is still in Court. And if at the end the Courts decide in favor of Vale we will pay it.

Now I will talk about just sales of iron ore, whether it's spot or benchmark. We are selling at better prices than the benchmark prices. I would say that our sale ratio this year will be 70/30, 80/20. The bulk of it will be benchmark and the remaining will be spot. I wouldn't even call it spot, but we will give better commercial conditions than those of the regular market conditions. So we are practicing sales at better conditions than benchmark.

We have also analysts sending us questions over the web. There is an analyst from Deutsche Bank, and I do understand that you have already answered that question. But there is an analyst that is asking once you verify 3.6m tonnes of sales volume for the first quarter, how is your sales forecast for 2008?

The sales number for the second quarter is absolutely in line, and maybe a little bit over our budget, or our forecast. Between Namisa and Casa de Pedra exports should be 24m tonnes and sales to the internal market, domestic market, should be around 4m tonnes. And the first quarter was weaker because exports were still a little bit limited because of our -- the rails in our terminal. We're also taking into account that the sales program and forestry this year will be enforced. And we're working hard enough to get some additional capacity for the two last months of the year. But we cannot count on that now, so we are still working with the assumption that we will comply with our sales program.

Just to complement the CVRD issue. To me, it's a closed issue. But we used to have iron ore, and we had an order. We did not have the shipment capability. Now we do, we do have shipment capability. So any change that will jeopardize our shipping capability can have a counterpart measure on our part because we used to have the business and we could not turn it into a reality. But now the moment we have an order and we have the shipment capability. If they play a trick on us we can also play a trick on them. So I think that is -- there's a financial issue that should be considered as of now because as of now we are discussing a lot of money. So if they are daring or aggressive I think it will be less daring and less aggressive.

I am Marcelo Aguiar from Goldman Sachs. I have two questions. First addressed to Benjamin. You talked a lot about liquidity. You don't want to sell the whole of Namisa and we understand why. But you're not touching on international expansion and buying an asset abroad and have [issued] all the sales production growth. So could you speak -- could you elaborate about international growth?

And my second question, then I'll pass on the mic, is addressed to Martinez. Your next capacity of rolled products will be in 2011/2012 in the best case scenario. The people of the Minas. The only company that has a new capacity for rolled products will be Arcelor Mittal next year 1.2m tonnes if I'm not mistaken. By 2010/11, if the projects -- if your projects are delayed, maybe until 2012, local manufacturers will not be able to fulfill the demand. So my question is, how can that impact prices in Brazil? Everybody calculates price compared to import parity. What do you think will be the price scenario in Brazil if we have this major shortage, which in my opinion will take place between 2010 and 2011, and 2012?

Marcelo, the cycle that you mentioned may happen if the market continues to grow, domestically, if we have a growth in those industries that are pushing this growth, the automotive industry, new consumption by lower income classes and for tin plate. In the case of CSN I believe that we will have to better rearrange our product mix. We'll try to manufacture what gives us the greatest premium and compare it to imports of materials.

In the second half of this year I believe that we have pretty good chance of recovering the premium that we had of about 15%/20% of some products compared -- comparing domestically manufactured products and imported products. But I think this is what's going to happen in 2010 or 2011. When the demand does become tighter this will leverage the prices.

Again, there's still some markets that I could have a tight supply and demand situation. I could have higher premium products in a value added product. I can get out of the product mix lower added value products geographically. But still I believe that the situation remains favorable for CSN.

The Brazilian market for this year, just to give you an idea, this past year we had imports of 7% or 8% of the Brazilian steel market, 30m flat, those were imported. The same thing for plates. There is a little bit more strength because the projects to modernize ports and infrastructure depend a lot on plates. In our case, because we have production capacity in GalvaSud, Parana and UPV I think we're in a privileged situation. If we have a more tight demand supply situation, to add to what Martinez said, I think that in a moment like this the need will make us more creative. So far we were not exposed to this kind of problem. We still have an export capacity that can be redirected to the domestic market. And as I said before, with hot band we have some idle capacity. We will put a lot of pressure on Eneas so he will come up with new solutions.

I can tell you we will not stop selling because of shortage of product. I hope that it will grow a lot, but we will use our technical ability and technical skills to deal with one time buffer max. We might even consider importing hot band so that we can add value and supply the domestic market. And we have some idleness in our lines. I could call it a good problem to face. I wish that I could be putting a lot of pressure on Eneas just because we have orders to fulfill and not enough production. But I'm not going to put pressure on you now, not yet, Eneas. If it happens it will be later.

But Marcelo, in my opinion there will be a shortage of hot band products. So you have to increase the production of slabs and hot band. But I agree, if it continues to grow by 2011 we will have a deficit. In CSN we'll be producing another 300,000 tonnes of hot band. Now as Benjamin said, will this go to long steel or the hot band? If it goes to long steel, we can buy slabs for templates to ensure that we have some idle capacity. We still can do some internal rearrangements, and I believe the other steel makers can also do some rearrangements. We have an average export of 20%, 25% of all manufacturing in Brazil. If Brazil grows at a very stronger pace, I don't think it will be that exaggerated. But if it's a continuous growth, that strongly, we will need to come up with creative solutions to really enjoy the moment. But I think that this will be a cool challenge to overcome.

Now as for investments abroad, I can tell you we are still considering, we are still keeping our eyes open. But it doesn't make sense to acquire a business just for the sake of saying that we have it, or to grow. I think that currently we have to look at the domestic market. The priority for the mid and long haul remains diversifying risk, having a share in other markets and having a globalized company, which I believe is healthy. And it is what is expected from a large company like CSN. But I can tell you, we're not just going to buy it for the sake of buying. If there's not a strong strategic rationale or a strong synergy rationale, we will not just invest for the sake of investing, buy for the sake of buying.

Looking at the alternatives, the options abroad, maybe because of the privileged position that CSN is enjoying in terms of earnings and margins, there aren't too many assets out there that would make sense to us. I believe that this -- this is something that will be done eventually, but at the right timing. What seemed to us to be a strategic -- a fabulously strategic move, the internationalization of the Company. I think that what we're seeing today is exactly the opposite. We see, large companies coming to Brazil to acquire assets here. So I would say that the investment plans of CSN include consistent, high margin projects. They're our priority. If there's anything that justifies the movement we'll do it. But we'll only do it if we are convinced that that would be better than any other opportunity of investing here.

The only different possibility is financial monetary and earnings based is a strategic decision. If the same is present in other countries, in other continents, could be interesting for the business in the mid and long term. And we understand that indeed this kind of international expansion would make sense. However, buy for the sake of buying is not going to happen. I prefer to have money in cash. I prefer to remain smaller than moving towards a growth that will not ensure the desirable, expected results when it comes to the company.

Good morning, it's Marcelo de Brisac from Itau Corretora. One question about the American U.S. steel market. I know it's becoming less and less important to you. Visibility over this is very difficult. We heard that from your press release, the price increases in the last quarter and some difficulties to pass on prices, particularly to the automotive industry. I would like to know your opinion about the U.S. market, if there are any specific industries, if the market has struggled? I'd like to have your input on that.

And the second question about containers. I looked at my database, maybe I'm completely out of speed, but Brazil 8.7m TEUs of capacity. You're talking about 2.3, if I've got the right number, by 2013? Porto Brazil another 3m TEUs. Do you see any risk of over supply? How do you see the supply and demand ratio in terms of containers?

Marcelo, with regards to the U.S. market, in spite of all the subprime crisis, the prices are quite solid there. Prices in the U.S. for hot band are not under $1,500. As of now, what's going to happen to the American economy is -- I cannot tell really. But I can tell you, that the steel price in the U.S. is not an issue controlled by supply and demand alone. It's also driven by costs. There's no other option than increasing $250 per tonne of hot band. And coal increased from $100 per tonne in '07 to $300 this year.

However there's some industries in specific markets that have some consequence to our customers, which would be the market of high added value products, pipes, etc. This is a market that continues strong because part of the investment made, cannot be unmade. There's still an inertia in the U.S. in some markets. And these markets will continue to have a demand for the next three to four months. Now beyond that it will be guesswork. I cannot really tell. Price will follow costs. The market might have an upside similar to what is happening in Europe.

In Europe, in my opinion, the next price increase due to export tariffs imposed by China and India and to the shortage of hot bands in some European markets, there seems to be a price increase in the horizon. That might be detached from costs and more attached to supply and demand. Whoever has it will sell for higher price and who doesn't have it will pay a higher price.

To add to what Martinez said with regards to the previous question, if you asked me what would be our priority today, in my opinion we would have a priority in the American market. If we are to invest abroad, I think that would be more directed to the U.S. rather than Europe or Asia. I think the American market, in spite of all the news regarding the subprime crisis, that is the financial problem. The American market is to be respected. If we talk to [Gerdau] it's his opinion. The subprime crisis has had no effect on him. The economy is very strong in the U.S. And if we used to work at Europe as a target, now we look at the U.S. There is a chance there. I would like to be present in the American market. The investment alternatives are not the best there. When I say that, I mean away from the unions there. Because they restrict a lot the investment options by a company like CSN. But I believe in the recovery of the U.S. market. I think that it's a good bet to bet on them.

Marcelo, in terms of the container market, the capacity figure for the country is about 8m and some. Last year we handled above 7m. This market is growing over 10% a year. And when we put 8m like further domestic market, we are simply talking about the entire country, from the Port of Rio Grande until Belem and Manaus. And the bulk of the problem is in the south east part of the country where we are and there is an imbalance in terms of import tariffs, particularly in the States of Espirito Santos and Santa Catarina. They benefit from fiscal incentives whereas Rio de Janeiro does not have the same benefits. And so because of that imbalance you have growth in the state of [Few].

But it is important to notice that our terminal is ready. We already have enough capacity, and that wasn't really moderated by demand, but it was because of contractual issues. We had to install two of the equipments that we showed here because they were in the contract and because of fiscal benefits or tax benefits we anticipated, the equipment. But the thing is that there is a major risk in terms of the growth speed versus the installed capacity.

If you think in terms of 8m, which is approximately right, 7m last year. So until 2010 we are forecasting more than 10m TEUs, and 10m TEUs is the lowest figure. I've seen figures varying between 11m and 12m TEUs. And I know that this bottleneck that people talk so much about it will be even extended. I believe that we are well positioned and some of the investments you mentioned are investments that I'm not going to comment on about it now, but the maturity date is much larger than ours. Some companies are already operating and they are ranked 7th or 8th in the country in terms of container handling.

Rodrigo, my name is Rodrigo. A lot was said about demand and supply of iron ore and then we noticed that in the steel milling market in Europe there was great utilization of the idle capacity in the last few years. And the market in general is operating close to its maximum capacity. And in Brazil, as much as I know, there are no projects maturing very early. So how do you see this market or the supply and demand of 2m products worldwide for the next few years?

I just want to know whether there is any trend towards lowering margins or margins dropping again.

Rodrigo, I don't have the answer to all of your questions because I don't know what will happen way in the future. But, if you look at all of the investments in the steel milling industry, upstream is way below the current speed of this industry in all markets. What means to say that we will have to make a better accommodation of all the capacities all over the world.

In terms of hot band and supply, Ian Christian in the last seminar about demand and supply, he said that there could be some mismatch in terms of supply and demand after 2011 or 2012. But precisely then we will already have new capacities coming in upstream, in the case of slabs and hot rolled. Even in Europe, there are some mills that could probably add some additional capacity to fulfill the market.

In Asia the market's very strong, I don't whether they will have additional capacity in that Asian market. I believe that both stronger market will be in 2011 and 2012. And then the same thing will apply to Brazil. Marcelo just said that I don't think we will have shortage of hot band.

We are selling to Usiminas for instance. I don't know whether you know but we are supplying to Usiminas galvanized tin plate. So, this is pretty much what Benjamin said. We can always squeeze here and there, like in your own household when your budget is very tight. In the case of steel the chain sometimes has to get more accommodating. You have to get the best that they have in Europe from [TC] and Acelor. Okay well we'll have to fulfill that capacity in the market and then we will have to maximize our efforts the best way possible. This is my understanding and we will have to do that until all of the investments reach their maximum capacity. We cannot just wake up and all of a sudden have an additional capacity of hot band because the market goes through internal variations of equipment supply. I don't know whether I answered your question completely but this is the global scenario.

Let me express my opinion, Rodrigo. I am very optimistic when it comes to the steel milling cycle and I think we will have to look for very strong investment. The market is very consistent and what Juarez said is 100% true. We have to go there and see what is happening.

In Brazil we are not used to experiencing a lot of growth and the growth that we are experiencing does not allow us yet to have a very comprehensive idea of what growth is. We work and work and we don't see a lot of different things happening and when you go to Asia -- I haven't visited Dubai recently, but everybody that goes there they come back and they talk a lot about their investment levels and the same thing goes for China, etc. We are not very used to very strong growth and steel is just a part of that. And I think that we are also -- we take things for granted in Brazil because we sometimes are too slow.

When we went to China we were able to see new technologies. Investments take place at a very faster pace. And being big is not trendy anymore because technology allows you to do things with less money. Because maturity time of a project is also lower so I think we will have to swing differently now. But I also think that we haven't started to temper with that big thing yet.

When we go to China we see 500,000 ton facility being installed in six months, and in Brazil we have that mindset of doing things big, and according to the rhythm that is imposed by the environment. So, I think that we have to be more creative and we have to meet the needs, because in times of need you have to be more creative and be more adaptable to the current reality.

For a businessman not fulfilling an order for us is a crime. We cannot afford not to be prepared to cope with the demand so we have to do something about it. And Brazil will have to do something now and we will have to do things that we've never tried before. When the Chinese came to Brazil they were surprised to see how difficult it was to make investments and how long it would take. Everything is much more lengthier and it takes a lot more time and is much more complicated. So I think we have to try to close the gap. Because I don't see why things have to be so slow, so time consuming and so complicated.

I think that we were not prepared to face actual growth but when that comes we, the business community, we will have to be able to react fast to cope with demand. And I think that we at CSN can do better. We are moving at a good pace. We are making things happen, but we haven't yet felt the need to be more aggressive vis-à-vis investment levels, and to be more prepared to cope with the demand. I am very optimistic in terms of the steel milling industry. I still think that we are lagging behind and to compensate for that delay we will have to use different technicalities.

For instance, I think that it makes sense because of the high logistic costs today, which was not that high in the past, but it makes sense to have smaller units to supply to smaller markets. We never dare to study a furnace of 500,000 tonnes, which is Coca Cola in China. How many 500,000 tonnes furnaces do they have in China? It's like Coca Cola. You can buy that big a furnace just like we buy cranes here. It's a very simple business.

And investment is also simple. The environmental issue is uncomplicated. The construction base and the difficulties, everything is a lot simpler. That's why I think we will have to look for a last -- a more diversified growth that can also look at regional markets. We are stagnated and that is true and I do believe that this demand is coming very, very quickly and I agree with Eneas, things are reaching a limit.

We can grow another 10% or 20% and we can always reach up for more. We can reach up for more production somehow. But I know that we are almost at the limit.

But Brazil hasn't made a lot of movement yet. But if we make a move just like some other countries are making, exception here would be Western Europe and America, but if we get closer to China, Dubai, Vietnam or some other countries we will be shaken up. And we are not ready to take that. But I think that will be good because for the first time in my life as a businessman I will have that feeling of being shaken up and that has never happened to me before. And then we will be awakened to cope with that demand. And I am just really waiting for that to happen. My generation has never experienced a time of very strong investment. But I am very optimistic with the steel industry. The plan to reach 10m tonnes I think will not be enough to cope with the demand of the next few years in terms of Brazil.

Only to add a few more things. Eneas is the guy that goes out, he sees things and he never does anything, well I do. But there is a certain mismatch. Things will grow and then we will certainly be startled and we'll have to see how we will react. I don't think China will pull the brakes, because if China grows half of what it's growing now, the impact will still be very strong. But the investment in the steel milling industry are not very substantial if we take the whole worldwide production into account. But the growth of China has always been a surprise. But in China, every eight months we pay a visit to China, but China is also reducing the level of investment and they are not investing as much.

But if we look at Colombia, India and other countries, they still have a lot to absorb, that's why we will have many good surprises. And, as Benjamin said, we will have to make quick adjustments, and I think that demand for steel will grow even further.

I think the question was about margins, but the answer by Benjamin is an issue related to demand. Because what we see now is a lack of product and why do I say that? It is based on growth. Because if you believe that things will continue to grow I don't see how can we have an excess of supply in a short run. I don't see how we could have an excess supply of raw materials.

So, when you bring this huge number of new consumers into the market and this is also something that we have never experienced. 600m Chinese are suddenly consuming. Or maybe even in Brazil all of a sudden let's say you have 20m Brazilians that start consuming. Of the 60m we have already 20m consuming, this is an ongoing trend today and now this is much more a sociological issue rather than an economic one, that the world is sponsoring new entrants in the consumer market worldwide. And we were not prepared for that.

Nobody believed that all of a sudden we would get 600m Chinese consuming the way they are consuming. Just as we in Brazil, even though we criticized it a lot, we were not prepared to take this high number of new consumers. So this is a social phenomenon. The world is making available the entry of new consumers and all of that is in line with the capitalist philosophy. And if this is an ongoing trend and a permanent trend, because I believe that we have to be able to provide to those that never had the opportunity of having things, and this is what we see worldwide, I hope that this is a perpetual trend. If that is the case we are in a growing curve and we are not prepared to cope with that growing demand. And the margins will remain to be very good in my opinion. If you ask me I think they will be good and they will remain good. And on the steel milling point of view, the margins will continue to be very good.

Of course, there are those that never make any money and there are those that make a lot of money. There are those that have a 5% margin because of the market and some others have more than 50% because of the cost. So, that's when things become different. CSN has this margin not because of the pricing effect but more due to the cost effect. There are some other obsolete steel mills that have some margin because of cost, but not because of cost, because of price and not because of cost. So, we see some differentiation up until we reach a certain level.

Pricing cannot move faster than cost replacement and from now on we will experience a lower pace of cost increase, and so those that operate at a lower cost will be able to be more successful.

I know that you were dying to ask a question but there is another important variable there we didn't mention but is equally important and that refers to the level of growth of consolidation in this industry. If you look at the past decade, this industry was down for, everybody was losing money, and there was a large number of smaller companies. The compensation process started with Acelor and others. But we still have a long way to go and companies are capitalized enough to keep that process going.

And if you go to China today, we know that some companies are going public just to make investments in China. And by the end of this decade, at the beginning of the next one, there will be a very fast consolidation pace of the Chinese industry, which is very important to keep the industry healthy. And this is something that didn't take place in the last decade. Therefore I think that this is an ongoing trend, which is very much exploited because of the level of capitalization of the companies in this industry and now we see something much healthier. We do not want to go back to that situation where everybody was losing money and the industry was just becoming very obsolete. So we have to take a lot of things into account if we want to evaluate future prices and the health of this industry.

I am from Credit Suisse. Juarez, I think this is a Company comment. I can add to it. What is CSN's strategy with regard to China? There are two factors, consolidation that you said is happening in China with the (inaudible) prepared to go public. Mittal also making some movement. I would like to know what would -- how would CSN move in China? Are you planning to acquire any steel mills in China? And another question.

With iron ore, with 160m tonnes or iron ore we have to analyze the global maximum, from the global South Asianic markets, the South Asianic market by product. The demand for pellet feed will increase phenomenally not only from CSN but CVRD and others. This opens up an opportunity to invest in pelletization and with our pellet prices today I think it will be an excellent business. We see investment in pelletization and the possibilities in China. Well for steel, I prefer Benjamin to answer that. But you are 100% right, market trend, particularly in Brazil, all the additional production in Brazil will be for pellet feed.

There is no more rich ore to produce granulated sinter feed. The current producers will have to adapt and I'm talking about the mid term, 10 years from now tops. The production of miniaturized area will be restricted to pellet feed. To me, fortunately, this translates into an opportunity. Why? Because in the first place with pellet feed you are more competitive in China and you can knock down the barrier of our pricing differential. Australia is producing low quality sinter and sending it China to work with low sintering productivity in China investing heavily in local production of pellets with Brazilian pellet feed.

I think you can say trend and we have the center line. We are working seriously along those lines when you are assessing many alternatives and we will be doing something along those lines. If we invest in pelletization in China, which is complicated as you know, regulation in China for this kind of activity is not simple. It's very risky. Sometimes it is better to have a long term contract signed, particularly for third years with somebody who's going to do pelletization, or be the minority shareholder in a pelletization company. But, I believe that steel, European steel will have to bid for that.

The European steel making industry will be very impacted by different product mix from Brazil and it will be impacted by environmental issues. Everybody you talk to in Europe, when you talk about pelletization in Brazil, they are all wide eyed because they know that this is the future of local steel. The local steel industry will be under supplied by this type of raw material or will be replaced by plates. That's inexorable. It might take 10 years but it will happen. But to replace this by slabs, we would have additional steel making based on our pellets rather than the traditional raw materials. Our steel projects are already considering, and you might know that, that 50% of raw materials will have to be put in the blast furnace. They are 50% higher in silicon content than sinter, with that you maintain all the operating positions of the blast furnace because the pellet will compensate for the high silica sinter.

I think, and this is a trend, the difficulty is that your operational costs will be higher for mining. That's obvious both in terms of trending but the nature of our reserves in Brazil, the trend is to match European demands for the future, taking into account environmental issues. And we will have a more competitive product, particularly for Asia, particularly in China with the local production of pellets. The CapEx in China to manufacture pellets is a lot lower than anywhere else in the world and in this case it would be worthwhile having a local pelletization operation in China for China.

I don't know if I answered your question but you know these are all equations that we have to work with. I think that we are doing quite well in this game and emphatically all additional production will be rich pellet feed and high in silica sinter feed, to meet our own needs in Brazil.

Now as for the Steel business in China I'll pass the floor to Benjamin.

We see China optimistically but we see them as being very far away from our plans. I think that we have closer priorities to be exploited from the steel making business standpoint. We can't just talk about the easy moves.

In Brazil investment costs are very high. This is a typical point about Brazil, i.e., Brazil is becoming expensive for investments and this is driving away some of the investments that could possibly be made in Brazil by foreigners, and by Brazilians alike. It's difficult to have equipment delivered here to supply the demand. There is an infrastructure in bureaucracy bottleneck in Brazil.

Eneas was mentioning that labor is an issue because our labor has been stolen from us, much highly skilled labor. Our Volta has owned a cement project. We had a headcount of 1,500 people and a turnover, a turnaround of 20% a month. It was incredible. Every month we would have 300 new people coming in, 300 people leaving. And it's very difficult to train these people and we have seen, we're very much talking about highly skilled people, but we're talking about low and medium skilled people.

In China it's different. When you talk to the Chinese, we talk with Dao and other steel mills about an investment in Brazil. They offered us 1,000 engineers, bilingual engineers, with a PhD to be sent from China to Brazil. The surplus of technical people means a concern that they had with growth and we didn't have this happening in Brazil and now we have a shortage of skilled labor. That is one of the issues right now, having trained highly skilled people. You see there's a real difficulty, a one time difficulty in Brazil.

I believe that with time, it's a nice feeling, we must be confident in growth and getting ready for it. I think that we are all more or less convinced that this is possible and that it will happen.

Now talking about ore, we studied the possibility of investing in China. We are being approached by local steel companies to do pelletization there and even other investments. The same for the Middle East.

We can also make some local investments. It's just a matter of the right momentum and financial equation. If it makes sense for us to grow in terms of adding value to the iron ore production and ensuring a market share, we'll do it for sure.

Now, steel making, I think that these plans are further out in the future. We might choose small investments closer to Brazil. Investments in Brazil, Latin America, the U.S., and what we presented here investments in Brazil. I consider the Volta is on the blast furnace and those two projects, Congonhas and Itaguai, have been definitive projects that will happen, will be executed in the right timing. However, we don't exclude this alternative.

Iron ore for the Middle East, into Asia, is the reality today. It's an invitation to invest there.

Now in terms of steel making, I think that we might have better opportunities (inaudible) is exploited.

It's almost noon, we have time for one last question before we close. Luis Toledo from Argus.

I'd like to know from Benjamin when you want to sell a part of Costa de Pedro how would you decide on the right price of the asset and the operation?

We are all very optimistic, the whole Company Board, in showing interesting figures for mining, steel making, logistics, everything is pointing in the right direction.

I think that Benjamin is a very intelligent man and a very capable man. Now why paying all the debt now if the Board is saying that you might be criticized? I can't believe that this is just a wish to have zero debt. Why are you considering paying off the debt? Is it the cost of the debt? Is this a sale opportunity?

Have you ever had a debt before? No, you see. Our history was built on very aggressive leverage. I can tell you the market has the right perception considering our leverage excessively. I was always very conservative. We always work with some results and that's why we could sustain the pressures. You know about a good deal of those pressures. I can tell you. Our competitors have low leverage. Usiminas, [Gazebra] has low debt, grew down, it's also working to reach a set debt. The other competitors are foreign competitors. So, I think it is healthy to look sideways.

My father used to say that in any circumstance of your life you can look down. You can look up, but you have also to look side to whoever's beside you. Look sideways. So, I don't think that because we are living in an exceptional moment that we should not consider risks.

It's not that we could have zero debt because you heard about the significant investments and projects that we have ahead of us. These investments will cost money. It will be for a very short while that we are going to have zero debt, but I think it's extremely healthy for a company which has grown paying the dividends that we've paid, and with the kind of appreciation that we had giving this demonstration of solidity to the market is very important. Very few people believed that we could get to the point of growing as much as we grew because we grew very aggressively.

I can tell you out of the Brazilian companies I think CSN, considering dividend distribution, which was quite aggressive, and our market CAP appreciation I think is the company that gave the shareholders the highest gain in the past years with a fantastic growth of 2,000% appreciation in five years. These are the dividends that we paid and at the end of all that having zero debt it will leave fantastic challenges ahead of us, margins or projects with margins of 50% or 60%. I don't think anyone of us, I don't think any other company on the same footing as CSN. We are being pushed by the right investments made in the past. We are being stimulated by challenges of new investments with the traditional profitability that have for our Company.

I think that more than anything else showing responsibility, respect, humility, you know respect for risk, humility regarding what we are delivering, is absolutely positive for the Company. For our Executive Board, for our technical employees, and I think it is the moment when we are relieved and I -- the moment we do that we will want to do double. To give you an idea of my figures I welcome that kind of challenge. I share that with my peers. Sometimes they are not with me but as they decide to do something they all embrace that cause and we move forward.

The figure I had for CSN was $45b. Like I said that I intend to deliver by June. In the next presentation of our earnings of the second quarter that appreciation will place us as the second steel and mining company. We have mining helping us and differentiating us, but we will definitely rank second in terms of market cap. The 45b level was just the first phase that we propose to do in the market.

How many dividends? 1.3b in dividends. We're delivering projects. We're delivering results. We're paying a dividend and I believe that the process presented here be consistent, the ultra consistent mining and logistics projects, the ultra consistent steel making projects, in all three projects we're talking about margins greater than 50%. All of those allied, including freeze and cement, etc., two cement plants that we are acquired in China. With investment in long steel and with the steel making working with a place long steel, which are segments where we are not very active, there's this growth that is going to bring to us new markets that we are not present in. The challenge is to reach $90b. What is motivating us for the next four years is delivering to the market a market CAP appreciation that will be double of what we imagine we will reach now in June.

And again this is not a magic trick. This will be due to consistency. Myself, my executive peers, and all of those involved in the new projects, are convinced that we can do it. I try to tell you what I believe in. This is a good moment for the world in terms of growth, sustainable growth. Addition of new consumers, mass consumers in the market and I guess that all those factors will extend at this good moment.

Now, obviously, if there's a natural catastrophe or an unforeseen war, and also a terrorist attack, things that we business people cannot really predict. We cannot stop investment because of these possibilities but if everything goes smoothly I can assure you CSN in itself can put effort and generate this kind of growth, this kind of earning, this kind of appreciation to our shareholders. This is what we aim to do.

I was joking that when we reach $45b I am not going to retire. They will have to put up with me for a little bit longer. But when I set the goal for $90b and when we reach $90b then the mission will be accomplished and I think that CSN for the next four or five years tops can be expected to do that. The Company that has been participating so actively and effectively to deliver to our promises to the market.

Our history is one of consistency. Never did we deceive the market. We always worked based on our beliefs and based on what we could convey to the market, and to our internal public, our audience. And if we reached the positive position we are in right now this was due to a lot of hard work because we believed in our goals. We were determined to achieve them. It was a little bit of work but with a bit of help and we always have to thank God for helping us.

Thank you very much to all and I hope that three months from now we will meet again and that we will be announcing, hopefully, to be the second in terms of market cap with mining helping us. Thank you.

Speaker statements on this transcript were Interpreted on the conference call by an Interpreter present on the live call. The Interpreter was provided by the Company sponsoring this Event.