Executive Summary / Key Takeaways

• Companhia Siderúrgica Nacional (CSN) is executing a robust deleveraging strategy, aiming for a Net Debt/EBITDA ratio below 3.0x by year-end 2025, supported by strong operational performance across its diversified segments and strategic asset divestitures.
• The company's integrated business model, spanning steel, mining, cement, energy, and logistics, provides significant operational synergies and resilience, as evidenced by record EBITDA in logistics and strong profitability in cement and steel in Q2 2025.
• Operational enhancements in the steel segment, including blast furnace optimization and a focus on higher-value products, are driving a recovery in profitability despite intense competition from imported materials.
• Strategic growth initiatives, such as the P15 mining project and greenfield cement expansions, are poised to unlock substantial future EBITDA, reinforcing CSN's long-term value proposition.
• While facing external headwinds like volatile commodity prices and aggressive import competition, CSN's commitment to cost control, operational excellence, and capital recycling positions it for sustained financial health and market leadership in its core Brazilian and Latin American markets.

A Brazilian Industrial Giant: History, Strategy, and Market Foundation

Companhia Siderúrgica Nacional (CSN), founded in 1941 and privatized in 1993, has evolved into a diversified industrial conglomerate, strategically positioning itself as a leader across five core segments: Steel, Mining, Cement, Energy, and Logistics. This integrated model is a cornerstone of its strategy, enabling significant synergies and operational resilience. The company stands as one of Brazil's largest steel producers, the second-largest exporter of iron ore, and the second-largest player in the domestic cement sector.

CSN's journey has been marked by strategic expansions and vertical integration. A pivotal moment occurred in late 2015 with the formation of CSN Mineração S.A. (CMIN) (CMIN3), consolidating its iron ore operations and logistics. Subsequent acquisitions, notably Elizabeth Cimentos S.A. in 2021 and LafargeHolcim Brasil S.A. in 2022, propelled CSN Cimentos to a 17 million tons per year production capacity, making it a dominant force in the Brazilian cement market. Energy self-sufficiency was achieved through acquisitions in 2022, including CEEE-G, further bolstering its integrated model. More recently, in March 2025, CSN expanded its international iron ore marketing capabilities with CSN ITC Solutions AG and strengthened its European steel profile operations by acquiring Gramperfil S.A. The acquisition of Estrela Comércio e Participações S.A. (Tora Group) in April 2025 significantly enhanced its logistics footprint, adding land transport and terminal management services.

The company's overarching strategy emphasizes maximizing "value over volume," stringent cost control, and relentless operational excellence across all segments. This approach is critical in navigating dynamic market conditions, including fluctuating commodity prices and intense competitive pressures. CSN's deep integration, from raw material extraction to finished product distribution and energy generation, provides a foundational strength, allowing it to manage costs and supply chains more effectively than many specialized competitors.

Operational Technology and Process Innovation: Driving Efficiency and Sustainability

While CSN may not be defined by a single, revolutionary product technology, its competitive edge is significantly sharpened by continuous process innovation and operational technology advancements across its integrated value chain. These initiatives are designed to enhance efficiency, reduce costs, and improve environmental performance.

In the steel segment, recent efforts have focused on optimizing blast furnace operations. The maintenance shutdown of blast furnace 2 in January 2025 facilitated crucial upgrades, including the use of "ritual iron ore" for blast furnace 3 and significant investments in proprietary sintering production. These enhancements are directly contributing to "excellent performance in efficiency and also from the viewpoint of cost," with management anticipating slab costs to drop to around R$3,000 per ton. Furthermore, CSN's commitment to decarbonization is evident in its contract with Petrobras (PBR) to supply natural gas to its Presidente Vargas Plant, re-entering the free gas market. This strategic move not only secures a vital energy input but also "brings about the possibility of partnerships that could make feasible several projects using natural gas adhering to our decarbonization agenda." These operational advancements are crucial for improving steel segment margins and maintaining competitiveness.

The mining segment's P15 project, scheduled for operation by late 2027, represents a significant technological leap, aiming to produce over 50 million tons of high-grade iron ore annually. This expansion is projected to generate an additional BRL 4.4 billion in EBITDA, fundamentally altering the segment's quality profile and cost structure. In cement, CSN Cimentos boasts the "lowest emission of CO2 per ton of cement worldwide," a testament to its advanced production processes and commitment to sustainability. This environmental leadership provides a competitive advantage in an increasingly carbon-conscious market. Across the group, ESG achievements in Q2 2025 included an 11% reduction in GHG emissions compared to the 2020 baseline and a 30% reduction in occupational health and safety incidents, reflecting a culture of continuous improvement. These operational and process innovations collectively form a robust competitive moat, driving cost efficiencies, enhancing product quality, and supporting CSN's long-term financial performance and market leadership.

Competitive Landscape: Resilience Amidst Global Headwinds

CSN operates within a highly competitive global and regional landscape, facing formidable rivals across its diverse segments. In the steel industry, global giants like ArcelorMittal (MT) and U.S. innovator Nucor (NUE) present challenges with their vast scale and technological prowess, particularly in advanced steel technologies and sustainable production methods. Regionally, Gerdau (GGB) is a strong competitor in long steel, while Vale (VALE) dominates the iron ore mining sector.

CSN's integrated model, encompassing mining, steel production, and energy generation, provides a distinct competitive advantage, particularly in Brazil. This vertical integration reduces reliance on external suppliers and offers a more stable cost structure compared to specialized players. For instance, its own iron ore reserves and energy self-sufficiency mitigate exposure to volatile input costs, a benefit not always shared by competitors like Gerdau. However, CSN faces vulnerabilities, notably its exposure to commodity price fluctuations and a significant reliance on the Brazilian market, which can be susceptible to local economic downturns.

The steel segment, in particular, is grappling with "a flood of imported material coming into Brazil," leading to "intense competition" and a "price war" that CSN has deliberately avoided by prioritizing "value over volume." Import penetration reached 28% across all products in Q2 2025, with tinplate and pre-painted galvanized steel seeing 40% to 70% penetration. Management has voiced strong concerns over the "innocuous" and slow response from the Brazilian government regarding anti-dumping measures, calling for "courage on the part of the President of the country" to implement more effective protectionist policies. This competitive pressure from imports significantly impacts pricing power and market share in the domestic steel market.

In the cement sector, CSN is the second-largest player in Brazil, benefiting from its expanded capacity and efficient logistics network. While the Brazilian cement market has recovered from previous lows, prices remain among the lowest in Latin America, indicating intense domestic competition. CSN's strategy here focuses on maximizing production, expanding distribution, and enhancing operational efficiency to maintain its leading EBITDA margins, which reached 24% in Q2 2025. The logistics segment, bolstered by the Tora acquisition, provides integrated solutions that enhance synergies across CSN's businesses, offering a competitive edge in freight and supply chain management within Brazil.

Financial Performance: A Resilient Recovery

CSN's financial performance in the second quarter of 2025 demonstrated a resilient recovery, driven by operational improvements and strategic focus across its diversified portfolio. The company reported a consolidated EBITDA of BRL 2.6 billion, marking a 5% increase and a 1.4 percentage point expansion in margin to 23.5% compared to the first quarter of 2025. This performance underscores effective cost and expense management and the benefits of diversified investments.

The steel segment, despite a challenging market flooded with imported materials, saw its EBITDA surge by 79% year-on-year in Q2 2025, achieving a 10.8% margin. This was a direct result of prioritizing value over volume, with average domestic prices 4.5% higher year-on-year. Consolidated Net Revenue for the steel segment stood at R$11.50 million for the six months ended June 30, 2025.

Mining, while achieving record production and sales volumes of 11.8 million tons in Q2 2025, experienced a 36% quarter-on-quarter drop in EBITDA due to a correction in iron ore prices. However, its cash cost remained competitive at less than $21 per ton. The cement segment showcased "incredible resiliency," with an 8% quarterly growth in sales volume and a 10% expansion in net revenue in Q2 2025, leading to a 24% EBITDA margin. The logistics segment achieved a new EBITDA record of BRL 519 million in Q2 2025, with a robust 44.1% margin, benefiting from strong rail performance and the Tora acquisition. The energy segment also delivered "extraordinary results," with EBITDA fivefold higher than the same period in 2024 due to increased prices.

From a liquidity perspective, CSN is actively managing its debt. The company reduced its gross debt by BRL 2.1 billion in Q2 2025, contributing to a BRL 5.7 billion reduction for the year, even with new asset incorporations. The Net Debt/EBITDA leverage decreased from 3.33x in Q1 2025 to 3.24x in Q2 2025. While adjusted cash flow was negative BRL 1.4 million in Q2 2025 due to increased investments and financial expenses, management asserts a "comfortable position" to meet short- and medium-term obligations for the next three years.

Outlook and Strategic Initiatives: A Path to Deleveraging and Growth

CSN's management has articulated a clear forward-looking strategy focused on deleveraging, operational excellence, and strategic growth. The primary financial objective is to reduce the Net Debt/EBITDA ratio to below 3.0x by the end of 2025, with a long-term target of 2.0x or lower. This commitment is reinforced by the decision not to distribute dividends in Q1 2025 and ongoing efforts in capital recycling.

Key to this strategy is the divestment of minority stakes in non-core assets. The CSN infrastructure project is in its "concluding stages," with a potential sale of 20% to 40% of the stake, which could inject up to BRL 8 billion in liquidity from the Southeast package alone. Discussions are also underway to bring in a partner for the energy segment. Furthermore, CSN completed the sale of 35.19 million common shares and 27.34 million preferred shares of Usiminas (UZIMY) on July 31, 2025, reducing its ownership to 7.92% of total share capital, a move that provides liquidity and aligns with antitrust agreements.

CapEx for 2025 is projected in the "low range, closer to BRL 5 billion," with over 60% allocated to high-priority expansion and productivity projects. The P15 mining project remains a cornerstone, with operations expected to commence in Q4 2027, promising an additional BRL 4.4 billion in EBITDA. In the steel segment, management anticipates slab costs to drop to around R$3,000 per ton, driven by ongoing operational enhancements and blast furnace optimization. The outlook for the steel market in Q3 2025 suggests "stability" and potential "price recovery" if conditions in China improve. The cement business is expected to continue its growth trajectory, with a "highly optimistic scenario" for 2025, fueled by civil construction growth (projected at 3.5%) and significant infrastructure investments. CSN is also pursuing three greenfield cement projects, with the Paraná plant being a high priority, aiming for an environmental license in 2024 for a 3-5 million tons/year capacity.

Risks and Challenges

Despite a positive outlook, CSN faces several pertinent risks. The company is exposed to significant foreign exchange risk due to dollar-denominated assets and liabilities, which can impact financial results. Interest rate risk from various financial instruments also poses a challenge. Market price risk related to commodity and input price volatility, particularly for iron ore and steel, remains a key concern, as demonstrated by the Q2 2025 EBITDA drop in mining due to iron ore price corrections.

Liquidity risk, though currently managed, requires continuous monitoring to ensure sufficient resources for financial commitments. A significant litigation risk stems from an arbitration proceeding initiated in Q1 2021 concerning an alleged breach of iron ore supply contracts, with a counterpart request of approximately US$1 billion.

However, the most pressing challenge highlighted by management is the intense competition from imported steel materials in Brazil. This "flood of imported material" has led to a "price war" and significant import penetration (28% consolidated, 40-70% for specific products like tinplate and pre-painted galvanized steel). Management has expressed frustration over the Brazilian government's "innocuous" response and lack of "courage" to implement effective anti-dumping measures, which severely impacts the domestic industry's profitability and market share. This external factor, largely outside CSN's direct control, remains a critical headwind for the steel segment's full recovery.

Conclusion

Companhia Siderúrgica Nacional is charting a determined course towards enhanced financial health and diversified growth, underpinned by its integrated operational model and a clear strategic vision. The company's recent performance, particularly the strong recovery in its steel segment and sustained profitability in cement and logistics, demonstrates the inherent resilience and synergistic benefits of its multi-segment approach. Management's unwavering commitment to deleveraging, supported by strategic asset sales and stringent cost controls, positions CSN to achieve its ambitious financial targets, including a Net Debt/EBITDA ratio below 3.0x by the end of 2025.

While external pressures from volatile commodity markets and aggressive import competition present ongoing challenges, CSN's focus on operational excellence, process innovation, and high-value product offerings provides a robust defense. The long-term growth trajectory is further solidified by significant investments in projects like P15 in mining and strategic expansions in cement, which are expected to unlock substantial future EBITDA. For discerning investors, CSN represents an integrated industrial powerhouse executing a disciplined strategy to enhance shareholder value, leveraging its foundational strengths and technological advancements to navigate a complex global market and solidify its leadership in key regional sectors.