As filed with the Securities and Exchange Commission on ~~June 17, 2011~~April 27, 2012

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

1	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
R	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, ~~2010~~2011
	OR
1	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
1	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-14732

COMPANHIA SIDERÚRGICA NACIONAL
(Exact Name of Registrant as Specified in its Charter)

NATIONAL STEEL COMPANY
(Translation of Registrant’s name into English)

THE FEDERATIVE REPUBLIC OF BRAZIL
(Jurisdiction of incorporation or organization)

~~Paulo Penido Pinto Marques, Chief Financial~~ David Moise Salama, Investor Relations ExecutiveOfficer
Phone: +55 11 3049-7100 Fax: +55 11 3049-7212

invrel@csn.com.br
Av. Brigadeiro Faria Lima, 3,400 – 20^th floor
04538-132, São Paulo-SP, Brazil

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class	Name of each exchange on which registered
Common Shares without par value	New York Stock Exchange*
American Depositary Shares, (as evidenced by American Depositary Receipts), each representing one share of Common Stock	New York Stock Exchange

____________________

* Not for trading purposes, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the period covered by the annual report:

Common Shares, without par value.

~~1,483,033,685, including 25,063,577 common shares held in treasury. This amount takes into account the cancellation of 27,325,535 common shares held in treasury in November 2010.~~1,457,970,108. For further information, see “Item 7A. Major Shareholders,” “Item 9A. Offer and Listing Details” and “Item 10B. Memorandum and Articles of Association.”

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

R Yes 1 No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

1 Yes R No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

R Yes 1 No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

R Yes 1 No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer R Accelerated Filer 1 Non-accelerated Filer 1

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP1

International Financial Reporting Standards as issued by the International Accounting Standards BoardR

Other1

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

Item 17 1 Item 18 1

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

1 Yes R No

TABLE OF CONTENTS

			Page
Introduction						1
~~Introduction~~ Forward-Looking Statements					1 2
~~Forward-Looking Statements~~					2
Presentation of Financial and Other Information			3
Item 1.	1. Identity of Directors, Senior Management and Advisors				3
Item 2.	2. Offer Statistics and Expected Timetable				3
Item 3.	3. Key Information				3
		3A.	Selected Financial Data		3
		3B.	Capitalization and Indebtedness		7 6
		3C.	Reasons for the Offer and Use of Proceeds		7 6
		3D.	Risk Factors		7 6
Item 4.	4. Information on the Company				15
		4A.	History and Development of the Company		15
		4B.	Business Overview		17
		4C.	Organizational Structure		49 53
		4D.	Property, Plant and Equipment		49 53
Item ~~4A.~~	4A. Unresolved Staff Comments				54 59
Item 5.	5. Operating and Financial Review and Prospects				54 59
		5A.	Operating Results		55 59
		5B.	Liquidity and Capital Resources		72 83
		5C.	Research & Development and Innovation		76 86
		5D.	Trend Information		76 87
	~~5E.~~	5E.	Off-Balance Sheet Arrangements		78 89
	~~5F.~~	5F.	Tabular Disclosure of Contractual Obligations		81 92
		5G.	Safe Harbor		82 93
Item 6.	6. Directors, Senior Management and Employees				82 93
		6A.	Directors and Senior Management		82 93
		6B.	Compensation		85 96
		6C.	Board Practices		85 96
		6D.	Employees		86 96
		6E.	Share Ownership		86 97
Item 7.	7. Major Shareholders and Related Party Transactions				86 97
		7A.	Major Shareholders		86 97
		7B.	Related Party Transactions		87 97
Item 8.	8. Financial Information				87 97
		8A.	Consolidated Statements and Other Financial Information		87 97
		8B.	Significant Changes		91 102
Item 9.	9. The Offer and Listing				91 102
		9A.	Offer and Listing Details		91 102
		9B.	Plan of Distribution		92 103
		9C.	Markets		92 103
		9D.	Selling Shareholders		95 105
		9E.	Dilution		95 106
		9F.	Expenses of the Issue		95 106
Item ~~10.~~	10. Additional Information				95 106
		10A.		Share Capital	95 106
		10B.		Memorandum and Articles of Association	95 106
		10C.		Material Contracts	98 109
		10D.		Exchange Controls	99 109
		10E.		Taxation	99 110
		10F.		Dividends and Paying Agents	~~108~~118
		10G.		Statement by Experts	~~108~~ 118
		10H.		Documents on Display	~~108~~ 118

		10I.	Subsidiary Information	118
Item	11. Quantitative and Qualitative Disclosures About Market Risk			118
Item	12. Description of Securities Other Than Equity Securities			125
Item	13. Defaults, Dividend Arrearages and Delinquencies			125
Item	14. Material Modification to the Rights of Security Holders and Use of Proceeds			125
Item	15. Controls and Procedures			126
Item	16.	[Reserved]		126
		16A.	Audit Committee Financial Expert	127
		16B.	Code of Ethics	127
		16C.	Principal Accountant Fees and Services	127
		16D.	Exemptions from the Listing Standards for Audit Committees	128
		16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	128
		16F.	Change in Registrant’s Certifying Accountant	128
		16G.	Corporate Governance	128
		16H.	Mine Safety Disclosure	130
Item	17. Financial Statements			130
Item	18. Financial Statements			130
Item	19. Exhibits			130

Table of Contents

Introduction

Unless otherwise specified, all references in this annual report to:

·“we,” “us,” “our” or “CSN” are to Companhia Siderúrgica Nacional and its consolidated subsidiaries;

·“Brazilian government” are to the federal government of the Federative Republic of Brazil;

·“real,” “reais” or “R$” are to Brazilianreais, the official currency of Brazil;

·“U.S. dollars,” “$,” “US$” or “USD” are to United States dollars;

·“billions” are to thousands of millions, “km” are to kilometers, “m” are to meters, “mt” or “tons” are to metric tons, “mtpy” are to metric tons per year and “MW” are to megawatts;

·“TEUs” are to twenty-foot equivalent units;

·“consolidated financial statements” are to the consolidated financial statements of Companhia Siderúrgica Nacional and its consolidated subsidiaries reported in International Financial Reporting Standards as issued by the IASB – IFRS as of December 31, 2009, 2010 and ~~2010~~2011 and for the years ended ~~December~~ December��31, 2009, 2010 and ~~2010,~~2011, together with the corresponding Report of Independent Registered Public Accounting Firm;

· “ADSs” are to CSN’s American Depositary Shares and “ADRs” are to CSN’s American Depositary Receipts; and

·“Brazil” is to the Federative Republic of Brazil.

Table of Contents

Forward-Looking Statements
This annual report includes forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, principally under the captions “Item 3. Key Information,” “Item 4. Information on the Company,” “Item 5. Operating and Financial Review and Prospects” and “Item 11. Quantitative and Qualitative Disclosures About Market Risk.” We have based these forward-looking statements largely on our current expectations and projections about future events, industry and financial trends affecting our business. Many important factors, in addition to those discussed elsewhere in this annual report, could cause our actual results to differ substantially from those anticipated in our forward-looking statements, including, among other things:
·      general economic, political and business conditions in Brazil and abroad, especially in China;
·      the ongoing effects of the recent global financial markets and economic crisis;
·      changes in competitive conditions and in the general level of demand and supply for our products;
·      management’s expectations and estimates concerning our future financial performance and financing plans;
·      our level of debt;
·      availability and price of raw materials;
·      changes in international trade or international trade regulations;
·      protectionist measures imposed by Brazil and other countries;
·      our capital expenditure plans;
·      inflation, interest rate levels and fluctuations in foreign exchange rates;
·      our ability to develop and deliver our products on a timely basis;
·      lack of infrastructure in Brazil;
·      electricity and natural gas shortages and government responses to them;
·      existing and future governmental regulation; and
·      other risk factors as set forth under “Item 3D. Risk Factors.”
The words “believe,” “may,” “will,” “aim,” “estimate,” “forecast,” “plan,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements. Forward-looking statements speak only as of the date they were made, and we undertake no obligation to publicly update or to revise any forward-looking statements after we distribute this annual report because of new information, future events or other factors. In light of the risks and uncertainties described above, the forward-looking events and circumstances discussed in this annual report might not occur and are not an indication of future performance. As a result of various factors, such as those risks described in “Item 3D. Risk Factors,” undue reliance should not be placed on these forward-looking statements.
2

Table of Contents

Presentation of Financial and Other Information
Our consolidated financial statements as of December 31, ~~2010~~2011 and ~~2009~~2010 and for the years ended December 31, ~~2009~~2011, 2010 and ~~2010~~2009 contained in “Item 18. Financial Statements” have been presented in thousands ofreais (R$) and prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). See Note 2(a) to our consolidated financial statements.
For certain purposes, such as providing reports to our Brazilian shareholders, filing financial statements with the Brazilian Securities Commission (Comissão de Valores Mobiliários), or CVM, and other distributions and tax liabilities in Brazil, we have prepared and will continue to be required to prepare financial statements in accordance with the accounting principles required by Brazilian laws No. 6,404, dated December 15, 1976, as amended, and No. 11,638 dated December 28, 2007, as amended, or the Brazilian Corporate Law, and the rules and regulations of the CVM, or Brazilian GAAP.
Changes on Regulatory Requirements for Presentation of Financial Statements – Convergence to International Financial Reporting Standards (“IFRS”)
Starting with the year ended December 31, 2010, Brazilian listed companies are required to publish their consolidated financial statements in accordance with IFRS. Those consolidated financial statements must be prepared based on IFRS as issued by the IASB.
~~Consequently, the~~The financial statements and other financial information for the years ended December 31, 2011, 2010 and 2009 included elsewhere in this Form 20-F, unless otherwise indicated, were prepared and presented in accordance with IFRS.
Previously published consolidated financial statements in our annual report on Form 20-F for our financial year ended December 31, 2009, as well as all prior financial periods, were prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). IFRS differs in certain material respects from U.S. GAAP and, accordingly, the consolidated financial statements for our financial years ended December 31, 2011, 2010 and 2009 prepared in accordance with IFRS are not comparable to our consolidated financial statements prepared in accordance with U.S. GAAP for 2009 and prior years presented in our reports on Form 20-F. ~~See “Item 5. Operating and Financial Review and Prospects—Change in Accounting from U.S. GAAP to IFRS” and Note 4 to our consolidated financial statements included elsewhere in this Form 20-F.~~
Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.
PART I
Item 1. Identity of Directors, Senior Management and Advisors
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
3A. Selected Financial Data
We present in this section the summary financial and operating data derived from our audited consolidated financial statements as of and for the year ended December 31, ~~2009~~2011, 2010 and ~~2010.~~2009.
The consolidated financial statements included in this annual report have been prepared in accordance with IFRS, as issued by the IASB, inreais. However, we have translated some of thereal amounts contained in this annual report into U.S. dollars. The rate used to translate such amounts in respect of the year ended December 31,
3

~~2010~~ 2011 was R$~~1.6662~~1.8758 to US$1.00, which was the commercial rate for the purchase of U.S. dollars in effect as of December 31, ~~2010,~~2011, as reported by the Central Bank of Brazil, or the Central Bank. The U.S. dollar equivalent information presented in this annual report is provided solely for the convenience of investors and should not beconstrued as implying that thereal amounts represent, or could have been or could be converted into, U.S. dollars at such rates or at any other rate. See “Exchange Rates” for more detailed information regarding the translation ofreais into U.S. dollars.

Table of Contents
IFRS Summary and Financial Data
The following tables present summary historical consolidated financial and operating data for us for each of the periods indicated. Solely for the convenience of the reader,real amounts as of and for the year ended December 31, ~~2010~~2011 have been translated into U.S. dollars at the commercial market rate in effect as of December 31, ~~2010~~2011 as reported by the ~~Brazilian~~ Central Bank of R$~~1.6662~~1.8758 to US$~~1.00~~1.00. The selected financial data below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects.”

Year Ended December 31,
Income Statement Data:

2011

2011

2010

2009

(in million of US$, except per share data)

(in million of R$, except per share data)
Net operating revenues

8,807

16,520

14,451

10,978
Cost of products sold

(5,225)

(9,801)

(7,883)

(7,211)
Gross Profit

3,582

6,719

6,568

3,768
Operating expenses

Selling

(322)

(604)

(482)

(447)
General and Administrative

(307)

(576)

(537)

(480)
Other Expenses

(267)

(501)

(599)

(648)
Other Income

383

719

49

1,369
Total

(513)

(962)

(1,569)

(206)
Operating income

3,069

5,757

4,998

3,561

Financial Income (expenses), net

(1,069)

(2,006)

(1,911)

(246)
Income Before Taxes

2,000

3,751

3,087

3,315
Income Tax

Current

(73)

(136)

(363)

(577)
Deferred

28

52

(207)

(123)

   Total

1,955

3,667

2,516

2,615

Net income

1,955

3,667

2,516

2,615

Loss attributable to noncontrolling interest

(21)

(39)

-

(4)

Net income attributable to Companhia Siderúrgica Nacional

1,976

3,706

2,516

2,619

Basic earnings per common share

1.35510

2.54191

1.72594

1.75478
Diluted earnings per common share

1.35510

2.54191

1.72594

1.75478

Year Ended December 31,
Statement of income data:

2010

2010

2009

(in million of US$, except per share data)

(in million of R$, except per share data)
Net operating revenues

                                    8,673

                                  14,451

                                  10,978
         Cost of products sold

                                  (4,613)

                                  (7,687)

                                  (7,022)
Gross Profit

                                    4,060

                                    6,764

                                    3,956
Operating expenses

                                          -

Selling

                                     (407)

(678)

                                     (636)
General and Administrative

                                     (322)

(537)

(480)
        Equity in results of affiliated companies

0

0

0
        Other Expenses

                                     (386)

(643)

(696)
        Other Income

                                         55

92

1,417
Total

(1,060)

(1,766)

(395)

Operating income

                                    3,000

                                    4,998

                                    3,561
Non-operating income (expenses), net

Financial Income (expenses), net

                                  (1,147)

                                  (1,911)

                                     (246)

Income Before Taxes

                                    1,853

                                    3,087

                                    3,315
Income Tax

Current

                                     (188)

                                     (313)

                                     (582)
Deferred

                                     (154)

                                     (257)

                                     (118)

   Total

                                    1,511

                                    2,517

                                    2,615

Net income

                                    1,511

                                    2,517

                                    2,615

Net loss attributable to noncontrolling interest

-

-

                                         (4)

Net income attributable to Companhia Siderúrgica Nacional

                                    1,511

                                    2,517

                                    2,619

Basic earnings per common share

1.03586

1.72594

1.75478
Diluted earnings per common share

1.03586

1.72594

1.75478

4

Table of Contents

As of December 31,

As of December 31,
Balance Sheet Data:

2010

2010

2009

2011

2011

2010

2009

(in million of US$)

(in million of R$)

(in million of US$)

(in million of R$)
Current assets

9,479

15,794

12,835

11,699

21,945

15,794

12,835
Investments

1,263

2,104

322

1,113

2,088

2,104

322
Property, plant and equipment

8,269

13,777

11,133

9,264

17,377

13,777

11,133
Other assets

3,676

6,126

6,436

2,911

5,460

6,380

6,436

Total assets

22,687

37,801

30,726

24,987

46,870

38,055

30,726

Current liabilities

2,674

4,456

3,998

3,464

6,497

4,456

3,998
Non -current liabilities⁽¹⁾

15,317

25,522

20,139

17,036

31,956

25,776

20,139
Stockholders’ equity

4,696

7,823

6,589
Shareholders’ equity

4,487

8,417

7,823

6,589

Total liabilities and stockholders’ equity

22,687

37.801

30,726
Total liabilities and shareholders’ equity

24,987

46,870

38,055

30,726

Paid-in capital (in millions ofreais)

896

1,681

1,681

1,681
Common shares (in million)

1,457

1,457

1,457

1,457
Dividends declared and interest on shareholders’ equity¹

640

1,200

1,856

1,819
Dividends declared and interest on shareholders’ equity per common share (inreais)¹

0.44

0.82

1.27

1.25

Common stock

2,447

2,447

2,447
Dividends declared and interest on stockholders’ equity (in millions ofreais)⁽¹⁾

937

1,561

2,571
Dividends declared and interest on stockholders’ equity per common share (inreais)⁽¹⁾

0.64

1.07

1.76
(1)
Amounts consist of dividends declared and accrued interest on ~~stockholders’~~shareholders’ equity during the year. For a discussion of our dividend policy and dividend and interest payments made in ~~2010,~~2011, see “Item 8A. Consolidated Statements and Other Financial Information-Dividend Policy.”
5

Exchange Rates
The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer ofreais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures. The Brazilian ~~currency~~ real has ~~during the last decades~~ experienced frequent and substantial variations in relation to the U.S. dollar and other foreign ~~currencies.~~currencies during the recent decades.
Between 2000 and 2002, thereal depreciated significantly against the U.S. dollar, reaching ~~an exchange rate of~~ R$3.53 per US$1.00 at the end of 2002. Between 2003 and mid-2008, thereal appreciated significantly against the U.S. dollar due to the stabilization of the macroeconomic environment and a strong increase in foreign investment in Brazil, with the exchange rate reaching R$1.56 per US$1.00 in August 2008. In the context of the crisis in the global financial markets after mid-2008, therealdepreciated 31.9% against the U.S. dollar ~~over the year~~throughout 2008, reaching R$2.34 per US$1.00 on December 31, 2008. ~~Since~~From 2009 to 2010, thereal appreciated 28.7% against the U.S. dollar and on December 31, 2010 the exchange rate was R$1.67 per US$~~1.00~~1.00. In 2011, thereal depreciated 12.6% and on ~~June~~14,December 31, 2011, the exchange rate was~~1.58~~ R$1.88 per US$1.00. On April 18, 2012 the exchange rate was R$1.87 per US$1.00. The Central Bank has intervened occasionally to ~~control instability~~mitigate volatility in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to allow thereal to float freely or will intervene in the exchange rate market through a currency band system or otherwise. Thereal may depreciate or appreciate against the U.S. dollar substantially.

Table of Contents
The following tables present the selling rate, expressed inreais per U.S. dollar (R$/US$), for the periods indicated.

Low

High

Average (1)

Period-end
Year ended

December 31, 2006

2.059

2.371

2.177

2.138
December 31, 2007

1.733

2.156

1.948

1.771
December 31, 2008

1.559

2.500

1.837

2.337
December 31, 2009

1.702

2.422

1.994

1.741
December 31, 2010

1.655

1.881

1.759

1.666

Low

High

Average

Period-end

Month ended

December 2010

1.655

1.881

1.759

1.666
January 2011

1.651

1.691

1.674

1.673
February 2011

1.661

1.677

1.668

1.661
March 2011

1.628

1.675

1.659

1.629
April 2011

1.565

1.619

1.586

1.573
May 2011

1.580

1.634

1.613

1.580
June 2011 (through June14, 2011)

1.574

1.594

1.583

1.582

Year ended

Low

High

Average⁽¹⁾

Period-end
December 31, 2007

1.733

2.156

1.948

1.771
December 31, 2008

1.559

2.500

1.837

2.337
December 31, 2009

1.702

2.422

1.994

1.741
December 31, 2010

1.655

1.881

1.759

1.666
December 31, 2011

1.535

1.902

1.675

1.876
Month ended

Low

High

Average

Period-end
October 2011

1.689

1.886

1.773

1.689
November 2011

1.727

1.894

1.790

1.811
December 2011

1.783

1.876

1.837

1.876
January 2012

1.739

1.868

1.790

1.739
February 2012

1.702

1.738

1.718

1.709
March 2012

1.715

1.833

1.795

1.822
April 2012 (through April 18, 2012)

1.862

1.869

1.835

1.869

Source: Central Bank.

(1)
Represents the daily average of the close exchange rates during the period.

~~Source: Central Bank.~~
~~(1) Represents the daily average of the close exchange rates during the period.~~
6
We will pay any cash dividends and make any other cash distributions with respect to our common shares in Brazilian currency. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by ~~the~~ADS holders ~~of ADSs~~ on conversion ~~by the depositary~~into U.S. dollars of such distributions ~~into U.S. dollars~~ for payment ~~to holders of ADSs.~~by the depositary. Fluctuations in the exchange rate between thereal and the U.S. dollar may also affect the U.S. dollar equivalent of thereal price of our common shares on ~~the~~ BM&FBOVESPA.
3B. Capitalization and Indebtedness
Not applicable.
3C. Reasons for the Offer and Use of Proceeds
Not applicable.
3D. Risk Factors
An investment in our ADSs or common shares involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, financial condition and results of operations could be materially and adversely affected by any of these risks. The trading price of our ADSs could decline due to any of these risks or other factors, and you may lose all or part of your investment. The risks described below are those that we currently believe may materially affect us.
Risks Relating to Brazil
The Brazilian government ~~has exercised, and continues to exercise,~~exercises significant influence over the Brazilian economy. This ~~involvement,~~influence, as well as Brazilian political and economic conditions, could materially and adversely affect ~~our business and the trading prices of our ADSs and common shares.~~us.
The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulation. See “—Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm our business” and “Item 5A. Operating Results—Brazilian Macro-Economic Scenario, Effects of Exchange Rate Fluctuations.” The Brazilian government’s actions, policies and regulations ~~to control inflation~~ have ~~often~~ involved, among other measures, increases in interest rates, changes in tax policies, price controls, ~~(such as those imposed on the steel sector prior to privatization),~~ currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by political, social, and economic developments in or affecting Brazil, and by changes in policy or regulations at the federal, state or municipal levels involving or affecting factors, such as:

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·      interest rates;
·      exchange controls;
·      currency fluctuations;
·      inflation;
·price volatility of raw materials and our final products;
·      lack of infrastructure in Brazil;
·      energy shortages and rationing programs;
·      liquidity of the domestic capital and lending markets;
·regulatory policy for the mining and steel industries;
·      environmental policies and regulations;
·      tax policies and regulations; and
·      other political, social and economic developments in or affecting Brazil.
Uncertainty over whether the Brazilian government will make changes affecting these and other factors may create instability. This may also adversely affect our business, financial condition and results of operations.
7
Exchange rate instability may adversely affect ~~our financial condition, results of operations~~us and the market price of our common shares and ADSs.
The Brazilian currency has long experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies. ~~Between 2000 and 2002,~~Most recently, for example, thereal ~~depreciated significantly against the U.S. dollar, reaching an exchange rate of R$3.53 per US$1.00 at the end of 2002. Between 2003 and mid-2008, the~~~~real~~ ~~appreciated significantly against the U.S. dollar due to the stabilization of the macroeconomic environment and a strong increase in foreign investment in Brazil, with the exchange rate reaching~~was R$1.56 per US$1.00 in August 2008. In the context of the crisis in the global financial markets after mid-2008, thereal depreciated 31.9% against the U.S. dollar over the year 2008 and reached R$2.34 per US$1.00 at year end. Since ~~2009,~~then, thereal appreciated ~~againts~~against the U.S. dollar ~~mainly due to the strong economic recovery of Brazil~~ and ~~high domestic real interest rate, and on December 31, 2010~~reached R$1.88 per US$1.00 at year end 2011. On April 18, 2012 the exchange rate was R$~~1.66~~1.87 per US$1.00. ~~On June 14, 2011, the exchange rate was R$1.58 per US$1.00.~~
Depreciation of thereal against major foreign currencies could create inflationary pressures in Brazil and contribute to Central Bank increases in interest rates, which could negatively affect us and the growth of the Brazilian economy, ~~as a whole and harm our financial condition and results of operations,~~ may curtail access to foreign financial markets and may prompt government intervention, ~~including~~which could include recessionary ~~governmental policies.~~measures. Depreciation of thereal ~~against the U.S. dollar~~ can also, as in the context of ~~the global~~an economic ~~and financial crisis in 2008 and 2009,~~slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the economy as a whole.
On the other hand, appreciation of thereal relative to major foreign currencies could lead to a deterioration of ~~the~~ Brazilian foreign exchange current accounts, as well as ~~dampen~~affect export-driven growth. Depending on the circumstances, either depreciation or appreciation of thereal could materially and adversely affect the growth of the Brazilian economy and us as well as impact the U.S. dollar value of distributions and dividends on and the U.S. dollar equivalent of the market price of our ~~business, financial condition~~common shares and ~~results of operations.~~our ADSs.
In the event thereal depreciates in relation to the U.S. dollar, the cost inreais of our foreign currency-denominated borrowings and imports of raw materials, particularly coal and coke, will increase. To the extent that we do not succeed in promptly reinvesting the funds received from such borrowings in dollar-denominated assets, we are exposed to a mismatch between our foreign currency-denominated expenses and revenues. On the other hand, if therealappreciates in relation to the U.S. dollar, it will causereal-denominated production costs to increase as a percentage of total production costs and cause our exports to be less competitive. We had total U.S. dollar-denominated or ~~–linked~~-linked indebtedness of US$~~5,804~~5,325 million, or ~~48%~~35.59% of our total indebtedness, atas of December 31, ~~2010.~~2011.
~~Depreciation~~

Table of ~~the~~~~real~~ ~~may also reduce the U.S. dollar value of distributions and dividends on the ADSs and the U.S. dollar equivalent of the market price of our common shares and, as a result, the ADSs.~~Contents
Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm ~~our business.~~us.
Brazil has in the past experienced extremely high rates of inflation, ~~and~~which has ~~therefore followed~~led the government to pursue monetary policies that have ~~resulted in~~contributed to one of the highest real interest rates in the world. Since the implementation of theRealPlan in 1994, the annual rate of inflation in Brazil has decreased significantly, as measured by the National Broad Consumer Price Index (Índice Nacional de Preços ao Consumidor Amplo, or IPCA). Inflation measured by the IPCA index was ~~4.31~~4.3%, 5.9% and ~~5.91~~6.5% in 2009, 2010 and ~~2010,~~2011, respectively.
~~Between~~ ~~2004 and 2010, the base interest rate, or SELIC rate, in Brazil varied between 19.25% p.a. and 8.75% p.a..~~ Inflation and the Brazilian government’s inflation containment measures, ~~to fight it, principally~~mainly through ~~the Central Bank,~~monetary policies, have had and may have significant effects on the Brazilian economy and our business. Tight monetary policies with high interest rates may restrict Brazil’s growth and the availability of credit. Conversely, more lenient ~~government and Central Bank~~ policies and interest rate decreases may trigger increases in inflation, ~~and, consequently, growth volatility and~~with the ~~need for~~consequent reaction of sudden and significant interest rate increases, which could negatively affect ~~our business.~~Brazilian economic growth and us. In addition, we may not be able to adjust the price of our products in the ~~export~~foreign markets to offset the effects of inflation in Brazil on our cost structure, given that most of our costs are incurred inreais.
8
Developments and perception of risk in other countries, especially in the United States, China and other emerging market countries, may adversely affect the trading price of Brazilian securities, including our common shares and ADSs.
The market value of securities of Brazilian companies is affected to varying degrees by economic and market conditions in other countries, including the United States, China, ~~other~~ Latin American and other emerging market countries. Although economic conditions in these countries may differ significantly from economic conditions in Brazil, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. Crisis in, ~~other emerging market countries~~ or economic policies of, other countries may diminish investor interest in securities of Brazilian issuers, including ours. This could adversely affect the trading price of our common shares and/or ADSs, and could also make it more difficult or impossible for us to access the capital markets and finance our operations ~~in the future,~~ on acceptable terms.
Risks Relating to Us and the Industries in Which We Operate
We are exposed to substantial changes in the demand for steel and iron ore, which has a substantial impact in the prices ~~for~~of our ~~products.~~products and may adversely affect our results of operations.
The steel and mining industries are highly cyclical, both in Brazil and abroad. ~~To the extent the Brazilian economy cannot absorb our entire steel production capacity, we are dependent on exporting our steel products, as in 2005 and 2006, for example.~~ The demand for ~~our~~ steel and mining products ~~(international commodities)~~ and, thus, the financial condition and results of operations of companies in the steel and mining industries, including us, are generally affected by macroeconomic fluctuations in the world economy and the economies of steel-producing countries, including trends in the automotive, construction, home appliances and packaging ~~and distribution industries. In recent years,~~industries, as well as other industries which rely upon steel distributors. A worldwide recession, an extended period of below-trend growth in developed countries or a slowdown in the ~~price~~emerging markets that are large consumers of our products (such as the domestic Brazilian market for our steel ~~and iron ore in world markets has been at historically high levels, with the exception of 2009, when these prices decreased as a result of lower domestic and international demand~~products and the ~~effects of the 2008 worldwide financial crisis, but with consistent recovery over 2010 due to product mix and recovery of international economy and prices.~~Chinese market for iron ore) could sharply reduce demand for our products. Reduced demand can lead to overcapacity and excessive downtime, lower utilization of our significant fixed assets and therefore reduced operating profitability. In addition, steel competes with other materials that may be used as substitutes, such as aluminum (particularly in the automobile industry), cement, composites, glass, plastic and wood. Government regulatory initiatives mandating the use of such materials in lieu of steel, whether for environmental or other reasons, as well as the development of other new substitutes for steel products, could also significantly reduce market prices and demand for steel products and thereby reduce our cash flow and profitability. Any material decrease in demand for steel and iron ore in the domestic or export markets served by us could have a material adverse ~~effect.~~effect on us.
The availability and the price of raw materials that we need to produce steel, particularly of coal and coke, may adversely affect our results of operations.
In ~~2010~~2011 and ~~2009,~~2010, raw material costs accounted for ~~56.4%~~59.4% and ~~53.6%~~ 56.4%, respectively, of our total production costs. Our ~~principal~~main raw materials include iron ore, coal, coke, ~~(a portion of which we produce from coal),~~ limestone, dolomite, manganese, zinc, tin and aluminum. We depend on third parties for some of our raw material ~~requirements. In addition, we import~~requirements, including importing all of the coal required to produce coke and approximately ~~28%~~38% of our coke requirements.
Global developments, for example the dramatic increase in 2008 in Chinese and Indian demand for raw materials used in steel manufacturing, may cause severe shortages and/or substantial price increases in key raw materials and ocean transportation capacity. Our inability to pass those cost increases on to our customers or to meet our customers’ demands because of non-availability of key raw materials may cause a material adverse effect on us.
In addition, we require significant amounts of energy, ~~both~~ in the form of natural gas adand electricity, to power our ~~plant~~plants and equipment.

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Any prolonged interruption in the supply of raw materials, natural gas or ~~energy,~~electricity, or substantial increases in their ~~costs,~~prices, could ~~also~~ materially and adversely affect us. These interruptions ~~in the supply of raw materials, natural gas or energy~~and price increases may be a result of changes in laws or trade regulations, the availability and cost of transportation, suppliers’ allocations to other purchasers, interruptions in production by suppliers or accidents or similar events on suppliers’ premises or along the supply chain. Our inability to pass those cost increases on to our customers or to meet our customers’ demands because of non-availability of key raw materials could also have a material and adverse effect on us.
9
WeOur steel products face significant competition, including price ~~competition and~~ competition, from other domestic or foreign producers, which may adversely affect our profitability and market share.
The global steel industry is highly competitive with respect to ~~price. Brazil exports~~price, product quality and customer service, as well as technological advances that enable steel companies to reduce their production costs. Brazil’s export of steel products ~~and~~ is influenced by several ~~factors:~~factors, including the protectionist policies of other countries, ~~questioning of~~disputes regarding these policies before the WTO (World Trade Organization), the Brazilian government’s exchange rate policy and the growth rate of the world economy. Further, continuous advances in materials sciences and resulting technologies have given rise to improvements in products such as plastics, aluminum, ceramics and glass that permit them to substitute steel. Due to high start-up costs, the economics of operating a steelworks facility on a continuous basis may encourage mill operators to maintain high levels of output, even in times of low demand, which increases the pressure on industry profit margins. In addition, downward pressure on steel prices by our competitors may affect our profitability.
The steel industry ~~is also highly competitive with respect~~has historically suffered from structural over-capacity which has recently worsened due to ~~product quality~~a substantial increase in production capacity in the developing world, particularly in China and ~~customer service,~~India as well as ~~technological advances that enable~~other emerging markets. China is now the largest global steel ~~manufacturer~~producer by a large margin and Chinese and other countries’ steel exports, or conditions favorable to ~~reduce its production costs. In 2010 the~~them (excess steel ~~companies~~capacity, undervalued currency or higher market prices for steel in ~~Brazil~~markets outside of such countries) can have ~~faced strong competition of imported products.~~S~~ome of the factors that facilitated this scenario were the reduction of~~a significant impact on steel ~~products demand~~prices in ~~mature markets, the exchange rate appreciation and some state tax incentives. The necessary measures were taken to contain imported products and domestic and imported prices were equated.~~
~~Over the past years, China has become a major steel producer.~~other markets. If we are not able to remain competitive in relation to China or other steel-producing countries, in the future weour results may be ~~materially~~adversely affected.
In 2010, steel companies in Brazil faced strong competition of imported products, mainly as a result of the reduction in steel products demand in mature markets, the exchange rate appreciation and ~~adversely affected. Recently~~tax incentives. The Brazilian government adopted measures to contain imported products and, as a result, prices of imported products stabilized as compared to local products. These measures also had a positive effect in 2011, when imports were consistently reduced. Apart from direct steel imports, ~~in Brazil have increased in light~~the Brazilian industry has also been facing the competition of ~~idle installed capacity in foreign markets, then if~~imported finished goods, which affects the whole steel chain. If the Brazilian Government were to remove the current protective measures or fails to act against cheap subsidized steel imports, our results of operation may also be materially and adversely affected.
The shift in iron ore pricing and increase in price volatility could adversely affect our iron ore business.
The previous annual benchmark price system for iron ore adopted by the main iron ore producers, including us, was replaced in the last couple of years by different pricing systems, and is now more sensitive to spot price volatility. Fluctuations in supply and demand could increase price volatility, mainly in spot prices, which could adversely affect our mining business and, consequently, our cash flow. See “Item 5A—Operating Results—Overview—Macro-Economic Scenario—Mining.”
Protectionist and other measures adopted by foreign government could adversely affect our export sales.
In response to the increased production and export of steel by many countries, anti-dumping, countervailing duties and safeguard measures were imposed in the late 1990s and early 2000s by foreign governments representing the main markets for our ~~exports which are in force until nowadays. Foreign countries continue to impose~~exports. In June 2011, safeguard measures imposed by Argentina and the United States were terminated, but restrictions imposed by Canada on ~~the exports to certain countries, such as the restrictions on exports~~imports of hot-rolled products from Brazil and by the European Union on imports of certain chemical substances contained either in products used to protect the ~~United States, Canada and Argentina.~~steel products or in products used to pack them, remain in effect. The imposition of these and other protectionist measures by foreign countries may materially and adversely affect our export sales.

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Our activities depend on authorizations, concessions, permits and licenses. Changes of laws and ~~regulation~~regulations and government measures could adversely affect us.
Our activities depend on authorizations, permits and licenses from and concessions by governmental regulatory agencies of the countries in which we operate. If ~~related~~ laws and regulations applicable to these authorizations, concessions, permits or licenses change, modifications to our technologies and operations could be required, and we ~~could be required~~may need to make unexpected capital expenditures. These changes and additional costs may have a negative impact on the profitability of our projects or even make certain projects economically or otherwise unfeasible. Also, we cannot guarantee that we will be able to maintain, renew or obtain any required authorization, concession, permit or license. Our authorizations, concessions, permits and licenses may require that we meet certain performance thresholds or completion milestones. In case we are unable to meet these thresholds or milestones we may lose our authorizations, concessions, permits and licenses. The loss ofor inability to obtain any ~~such~~ authorization, concession, permit or license, or changes in the regulatory framework we operate in, may materially and adversely affect us.
~~Mining is~~In addition, our activities are subject to government regulation in the form of taxes and royalties, which can have an important financial impact on our operations. In the countries where we operate, governments may impose new taxes, raise existing taxes and royalties, or change the basis on which they are calculated in a manner unfavorable to us.
Furthermore, in response to the increased production and export of steel by many countries, anti-dumping, countervailing duties and safeguard measures were imposed in the late 1990s and early 2000s by governments of the principal foreign markets for our steel exports in that period. Some of these restrictions are still in force, such as the restrictions on exports of hot-rolled products from Brazil to the United States, Canada and Argentina and the restrictions imposed by the European Union on exports of certain chemical substances contained either in products used to protect the steel products or in products used to pack them, effective as of January 2009. These and other restrictions could materially and adversely affect us, especially to the extent we rely on exporting our iron ore and steel production.
10
Malfunctioning equipment or accidents on our premises, railways or ports may decrease or interrupt production, internal logistics or distribution of our products. ~~Our insurance policies may not be sufficient to cover all our losses.~~
The steel and iron ore production processes depend on certain critical equipment, such as blast furnaces, steel converters, continuous casting machines, drillers, crushing and screening ~~equipments~~equipment and shiploaders, as well as on internal logistics and distribution channels, such as railways and seaports. This equipment and infrastructure may be affected in the case of malfunction or damage. In 2006, there was an accident involving the gas cleaning system adjacent to Blast Furnace No. 3 at the Presidente Vargas ~~steelworks,~~Steelworks, which prevented us from operating this blast furnace for approximately six ~~months and resulted in losses of approximately US$520 million, all of which was reimbursed by our insurers.~~months. Similar or any other significant interruptions in our production process, internal logistics or distribution channels (including our ports and railways) could materially and adversely affect us.
Our insurance policies may not be sufficient to cover all our losses.
We maintain several types of insurance policies, in line with the risk management of our ~~view~~business, that attempt to ~~managing risk, but the~~follow industry market practices for similar activities. Coverage in such policies encompasses domestic and international (import and export) cargo transport (road, rail, sea or air), carrier liability, life insurance, personal accidents, health, auto insurance, D&O, general liability, erection risks, boiler and machinery coverage, ~~obtained in these may not be sufficient to cover all our risks which may adversely affect our financial position.~~export credit insurance, surety, ports and terminal liabilities. We also have an operational risks policy for the Presidente Vargas Steelworks and some ~~other~~of our branches and subsidiaries ~~but~~ for ana total insured value of R$850 million out of a total risk amount of R$25.1 billion. ~~Despite~~Under the terms of this ~~coverage,~~policy CSN remains responsible for the first ~~tranche of~~ R$170 million in losses (material damages and loss of profits)~~, in excess to the deductibles,~~ and ~~shall be responsible~~ for ~~64%~~53.55% of the losses above ~~this first tranche.~~
Wesuch amount. The coverage obtained in these insurance policies may not be sufficient to cover all risks we are exposed to. Additionally, we may not be able to successfully contract or renew our insurance policies in terms satisfactory to us, which may adversely affect our financial position.
Our projects are subject to risks that may result in increased costs or delay or prevent their successful implementation.
We are investing to further increase our steel, mining and cement production capacity, as well as our logistics capabilities. ~~Our expansion~~See “Item 4D. Property, Plant and Equipment—Capital Expenditures—Planned Investments.” These projects are subject to a number of risks that may adversely affect our growth prospects and profitability, including the following:
·        we may encounter delays, availability problems or higher than expected costs in obtaining the necessary equipment, or services and materials to build and operate a project;

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·        our efforts to develop projects according to schedule may be hampered by a lack of infrastructure, including aavailability of overburden and waste disposal areas as well as reliable power ~~supply;~~and water supplies;
·        we may fail to obtain, lose, or experience delays or higher than expected costs in obtaining or renewing the required permits, authorizations, licenses, concessions and/or regulatory approvals to build or continue a project; and
·        changes in market conditions, laws or regulations may make a project less profitable than expected ~~at the time we initiated work on it.~~or economically or otherwise unfeasible.
Any one or a combination of factors described above may materially and adversely affect us.
New or more stringent environmental, safety and health regulations imposed on us may result in increased liabilities and increased capital expenditures.
Our steel making, mining, cement and logistics facilities are subject to a broad range of laws, regulations and permit requirements in Brazil relating mainly to the protection of health, safety and the environment.
Brazilian pollution standards are expected to continue to change, including the introduction of new effluent and air emission standards, ~~and~~ solid waste-handling ~~regulations.~~ regulations, and native forest preservation requirements in rural land. The Brazilian government has recently adopted a decree under the climate change national policy (Política Nacional de Mudanças Climáticas) that contemplates specific limits on carbon emissions to be established in 2012 and phased in through 2020. These limits will be established jointly by industry and government representatives and will include goals for reduction of emissions, including gradual measures at three-year intervals, which may require a material investment by us.
New or more stringent environmental, ~~(including measures seeking to address global warming)~~safety and health standards imposed on us ~~can~~could require us to make increased capital ~~expenditures.~~expenditures, create additional legal preservation areas in our properties, or make modifications in operating practices or projects. As a result, the amount and timing of future environmental and related expenditures may vary substantially from those currently anticipated. These additional costs may also have a negative impact on the profitability of the projects we intend to implement or may make such projects economically unfeasible. We could also be exposed to civil penalties, criminal sanctions and closure orders for non-compliance with these regulations. Waste disposal and emission practices may result in the need for us to clean up or retrofit our facilities at substantial costs and/or could result in substantial liabilities. Environmental legislation restrictions imposed by foreign markets to which we export our products may also materially and adversely affect our export sales and us.
Our governance and compliance processes may fail to prevent regulatory penalties and reputational harm.
We operate in a global environment, and our activities straddle multiple jurisdictions and complex regulatory frameworks with increased enforcement activities worldwide. Our governance and compliance processes may ~~notprevent~~not prevent future breaches of law, accounting and/or governance standards. We may be subject to breaches of our Code of Ethics, business conduct protocols and instances of fraudulent behavior and dishonesty by our employees, contractors or other agents. Our failure to comply with applicable laws and other standards could subject us to fines, loss of operating licenses and reputational harm, which may materially and adversely affect us.
11
Some of our operations depend on joint ventures, consortia and other forms of cooperation, and our business could be adversely affected if our partners fail to observe their commitments.
We currently operate parts of our business through joint-ventures and consortia with other companies. We have established a joint-venture with an Asian consortium at our 60% consolidated investee Nacional Minérios S.A., or Namisa, to mine iron ore; a joint-venture with other Brazilian steel and mining companies at MRS Logística S.A., or MRS, to explore railway transportation in the Southeastern region of Brazil,, a joint-venture with Tractebel and Itambe at Itá Energética S.A., or ITASA, to produce electricity, and a consortium with Vale, Votorantim Metais, CEMIG and Anglo Gold Ashant at Igarapava Hydroelectric Power Plant to produce electricity.

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Our forecasts and plans for these joint-ventures and consortia assume that our partners will observe their obligations to make capital contributions, purchase products and, in some cases, provide managerial personnel or financing. In addition, many of the projects contemplated by our joint-ventures or consortia rely on financing commitments, which contain certain preconditions for each disbursement. If any of our partners fails to observe their commitments or we fail to comply with all preconditions required under our financing commitments, the affected joint-venture, consortium or other project may not be able to operate in accordance with its business plans, or we may have to increase the level of our investment to implement these plans. Any of these events may have a material adverse effect on us.
Our mineral reserve estimates may materially differ from mineral quantities that we may be able to actually recover; our estimates of mine life may prove inaccurate; and market price fluctuations and changes in operating and capital costs may render certain ore reserves uneconomical to mine.
Our reported ore reserves are estimated quantities of ore and minerals that we have determined can be economically mined and processed under present and anticipated conditions to extract their mineral content. There are numerous uncertainties inherent in estimating quantities of reserves and in projecting potential future rates of mineral production, including many factors beyond our control. Reserve engineering involves estimating deposits of minerals that cannot be measured in an exact manner, and the accuracy of any reserve estimate is a function of the quality of available data and engineering and geological interpretation and judgment. As a result, no assurance can be given that the indicated amount of ore will be recovered or that it will be recovered at the rates we anticipate. Estimates of different engineers may vary, and results of our mining and production subsequent to the date of an estimate may lead to revision of estimates. Reserve estimates and estimates of mine life may require revision based on actual production experience and other factors. For example, fluctuations in the market prices of minerals and metals, reduced recovery rates or increased operating and capital costs due to inflation, exchange rates or other factors may render proven and probable reserves uneconomic to exploit and may ultimately result in a restatement of reserves. See “Item 4B—Business Overview—Our Mining Segment—Mineral Reserves.”
We may not be able to adjust our mining production volume in a timely or cost-efficient manner in response to changes in demand.
Revenues from our mining business represented in 2009, 2010 and ~~2010,~~2011, respectively, 17%, 24% and ~~24%~~35% of our total net revenues. Our ability to rapidly increase production capacity is limited, which could render us unable to fully satisfy demand for our products. When demand exceeds our production capacity, we may meet excess customer demand by purchasing iron ore from unrelated parties and reselling it, which would increase our costs and narrow our operating margins. If we are unable to satisfy excess customer demand in this way, we may lose customers. In addition, operating close to full capacity may expose us to higher costs, including demurrage fees due to capacity restraints in our logistics systems.
Conversely, operating at significant idle capacity during periods of weak demand may expose us to higher unit production costs since a significant portion of our cost structure is fixed in the short-term due to the high capital intensity of mining operations. In addition, efforts to reduce costs during periods of weak demand could be limited by labor regulations or existing labor or government agreements.
12
Adverse economic developments in China could have a negative impact on our revenues, cash flow and profitability.
China has been the main driver of global demand for minerals and metals over the last few years. In ~~2010,~~2011, Chinese demand represented ~~60%~~61% of global demand for seaborne iron ore. The percentage of our ~~mining operating revenues attributable to~~iron ore sales volume to consumers in China was ~~47%~~33% in ~~2010.~~2011. A contraction of China’s economic growth could result in lower demand for our products, leading to lower revenues, cash flow and profitability. Poor performance in the Chinese real estate sector, one of the largest consumers of carbon steel in China, could also negatively impact our results.
Drilling and production risks could adversely affect the mining process.
Once mineral deposits are discovered, it can take a number of years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial time and expenditures are required to:

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·      establish mineral reserves through drilling;
·      determine appropriate mining and metallurgical processes for optimizing the recovery of metal contained in ore;
·      obtain environmental and other licenses;
·      construct mining, processing facilities and infrastructure required for greenfield properties; and
·      obtain the ore or extract the minerals from the ore.
If a mining project proves not to be economically feasible by the time we are able to ~~exploit~~profit from it, we may incur substantial losses and be obliged to take write-offs. In addition, potential changes or complications involving metallurgical and other technological processes arising during the life of a project may result in delays and cost overruns that may render the project not economically feasible.
Natural and other disasters could disrupt our operations.
Our business and operating results could be negatively impacted by social, technical and/or physical risks such as flooding, fire, power loss, loss of water supply, leakages, telecommunications and information technology system failures, and political instability, including a global economic slowdown. For example, flooding in Australia at the end of 2010 affected global coal supply and consequently increased our raw material costs. In addition, heavy rainfall in the Southeast Region of Brazil could affect our iron ore and logistics operations and consequently our revenues. Such events could affect our ability to conduct our business operations and, as a result, reduce our operating results and materially and adversely affect us.
We may not be able to consummate proposed acquisitions successfully or integrate acquired businesses successfully.
From time to time, we may evaluate acquisition opportunities that would strategically fit our business objectives. If we are unable to complete acquisitions, or integrate successfully and develop these businesses to realize revenue growth and cost savings, our financial results could be adversely affected. Acquisitions also pose the risk that we may be exposed to successor liability involving an acquired company. Due diligence conducted in connection with an acquisition, and any contractual guarantees or indemnities that we receive, may not be sufficient to protect us from, or compensate us for, actual liabilities. A material liability associated with an acquisition, such as labor- or environmental-related, could adversely affect our reputation and financial performance and reduce the benefits of the acquisition.
In addition, we may incur asset impairment charges related to acquisitions, which may reduce our profitability. Finally, our acquisition activities may present financial, managerial and operational risks, including diversion of management attention from existing core businesses, difficulties integrating or separating personnel and financial and other systems, adverse effects on existing business relationships with suppliers and customers, inaccurate estimates of fair value made in the accounting for acquisitions and amortization of acquired intangible assets which would reduce future reported earnings, potential loss of customers or key employees of acquired businesses, and indemnities and potential disputes with the buyers or sellers. Any of these activities could affect our product sales, financial condition and results of operations.
We have a substantial amount of indebtedness, which could make it more difficult or expensive to refinance our maturing debt and /or incur new debt.
As of December 31, 2011, our total debt outstanding amounted to R$28,067 million, consisting of R$2,735 million of short-term debt and R$25,332 million of long-term debt. See “Item 5B. Liquidity and Capital Resources” and “Item 18. Financial Statements.” Although we had R$15,417 million of cash and cash equivalents as of December 31, 2011, our planned investments in all of our business segments will require a significant amount of cash over the course of 2012 and following years. See “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments.”

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The level of our indebtedness could affect our credit rating and ability to obtain any necessary financing in the future and increase our cost of borrowing. In these and other circumstances, servicing our indebtedness may use a substantial portion of our cash flow from operations, which could make it more difficult for usto make payments of dividends and other distributions to our shareholders, including the holders of our ADSs, and adversely affect our financial condition and results of operations.
We have experienced labor disputes in the past that have disrupted our operations, and such disputes may recur.
A substantial number of our employees and some of the employees of our subcontractors are represented by labor unions and are covered by collective bargaining or other labor agreements, which are subject to periodic renegotiation. Strikes and other labor disruptions at any of our facilities or labor disruptions involving third parties who may provide us with goods or services, have in the past and may in the future materially and adversely affect the operation of our facilities, or the timing of completion and the cost of our projects.
13
Risks Relating to our Common Shares and ADSs
Our controlling shareholder has the ability to direct our business and affairs and its interests could conflict with yours.
Our controlling shareholder has the power to, among other things, elect a majority of our directors and determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations, acquisitions, dispositions, and the timing and payment of any future dividends, subject to minimum dividend payment requirements imposed under ~~the~~ Brazilian ~~corporation law.~~Corporate Law. Our controlling shareholder may have an interest in pursuing acquisitions, dispositions, financings or similar transactions that could conflict with your interests as a holder of our common shares and ADSs. For a description of our ownership structure, see “Item 7A. Major Shareholders.”
If you surrender your ADSs and withdraw common shares, you risk losing the ability to remit foreign currency abroad and certain Brazilian tax advantages.
As an ADS holder, you benefit from the electronic certificate of foreign capital registration obtained by the custodian for our common shares underlying the ADSs in Brazil, which permits the custodian to convert dividends and other distributions with respect to the common shares into non-Brazilian currency and remit the proceeds abroad. If you surrender your ADSs and withdraw common shares, you will be entitled to continue to rely on the custodian’s electronic certificate of foreign capital registration for only five business days from the date of withdrawal. Thereafter, upon the disposition of, or distributions relating to, the common shares, you will not be able to remit abroad non-Brazilian currency unless you obtain your own electronic certificate of foreign capital registration or you qualify under Brazilian foreign investment regulations that entitle some foreign investors to buy and sell shares on Brazilian stock exchanges without obtaining separate electronic certificates of foreign capital registration. If you do not qualify under the foreign investment regulations you will generally be subject to less favorable tax treatment of dividends and distributions on, and the proceeds from any sale of, our common shares.
For more information regarding exchange controls, see “Item 10.D. Exchange Controls.” If you seek to obtain your own electronic certificate of foreign capital registration, you may incur expenses or suffer delays in the application process, which could delay your ability to receive dividends or distributions relating to our common shares or the return of your capital in a timely manner. The depositary’s electronic certificate of foreign capital registration may also be adversely affected by future legislative changes.
Holders of ADSs may not be able to exercise their voting rights.
~~Holder~~Holders of ADSs may only exercise their voting rights with respect to the underlying common shares in accordance with the provisions of the deposit agreement. Under the deposit agreement, ADS holders must vote by giving voting instructions to the depositary. Upon receipt of the voting instructions of the ADS holder, the depositary will vote the underlying common shares in accordance with these instructions. Otherwise, ADS holders will not be able to exercise their right to vote unless they surrender the ADS for cancellation in exchange for our common shares. Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 15 days in advance of the meeting, the second call must be published at least eight days in advance of the meeting. When a shareholders’ meeting is convened, holders of ADSs may not receive sufficient advance notice to surrender the ADS in exchange for the underlying common shares to allow them to vote with respect to any specific matter. If we ask for voting instructions, the depositary will notify ADS holders of the upcoming vote and will arrange to deliver the proxy card. We cannot assure that ADS holders will receive the proxy card in time to ensure that they can instruct the depositary to ~~vote the shares.~~vote. In addition, the depositary and its agents are not liable for failing to carry out voting instructions or for ~~the manner~~themanner of carrying out voting instructions. Alternatively, ADS holders can exercise their right to vote by surrendering their ADSs for cancellation in exchange for our common shares. Pursuant to our bylaws, the first call for a shareholders’ meeting must be published at least 15 days in advance of the meeting, and the second call must be published at least eight days in advance of the meeting. When a shareholders’ meeting is convened, holders of ADSs may not receive sufficient advance notice to surrender their ADSs in exchange for the underlying common shares to allow them to vote with respect to any specific matter. As a result, holders of ADSs may not be able to exercise their voting rights.

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The relative volatility and illiquidity of the Brazilian securities markets may substantially limit your ability to sell the common shares underlying the ADSs at the price and time you desire.
Investing in securities that trade in emerging markets, such as Brazil, often involves greater risk than investing in securities of issuers in the United States, and such investments are generally considered to be more speculative in nature. The Brazilian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than major securities markets in the United States. Accordingly, although you are entitled to withdraw the common shares underlying the ADSs from the depositary at any time, your ability to sell the common shares underlying the ADSs at a price and time at which you wish to do so may be substantially limited. There is also significantly greater concentration in the Brazilian securities market than in major securities markets in the ~~UnitedStates.~~United States. The ten largest companies in terms of market capitalization represented ~~55.3%~~53.1% of the ~~aggregate~~total market capitalization of the BM&FBOVESPA as of December 31, ~~2010.~~2011. The top ten stocks in terms of trading volume accounted for ~~43.4%~~47.2%, 48.8% and ~~49.7% and 53.2%~~50.9% of all shares traded on the BM&FBOVESPA in 2011, 2010 and 2009, ~~and 2008,~~ respectively.
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Holders of ADSs may be unable to exercise preemptive rights with respect to our common shares.
We may not be able to offer our common shares to U.S. holders of ADSs pursuant to preemptive rights granted to holders of our common shares in connection with any future issuance of our common shares unless a registration statement under the Securities Act is effective with respect to such common shares and preemptive rights, or an exemption from the registration requirements of the Securities Act is available. We are not obligated to file a registration statement relating to preemptive rights with respect to our common shares or to undertake steps that may be needed to find exemptions from registration available, and we cannot assure you that we will file any such registration ~~statement.~~statement or take any such steps. If such a registration statement is not filed and an exemption from registration does not exist, The JP Morgan Chase Bank, N.A., as depositary, ~~will~~may attempt to sell the preemptive rights, and you will be entitled to receive the proceeds of such sale. However, these preemptive rights will expire if the depositary does not sell them, and U.S. holders of ADSs will not realize any value from the granting of such preemptive rights. Fora more complete description of preemptive rights with respect to the underlying shares, see “Item 10B. Memorandum and Articles of Association—Preemptive Rights.”
~~Substantial sales of our ADSs could cause the price of our ADSs to decrease significantly.~~
The sale of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of our common shares and our ADSs. Holders of our common shares and/or ADSs may not be able to sell their securities at or above the price they paid for them.
Item 4. Information on the Company
4A. History and Development of the Company
History
~~History~~
Companhia Siderúrgica Nacional is a Brazilian corporation (sociedade por ações) incorporated in 1941 pursuant to a decree of the Brazilian President at the time, Getúlio Vargas. The Presidente Vargas ~~steelworks,~~Steelworks, located in the city of Volta Redonda, in the State of Rio de Janeiro, started the production of coke, pig iron ~~castings~~ and ~~long~~steel products in 1946.
Three major expansions were undertaken at the Presidente Vargas ~~steelworks~~Steelworks during the 1970s and 1980s. ~~The first,~~These were completed in 1974, 1977 and 1989 and increased installed annual production capacity to 1.6 million tons, ~~of crude steel. The second, completed in 1977, increased annual production capacity to~~ 2.4 million ~~tons of crude steel. The third, completed in 1989, increased annual production capacity to~~and 4.5 million tons of crude ~~steel.~~steel, respectively.
     ~~We were~~The Company was privatized through a series of auctions held in 1993 and early 1994, through which the Brazilian government sold its 91% ownership ~~interest in us.~~interest.
~~From~~

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Between 1993 ~~through~~and 2002, we implemented a capital improvement program aimed at increasing our annual production of crude steel, improving the quality of our products and enhancing our environmental protection and cleanup programs. As part of the investments, since February 1996, all our production has been based on the continuous casting process, rather than ingot casting, which involved an alternative method that ~~results~~resulted in higher energy use and metal loss. From 1996 ~~through~~until 2002, we spent the equivalent of US$2.4 billion ~~under~~on the capital improvement program and on maintaining our operational capacity, culminating with the renovation ~~in 2001~~ of Blast Furnace No. 3 and Hot Strip Mill No. 2 ~~at the Presidente Vargas steelworks.~~in 2001. These measures resulted in the increase of our annual production capacity to 5.6 million tons of crude steel and 5.1 million tons of rolled products.
General
We are one of the largest fully integrated steel producers in Brazil and in Latin America in terms of crude steel production. Our current annual crude steel capacity and rolled product capacity is 5.6 million and 5.1 million tons, respectively. ~~Production~~In 2011, production of crude steel and rolled steel products ~~increased in 2010 by 12%~~amounted to 4.9 million tons and ~~finished steel production increased in 2010 by 14% to~~ 4.7 million tons asrespectively, both stable when compared to ~~2009, due to a recovery fromthe global economic and financial crisis in 2008 and 2009. In addition to our steel business, we~~2010. We also operate in the mining, cement, logistics and ~~cement~~energy businesses, which have become increasingly important to our operations and growth.
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Steel
Our fully integrated manufacturing facilities produce a broad line of steel products, including slabs, hot- and cold-rolled, galvanized and tin mill products for the distribution, packaging, automotive, home appliance and construction industries. In 2010, we accounted for approximately 46% of the coated steel products market ~~share~~ in Brazil. We are also one of the world’s leading producers of tin mill products for packaging ~~containers. In 2010, we accounted~~containers, and were responsible for approximately ~~98%~~100% of the ~~tin mill products~~ market share in ~~Brazil.~~Brazil in 2010. Market share information for 2011 was not yet available as of the date of this annual report.
Our production process is based on the integrated steelworks concept. Below is a brief summary of the steel making process at our Presidente Vargas ~~steelworks, located in the city of Volta Redonda, in the State of Rio de Janeiro:~~Steelworks:
~~iron~~Iron ore produced from our own mines is processed in continuous sintering machines to produce sinter;
~~sinter~~Sinter and lump ore direct charges are smelted with lump coke and injected powdered coal in blast furnaces to produce pig iron;
~~pig~~Pig iron is then refined into steel ~~by means of~~via basic oxygen converters;
~~steel~~Steel is continuously cast in slabs; and
~~slabs~~Slabs are then hot rolled, producing hot bands that are coiled and sent to finishing facilities.
We currently ~~produce~~obtain all of our ~~requirements of~~ iron ore, limestone and dolomite requirements, and a portion of our tin requirements from our own mines. Using imported coal, we produce approximately 75% of our coke requirements at current production levels in our own coke batteries at Volta Redonda. Imported coal is also pulverized and used directly in the pig iron production process. Zinc, manganese ore, aluminum and a portion of our tin requirements are purchased in local markets. Our steel production and distribution processes also require water, industrial gases, electricity, rail and road transportation, and port facilities.
Mining
     The first step to our entry into the international iron ore market was taken in February 2007, with the completion of the first phase of the expansion of our solid bulks seaport terminal in the city of Itaguaí, in the State of Rio de Janeiro, which enabled the terminal to also handle and export iron ore and to load from its facilities the first shipment of our iron ore products.
    ~~CSN owns~~We own a number of high quality iron ore mines, all located within ~~the~~ Brazil’s Iron Ore Quadrangle (Quadrilátero Ferrífero), in the ~~State~~state of Minas ~~Gerais.~~Gerais, including the Casa de Pedra ~~Mining,~~mine, located in Congonhas, ~~– MG, produces high quality iron ore. As far as it concerns quality, the previous statement is also applicable to~~and Namisa – Nacional Minérios S.A. ~~In addition to that, the company’s~~mines (Fernandinho, located in Itabirito and Engenho, also located in Congonhas). Our mining assets also include TECAR, ~~(two deep-sea water terminals),~~a solid bulks seaport terminal, located in ~~Porto~~Itaguaí Port in the state of Rio de ~~Itaguai (RJ),~~Janeiro, Mineração Bocaina, located in Arcos, ~~(MG),~~in the state of Minas Gerais, which produces dolomite and limestone, and Estanho de Rondônia ~~SA - ERSA,~~S.A. (ERSA), which mines and casts ~~tin.~~tin, located in Ariquemes, in the state of Rondônia.

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Logistics
~~Logistics~~
     ~~The~~Our verticalization strategy and intense synergies among the Company's business units are strongly dependent on the logistics created to guarantee the transportation of the inputs at a low operating cost.
A number of railroads and port terminals make up the logistics system integrating CSN's mining, steelmaking and ~~steelmaking~~cement units.
CSN manages two port terminals at Itaguaí, in Rio de Janeiro, —one for bulk solids ~~(Tecar)~~(TECAR) and ~~Containers~~one for containers (Sepetiba Tecon).
CSN also has interests in two ~~railroad companies:~~railways: MRS Logística, which operates the former Southeast Network of the Federal Railroad Network, along the Rio de Janeiro-São Paulo-Belo Horizonte axis, and the Transnordestina Logística ~~S/A. With 1,728km of track,~~S.A., whose Nova Transnordestina ~~railway, when completed,~~project will connect the ~~northeastern cerrado~~interior of northeast Brazil to Pecém and Suape ~~Ports.~~Ports, with an extension of 1,728km of track.
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Cement
     ~~In May 2009,~~ CSN entered the cement market in May 2009, driven by the high synergy ~~between this new activity and~~with its current business. This ~~project~~segment takes advantage of the slag generated by our blast furnaces and of our limestone reserves, located in the city of Arcos, in the ~~State~~state of Minas Gerais. ~~The limestone, which is transformed into~~Limestone, used to produce clinker, and ~~the~~ slag account for approximately 95% of the ~~production~~ cost ~~to produce cement.~~of inputs in cement production.
CSN plans to increase its market share ofin the cement segment in Brazil ~~aiming~~in order to diversify its ~~products~~product mix and markets, ~~and help reduce risk~~reducing risks and adding value for its shareholders.
Energy
CSN is one of Brazil’s largest industrial electric power ~~consumers only behind the aluminum producers.~~consumers. Since 1999, we have ~~been investing~~invested in power generation projects in order to ensure self-sufficiency. ~~Its~~Our electrical assets ~~are~~include: (i) CSN’s 29.5% stake in the Itá Hydroelectric Power Plant, in Santa Catarina, ~~(CSN holding a 29.5% stake),~~ corresponding to 167 MW, through a 48.75% equity interest in Itá Energética S.A.; (ii) CSN’s 17.9% interest in the 210-MW Igarapava Hydroelectric Power Plant in Minas Gerais, ~~(holding~~corresponding to 23 MW; and (iii) a ~~17.9% interest) and the 238-MW~~238 MW cogeneration thermoelectric power plant in Presidente Vargas Steelworks, ~~in Volta Redonda,~~ which is fueled by the waste gases from the steel production process. These three plants give CSN an average generation capacity of ~~430~~428 MW, supplying the group’s total need for power.
Other Information
CSN’s legal and commercial name is Companhia Siderúrgica Nacional. CSN is organized for an unlimited period of time under the laws of the Federative Republic of Brazil. Our head offices are located at Av. Brigadeiro Faria Lima, 3400, ~~20º~~20^th floor, Itaim Bibi, ~~Sao~~São Paulo, Brazil, ~~CEP04538-132~~CEP 04538-132, and our telephone number is +55-11-3049-7100. CSN’s agent for service of process in the United States is CT Corporation, with offices at 111 Eighth Avenue, New York, New York 10011.
4B. Business Overview
Competitive Strengths
We believe that we have the following competitive strengths:
Fully integrated business model.We believe we are one of the most fully integrated steelmakers in the world. ~~We have~~This is due to our captive sources of raw materials, especially iron ore, ~~reserves,~~and access to owned infrastructure, such as railroads and deep-sea water port facilities.We own a number of high quality iron ore mines, all located within Brazil’s Iron Ore Quadrangle (Quadrilátero Ferrífero), in the State of Minas Gerais, which ~~differentiate~~differentiates us from our main competitors in Brazil that purchase their iron ore from mining companies such as Vale S.A., or Vale. In 2006, we hired Golder Associates S.A., or Golder, to evaluate the Casa de Pedra iron ore reserves. The results confirmed proven and probable mineral resources of 1.6 billion tons with a grade of approximately 48.0%. In addition to our iron ore reserves, we have captive dolomite and limestone mines that supply our Presidente Vargas ~~steelworks.~~Steelworks. Our steelworks are close to the main steel consumer centers in Brazil, with easy access to port facilities and railroads. See “Item 4B. Business Overview—Our ~~operations are strongly integrated as a result of our captive sources of raw materials, such as iron ore,~~mining segment” and ~~our access to owned infrastructure, such as railroads~~“Item 4D—Property Plant and ~~deep-sea water port facilities.~~Equipment.”

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Profitable mining ~~business~~business.~~The Mining~~Our mining business has received investments in recent years, ~~lifting~~placing CSN ~~into~~in a prominent positionamong the country’s leading mining firms. Additional investments will increase capacity to approximately 89 mtpy,, including third ~~parts~~party purchases, ~~in the next years,~~ thereby strengthening CSN’s position as an important player in the global iron ore ~~worldwide~~ market. The Company has ~~reserves of~~ high-quality iron ore inreserves through Casa de Pedra mine and Namisa mines (Engenho and Fernandinho), both located in Minas Gerais. Our mining activities provide ~~us with~~ strong revenue generation, and have significantly increased ~~production of iron ore~~ in the last ~~four~~five years. ~~In 2007 we~~We sold 10.5 million tons ~~18.4~~in 2007, 18.5 million tons in 2008, ~~22.4~~17.5 million tons in 2009 ~~and 25.3~~, 18.6 million tons in 2010 and 23.8 million tons in 2011 (considering ~~a 100% stake~~our proportional interest in Namisa throughout this period). ~~All these factors contribute to the high EBITDA margins of this segment.~~ The company’s mining assets also include TECAR, ~~(two deep-sea water terminals)~~ a solid bulks seaport terminal,with ~~30Mtpy~~a capacity for 30 mtpy, located in ~~Porto de Itaguai~~Itaguaí Port (RJ), Mineração Bocaina, located in Arcos (MG), which produces dolomite and limestone, and Estanho de Rondônia SA ~~- ERSA,~~(ERSA), which mines and casts tin.
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Thoroughly developed transport infrastructure.We have a thoroughly developed transport infrastructure, from our iron ore mine to our steel mill and to our ports. ~~The location of our~~Our steelworks facility is located next to railroad systems and port facilities, facilitating the supply of raw ~~material,~~materials, the shipment of our production and easy access to our principal clients. The concession for the main railroad used and operated by us is owned by MRS, a company in which we hold, directly and indirectly, a 33.27% ownership interest. The railway connects our Casa de Pedra mine to the Presidente Vargas ~~steelworks~~Steelworks and to ~~the container terminal~~our terminals at Itaguaí Port, which handles our iron exports and most of our steel exports. Since we obtained the concession to operate ~~MRS’~~MRS railway in 1996, we have significantly improved its tracks and developed its business, with strong cash generation. We also own concessions to operate two deep-sea water terminals from which we export our products and ~~also~~ import coal and small amounts of coke, which are the only important raw materials that we need to purchase from ~~third-parties.~~third parties.
Self-sufficiency in energy generation.We are self-sufficient in energy, through our interests in the hydroelectric plants of Itá and Igarapava, and our own thermoelectric plant inside the Presidente Vargas ~~steelworks.~~Steelworks. We also sell the excess energy we generate ~~into~~in the energy market. Our 238 MW thermoelectric cogeneration plant provides the Presidente Vargas ~~steelworks~~Steelworks with approximately 60% of its energy needs ~~for~~in its steel mills, using as its primary fuel the waste gases generated by our coke ovens, blast furnaces and steel processing facilities. We ~~indirectly~~ holda 29.5% ofstake in the Itá ~~hydroelectric plant that has~~Hydroelectric Power Plant, in Santa Catarina, through a 48.75% equity interest in Itá Enérgetica S.A., or ITASA. This ownership grants usan installed capacity of ~~1,450~~167 MW ~~with a guaranteed output of 668 MW to us and to the other shareholders of Itá Energética S.A.~~, ~~or ITASA, proportionally~~proportional to our interests in the project, pursuant to 30-year power purchase agreements at a fixed price per megawatt hour, adjusted annually for inflation. In addition, we ~~hold~~own 17.9% of the Igarapava hydroelectric plant, with 210 MW fully installed capacity. We have been using part of our 2223 MW take from Igarapava to supply energy to the Casa de Pedra and Arcos mines.
Low cost structure.As a result of our fully integrated business model, our thoroughly developed transportation infrastructure and our self-sufficiency in energy generation, we have been consistently generating high margins. Other factors that lead to these margins are the strategic location of our steelworks facility, the use of state of the art technology and our well qualified work force.
Diverse product portfolio and product mix.We have a diversified product mix that ~~includes:~~includes hot-rolled, cold-rolled, galvanized and steel tin mill ~~products. We offer many kinds of steel packaging produced~~products, in ~~Brazil, accounting for approximately 98.0% of the steel tin mill products and 46.0% of coated flat steel produced in Brazil. We also produce a diversified portfolio of products~~order to meet a wide range of customer needs across all steel consuming industries. We focus on selling high margin products, such as tin plate, pre-painted, galvalume and galvanized products in our product mix. Our galvanized product provides material for exposed auto parts, using hot-dip galvanized steel and laser-welded blanks. Our ~~branch~~ CSN Paraná branch provides us with additional capacity to produce high-quality galvanized, galvalume and pre-painted steel products for the construction and home appliance industries. In addition, our subsidiary Prada, the largest flat steel distributor in Brazil, isoffers a strong sales channel in the domestic market, enabling us to meet ~~demands~~demand from smaller ~~customer, and therefore to have~~customers, thus creating a strong presence in this market.
Strong presence in domestic market and strategic international ~~exposure.~~exposure for steel products.We have a strong presence in the domestic market for steel products, with 86% of our steel sales in the domestic market.In 2010, we accounted for approximately ~~98.0% market share~~46% of the market in Brazil for coated steel products and 100% of the market in Brazil for tin mill ~~product industry in Brazil and a large market~~products. Market share information for ~~galvanized flat steel.~~ 2011 was not yet available as of the date of this annual report.In addition, we use our subsidiaries CSN LLC and Lusosider ~~constitute~~also as sales channels for our products ~~selling~~ in the United States and in Europe, ~~kept stable in 5.0%~~with 10.0% of our total sales in ~~2010~~2011 and ~~2009.~~  2010. Direct exports accounted for 4% of our total sales.
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~~Strategies~~

Strategies
Our goal is to increase value for our shareholders by further benefiting from our competitive cost advantages, maintaining our position as one of the world’s lowest-cost steel producers, becoming an important iron ore global player, ~~growing~~developing our cement business and optimizing our infrastructure assets (including ports, railways and power generating plants). To achieve this goal we ~~have~~ developed specific strategies for each of our business segments, as described below.
Steel
~~Our~~The strategy for our steel business involves:
üA focus on the domestic ~~markets,~~market, in which we have historically recorded higher profit margins and ~~better~~increased competitiveness, by expanding our ~~market-share~~market share in flat ~~steel~~steels and by entering in the long steel ~~market as a relevant player;~~market;
ü~~constant~~Constant pursuit of operational excellence, by implementing cost reduction projects ~~(eg.~~(e.g. pellet plant ~~coque battery revamp,~~and energy efficiency) and programs ~~(eg,~~(e.g. internal logistic optimization, ~~inventories~~inventory reduction, project development and implementation disciplines);
ü~~emphasis~~Emphasis on high value-added steel products, such as galvanized, pre-painted and tin-coated ~~in addition to enhancing service centers and finished goods offering;~~steel;
ü~~explore synergic markets and profitability,~~Exploring synergies by ~~employing~~using our flat steel distribution ~~units~~network and product portfolio ~~complementarily~~ to accelerate entrance ~~in longs market, capturing synergies with cement and others products;~~into the long steel market; and
ü~~gain market-share in~~Increase market share by expanding our services and distribution ~~network, via new deposits and service centers regions.~~network.
For information on ~~our~~ planned investments relating to our steel activities, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.
Mining
In order to strengthen our position ~~as a player~~ in the iron ore market, we plan to expand our mining assets, Casa de Pedra and Namisa, and search for investment opportunities, primarily in ~~mining operations and~~mines in operation or in an advanced ~~projects.~~stage of development.
We expect in the next years to reach an annual production level of approximately 89 mtpy of iron ore products, ~~in the next years,~~ including third ~~parts~~party purchases, which represents roughly 3three times the ~~volume~~production observed in ~~2010,~~2011, by increasing capacity to 50 mtpy in Casa de Pedra and 33 mtpy in Namisa,, thereby strengthening CSN’s position as an important player in the iron ore worldwide market.
To sustain this growth, we will increase capacity in TECAR, our solid bulks terminal in Itaguai Port, from 30 mtpy to 84 mtpy and we are also analyzing the possibility of increasing capacity beyond 84 mtpy. We are also studying seaborne shipping opportunities, focused on increasing our competitiveness in the Asian market.
In order to maximize the profitability of our product portfolio, ~~and resources,~~ we will also focus on pellet and pellet-feed, by using ~~Itabiritos resources,~~Itabirito’s deposits, investing with strategic partners and clients in pellet ~~capacity and seeking strategic partnerships towards captive consumption of pellet feed.~~
Regarding our infrastructure to sustain this growth, we will increase capacity in TECAR (our private port in the State of Rio de Janeiro) from 30 mtpy to 84 mtpy in the next years, and we are analyzing other capacity additions. In addition to the port expansion, we are also studying seaborne shipping opportunities, focused on gaining competitiveness in the Asian market.capacity.
For information on ~~our~~ planned investments relating to our mining activities, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.
Logistics
We expect to take advantage of and expand our current logistics capabilities, including our integrated infrastructure operations of railways and ports.
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We have substantially improved the infrastructure that supports the Presidente Vargas steelworks by investing in projects such as railways and port facilities in order to increase our ability to control production costs and delivery services.
In addition to investments in TECAR, ~~(iron ore and coal),~~ we will strengthen ~~STSA (container terminal)~~Sepetiba TECON, our container terminal, in order to ~~operate~~accommodate larger ships, increasing its capacity and competitiveness by ~~aggregating~~adding services to ~~facilitate~~develop client loyalty.
In terms of railways, we plan to ~~accelerate~~continue the implementation of our Transnordestina project and explore its logistic potential through terminals and regional cargo, focusing on iron ore, agricultural, gypsum and ~~fuel volumes.~~fuel. We also plan to invest in increasing our efficiency and capacity in the ~~southern region~~south of Brazil through our interest in MRS.
We intend to continue to improve the delivery of our products in the domestic market (mainly steel and cement), with low cost and efficiency by integrating and increasing the use of rail transportation, and by providing more distribution centers.
Cement
Our ~~strategy for~~ cement business ~~includes greater~~strategy involves the utilization of ~~by-products~~the limestone reserves in our Arcos mine and the slag generated by ~~continuing construction of~~CSN’s blast furnaces in our cement ~~grinding and the clinker facility that we expect will produce~~plant in Volta Redonda, inaugurated in 2009, with capacity for producing 2.4 million tons per ~~year of cement~~year. In 2011, CSN also began producing clinker in the ~~next years.~~Arcos plant with the aim of reducing its production costs. We are evaluating other organic growth initiatives to expand our annual capacity inby an additional 3 million tons ~~per year,~~ in order to capture the strong growth expected with the Soccer World Cup of 2014 and the Olympic Games in Rio de Janeiro in 2016, ~~besides~~in addition to the expected strong pace of construction of new housing units and commercial and infrastructure projects. For information on ~~our~~ planned investments relating to our cement activities, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.
Additional Investments
In addition to the currently planned investments and capital expenditures, we continue to consider possible acquisitions, joint ventures and brownfield or greenfield projects to increase or complement our steel, cement and mining ~~producing~~production and logistics capabilities, ~~in addition to~~ logistics infrastructure and energy generation.
Our Steel Segment
We produce carbon steel, which is the world’s most widely produced type of steel, representing the vast bulk of global ~~steel~~ consumption. From carbon steel, we sell a variety of ~~steel~~ products, both domestically and abroad, to manufacturers in several industries.

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The following chart reflects our production cycle in general terms.
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Our Presidente Vargas ~~steelworks~~Steelworks produces flat steel products — slabs, hot-rolled, cold-rolled, galvanized and tin mill products. For further information on our production process, see “—Product Process.”
Slabs
Slabs are semi-finished products used for processing hot-rolled, cold-rolled or coated coils and sheet products. We are able to produce continuously cast slabs with a standard thickness of 250 millimeters, widths ranging from 830 to 1,600 millimeters and lengths ranging from 5,250 to 10,500 millimeters. We produce high, medium and low carbon slabs, as well as micro-alloyed, ultra-low-carbon and interstitial free slabs.
Hot-Rolled Products
Hot-rolled products ~~comprise heavy-gauge hot-rolled coils and sheets,~~include heavy and light-gauge hot-rolled coils and sheets. A heavy gauge hot-rolled product, as defined by Brazilian standards, is a flat-rolled steel coil or sheet with a minimum thickness of 5.01 millimeters. We are able to provide coils of heavy gauge hot-rolled sheet having a maximum thickness of 12.70 ~~millimeters. Heavy gauge sheet steel is~~millimeters used to manufacture automobile parts, pipes, mechanical construction and other products. Light gauge hot-rolled coils and sheets produced by us have a minimum thickness of 1.20 millimeters and are used for welded pipe and tubing, automobile parts, gas containers, compressor bodies and light cold-formed shapes, channels and profiles for the construction industry.
Cold-Rolled Products
Cold-rolled products ~~comprise~~include cold-rolled coils and sheets. A cold-rolled product, as defined by Brazilian standards, is a flat cold-rolled steel coil or sheet with thickness ranging from 0.30 millimeters to 3.00 millimeters. Compared to hot-rolled products, cold-rolled products have more uniform thickness and better surface quality and are used in applications such as automotive bodies, home appliances and construction. In addition, cold-rolled products serve as the base ~~steel~~ for ~~our~~ galvanized and tin mill products. We supply cold-rolled coils in thicknesses of between 0.30 millimeters toand 2.99 millimeters.
~~Galvanized Products~~
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Galvanized Products
Galvanized products ~~comprise~~are comprised of flat-rolled steel coated on one or both sides with zinc or a zinc-based alloy applied by either a hot-dip or an electrolytic process. We use the hot-dip process, which is approximately 20% less expensive than the electrolytic process. Galvanizing is one of the most effective and low-cost processes used to protect steel against corrosion caused by exposure to water and the atmosphere. Galvanized products are highly versatile and can be used to manufacture a broad range of products, such as:
·        bodies for automobiles, trucks and buses;
·        manufactured products for the construction industry, such as panels for roofing and siding, dry wall and roofing support frames, doors, windows, fences and light structural components;
·        air ducts and parts for hot air, ventilation and cooling systems;
·        culverts, garbage containers and other receptacles;
·        storage tanks, grain bins and agricultural equipment;
·        panels and sign panels; and
·        pre-painted parts.
Galvanized sheets, both painted and bare, are also frequently used for gutters and downspouts, outdoor and indoor cabinets, all kinds of home appliances and similar applications. We produce galvanized sheets and coils in continuous hot-dip processing lines, with thickness ranging from 0.30 millimeters to 3.00 millimeters. The continuous process results in products with highly adherent and uniform zinc coatings capable of being processed in nearly all kinds of bending and heavy machinery.
In addition to standard galvanized products, we produceGalvanew®, galvanized steel that is subject to a special annealing process following the hot-dip coating process. This annealing process causes iron to diffuse from the base steel into the zinc coating. The resulting iron-zinc alloy coating allows better welding and paint performance. The combination of these qualities makes ourGalvanew® product particularly well suited for manufacturing automobile and home appliance parts including high gloss exposed parts.
At CSN Paraná, one of our branches, we produce galvalume, a cold-rolled material coated with a zinc-aluminum alloy. The production process is similar to hot-dip galvanized coating, and galvalume has at least twice the corrosion resistance of standard galvanized steel. Galvalume is primarily used in outdoor construction applications that may be exposed to severe acid corrosion, ~~environments~~ like marine uses.
The value added ~~value~~ from the galvanizing process permits us to price our galvanized products with a higher profit margin. Our management believes that our value-added galvanized products present one of our best opportunities for profitable growth because of the anticipated increase in Brazilian demand for such high margin products.
Through our branch CSN Paraná, we also produce pre-painted flat steel, which is manufactured in a continuous coating line. In this production line, a layer of resin-based paint in a choice of colors is deposited over either cold-rolled or galvanized base materials. Pre-painted material is a higher value-added product used primarily in the construction and home appliance markets.
Tin Mill Products
Tin mill products ~~comprise~~consist of flat-rolled low-carbon steel coils or sheets with, as defined by Brazilian standards, a maximum thickness of 0.45 millimeters, coated or uncoated. Coatings of tin or chromium are applied by electrolytic process. Coating costs place tin mill products among the highest priced products that we sell. The added value from the coating process permits us to price our tin mill products with a higher profit margin. There are four types of tin mill products, all produced by us in coil and sheet forms:

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·        ~~tin~~Tin plate - coated on one or both ~~faces~~sides with a thin metallic tin layer plus a chromium oxide layer, covered with a protective oil film;
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·        ~~tin~~Tin free steel - coated on both ~~faces~~sides with a very thin metallic chromium layer plus a chromium oxide layer, covered with a protective oil film;
·        ~~low~~Low tin coated steel - coated on both ~~faces~~sides with a thin metallic tin layer plus a thicker chromium oxide layer, covered with a protective oil film; and
·        ~~black~~Black plate - uncoated product used as the starting material for the coated tin mill products.
Tin mill products are primarily used to make cans and other containers. With six electrolytic coating lines, we are one of the biggest producers of tin mill products in the world and the sole producer of coated tin mill products in Brazil.
Production
Production Process
The principal raw materials for steel production in an integrated steelworks are iron ore, coal, coke, and fluxes like limestone and dolomite. The iron ore consumed at the Presidente Vargas ~~steelworks~~Steelworks is extracted, crushed, screened and transported by railway from our Casa de Pedra mine located in the city of Congonhas, in the State of Minas Gerais, 328 km from the Presidente Vargas ~~steelworks.~~Steelworks. The high quality ores mined and sized at Casa de Pedra, with iron content of approximately 60%, and their low extraction costs are major contributors to our low steel production costs.
~~Because Brazil lacks quality coking coals, we~~We import all the coal required for coke ~~production.~~production because Brazil lacks quality coking coals. The coal is then charged in coke batteries to produce coke through a distillation process. See “—Raw Materials and Suppliers—Raw Materials and Energy Requirements.” This coal distillation process also produces coke oven gas as a byproduct, which we use as a main source of fuel for our thermoelectric co-generation power plant. After being screened, coke is transported to blast furnaces, where it is used as a combustion source and as a component for transforming iron ore into pig iron. In ~~2010,~~2011, we produced approximately ~~75%~~62% of our coke needs and imported the balance. Coke output was 17% lower compared to 2010, due to a revamping of the gas systems of two coke batteries.
At sintering plants, fine-sized iron ore and coke or other fine-sized solid fuels are mixed with fluxes (limestone and dolomite) to produce sinter. The sinter, lump iron ore, fluxing materials and coke are then loaded into our two operational blast furnaces for smelting. We operate a pulverized coal injection, or PCI, facility, which injects low-cost pulverized coal directly into the blast furnaces as a substitute for approximately one-third of the coke otherwise required.
The iron ore is reduced to pig iron through successive chemical reactions with carbon monoxide (from the coke and PCI) in ~~two~~the blast furnaces, ~~that~~which operate 24 hours a day. The ore is gradually reduced, then melts and flows downward. Impurities are separated from the iron to form a liquid slag with the loaded fluxes (limestone and dolomite). From time to time, white-hot liquid iron and slag are drawn off from the bottom of the furnace. Slag (containing melted impurities) is granulated and is now is being used to produce cement.
The molten pig iron is transported to the steelmaking shop by 350-ton capacity torpedo cars and charged in basic oxygen furnaces together with scrap and fluxes. In the basic oxygen furnaces, oxygen is blown onto the liquid burden to oxidize its remaining impurities and to lower its carbon content, thus producing liquid steel. The molten steel is conveyed from the basic oxygen furnaces to the secondary refining equipment (degasser, ladle furnace and Argon Stirring Station). After adjusting the chemical composition, the molten steel is transferred to the continuous casting machines from which crude steel (i.e., rectangular shaped slabs) is produced. A portion of the slab products is sold directly in the export market.
~~The hot-rolling,~~

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In the hot rolling process, reheated slabs from the continuous casting machines are fed into hot strip mills to reduce the thickness of the slabs from 250 millimeters to a range of between 1.2 and 12.7 millimeters. At the end of the hot strip mill, the long, thin steel strip from each slab is coiled and conveyed to a cooling yard. Some hot-rolled coils are dispatched directly to customers in the as-rolled condition. Others are further processed in the pickling line, in a hydrochloric bath, to remove surface oxides and improve surface quality. In 2011, one of the two pickling lines had a 40 day stoppage to allow for the changing of the entire set of pickling tanks. After pickling, the hot-rolled coils selected to produce thinner materials are sent to be rolled in cold strip mills. CSN has three cold strip mills, one of which was revamped in 2011, adding 150,000 tons per year to CSN’s cold rolling capacity. The better surface characteristics of cold-rolled products enhance their value to customers aswhen compared to hot-rolled products. Additional processing related to cold-rolling may further improve surface quality. Following cold-rolling, coils may be annealed, ~~coated(by~~coated (by a hot dip or electrolytic tinning process) and painted, to enhance medium-and long-term anti-corrosion performance and to add characteristics that will broaden the range of steel utilization. Coated steel products have higher profit margins than bare steel products. Of our coated steel products, tin mill and galvanized products are our highest margin products.
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Steel plant equipment regularly undergoes scheduled maintenance shutdowns. Typically the rolling mills and coating lines are maintained on a weekly or monthly basis whereas the blast furnaces and other special equipment are scheduled for routine maintenance on a semi-annual or annual basis.
Our business encompasses operations and commercial activities. Our operations ~~activities~~ are undertaken by our production sector, which is composed of the following two units:
·        ~~the~~The operations unit is- responsible for steel production operations, repair shops, in-plant railroad, and process development at ~~Volta Redonda;~~our Presidente Vargas Steelworks; and
·        ~~the~~The support unit is- responsible for production planning, management of product stockyards, energy and utility facilities and work force safety assistance at the Presidente Vargas ~~steelworks.~~Steelworks.
The production sector is also responsible for environment and quality consultancy, new ~~products~~product development, capital investment implementation for steel production and processing, ~~as well as~~and the supervision ofCSNPorto Real’s and CSN Paraná’s operations.
Quality Management Program
We practice Total Quality Management, a set of techniques that have been adopted by many leading companies in our industry. We also maintain a Quality Management System that has been certified to be in compliance with the ISO 9001 standards set forth by the International Standardization Organization, or ISO. In ~~October 2003,~~March 1993, we were awarded the ISO ~~9000: 2000~~9002 certificate of compliance for the manufacture of several of our products. In April 1996, we were awarded the ISO 9001 certificate of compliance which replaced ISO9002 and included the element of “design” in its scope. In April 1998, we were awarded certification of compliance to QS 9000 standards, requirements specific to the automotive industry. Over the years the ISO 9001 certificate has been maintained and renewed, with the most recent renewal to the ISO 9001:2008 version awarded in August 2011, for the design and manufacture of ~~hot-rolled,~~slabs, hot rolled flats, pickled and oiled steel products, ~~cold-rolled,~~cold rolled, galvanized steel products and tin mill ~~products, which replaced the ISO 9001 Certificate that we were awarded in December 1994.~~products. In ~~October 2003,~~June 2004, we were also awarded the automotive industry’s Technical Specification ~~- 16949: 2002,~~ISO/TS 16949, for the design and manufacture of hot-rolled, pickled and oiled, cold-rolled and galvanized steel products, which replaced the QS 9000 ~~standards that we were~~standards. The most recent renewal to the ISO/TS 16949:2009, third edition, was awarded in ~~1997.~~September 2011. Some important automotive companies, like Volkswagen, General Motors and Ford, require their suppliers to satisfy the ~~QS 9000~~ISO/TS 16949 standards.
Production Output
The following table sets forth, for the periods indicated, the annual production of crude steel within Brazil and by us and the percentage of Brazilian production attributable to us.

CSN% of
Crude Steel Production

Brazil

CSN

Brazil

(In millions of tons)

2010

32.8

4.9

14.9%
2009

26.5

4.4

16.6%
2008

33.7

5.0

14.8%
2007

33.8

5.3

15.7%
2006

30.9

3.5 *

11.3%

CSN % of
Crude Steel Production

Brazil

CSN

Brazil

(In millions of tons)

2011

35.2

4.9

13.9%
2010

32.8

4.9

14.9%
2009

26.5

4.4

16.6%
2008

33.7

5.0

14.8%
2007

33.8

5.3

15.7%
2006

30.9

3.5 *

11.3%
_______________
Source: Brazilian Steel Institute (Instituto Aço Brasil), or IABr.
* Lower production due to accident at Blast Furnace No. 3 on January 22, 2006.

~~_______________~~
~~Source: Brazilian Steel Institute (~~~~InstitutoAçoBrasil~~~~), or I~~A~~Br..~~
* Lower production due to accident at Blast Furnace No. 3 on January 22, 2006.

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The following table contains some of our operating statistics for the periods indicated.

Certain Operating Statistics

2010

2009

2008

2011
2010

2009

(In millions of tons)

(In millions of tons)

(In millions of tons)

(In millions of tons)
(In millions of tons)

(In millions of tons)
Production of:

Iron Ore *

21.6

17.1

17.0

20.1
21.6

17.1
Molten Steel

5.0

4.5

5.1

5.0
5.0

4.5
Crude Steel

4.9

4.4

5.0

4.9
4.9

4.4
Hot-Rolled Coils and Sheets

5.0

4.1

4.7

4.8
5.0

4.1
Cold-Rolled Coils and Sheets

2.5

2.4

2.6

2.4
2.5

2.4
Galvanized Products

1.1

0.7

1.1

1.4
1.1

0.7
Tin Mill Products

0.7

0.6

0.7

0.7
0.7

0.6
Consumption of Coal for Coke Batteries

2.2

2.1

2.3

2.1
2.2

2.1
Consumption of Coal for PCI

0.7

0.6

0.8

0.6
0.7

0.6
*Casa de Pedra

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Raw Materials and Suppliers
The ~~principal~~main raw materials we use in our integrated steel mill include iron ore, coke, coal (from which we make coke), limestone, dolomite, aluminum, tin and zinc. In addition, our production operations consume water, gases, electricity and ancillary materials.
Raw Materials and Energy Requirements
In light of the global economic and financial crisis, which resulted in lower economic activity in 2009 as compared to 2008 and decrease demand for various commodity type industrial segments, coal and iron ore miners, and coke producers charged customers lower prices. At the end of 2009 we noticed a recovery in the economy of certain countries, including Brazil. Consequently, there was a pressure for increase in prices of certain raw materials.
In 2010, prices of our main raw materials increased due to ~~increased post crisis~~larger post-crisis demand and a strengthening of the steel industry worldwide.
In the first half of 2011, prices of the main raw materials used by CSN continuously increased due to unbalanced supply and demand. In the second half of 2011, prices decreased, mainly due to the worsening of the European crisis.
These commodity segments are highly concentrated in the hands of a few global players and there can be no assurance that price increases will not be imposed on steel producers in the future.
Iron Ore
We are able to obtain all of our iron ore requirements from our Casa de Pedra mine located in the State of Minas Gerais. For a description of our iron ore segment see “– Our Mining Segment.”
Coal
In ~~2010,~~2011, our metallurgical coal consumption totaled ~~2.9~~2.8 million tons and accounted for ~~22%~~23% of our production cost.
~~After the post-crisis demand recovery in the end of 2009, 2010 was a year of consolidation in terms of~~ Metallurgical coal ~~demand, especially from Asia. Because of the cyclical and volatile nature of the coal industry, price negotiation of~~includes coking coal and PCI coal, ~~switched from an annual~~which is a lower grade coal injected into the blastfurnaces, in a pulverized form, to ~~a quarterly basis, as~~reduce coke consumption. The PCI system has reduced CSN’s need for imported coking coal and coke, thus reducing production costs. In 2011, we used 622,875 tons of ~~April 2010.~~imported PCI coal.

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During 2011, CSN’s coking coal and PCI coal costs ~~during~~increased when compared to 2010 ~~increased significantly compared with previous year~~because market prices, negotiated on a quarterly basis, were strongly affected by the floods in Australia which reduced coal supply worldwide. The demand for metallurgical coke began to decrease in the fourth quarter due to ~~a demand recovery.~~ the financial crisis in Europe and slowdown in China’s economic growth.
The ~~prices in 2010 varied from quarter to quarter, following~~sources of the ~~benchmark price settled between BHP Billiton and Japanese Steel producers prior to the beginning of each quarter.~~
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~~In addition the 2010 average spot prices of~~ coking coal consumed in our plants in 2011 were as follows: USA (51%), Australia (30%), Canada (17%) and Colombia (2%). It is important to mention that Australia’s participation decreased by 25.8% when compared to 2010. In terms of PCI Coal, ~~increased significantly compared to 2009, affected by demand fluctuation~~the sources were: Russia (54%), Australia (29%) and ~~unexpected heavy rains in Australia during fourth quarter, when some major exporters started to face serious operational issues at their mines as well as logistics constraints.~~Venezuela (17%).
CSN uses a PCI system that allows its production area to use less coke in the blast furnaces during the process, substituting a portion of the coke with lower grade coal. The PCI system has reduced our need for imported coking coal and imported coke, thereby reducing production costs. In 2010, we used 710,940 tons of imported PCI coal.
Coke
In ~~2010,~~2011, in addition to the approximately ~~1.6~~1.3 million tons of coke we produced, we also consumed ~~440,696~~631,197 tons of coke bought from third parties in China, India ~~Colombia~~ and ~~in the domestic market. This figure represents~~Colombia, an increase of ~~47%~~43% as compared to our consumption in ~~2009 and is similar~~2010, due to maintenance in our ~~historical level of consumption.~~coking plant. The ~~market~~demand for coke has been ~~very competitive~~increasing significantly since 2002 because China, a major player in the sea-borne trade, has increased its internal consumption and adopted restrictive export quotas. In addition, India has become a major consumer of coke, considerably increasing its ~~consumption~~imports in the past years. Due to logistical reasons, China supplies most of India’s coke and this increase in consumption tightened even more the worldwide supply-demand balance of metallurgical coke. During 2011, market prices for coking coal were strongly affected by weather related supply disruption in Australia and the USA, where some major producers faced difficulties; this situation also affected the coke market price, which increased from April to October 2011. The demand for metallurgical coke began to decrease in the fourth quarter due to the financial crises in Europe and slowdown in China’s economic growth.
Limestone and Dolomite
Our Bocaina mine is located in ~~the town of~~ Arcos, in the State of Minas Gerais, and it has been ~~suppling,~~supplying, since the early '70s, limestone (calcium carbonate) and dolomite (dolomitic limestone) to our Presidente Vargas Steelworks in Volta Redonda. These products are used in the process of sintering and calcination. Arcos has one of the biggest and best ~~world’s~~ reserves of limestone ~~and it’s~~in the world, which is used ~~for~~in the production of various products, including cement.
The annual production of limestone and dolomite tofor our steelworks is approximately 2 million tons.
The main products obtained from limestone and dolomite that are transferred to our steelworks in Volta Redonda are:
·        ~~limestone~~Limestone and dolomite calcination: ~~they have~~with a granulometry between 32 and 76 mm, ~~and~~ they are used in the lime plant in Volta Redonda to produce calcitic and dolomitic lime, for further use in the steelmaking process and sintering. At the steelworks, lime is used for chemical controlling of liquid slag, in order to preserve the refractory of the converters and assist in the stabilization of the chemical reactions that occur during the steel manufacturing ~~process of steel. In the~~process. During sintering, the purpose of lime is to increase the performance of this process and the final quality of the sinter that is produced.
·        ~~limestone~~Limestone and dolomite sintering: used in the production of “sinter”, in our steelworks. The sinter is composed byof fine ores, solid fuel and flux, which enable ~~the~~ semi-melting and sintering ore. The sinter is used in blast ~~furnace~~furnaces as a source of Feiron for the production of pig iron.
·~~From~~Beginning in 2009, ~~on,~~ with our entry ininto the cement market, ~~Arcos’mine~~the mine in Arcos also became responsible for supplying limestone for the cement manufacturing process in Volta Redonda.
With the startup of clinker production in 2011, our Bocaina mining will also be in charge of providing non steel limestone (limestone with high silica content), in approximately 1.3 million tons / year for clinker production, the main raw material for cement production.
Aluminum, Zinc and Tin
Aluminum is mostly used for steelmaking. Zinc and tin are important raw materials used in the production of certain higher-value steel products, such as galvanized and tin plate, respectively. We typically purchase aluminum,zinc and tin ~~typically~~ from third-party domestic suppliers under one ~~or two-year~~year contracts. We maintain approximately ~~a 50-day reserve~~30 and 60 days inventory of ~~such materials~~zinc/aluminum and tin, respectively, at the Presidente Vargas ~~steelworks.~~Steelworks.
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Other Raw Materials
In our production of steel, we ~~also~~ consume, on an annual basis, significant amounts of spare parts, refractory bricks and lubricants, which are generally purchased from domestic suppliers.
We also consume significant amounts of oxygen, nitrogen, hydrogen, argon and other gases at the Presidente Vargas ~~steelworks.~~Steelworks. These gases are supplied by a third-party under a long-term ~~contracts~~contract from its gas production facilities located on the Presidente Vargas ~~steelworks~~Steelworks site. In ~~2010,~~2011, we used ~~786,746~~512,293 tons of oxygen to produce 4.9 million tons of crude steel.
Water
Large amounts of water are also required in the production of steel. Water serves as a solvent, a catalyst and a cleaning agent. It is also used to cool, to carry away waste, to help produce and distribute heat and power, and to dilute liquids. Our source of water is the Paraíba do Sul River, which runs through the city of Volta Redonda. Over ~~80%~~85% of the water used in the steelmaking process is recirculated and the balance, after processing, is returned to the Paraíba do Sul River. Since March 2003, the Brazilian government has imposed a monthly tax for our use of water from the Paraíba do Sul River, based on an annual fee of approximately US$~~1.6~~12.5 million.
Electricity
Steelmaking also requires significant amounts of electricity to power rolling mills, production lines, hot metal processing, coking plants and auxiliary units. In ~~2010, the~~2011, our Presidente Vargas ~~steelworks~~Steelworks consumed approximately ~~2.97~~2.88 million MWh of electric energy or ~~664~~659 kilowatt hours per ton of crude steel. This ~~consumption made us~~level means we are one of the largest consumers of electricity in Brazil, accounting for approximately 12% of the overall consumption of electricity in the State of Rio de Janeiro.
Our main current source of electricity is our 238 MW thermoelectric co-generation power plant at the Presidente Vargas ~~steelworks,~~Steelworks, besides the Itá and Igarapava hydroelectric facilities, ~~held by us,~~ from which we have a take capacity available of 167 MW and 2223 MW, respectively. In addition, ~~we have approved the construction of~~CSN is installing a new turbine generator at the Presidente Vargas ~~steelworks,~~Steelworks, which will ~~increase 20~~add 17 MW to our existing installed ~~capacity.~~capacity with start-up planned for 2012. This turbine will be ~~allocated~~located near to our Blast Furnace No. 3, using the outlet gases from the iron making process to generate energy.
Natural Gas
In addition to electricity, we consume natural gas, mainly in our hot strip mill. Companhia Estadual de Gás do Rio de Janeiro S.A., or CEG Rio, which was privatized in 1997, is currently our major source of natural gas. Variations in the supply of gas can affect the level of steel production. We have not experienced any significant stoppages of production due to a shortage of natural gas. We also purchase fuel oil from Petrobras. ~~See “Item 3D. Risk Factors—Risks Relating to~~In 2011, the ~~Steel Industry and CSN—Interruptions in the supply~~Presidente Vargas Steelworks consumed 431,150 dam³ of natural ~~gas and power transmission over the government power grid may adversely affect our business, financial condition and results of operations.”~~gas.
Diesel Oil
In mid-October 2006 and July of 2008, we entered into ~~an agreement to receive diesel oil from the~~agreements with Companhia Brasileira de Petróleo Ipiranga, or Ipiranga, to receive diesel oil in order to supply our equipment in ~~Casa de Pedra, Arcos and Namisa~~our mining plants in the ~~State~~state of Minas Gerais, which ~~are~~provide the ~~plants responsible for~~iron ore, dolomite and limestone used in our ~~mining activity.~~steel plant in Volta Redonda. In ~~2009 and 2010, we had a~~2011, our consumption ~~of 57,177 kiloliters and 66,237~~totaled 61,290 kiloliters of diesel oil, ~~respectively. This increase was mainly due to the growth of our mining activity to support our growing iron ore production,~~for which ~~required us to enlarge our mining equipment fleet. In 2009 and 2010,~~ we paid US$~~60.4 million and US$37.8 million, respectively, for the diesel oil we consumed.~~50.3 million.
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~~Clinker~~Suppliers
We are importing Clinker in order to supply our cement mill in Presidente Vargas steelworks in the state of Rio de Janeiro. Addionally, as from Abril 2011, we started producing our own clinker in our plant in Arcos, Minas Gerais.
~~Suppliers~~
We acquire the inputs necessary for the production of our products in Brazil and abroad, with aluminum, zinc, tin, spare parts, refractory bricks, lubricants, oxygen, nitrogen, hydrogen and argon being the main inputs acquired in Brazil. Coal and coke are the only inputs acquired abroad.

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Our main raw materials suppliers are set forth below:

Main Suppliers

Raw Material

BHP Billiton, Jim Walter Resources, Alpha Natural Resources, Rio Tinto, Marubeni and Jellinbah

Coal
Noble, Glencore and CI Milpa

Coke
Reciclagem Brasileira de Metais Ltda.

Aluminum
Votorantim Metais⁽¹⁾

Zinc
White Solder, Coopertrading and Melt

Tin
Sotreq, P & H Minepro and MTU do Brasil .

Spare parts
Magnesita, RHI and Saint Gobain

Refractory bricks
~~Petrobras,~~Daido, Ipiranga and Quaker

Lubricants
___________
(1) We depend on Votorantim Metais as ~~they are~~it is the only ~~suppliers~~supplier of zinc in Brazil

Facilities
Steel Mill
The Presidente Vargas ~~steelworks,~~Steelworks, located in the city of Volta Redonda, in the State of Rio de Janeiro, began operating in 1946. It is an integrated facility covering approximately 4.0 square km and containing five coke batteries (three of which are currently in operation), three sinter plants, two blast furnaces, a basic oxygen furnace steel shop, or BOF shop, with three converters, three continuous casting units, one hot strip mill, three cold strip mills, two continuous pickling lines, one continuous annealing line, three continuous galvanizing lines, four continuous annealing lines exclusively for tin mill products and six electrolytic tinning lines.
Our major operational units and corresponding effective capacities as of December 31, ~~2010,~~2011, including CSN LLC and Lusosider, are set forth in the following chart:
Effective Capacity

Tons
per year

Equipment
in operation
Process:

Coking plant

1,680,000

3 batteries
Sintering plant

6,930,000

3 machines
Blast furnace

5,380,000

2 furnaces
BOF shop

5,750,000

3 converters
Continuous casting

5,600,000

3 casters
Finished Products:

Hot strip mill

5,100,000

1 mill
Cold strip mill

~~4,550,000~~4,700,000

6 mills
Galvanizing line

2,095,000

7 lines
Electrolytic tinning line

1,190,000

7 lines

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Downstream Facilities
CSN Paraná
Our branch CSN Paraná produces and supplies plain regular galvanized,Galvalume® and pre-painted steel products for the construction and home appliance industries. The plant has an annual capacity of 330,000 tons of galvanized products andGalvalume® products, 100,000 tons of pre-painted products, which can use cold-rolled or galvanized steel as substrate, and 220,000 tons of pickled hot-rolled coils in excess of the coils required for the coating process.

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Metalic
We have a 99.99% ownership interest in Cia. Metalic Nordeste, or Metalic. Metalic is one of the few two-piece steel can ~~producer~~producers in all the Americas. It has approximately ~~48%~~30% of the packaging market for carbonated drinks in the Northeastern regions of Brazil. Currently, we are ~~the~~Metalic’s only supplier ~~to Metalic~~ of the steel used to make two-piece cans. The development of drawn-and-wall-ironed steel for the production of two-piece cans is an important achievement in the production process at the Presidente Vargas ~~steelworks. In 2010, the company sold 831 million cans of 350 ml, 60 million cans of 250 ml and 1,284 million ends, and of these 13% were exported to Latin America.~~Steelworks.
Prada
We have a 99.99% ownership interest in Cia. ~~Matelú~~Metalúrgica Prada, or Prada. Established in 1936, Prada is the largest Brazilian steel can manufacturer and has an annual production capacity of over one billion cans in its three industrial facilities located in the states of São Paulo, Rio Grande do Sul and Minas Gerais. Currently, we are the only Brazilian producer of tin plate, Prada’s main raw material, which makes Prada one of our major customers of tin plate products. Prada has important clients in the food and chemical industries, including packages of vegetables, ~~fishes,~~fish, dairy products, meat, aerosols, paints and varnishes, and other business activities. On December 30, 2008, we merged one of our subsidiaries, Indústria Nacional de Aços Laminados S.A., or INAL, into Prada. INAL was a distributor of laminated steel founded in 1957 and, after the merger,itbecame a branch of Prada responsible for distribution of Prada’s products, or Prada Distribuição.
Prada Distribuição is also the leader in the Brazilian distribution market, with 460,000 tons per year of installed processing capacity. Prada Distribuição has two steel service centers and five distribution centers strategically located in Brazil. Its main service center is located in the city of Mogi das Cruzes between the cities of São Paulo and Rio de Janeiro. Its product mix also includes sheets, slit coils, sections, tubes, and roofing in standard or customized format, according to ~~client’s~~clients’ specifications. Prada Distribuição processes ~~all~~the entire range of products produced by us and services 4,000 customers annually from the civil construction, automotive and home appliances sectors, among others.
~~Inal Nordeste~~
Inal Nordeste, or INOR, is our subsidiary and a distributor of laminates located in Northeastern Region. INOR has a service center located in the city of Camaçari, in the State of Bahia, to support sales in the Northeastern and North regions of Brazil, with 155,000 tons per year of installed processing capacity. On May 30, 2011, INOR was merged into the Company, then allowing the optimization of processes and operations as well as reduction of costs.
Companhia Siderurgica Nacional, LLC
CSN LLC holds the assets of former Heartland Steel, a flat-rolled steel processing facility in Terre Haute, Indiana. This facility has an annual production capacity of 180,000 tons of cold-rolled products and 315,000 tons of galvanized products. Currently, CSN LLC is obtaining hot coils by buying slabs from CSN and then having them converted into hot coils by local steel companies or buying hot rolled coils directly from mills in the United States. See “Item 4B. Government Regulation and Other Legal Matters—Anti-Dumping Proceedings—United States” for a discussion about anti-dumping issues on Brazilian hot coils exports to the United States.
29
Lusosider, Aços Planos, S.A.
We own 99.94% of Lusosider, a producer of hot-dip galvanized products and cold-rolled located in Seixal, near Lisbon, Portugal. Lusosider produces approximately 240,000 tons of galvanized products and 50,000 tons of cold-rolled ~~annually.~~per year. Its main customers include service centers and tube making industries.
Inal Nordeste
Inal Nordeste, or INOR, is a distributor of laminates located in the Northeastern Region. INOR has a service center located in the city of Camaçari, in the State of Bahia, to support sales in the Northeastern and North regions. On May 30, 2011, INOR was merged into us, allowing for the optimization of processes and operations as well as the reduction of costs.
Our Mining Segment
Our mining activities are one of the largest in Brazil and are mainly driven by the exploration of one of the richest Brazilian iron ore reserves, Casa de Pedra, in the State of Minas Gerais. We sell our iron ore products mainly in Asia, Europe and Brazil with sales and marketing taking place through our principal hubs of Minas Gerais, in Brazil, Austria, Madeira Islands, in Portugal and Hong Kong.

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Our Mines
Location, Access and Operation
Casa de Pedra
Casa de Pedra mine is an open pit mine located next to the city of Congonhas in the State of Minas Gerais, Brazil, approximately 80 km ~~South~~south of the city of Belo Horizonte and 360 km ~~North~~north of the city of Rio de Janeiro. The site is approximately 1,000 meters above sea level and accessible from the cities of Belo Horizonte or Congonhas through mostly paved roads.
Casa de Pedra mine is a hematite-rich iron deposit of an early proterozoic banded iron formation in Brazil’s Iron Ore Quadrangle ~~region~~ (Quadrilátero Ferrífero), which is located in the central part of the State of Minas Gerais in the Southeastern region of Brazil and has been one of the most important iron producing regions in Brazil for the last 50 years.
Our iron ore at Casa de Pedra is currently excavated by a fleet composed of Marion 191M electric shovels, P&H 1900AL electric shovels, ~~PC 5500 Demag~~Komatsu PC5500 hydraulic shovels, wheel loaders ~~(different brands)~~(Caterpillar 994F, Komatsu WA1200 and LeTourneau 1850) and then hauled by a fleet of Terex Unit Rig MT3300AC (150 tons), Caterpillar ~~CAT793~~793D (240 tons) and Terex Unit Rig ~~MT4400~~MT4400AC (240 tons).
Casa de Pedra mine is wholly-owned by us and ~~accounts for~~supplies all of our iron ore ~~supply,~~needs, producing lump ore, sinter feed and pellet feed fines with high iron content.
The maps below illustrate the location of our Casa de Pedra mine:

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Namisa
We own additional iron ore assets through Namisa, our 60% consolidated investee, which acquired CFM (Companhia de Fomento Mineral e Participações) in July 2007. CFM was ~~incorporated~~formed in 1996 with the purpose of utilizing and enhancing the ore treatment facilities of the Itacolomy mines, for the beneficiation of crude ore extracted from ~~its deposit,~~ the Engenho mine.
The Engenho mine is located at the Southwestern region of the Iron Ore Quadrangle, 60 km South of the city of Belo Horizonte.
The ~~maps~~map below ~~illustrate~~illustrates the location of our Engenho mine:

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The Fernandinho mine, ~~an asset that~~which we also hold through Namisa, is located in the city of Itabirito, in the State of Minas Gerais. This ~~town~~city is located in the Middle-East region of the State of Minas Gerais and approximately 4340 km from the city of Belo Horizonte.
The ~~maps~~map below ~~illustrate~~illustrates the location of our Fernandinho mine:

Limestone and Dolomite Mine
Our extraction and preparation of limestone and dolomite is done at our Bocaína mining facility located in the city of Arcos, in the State of Minas Gerais. This mining facility has an installed annual production capacity of approximately 4.0 million tons. We believe this mining facility has sufficient limestone and dolomite reserves to adequately supply our steel production, at current levels, for more than 4538 years. The mining facility is located 455 km from the Presidente Vargas ~~steelworks.~~Steelworks.
Tin
We own a tin mine ~~and a smelter located~~in Itapuã do Oeste, in the State of Rondô~~nia. The inventory~~nia, through our subsidiary Estanho de Rondônia S.A. (ERSA). This facility has an installed annual production capacity of approximately 3,600 tons of tin, which we use substantially as a raw material to produce tin plate, a coated steel product. A small part of our tin production that is not used as raw material is sold to third parties; however, the ~~geological reserves has been prepared~~results from ~~a review of the major reports from the Santa Barbara Mine Document Center. The majority of the deposits and/or target areas~~these sales are ~~within Mining Leases that have been~~insignificant to our consolidated ~~into Mining Group (Grupamento Mineiro No. 131/92). The reserves provided were recognized by the DNPM. The reserves and resources presented are “in situ.”~~results.
Mineral Rights and Ownership
The Mining Code and the Brazilian Federal Constitution impose requirements on mining companies relating to, among other things, the manner in which mineral deposits are exploited, the health and safety of workers, the protection and restoration of the environment, the prevention of pollution and the promotion of the health and safety of local communities where the mines are located. The Mining Code also imposes certain ~~notification~~snotifications and reporting requirements.
We hold concessions to mine iron ore, limestone and dolomite. We purchase manganese in the local market. Except for Namisa’s mines, in which we have a 60% ownership interest, we own 100% of each of our mines. In addition, each mine is an “open pit” mine. Iron ore extraction, crushing, screening and concentration are done ~~inthree~~in three different sites: Casa de Pedra (CSN’s property), Pires Beneficiation Plant and Fernandinho Mine (both Namisa’s property).
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Casa de Pedra
Our mining rights for Casa de Pedra mine include the mine, a beneficiation plant, roads, a loading yard and a railway branch and are duly registered with the Brazilian Department of Mineral Production (Departamento Nacional de Produção Mineral), or DNPM. ~~We have~~DNPM has also ~~been~~ granted ~~by DNPM~~us easements in 15 mine areas located in the surrounding region, which are not currently part of Casa de Pedra ~~mine, and hold title to all our proved and probable reserves.~~mine.
We believe we have obtained and are in compliance with all licenses and authorizations for our operations and projects at Casa de Pedra mine.
~~The exploitation in~~Exploration undertaken at the Casa de Pedra mine is subject to mining lease restrictions, which were ~~duly addressed~~reflected in our iron ore reserve calculations. Quality requirements (chemical and physical) are the key “modifying factors” in the definition of ore reserves at Casa de Pedra and were properly accounted for by ~~the CSN mine planning department.~~us.
Mineral Reserves
The following table sets forth the type of each of our mines, period of operation, projected exhaustion dates and percentage of our interest:
Mine

Type

Operating Since

Projected exhaustion date

CSN % interest

Type

Operating Since

Projected exhaustion date

CSN % interest

Iron:

Casa de Pedra (Congonhas, Minas Gerais)

Open pit

1913

2041

100

Open pit

1913

2041

100
Engenho (Congonhas, Minas Gerais)

Open pit

2007 (Start of operation by Namisa)

2041

60

Open pit

2007 (Start of operation by Namisa)

2041

60
Fernandinho (Itabirito, Minas Gerais)

Open pit

2007 (Start of operation by Namisa)

2030

60

Open pit

2007 (Start of operation by Namisa)

2030

60

Limestone and Dolomite:

Bocaina (Arcos, Minas Gerais)

Open pit

1946

2052

100

Open pit

1946

2049

100

Tin:

(Itapoã do Oeste, Rondônia)

Open pit

1950

-

100

The following table sets forth our estimates of proven and probable reserves and other mineral deposits at our mines reflecting the results of reserve ~~study.~~studies. They have been calculated in accordance with the technical definitions contained in the SEC’s Industry Guide 7, and estimates of mine life described herein are derived from such reserve estimates. In the case of the Engenho and Fernandinho mines, where we own 60% of interests, the mineralized material disclosed are for the entire mine, and not just for our proportional interest in the mine.
According to the report “Audit of Ore Reserves for CSN Casa de Pedra Iron Mine”, prepared by Golder Associates in May 2007, our reserve estimation process is subject to some smoothing, but does not reflect losses for mine dilution and mining recovery. We intend to perform studies regarding those losses during the preparation process for the new reserve audit. Likewise, Namisa’s estimation process for the Engenho and Fernandinho mines does not reflect losses for mine dilution and mining recovery.

MINERAL RESERVES AND QUANTITY ESTIMATES FOR MINERALIZED MATERIAL– As of December 31, 2011

MINERAL RESOURCES– As of December 31, 2010

Proven and Probable Reserves(1)

Quantity Estimates for Mineralized Material⁽²⁾



Recoverable

Proven and Probable Reserves(1)

Mineral Deposits Resources⁽²⁾

Recoverable

Ore Tonnage⁽³⁾

Product⁽⁵⁾

Tonnage
Mine Name and Location

(millions of tons)

Grade(4)

Rock Type

(millions of tons)

(millions of tons)

⁾

Probable⁽⁷⁾

Mine Name

Ore Tonnage⁽³⁾

Product⁽⁵⁾

Tonnage
and Location

(millions of tons)

Grade(4)

Rock Type

(millions of tons)

(millions of tons)

Proven⁽⁶⁾

Probable⁽⁷⁾

Iron:

Casa de Pedra(Congonhas,

Hematite (21%)

Hematite (21%)

Minas Gerais)

1,016

514

47.79% Fe

Itabirite (79%)

891

8,285

985

514

47.79% Fe

Itabirite (79%)

861

8,285
Engenho

(Congonhas, Minas Gerais)

46.07%

Itabirite (100%)

857

46.07%

Itabirite (100%)

852
Fernandinho

(Itabirito, Minas Gerais)

40.21%

Itabirite (100%)

582

40.21%

Itabirite (100%)

578
Total Iron:

1,016

514

891

9,724

985

514

861

9,715
(Congonhas, Minas Gerais)
(Congonhas, Minas Gerais)
(Congonhas, Minas Gerais)

Limestone and Dolomite:

Proven⁽⁶⁾

Probable⁽⁷⁾

Proven⁽⁶⁾

Probable⁽⁷⁾

Bocaina

41.3%CaO

Limestone (86%)

41.3%CaO

Limestone (86%)

(Arcos, Minas Gerais)

117.71

41.9

5.99%MgO

Dolomite (14%)

156

1,187.5

5.99%MgO

Dolomite (14%)

155.95

1,190

Proven+Probable Reserves(Mm3)

Recoverable Product⁵

Resources (Mm³)

(in tons)

(in million cubic meters)

Tin

Paleo valley and

(Itapoã do Oeste, Rondônia)

40,31

shallow

23,509

94,85

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__________________
(1) Reserves means ~~that~~the part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. We do not have reserve audits for the Engenho and Fernandinho. The reserves for the Casa de Pedra mine were audited in 2006 and we have reduced the amount of proven reserves by our annual production since then.
(2) ~~Includes inferred tonnages.~~Mineralization that has been sufficiently sampled at close enough intervals to reasonably assume continuity between samples within the area of influence. This material does not yet qualify as a reserve.
(3) Represents ROM material.
(4) Grade is the proportion of metal or mineral present in ore or any other host material.
(5) Represents total product tonnage after mining and processing losses.
(6) Means reserves for which: (i) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade ~~and/or~~and /or quality are computed from the results of detailed sampling; and (ii) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well- established.
(7) Means reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measure) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measure) reserves, is high enough to assume continuity between points of observation.
33We do not have audited data for resources estimates, only for reserves estimates.
The metallurgical recovery factor is the proportion of iron in the ore delivered to the processing plant that is recovered by the metallurgical process. In 2011, the metallurgical recovery factor obtained by Casa de Pedra plant was 83.52%. That same factor was 56.34% for the Engenho plant and 58.64% for the Fernandinho plant.
The cutoff grade is the minimum ore percentage that determines which material will be fed in the processing plant. We also plan to perform studies to determine the cutoff grade value during the preparation process for the new audit in Casa de Pedra. In the audit performed in 2006, the Benefit Function considered the lithologies to separate iron from waste. The cutoff grade value for Namisa is also yet to be determined.
The prices used in the 2006 audit for the estimation of Casa de Pedra reserves are shown in the following table (Golder’s Final Report for the Audit of Ore Reserves for CSN Casa de Pedra Iron Mine, 2007). As shown, the product price we assumed to estimate our reserves is conservative in comparison to the actual three-year average prices.
PRICE FOR THE THREE YEARS PRIOR TO THE AUDIT

Price for the three years prior to the audit

Average

Product Price

(US$/t)

(US$/t)

(US$/t)

2004
2005
2006

From 2004 to 2006

Assumption
Lump
28.80
49.40
58.79

45.66

25.26
“Hematitinha”
12.08
28.34
35.75

25.39

18.14
Sinter Feed
21.91
37.58
44.73

34.74

20.73
Pellet Feed Fines
21.40
36.69
43.66

33.92

20.44
WeNAMISA does not yet have a reserve audit, therefore we have not established prices to estimate reserves for its mines.
Casa de Pedra
In 2006, we concluded an extensive, multi-year study of our iron ore reserves at Casa de Pedra. The study consisted of three phases. Phase one, which was completed in 1999, covered the ore bodies that are currently being mined or are close to the current operating open pits. Phase two, which was completed in early 2003, covered ~~the other~~theother iron ore deposits at Casa de Pedra site. Phase three started in 2005 and involved a complete revaluation of our mineral reserves at Casa de Pedra.

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We conducted extensive work throughout 2006 to document and classify all information related to both the current and future operations of the Casa de Pedra mine.
In 2006, we hired Golder Associates S.A., or Golder, to undertake an independent analysis of the Casa de Pedra iron ore reserves. Golder carried out a full analysis of all available information and has independently validated our reported reserves.
Golder accepts as appropriate the estimates regarding proven and probable reserves made by us, totaling 1,631 million tons of iron ore (as of December 31, 2006) at a grade of 47.79% Fe and 26.63% SiO2. This new estimate of our iron ore reserves at Casa de Pedra is significantly larger than our estimate of 444 million tons, ~~reported on~~contained in an appraisal report prepared in 2003.
Over the course of the Casa de Pedra Mine’s life we have executed different drilling campaigns and, in total, we have drilled 91,514.63 meters. The last campaign started in May 2010 and ended in April 2011. In ~~2010,~~the course of that campaign, we ~~had a total drilling of 8,489~~drilled 11,068.65 meters. We are extending our drilling campaign ~~with~~by an additional ~~66,000~~30,000 meters to increase and improve our knowledge about the iron ore deposits at Casa de Pedra. OfThis campaign includes the programming of laboratory tests for approximately 1,800 samples and is expected to start in 2012. We will use this ~~total,~~new campaign and the 2010-2011 campaign for the new reserve audit, which we expect to conclude drilling by December 2013. We expect to have ~~already concluded 8,271 meters. When this drilling campaign is concluded, we intend to conduct a~~the new ~~ore reserve audit.~~Audit Report ready by early 2014.
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Namisa
An initial study was conducted at Fernandinho and Engenho mines to define the geological ~~resources~~reserves and final pits. In 2008 and 2009, we extended our drilling campaign with an additional 5,179 meters at Engenho mine and 2,771 meters at Fernandinho mine ~~(totalizing~~(totaling a campaign of 7,950 meters) to increase and improve our knowledge about the iron ore deposits at these mines. In 2012 and 2013, a new drilling campaign with an additional 10,000 meters in the Engenho Mine and 10,000 meters in the Fernandinho Mine will be conducted. We expect that, as soon as a new model and final pit is finished, this reserve ~~could~~can be audited and may be incorporated ininto our mineral ~~deposits.~~deposits (approximately in December 2013).
Production
Casa de Pedra
The Casa de Pedra facilities are located in the city of Congonhas, in the State of Minas Gerais. The Casa de Pedra mine is located 350 km from the Presidente Vargas ~~steelworks~~Steelworks and supplies iron ore products to our steel mill, as well as for export through the ~~Itaguai~~Itaguaí Port. Casa de Pedra’s equipment fleet and treatment facilities have an installed annual ROM capacity of approximately ~~85.0~~86.0 million tons and ~~21.5~~22 million tons, respectively. ~~In 2010~~
Namisa
Namisa has two beneficiation plants: one is the Pires Plant, which receives material from our Engenho mine (located at the northern border of the Casa de Pedra ~~produced 21.6 million tons~~mine) and the other is the Fernandinho Plant, which receives material from our Fernandinho mine (located in the city of ~~iron ore.~~
~~Namisa~~
Itabirito). The beneficiation plant at Pires also ~~processed~~processes crude ore acquired from other companies, which along with its own ROM, generates final products such as: lump ore, small lump ore (hematitinha), sinter feed and concentrates. The beneficiation plant at ~~the~~ Fernandinho ~~unit generated 0.5 million tons of small lump ore and~~generates sinter feed ~~products, in which the sinter feed practically corresponded to the total production.~~
Most of the ROM of the Pires Beneficiation Plant comes from Engenho mine (Namisa’s property), which is located at the northern border of the Casa de Pedra mine. Pires Beneficiation Plant has the capacity to process 10.3 million tons per year. From this total, approximately 3 million tons are currently provided by the Engenho mine and ~~the balance is purchased from third parties.~~fines as final products.
Namisa complements our strategy to be a world leading producer of high quality iron ore. Namisa remains fully integrated with our railway and port logistics corridor, through long-term contracts, which provide sufficient railway and port logistics capacity for Namisa’s current and future production. Namisa is a leading company in iron ore mining and trading, with mining and processing operations in the State of Minas Gerais. Trading iron ore is obtained from small mining companies in the neighborhood and other trading companies. ~~For information on the sale of 40% of our ownership interest in Namisa, see “Item 4. Information on the Company —A. History and Development of the Company—Acquisitions and Dispositions.”~~
~~Our steelmaking operations consumed 6.9 million tons~~The table below sets forth production of iron ore ~~during 2010, consisting~~ of ~~5.1~~our mines for the last three years:

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Production⁽¹⁾

2009
2010
2011
Casa de Pedra (Mt)
17.4
21.6
20.1
Grade (%)
65.4%
65.6%
65.3%
Pires⁽²⁾ (Mt)
5.2
6.1
5.7
Grade (%)
63.8%
62.6%
62.3%
Fernandinho⁽²⁾ (Mt)
0.5
0.5
0.7
Grade (%)
61.5%
59.6%
58.6%
(1)In addition to its own production, Namisa also purchases iron ore from third parties. Third party purchase volumes totaled 5.9 million tons, ~~of sinter-feed material and 1.8~~5.9 million tons and 7.5 million tons in 2009, 2010 and 2011, respectively.
(2) Production information considers 100% of ~~lump ore. As we do~~the mines, not ~~have pelletizing plants, the total amount~~just our 60% interest.

CSN Consolidated Sales⁽¹⁾

2009
2010
2011
Consolidated Sales (Mt)
17.5
18.6
23.8
Consolidated Net Revenue Per Unit (US$/t)
49
98
135
(1)  Consolidated sales consider our proportional 60% interest in Namisa.

Table of ~~pellets has been acquired in the Brazilian market.~~Contents
Distribution
Transportation costs are a significant component of our steel and iron ore production costs and are a factor in our price-competitiveness in the export market. Railway ~~transportation~~ is the ~~principal~~main means of transport by which we ~~transport~~convey raw materials from our mines to the Presidente Vargas ~~steelworks~~Steelworks and steel and iron ore products to ports for shipment overseas. Iron ore, limestone and dolomite from our two mines located in the State of Minas Gerais are transported by railroad to the Presidente Vargas ~~steelworks~~Steelworks for processing into steel. The distances from our mines to the Presidente Vargas ~~steelworks~~Steelworks are 328 km and 455 km. The distances from our mines to the ports are 440 km and 160 km. Imported coal and coke bought from foreign suppliers are unloaded at the port of Itaguaí, 90 km west of the city of Rio de Janeiro, and shipped 109 km by train to the Presidente Vargas ~~steelworks.~~Steelworks. Our finished steel products are transported by train, truck and ships to our customers throughout Brazil and abroad. Our ~~principal Brazilian~~most important local markets are the cities of São Paulo (335 km from the Presidente Vargas ~~steelworks)~~Steelworks), Rio de Janeiro (120 km) and Belo Horizonte (429 km).
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Until recently, Brazil’s railway system (including railcars and tracks) was principally government-owned and in need of repair, but it has now been largely privatized. In an attempt to increase the reliability of our rail transportation, we ~~indirectly~~hold interests in companies that hold concessions for the main railway systems we use. For further information on our railway concessions, see “—Facilities—Railways.”
We export ~~mainly through the ports of Itaguaí and Rio de Janeiro,~~iron ore and import coal and coke through the Itaguaí Port, ~~all~~ in the State of Rio de Janeiro. The coal and container terminals have been operated by us since August 1997 and 1998, respectively.
Our Logistics Segment
Our logistics segment is comprised of railway and port facilities.
Railways
Southeastern Railway System
MRS has a 30-year concession to operate, through the year 2026 and renewable for an equal period of 30 years, Brazil’s Southeastern railway system. As of December 31, ~~2010,~~2011, we held directly and indirectly 33.27% of MRS’ total capital. The Brazilian Southeastern railway system, with ~~1,674~~1,643 km of track, serves the São Paulo –- Rio de Janeiro –- Belo Horizonte industrial triangle in Southeast Brazil, and links our mines located in the State of Minas Gerais to the ports located in the states of São Paulo and Rio de Janeiro and to the steel mills of CSN, Companhia Siderúrgica Paulista, or Cosipa, and Gerdau Açominas.   In addition to serving other customers, the line transports iron ore from our mines at Casa de Pedra in the State of Minas Gerais and coke and coal from the Itaguaí Port in the State of Rio de Janeiro to the Presidente Vargas ~~steelworks~~Steelworks and transports our exports to the ports of Itaguaí and Rio de Janeiro. The railway system connects the Presidente Vargas ~~steelworks~~Steelworks to the container terminal at Itaguaí Port, which handles most of our steel exports. Our transport volumes represent approximately ~~28%~~29% of the Brazilian Southeastern railway system’s total volume. ~~While we~~We are jointly and severally liable, along with the other principal MRS shareholders, for the full payment of the outstanding amount of its indebtedness (See “Item 5E. Off-Balance Sheet Arrangements”), however, we expect that MRS will make the lease payments through internally generated funds and proceeds from financing.

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Northeastern Railway System
As of December 31, ~~2010,~~2011, we hold ~~76.45%~~70.91% of the capital stock of Transnordestina Logística ~~S.A.~~S.A.. Transnordestina Logística S.A. has a 30-year concession granted in 1998, renewable for an equal 30-year period, to operate Brazil’s Northeastern railway system. The Northeastern railway system includes 4,238 km of track and operates in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte. It also connects with the region’s leading ports, thereby offering an important competitive advantage through opportunities for intermodal transportation solutions and made-to-measure logistics projects.
For more information on ~~the merger and financings for~~ Transnordestina, see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned ~~Investments”.~~  Investments.”
Port Facilities
Solid Bulks Terminal
We hold the concession to operate TECAR, a solid bulks terminal, one of four terminals that form the Itaguaí Port, located in the State of Rio de Janeiro, for a term expiring in 2022 and renewable for another 25 years. Itaguaí Port, in turn, is connected to the Presidente Vargas ~~steelworks,~~Steelworks, Casa de Pedra and Namisa by the ~~southeastern railway system.~~Southeastern Railway System. Our imports of coal and coke are made through this terminal. Under the terms of the concession, we undertook to load and unload at least 3.0 million tons of bulk cargo annually. Among the approved investments that we announced is the development and expansion of the solid bulks terminal at Itaguaí to also handle ~~upto~~up to 84 million tons of iron ore per year. For further information, see “Item 4. Information on the Company ~~—A. History~~- D. Property, Plant and ~~Development of the Company~~Equipment —Planned Investments—~~Iron Ore Project.~~Mining.”
36

Container Terminal
We own 99.99% of Sepetiba Tecon S.A., or TECON, which has a concession to operate, for a 25-year term expiring in 2026 that is renewable for another 25 years, the container terminal at Itaguaí Port. As of December 31, ~~2010,~~2011, US$~~183~~177 million of the cost of the concession remained payable over the next 15 years of the ~~lease.~~concession. For more information, see “Item 5E. Off-Balance Sheet Arrangements”. The Itaguaí Port is located in the heart of Brazil’s Southeast Region, with all major exporting and importing areas of the states of São Paulo, Minas Gerais and Rio de Janeiro within 500 km from the port. This area represents more than 60% of the Brazilian gross domestic product, or GDP, according to the Brazilian Geography and Statistics Institute ~~(Instituto~~(Instituto Brasileiro de Geografia e Estatí~~stica)~~stica). The Brazilian Federal Port Agency has spent more than US$48 million in the past few years in port infrastructure projects such as expanding the maritime access channel and increasing ~~the~~its depth. In addition, significant investments were made by the Brazilian federal government in adding two extra lanes to the ~~Rio Santos~~Rio-Santos road, and are being made in constructing the Rio de Janeiro Metropolitan Bypass, a beltway that will cross the Rio de Janeiro metropolitan ~~area.~~area, to be concluded by the end of 2012. Also, MRS railway is investing in an extra rail track ~~along the way~~ to the Itaguaí Port. These ~~factors, combined~~investments, together with favorable natural conditions, like natural deep waters and a low urbanization rate around the port area, allow the operation of large vessels ~~as well as~~and the maintenance of highly competitive prices for all ~~the~~ services ~~rendered, resulting in~~rendered. All of these factors have made the terminal ~~being~~ a major hub port in Brazil. ~~For further information on our planned investments relating~~
Investments made from 2007 to our Itaguaí CSN Logistics Platform Project, see “Item 4. Information on the Company —A. History and Development of the Company —Planned Investments—Itaguaí CSN Logistics Platform Project”.
~~The figures show the effect of investments made since 2007~~2011, mainly in two Super Post Panamax Portainers and two Rubber Tired Gantry, or RTG, ~~cranes.~~cranes and 6 new Reach Stackers, among others, have shown to be successful. These investments, along with a focused marketing and sales strategy, enabled the terminal to rank first in market share among the three terminals of the state of Rio de Janeiro in 2011, with 40% of the total moves in those terminals.
We plan to carry out new infrastructure and equipment investments in Sepetiba TECON, such as the Berth 301 Equalization, ~~and the acquisition of~~ two new Super Post Panamax Portainers and four new RTG cranes to yard operations. We are also currently investing in dredging Sepetiba Tecon’s Berths 302/303 and access channel to ‑15.5 m depth. These investments will increase TECON’s capacity from 320,000 containers (or 480,000 TEUs) to 410,000 containers (or 610,000 TEUs) aper year and from 2.0 million tons to 6.0 million tons aper year of steel products. We intend to use this port to ship all our exports of steel products. In ~~2010, 69%~~2011, 83% of ~~the~~our exported steel products (or ~~147,691~~320,963 tons), ~~was~~were shipped from this port, as compared to ~~91.6%~~69% in ~~2009.~~2010.
In 2010, the terminal ~~has resumed the~~experienced a 27% growth ~~that had been affected by~~in units handled, following the global ~~downturn. Is achieved 196,313~~downturn of 2008 and 2009. In 2011 it continued to grow, reaching 216,311 units handled (or ~~298,417~~322,680 TEUS), ~~which represents~~ an increase of ~~27% compared to 2009.~~10% over 2010.

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Our Cement Segment
Our cement segment is comprised of a cement plant in Volta Redonda, in the state of Rio de Janeiro, and a clinker plant in Arcos, in the state of Minas Gerais.
Production
The production process in CSN’s cement factory in Volta Redonda begins with the influx of raw materials: clinker, limestone, gypsum and slag. We currently import clinker, but, with the startup of our clinker plant in Arcos, in mid-2011, imports are gradually being reduced.Limestone comes from Arcos by rail. Clinker is stored in a silo (capacity: 45,000 tons) and limestone in a warehouse (capacity: 10,000 tons). Slag is a by-product of iron and steel, produced in the blast furnace, and is also stored in the warehouse (capacity: 20,000 tons), arriving at the plant by road. CSN uses natural gypsum, from Ouricuri, in the state of Pernambuco, which arrives at the plant by truck and is stored in the warehouse (capacity: 10,000 tons).
All transportation of raw materials within the plant is carried out by conveyor belts, placing inputs in scales according to a predefined formula and delivering them to the mills. There are two grinding lines and each mill has a nominal capacity of 170 tons/h. Annual plant capacity is 2.4 million tons of cement. The mill has a hydropneumatic roller system, which uses pressure to grind the layer of material on the turntable. Hot gas, derived from the combustion of natural gas or petroleum coke, is pumped into the mills to maintain the proper temperature in the circuit.
The type of cement we produce is CP III-40 RS (Sulfator resistant), which is then taken through a bucket elevator to be stored in silos. The plant has four silos, two of them with 10,000 tons of capacity and two with 5,000 tons of capacity. Cement can be shippedin bagged and bulk forms. We have two baggers with 12 filling nozzles (nominal capacity of 3600 bags/hour) and two palletizers for bagging cement.
Our Energy Segment
Our energy segment is comprised of generation plants and is aimed at enabling us to maintain our self-sufficiency in energy, reducing our production cost and our exposure to fluctuations or availability of certain energy sources.
Our energy related assets include:
Thermoelectric Co-Generation Power Plant
We completed the construction of a 238 MW thermoelectric co-generation power plant at the Presidente Vargas ~~steelworks~~Steelworks in December 1999. Since October 2000, the plant has provided the ~~Presidente Vargas~~ steelworks with approximately 60% of the electric energy ~~needs for~~needed in its steel mills. Aside from operational improvements, the power plant supplies our strip mills with electric energy, processed steam and forced air from the blast furnaces, benefiting the surrounding environment through the elimination of flares that burn steel-processing gases into the atmosphere.
Itá Hydroelectric Facility
37

~~Each of~~ Tractebel and ~~we own~~CSN each owns 48.75%~~, and Companhia de Cimento Itambé, or Itambé, owns the remaining 2.5%~~ of ITASA, a special-purpose company formed for the purpose of owning and operating, under a 30-year concession granted in 2000 and renewable for an equal term, 60.5% of the Itá hydroelectric facility on the Uruguay river in Southern Brazil. Companhia de Cimento Itambé, or Itambé, owns the remaining 2.5% of ITASA. Tractebel directly owns the remaining 39.5% of the Itá hydroelectric facility.
The power facility was built ~~under~~using a project finance structure with an investment of approximately US$860 million. The long-term financing for the project was closed in March 2001 and consisted of US$78 million ofin debentures issued by ITASA, a US$144 million loan from private banks and US$116 million of direct financing from BNDES, all of which are due by 2013. The sponsors of the project have invested approximately US$306 million in this project.
Itá has an installed capacity of 1,450 MW, with a firm guaranteed output of 668 MW, and became fully operational in March 2001.

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We and the other shareholders of ITASA have the right to take our pro rata share (proportionally to our ownership interest in the project) of Itá’s output pursuant to 30-year power purchase agreements at a fixed price per megawatt hour, adjusted annually for inflation. Since October 2002, we have been using our entire Itá take internally.
Igarapava Hydroelectric Facility
We own 17.9% of a consortium that built and has the right to operate for 30 years the Igarapava hydroelectric facility. Other consortium members are Vale, Companhia Mineira de Metais, Votorantim Metais Zinco, AngloGold Ashanti Mineração Ltda., and Companhia Energética de Minas Gerais, or ~~CEMIG.The~~CEMIG. The planthas an installed capacity of 210 MW, corresponding to 136 MW of firm guaranteed output as of December 31, ~~2010.~~2011. We have been using part of our 22.8 MW take from Igarapava to supply energy to the Casa de Pedra and Arcos mines and to the Presidente Vargas ~~steelworks. From time to time, we also sell the excess energy in the spot energy market.~~Steelworks.
Marketing Organization and Strategy
Steel
Our steel products are sold both domestically and abroad as a main raw material for several different manufacturing industries, including the automotive, home appliance, packaging, construction and steel processing industries.
Our sales approach is to establish brand loyalty and achieve a reputation for quality products by developing relationships with our clients and focusing on their specific ~~needs.~~needs, providing tailor-made solutions for each of our clients.
Our commercial area is responsible for sales of all of our products. This area is divided into two major teams, one focused on international sales and the other on domestic sales. The domestic market oriented sales team is divided into ~~six~~seven market segments: ~~packaging, distribution, automotive, home appliances, original equipment manufacturer,~~Packaging, Distribution Network, Automotive Industry (Automakers and Auto Parts), Home Appliances, Original Equipment Manufacturer, or OEM, Construction and ~~construction. Each one of these segments~~Pipes. The commercial area also has a ~~specific strategic goal to provide tailor-made steel solutions that meet~~team called “Special Sales” which is responsible for selling all the ~~specific needs of each client they serve.~~process residues, such as blast furnace slag, pitch and ammonia, which are widely used as inputs in chemical and cement industries.
The ~~distribution~~Distribution Network division is responsible for supplying large steel processors and distributors. Besides the independent distributors, CSN also has its own distributor, called Prada Distribuição. The Pipes division supplies oil and gas pipe manufacturers as well as some industries that produce small diameter pipe and light profiles. The ~~packaging~~Packaging unit acts in an integrated way with suppliers, representatives of the canning industry and distributors to respond to customer needs for finished-products. The ~~automotive~~Automotive unit is supplied by a specialized mill, CSN Porto Real, and also by a portion of the galvanized material produced at Presidente Vargas ~~steelworks, benefiting~~Steelworks, benefitting from a combined sales strategy.
In ~~2010, more than a half~~2011, about 65% of our domestic sales were made through our own sales force directly to customers. The remaining sales were to independent distributors for subsequent resale to smaller clients.
Historically, our export sales were made primarily through international brokers. However, as part of our strategy to establish direct, longer-term relationships with end-users, we have decreased our reliance on such brokers. We have focused our international sales toon more profitable markets in order to maximize revenues and shareholder returns.
38

All of our sales are on an order-by-order basis and have an average delivery time of 45 days. As a result, our production levels closely reflect our order log book status. We forecast sales trends in both the domestic and export markets based on the historical data available from the last two years and the general economic outlook for the near future. We have our own data systems to remain informed of worldwide and Brazilian market developments. Further, our management believes that one of the keys to our success is maintaining a presence in the export market. Such presence gives to us the flexibility to shift between domestic and export markets, thereby allowing us to maximize our profitability.

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Unlike ~~classic~~with other commodity products, there is no exchange trading of steel, or uniform pricing, as wide differences exist in terms of size, quality and specifications. In general, exports are priced based on international spot prices of steel at the time of sale in U.S. dollars or Euros, depending on the destination. Sales are normally paid ~~at sight,~~up front, or within 14 or 28 days, and, in the case of exports, usually backed by a letter of credit and an insurance policy. Sales are made primarily on cost and freight terms.
Sales by Geographic Region
In ~~2010,~~2011, we sold steel products to customers in Brazil ~~and 35~~as well as to customers in 30 other countries. The fluctuations in the portion of total sales assigned to domestic and international markets, which can be seen in the table below, reflect our ability to adjust sales in light of variations in the domestic and international economies, as well as steel demand and prices, both domestically and abroad.
The ~~four~~two main export markets for our products are Europe ~~Latin America, Asia,~~ and North America, representing ~~40%, 33%, 12%~~45% and 7%40%, respectively, of our export sales volume in ~~2010.~~2011.
In North America, we take advantage of our subsidiary CSN LLC, which acts as a commercial channel for our products. In order to gain a cost advantage among our U.S. competitors, CSN is able to export ~~slabs~~hot-rolled to CSN LLC which ~~are~~is then processed ~~at third parties into hot-rolled coil~~ and ~~then~~ transformed into more ~~added value~~value-added products at CSN LLC’s plant, such as cold-rolled coil and galvanized. Moreover, we are able to export cold-rolled coils which can be directly sold or processed by CSN LLC in order to manufacture galvanized products.
CSN – Sales of Steel Products by Destination
(In thousands of metric tons and millions of R$)
CSN – Sales of Steel Products by Destination
CSN – Sales of Steel Products by Destination
(In thousands of metric tons and millions of R$)
(In thousands of metric tons and millions of R$)

2010
2009
2011
2010
2009

Tons
% of Total
Net Operating Revenues⁽²⁾
% of Total
Tons
% of Total
Net Operating Revenues⁽²⁾
% of Total
Tons
% of Total
Net Operating Revenues⁽²⁾
% of Total
Tons
% of Total
Net Operating Revenues⁽²⁾
% of Total
Tons
% of Total
Net Operating Revenues⁽²⁾
% of Total
Brazil
4,135
86.2
8,575
88.6
3,243
78.9
6,770
85.8
4.216
86.1%
8.033
86.8%
4.135
86.2%
8.575
88.6%
3.243
78.9
6.77
85.8
Export
661
13.8
1.107
11.4
867
21.1
1,124
14.2
680
13.9%
1.219
13.2%
661
13.8%
1.107
11.4%
867
21.1
1.124
14.2
Total
4,796
100.0
9,682
100.0
4,110
100.0
7,894
100.0
4.896
100.0
9.252
100.0
4.796
100.0
9.682
100.0
4.110
100.0
7.894
100.0
Exports by Region

Asia
29
0.6
41
0.4
259
6.3
249
3.9
21
0.4%
31
0.3%
28
0.6%
38
0.4%
259
6.3%
249
3.9%
North America⁽¹⁾
15
0.3
407
4.2
243
5.9
307
3.9
270
5.5%
473
5.1%
268
5.6%
434
4.5%
243
5.9%
307
3.9%
Latin America
55
1.1
187
1.9
55
1.3
115
1.5
58
1.2%
144
1.6%
56
1.2%
136
1.4%
55
1.3%
115
1.5%
Europe
46
1.0
432
4.5
290
7.1
411
5.2
312
6.4%
545
5.9%
277
5.8%
434
4.5%
290
7.1%
411
5.2%
All Others
32
0.7
41
0.4
20
0.5
42
0.5
19
0.4%
27
0.3%
32
0.7%
65
0.7%
20
0.5%
42
0.5%
_______________
(1) Sales to Mexico are included in North America.
(2) Total net operating revenues presented above differ from amounts in our IFRS consolidated financial statements because they do not include revenues from non-steel products (non-steel products include mainly by-products, iron ore, logistics services and cement), which in ~~2010 represented~~2011 were R$ ~~4,750~~7,267 million and in ~~2009 represented~~2010 were R$ ~~3,044~~4,769 million. .
Sales by Product
The following table sets forth our market shares for steel sales in Brazil of hot-rolled, cold-rolled, galvanized and tin mill products for 2010, 2009 and 2008. Market Share information for 2011 was not yet available as of the ~~past three years.~~date of this annual report. The data of 2008 and 2009 were filled based on IABr(Instituto Aço Brasil) and 2010 considered internal data gathered by CSN.
39

Table of Contents

CSN Domestic Market Share

2010
2009
2008

2010

2009

2008

(As a percentage of the market for each product)
Hot-Rolled Products

36.2%

33.0%

34.0%

36.2%
33.0%
34.0%
Cold-Rolled Products

27.9%

29.0%

26.0%

27.9%
29.0%
26.0%
Galvanized Products

45.8%

47.0%

49.0%

45.8%
47.0%
46.0%
Tin Mill Products

100.0%

98.0%

99.0%

100.0%
98.0%
99.0%

Sales by Industry
We sell our steel products to manufacturers in several industries. ~~Following is a breakdown of~~The table below shows our domestic shipments breakdown by volume for the last three years among our market segments:
Sales by Industrial Segment in Brazil

2010

2009

2008
2011
2010
2009

(In percentages of total domestic volume shipped)
(In percentages of total domestic volume shipped)
Distribution

43.6%

38.9%

44.7%
Distribution Network
38%
30%
Packaging

12.7%

15.4%

15.1%
12%
13%
14%
Automotive

21.3%

20.6%

19.6%
20%
23%
28%
Home Appliances/OEM

11.6%

14.6%

12.1%
Home Appliances
8%
9%
10%
OEM
7%
6%
7%
Construction

10.8%

10.5%

8.5%
15%
12%
11%

We believe we have a particularly strong domestic and export position in the sale of tin mill products used for packaging. Our customers for these products include some of the world’s most important food processing companies, as well as many small and medium-sized entities. We also maintain a strong position in the sale of galvanized products for use in the automobile manufacturing, construction and home appliance industries in Brazil and abroad, supplied by CSN Porto Real and CSN Paraná. No single customer accounts for more than 10% of our net operating revenues.
For further information on steel sales, see “Item 5A. Operating Results - Steel Markets and Product Mix - Sales Volume and Net Operating Revenues by Steel Products and Markets” and “Item 5A. Operating Results - Results of Operations - Year ~~2010~~2011 Compared to Year ~~2009~~2010 – Net Operating Revenues”.
Seasonality
~~The~~We do not experience seasonality ~~item was not identified in the Company activity, as out~~and our production is continuous during the year.
Iron Ore
Iron ore products are commercialized by our commercial team located in Brazil and overseas. In Europe ~~(Portugal)~~ and Asia, ~~(Hong Kong),~~ our offices also include our technical assistance management. These three marketing units allow us to stay in close contact with our customers worldwide, understand the environment where they operate, monitor their requirements and provide all necessary assistance in a short period of time. Domestic sales, market intelligence analysis, planning and administration of sales are handled from Brazil by the staff in our Nova Lima office, which is located approximately 70 km from the Casa de Pedra mine, in the State of Minas Gerais.
We supply our iron ore to the steel industry and our main targets are the Brazilian, European, Middle Eastern and Asian markets. Prevailing and expected levels of demand for steel products directly affect demand for iron ore. Demand for steel products is correlated to many factors, such as GDP, global manufacturing production, urbanization, civil construction and infrastructure spending.
We believe our competitiveness has been improved by our customer service and market intelligence. It is paramount for us to have a clear understanding of our customers’ businesses in order to address their needs, surpass their expectations and build long-term relationships. We have a customer-oriented marketing policy and specialized local personnel in direct contact with our clients to help determine the mix that best suits each particular customer.
40

Table of Contents

Iron Ore Sales

CSN – Sales of Iron Ore Products by Destination
(In thousands of metric tons and millions of R$)

2011
2010
2009

Tons
% of Total
Net Operating Revenues⁾
% of Total
Tons
% of Total
Net Operating Revenues⁾
% of Total
Tons
% of Total
Net Operating Revenues
% of Total
Brazil
1,457,381
6.1%
834,144
14.0%
1,519,562
8.2%
573,976
15.9%
713,270
4.1%
247,490
12.6%
Export
22,392,132
93.9%
5,107,707
86.0%
17,035,422
91.8%
3,041,166
84.1%
16,765,567
95.9%
1,716,050
87.4%
Total
23,849,513
100%
5,941,851
100%
18,554,984
100%
3,615,142
100%
17,478,837
100%
1,963,540
100%
Exports by Region

Asia
18,815,484
84.0%
4,250,002
83.2%
14,140,642
83.0%
2,513,499
82.6%
13,420,063
80.0%
1,368,608
79.8%
North America⁽¹⁾
-
0.0%
-
0.0%
-
0.0%
-
0.0%
483,754
2.9%
79,426
4.6%
Latin America
-
0.0%
-
0.0%
-
0.0%
-
0.0%
-
0.0%
-
0.0%
Europe
3,576,648
16.0%
857,705
16.8%
2,894,780
17.0%
527,667
17.4%
2,861,749
17.1%
268,016
15.6%
All Others
-
0.0%
-
0.0%
-
0.0%
-
0.0%
-
0.0%
-
0.0%

The first step to our entry into the international iron ore market was taken in February 2007, with the completion of the first phase of the expansion of our coal seaport terminal in Itaguaí, in the State of Rio de Janeiro, which enabled us to also handle and export iron ore and to load from our own facilities the first shipment of our iron ore products.
In ~~2010,~~2011, CSN’s iron ore sales reached ~~25.3~~23.8 million tons, a ~~13%~~29% increase compared to ~~2009 (including 100% of our investee Namisa).~~2010. According to our consolidated financial statements, total mining revenue increased by ~~84%~~64% over the past year, due to rising iron ore prices as well as the increase in sales volume. The share of mining revenue in CSN's total net revenue increased from 24% in 2010 to ~~17%~~35% in ~~2009.~~2011.
In ~~2010,~~2011, the ~~Asian markets~~Chinese market accounted for ~~61%~~33% of our export sales, ~~– of which 34% correspond to China and 27% to other Asian countries –~~ followed by Japan (23%), the Middle East ~~(19%~~(20%) and Europe ~~(14%~~(16%). While 83% of our sinter feed ~~and 56%~~was directed to Asia, 72% of our lump ore ~~were directed~~went to ~~Asia, 90%~~China, and 94% of our pellet feed and ~~66%~~73% of our concentrated ~~were~~was consumed by Europe and the Middle East.
This result was notably influenced by world economic recovery in 2010. All of our major markets – Asia, Europe, Middle East and Domestic Market – had significant GDP increases, after slowdowns or even decreases experienced in 2009. We expect the iron ore market to maintain a bullish trend supported by growing emerging market demand, high cost Chinese production, and infrastructure bottlenecks for low cost producers. The continued urbanization process in ~~many~~ regions such as India, the Middle East, Latin America and China should support this tendency.
As global iron ore markets are highly competitive, we focus on our flexibility, reliability and efficient manner of supplying iron ore to the world market.
Through our marketing offices, we have long term ~~relationship~~relationships with most players ofin the steel industry in China, Japan, Taiwan, South Korea, Europe and Brazil.
For further information on iron ore sales, see “Item 5A. Operating Results - Results of Operations - Year ~~2010~~2011 Compared to Year ~~2009~~2010 – Net Operating Revenues.”
Cement
We sell cement type CPIII 40 RS in bagged and bulk forms. We operate in the markets of Rio de Janeiro, Minas Gerais and São Paulo. With the purpose of expanding and increasing competitiveness, we own six distribution centers located in strategic points: three in São Paulo, two in Rio de Janeiro and one in Minas Gerais. Supply to these distribution centers is made through railways and road transport, using mainly the MRS railway.
We have a diverse client base of over 8,000 clients, including construction material stores, home centers, concrete producers, construction companies, mortar industries and cement artifact producers.
The focus of our sales strategy is on retail. In this segment, we have a strong presence in sales points, where we reinforce the quality of the product to final customers. The retail segment operates with a low level of inventory, and a significant percentage of repurchase in the month, which highlights the competitive advantage of CSN’s distribution centers.

Table of Contents
In 2011, we significantly increased our sales, reaching 1,755 thousand tons, representing a growth of 76.9% when compared to 2010.
CSN – Sales of Cement by Destination
(In thousands of metric tons and millions of R$)

2011
2010
2009

Tons
% of Total
Net Operating Revenues
% of Total
Tons
% of Total
Net Operating Revenues
% of Total
Tons
% of Total
Net Operating Revenues
% of Total
Brazil
1,755
100
333
100
992
100
202
100
338
100
60
100
Export
-
-
-
-
-
-
-
-
-
-
-
-
Total
1,755
100
333
100
992
100
202
100
338
100
60
100
Insurance
We and our subsidiaries maintain several types of insurance policies. These insurances are contracted in line with the risk management of our business and attempt to follow the market practices for similar activities. Coverage in such policies encompasses domestic and international ~~import~~(import and ~~export~~export) cargo transport (by road, rail, sea or air), carrier liability, life insurance, personal ~~accident,~~accidents, health, auto insurance, D&O, general liability, erection risks, boiler and machinery coverage, export credit insurance, surety, ports and terminal liabilities. ~~The coverage in these~~These policies may not be ~~not~~ sufficient to cover all risks we are exposed to.
We also have an insurance policy ~~to cover~~covering the operational risks, material ~~damage~~damages and loss of profits as of ~~March 23, 2011, to March 22, 2012, for a total insured value of R$ 850 million (out of a total risk amount of R$ 25.1 billion), applicable to~~ the following CSN’s branches and subsidiaries: Presidente Vargas Steelworks, Casa de Pedra Mine, Arcos Mine, Paraná Branch, CSN Porto Real (former Galvasud), Coal Terminal TECAR, Container Terminal TECON, Namisa, eCSN Export Europe, CSN Europe and CSN Cimentos. ~~Such~~This policy was negotiated with domestic and ~~foreigners~~foreign insurers and ~~reinsurers. Despite this coverage,~~reinsurers and is valid until June 30, 2012 for a total insured value of R$850 million (out of a total risk amount of R$25.1 billion). Under the terms of the policy, CSN remains responsible for the first tranche of R$170 million in losses (material damages and loss of profits)~~, in excess to the deductibles,~~ and ~~shall be responsible~~ for ~~64%~~53.55% percent of the losses above ~~this first tranche.~~such amount. We continue to analyze alternatives to further reduce our ~~co-responsibility~~.co-responsibility.
Intellectual Property
We possess patents and have ~~several~~ technical cooperation agreements with universities and research institutes ~~in order to~~that provide us with special technical reports and advice related to specific products and processes. ~~In addition to several~~We are not dependent on any of such patents ~~previously approved by~~or agreements for the ~~Brazilian National Institute~~commercialization of ~~Industrial Property (~~our products.
~~Instituto Nacional da Propriedade Industrial~~~~), in 2010 we requested the granting of 3 new patents on the field of productapplications~~.
41

'Competition in the Steel Industry
Both the worldwide and the Brazilian steel markets are intensely competitive. The primary competitive factors in these markets include quality, price, payment terms and customer service. Further, continuous advances in materials, sciences and resulting technologies have given rise to improvements in products such as plastics, aluminum, ceramics, glass and concrete, ~~that permit~~permitting them to ~~substitute~~serve as substitutes for steel for certain purposes.
Competition in the Brazilian Steel Industry
The primary competitive factors in the domestic market include quality, price, payment terms and customer service. ~~Several~~Also, several foreign steel companies ~~however,~~ are significant investors in Brazilian steel mills.
The following table sets forth the production of crude steel by Brazilian companies for the years ~~indicated:~~
indicated (³):

2010

2009

2008

Ranking

Production

Ranking

Production

Ranking

Production

(In million tons)

(In million tons)

(In million tons)
Gerdau⁽¹⁾

1

7.8

1

6.1

1

8.7
Usiminas

2

7.3

2

5.6

2

8.0
ArcelorMittal Tubarão

3

6.0

3

5.3

3

6.2
CSN

4

4.9

4

4.4

4

5.0
ArcelorMittal Aços Longos

-⁽²⁾

-

5

3.2

5

3.5
Others

-⁽²⁾

-

1.9

2.3
Total

32.8

26.5

33.7
Source: IABr

2010

2009

2008

Ranking

Production

Ranking

Production

Ranking

Production

(In million tons)

(In million tons)

(In million tons)
Gerdau⁽¹⁾

1

7.8

1

6.1

1

8.7
Usiminas

2

7.3

2

5.6

2

8.0
ArcelorMittal Tubarão

3

6.0

3

5.3

3

6.2
CSN

4

4.9

4

4.4

4

5.0
ArcelorMittal Aços Longos

-⁽²⁾

-

5

3.2

5

3.5
Others

-⁽²⁾

-

1.9

2.3
Total

32.8

26.5

33.7
Source: IABr

~~(1)~~1.        Data from Aços Villares have been merged into data from Gerdau.
~~(2)~~2.        Data not available
3.Information for 2011 was not yet available as of the date of this annual report

Table of Contents

Competitive Position — Global
During ~~2010,~~2011, Brazil maintained its place as the largest producer of crude steel in Latin America, with a production output of ~~32.8~~35.2 million tons and a 2.3% share of total world production, according to data from ~~Instituto Aço Brasil (IABr)~~the World Steel Association (WSA). In ~~2010,~~2011, Brazil ~~was~~also maintained its position as the ninth largest steel producer globally, accounting for ~~approximately~~around two-thirds of total production in Latin America, approximately twice the size of Mexico’s ~~and approximately~~or 40% of the U.S.’ steel production, according to data from the World Steel Association ~~or WSA.~~(WSA). According to IABr, Brazilian exports in ~~2010~~2011 amounted to ~~9.0~~9.3 million tons of finished and semi-finished steel products.
We compete on a global basis with the world’s leading steel manufacturers. We have positioned ourselves in the world market with a product mix characterized by high margin and strong demand, such as tin ~~mill~~plate and ~~galvanized.~~galvanized products. We have relatively low-cost and sufficient availability of labor and energy, and own high-grade iron ore ~~reserves that we believe more than meet our production needs.~~reserves. These global market advantages are partially offset by costs of transporting steel throughout the world, usually by ship. Shipping costs, while helping to protect our domestic market, put pressure on our export price. To maintain our position in the world steel market in light of the highly competitive international environment with respect to price, our product quality and customer service must be maintained at a high level. We have continually monitored the quality of our products by measuring customer satisfaction with our steel in Europe, Asia and the Americas. See “Item 4B. Business Overview—Government Regulation and Other Legal Matters—Proceedings Related to Protectionist Measures” for a description of protectionist measures being taken by steel-importing countries that could negatively impact our competitive position.
Competitive Advantages of the Brazilian Steel Industry
Brazil’s principal competitive advantages are its abundant supply of low-cost, high-grade iron ore and energy resources. Brazil also benefits from a vast internal market with a large growth potential, a privatized industry making investments in plant and equipment, and deep water ports ~~that allow~~allowing the operation of large ships, which facilitates access to export markets.
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Brazilian domestic steel prices have historically been higher than its export ~~price.~~prices. However, in 2010 ~~due to~~and 2011, lower demand in mature markets, the appreciation of thereal against the U.S. dollar, ~~and~~certain tax incentives, and imported steel products ~~caused~~forced Brazilian ~~steel~~ producers to adjust prices closer to export price levels in order to maintain competitiveness.
Government Regulation and Other Legal Matters
Environmental Regulation
We are subject to Brazilian federal, state and municipal environmental laws and regulations governing air emissions, waste water discharges, and solid and hazardous waste handling and disposal. We are committed to controlling the substantial environmental impact caused by our steelmaking, mining, cement and logistics operations, in accordance with international standards and in compliance with environmental laws and regulations in Brazil. We believe we are currently in substantial compliance with applicable environmental requirements.
The Brazilian Federal Constitution provides both the federal and state governments authority to enact environmental protection laws and issue regulations under such laws. In addition, we are subject to municipal environmental laws and regulations. While the Brazilian government has authority to promulgate environmental regulations setting forth minimum standards of environmental protection, state and local governments have the power to enact more stringent environmental regulations. ~~Most~~We are subject to regulation and supervision by the Brazilian Ministry of Environment, the Environmental National Council (“CONAMA”), which is the Federal body responsible for enacting technicalregulations and environmental ~~regulations in Brazil are thus at~~protection standards, and by the ~~state~~Brazilian Institute of Environment and ~~local level complemented by a current process of regulations reviews and new propositions~~Renewable Natural Resources (“IBAMA”), which is responsible for enforcing environmental laws at the federal level. The environmental regulations of the State of Rio de Janeiro, in which the Presidente Vargas ~~steelworks~~Steelworks is located, are ~~plant-specific. Thus, specific~~enforced by the State Institute of Environment (“INEA”). In the state of Minas Gerais, where our main mining operation is located, we are subject to regulation and supervision by the Environmental Policy Council (“COPAM”) and the State Environmental Foundation (“FEAM”). Specific goals and standards are established in operating permits or environmental accords issued to each company or plant. These specific operation conditions complement the standards and regulations of general applicability and are required to be observed throughout the life of the permit or accord. The terms of such operating permits are subject to change and are likely to become stricter. All of our facilities currently have operating permits.

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In ~~2010,~~recent years, we requested ~~and~~and/or obtained several emissions permits and renewals of environmental permits, both for our current operations and for the development of new projects regarding steel and cement manufacturing, iron ore and limestone mining and logistics, including: (i) the ~~expansion of the Casa de Pedra mine;~~Operating and Recovery Permit for our Presidente Vargas Steelworks; (ii) the construction of the Transnordestina Railroad, to explore railway transportation in the Northeastern region of Brazil; (iii) the operation of a cement mill at Volta Redonda; and (iv) the expansion of the Solid Bulks Terminal of Itaguaí Port, in the State of Rio de Janeiro, or TECAR, to 45 million tons per year.
Environmental Expenditures and Claims
Promoting responsible environmental and social management is part of our business. We prioritize processes and ~~equipments~~equipment that offer the most modern and reliable technologies on environmental risks monitoring and control. We operate a corporate environmental department managed under an Environmental Management System, or EMS, compliant with ISO 14001:2004 requirements. In addition, we have a ~~factory~~ committee for environmental management composed of professionals from all departments of CSN’s units. This ~~factory~~ committee usually meets every week to discuss any problem that may arise and to identify risks and aspects of the operations in which the group can act pro-actively, in order to prevent possible environmental harm.
Since our privatization, we have invested heavily in environmental protection and remediation programs. We had environmental expenditures (capitalized and expensed) of R$310.6 million in 2011, R$336.0 million in 2010 and R$290.5 million in ~~2009 and. R$330.~~7 ~~million in 2008~~2009.
Our investments in environmental projects during ~~2010~~2011 were ~~related~~ mainly related to: (i) operation, maintenance and ~~retrofit~~retrofitting of environmental control ~~equipments;~~equipment; (ii) development of environmental studies for permit applications and (iii) studies, monitoring and remediation of environmental liabilities due to prior operations, especially before our privatization. In ~~2010,~~2011, we had a total of R$~~336.0~~311 million in environmental expenditures, of which R$~~116.2~~79.8 million was capital expenditures and R$~~219.8~~230.8 million was operational expenditures.
In 2010, we signed with the Rio de Janeiro State government a Term of Undertaking, or TAC, that ~~requires~~ ~~investments of R$260.0 million in our Presidente Vargas steelworks for the next 3 years. This TAC preview~~required newinvestments and studies to retrofit our environmental control ~~equipments.~~ equipment at the Presidente Vargas Steelworks. The TAC initially estimated the total amount to be disbursed in connection with implementation of the required projects thereunder to be R$216 million. The initial estimate was updated to R$260 million as we obtained more accurate cost estimates for completion of the projects, a process that continued over the course of 2011. These cost estimates are received as we approach the start of a required project. Although we have not yet concluded the process of obtaining update cost estimates for all projects under the TAC, we expect that investments required will exceed our last estimate.
Our main environmental claims onas of December 31, ~~2010~~2011 were associated with ~~clean-up obligations~~recovery services at former coal mines decommissioned in 1989 in the state of Santa ~~Catarina; legal environmental compensation projected for new projects at the States of Minas Gerais~~Catarina, and ~~Rio de Janeiro; and clean-up obligations~~recovery services due to previous operations in our Presidente Vargas ~~steelworks.~~ Steelworks.
We record a provision for remediation costs and environmental lawsuits when a loss is probable and the amount can be reasonably estimated. This provision is included in our statements of income in “Other Operating (Expenses) Income”.We do not include in our reserves environmental liabilities related to ERSA, as these are contractually supported by its seller.
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~~We record a reserve for remediation costs and environmental lawsuits when a loss is probable and the amount can be reasonably estimated.~~ As of December 31, ~~2010,~~2011, we had provisions for environmental liabilities in the total amount of R$~~278.1~~312.6 million, ~~as compared to R$ 116.5 million as of December 31, 2009,~~ which we believe are sufficient to cover all probable losses. ~~For further information, see Note 22~~Such amount compares to R$278.1 million as of December 31, 2010, and R$116.5 million as of December 31, 2009. The increase in our provisions forenvironmental liabilities in 2010 as compared to 2009 and in 2011 as compared to 2010 is mainly due to our ~~consolidated~~conclusion of certain environmental investigations of landfills and corresponding remediation costs, which have been recorded as probable remediation obligations, and certain environmental compensation agreed to in the TAC, which are not related to investments in equipment. The changes in the provision for environmental liabilities on our financial statements ~~included~~are as follows:

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Amounts
(in millions of R$)
December 31, 2009
116.5
Landfills⁽¹⁾
116.7
Term of Undertaking (TAC)⁽²⁾
34.7
Other
10.2
December 31, 2010
278.1
Landfills⁽¹⁾
6.2
Term of Undertaking (TAC)⁽²⁾
28.3
Other
-
December 31, 2011
312.6
(1)           During 2010 and 2011 we concluded certain environmental investigations of landfills and, therefore, were able to have estimate calculations of remediation costs. We recorded the related provision for those landfills with probable remediation obligations for the respective years.
(2)           Refers to environmental compensation agreed in ~~“Item 18. Financial Statements.”~~the TAC but not related to investments in equipment.
Brazil – mining regulation
Under the Brazilian Constitution, all mineral resources in Brazil belong to the federal government. The Brazilian Constitution and Mineral Code impose various regulatory restrictions on mining companies relating to, among other things:
·        the manner in which mineral deposits must be exploited;
·        the health and safety of workers and the safety of residential areas located near mining operations;
·        the protection and restoration of the environment;
·        the prevention of pollution; and
·        the support of local communities where mines are located.
Mining companies in Brazil can only prospect and mine pursuant to prospecting authorizations or mining concessions granted by the National Department of Mineral Production (Departamento Nacional de Produção Mineral), or DNPM, an agency of the Ministry of Mines and Energy of the Brazilian Government. DNPM grants prospecting authorizations to a requesting party for an initial period of one to three years. These authorizations are renewable at DNPM’s discretion for another period of one to three years, provided that the requesting party is able to show that the renewal is necessary for proper conclusion of prospecting activities. On-site prospecting activities must start within 60 days of official publication of the issuance of a prospecting authorization. Upon completion of prospecting activities and geological exploration at the site, the grantee must submit a final report to DNPM. If the geological exploration reveals the existence of a mineral deposit that is economically exploitable, the grantee has one year (which DNPM may extend) from approval of the report by DNPM to apply for a mining concession or to transfer its right to apply for a mining concession to an unrelated party. When a mining concession is granted, ~~the holder~~theholder of the concession must begin on-site mining activities within six months. DNPM grants mining concessions for an indeterminate period of time lasting until the exhaustion of the mineral deposit. Extracted minerals that are specified in the concession belong to the holder of the concession. With the prior approval of DNPM, the holder of a mining concession can transfer it to an unrelated party that is qualified to own concessions. Under certain circumstances, mining concessions may be challenged by unrelated parties.

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Mining Concessions
Our iron ore mining activities at Casa de Pedra mine are performed based on aManifesto de Mina, which gives us full ownership over the mineral deposits existing within our property limits. Our iron ore mining activities at Engenho and Fernandinho mines are based on a concession by the Ministry of Mines and Energy, which grants us the right to exploit mineral resources from the mine for an indeterminate period of time lasting until the exhaustion of the mineral deposit. Our limestone and dolomite mining activities at the Bocaína mine and our tin mining activities at Ariquemes (ERSA mine) are based on a concession under the same conditions. See “Item 4D. Property, Plant and Equipment” for further ~~information on our reserves at Casa de Pedra mine and resources at Fernandinho and Engenho mines.~~
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~~Table of Contents~~information.
Mineral Rights and Ownership
Our mineral rights for Casa de Pedra mine include the mining concession, a beneficiation plant, roads, a loading yard and railway branch, and are duly registered with the ~~National Department of Mineral Production (~~~~Departamento Nacional de Produção Mineral -~~ DNPM). We have also been granted by DNPM easements in 15 mine areas located in the surrounding region, which are not currently part of Casa de Pedra mine, and hold title to all our proved and probable reserves.
In addition, we have obtained and are in compliance with all licenses and authorizations for our operations and projects at Casa de Pedra mine.
The exploitation in Casa de Pedra mine ~~are~~is subject to mining lease restrictions, which were duly addressed in our iron ore reserve calculations. Quality requirements (chemical and physical) are the key “modifying factors” in the definition of ore reserves at Casa de Pedra and were properly accounted for by the CSN mine planning department.
The Brazilian government charges us a royalty known as the Financial Compensation for Exploiting Mineral Resources (Compensação Financeira pela Exploração de Recursos Minerais), or CFEM, on the revenues from the sale of minerals we extract, net of taxes, insurance costs and costs of transportation. DNPM is responsible for enacting regulations on CFEM and auditing the mining companies to ensure the proper payment of CFEM The current annual rates are:
·3% on ~~our products are:~~bauxite, potash and manganese ore;
·        2% for iron ore, kaolin, copper, nickel, fertilizers and other ~~minerals;~~minerals
·~~3% on bauxite, potash and manganese ore;~~; and
·        1% on gold.
The Mineral Code and ancillary mining laws and regulations also impose other financial obligations. For example, mining companies must compensate landowners for the damages and loss of income caused by the use and occupation of the land (either for exploitation or exploration) and must also share with the landowners the results of the exploration (in a rate of 50% of the CFEM). Mining companies must also compensate the government for damages caused to public lands. A substantial majority of our mines and mining concessions are on lands owned by us or on public lands for which we hold mining concessions.
Antitrust Regulation
We are subject to various laws in Brazil which seek to maintain a competitive commercial ~~environment~~environment. The competition law and practice in ~~the Brazilian steel industry. For instance, under~~Brazil is governed primarily by Law No. 8,884/94, theLei de Defesa da Concorrência, or Competition Defense ~~Law, the~~Law. The Brazilian Antitrust System is currently comprised of three agencies, namelySecretaria de Direito Econômico(SDE) ofandConselho Administrativo de Defesa Econômica (CADE),both entailed to Brazil’s Ministry of Justice, andSecretaria de Acompanhamento Econômico (SEAE),entailed to Brazil’s Ministry of Treasury.

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SDE has broad authority to promote economic competition among companies in Brazil, including the ability to suspend price increases and investigate collusive behavior between companies. ~~In addition, if the Brazilian anti-trust agency (~~~~Conselho Administrativo de Defesa Econômica~~~~), or~~If CADE determines that certain companies have acted collusively to raise prices, it has the authority to impose fines on the offending companies, prohibit them from receiving loans from Brazilian government sources and bar them from bidding on public projects. In addition, CADE has the authority to dissolve mergers and to require a company to divest assets should it determine that the industry in which it operates is insufficiently competitive.
A new Antitrust Law was enacted in 2011 (Law No. 12,529/11), which provides for significant changes in both the current structure and proceedings. The main change is the introduction of a mandatory pre-merger notification system, as opposed to the post-merger review system currently in force. The new CADE will be formed by an Administrative Tribunal of Economic Defense(Tribunal Administrativo de Defesa Econômica), a General-Superintendence(Superintendência-Geral)and a Department of Economic Studies(Departamento de Estudos Econômicos). Law No. 12,529/11 is expectedto come into force on May 30, 2012.
For further antitrust-related information, see “Item 8A. Consolidated Statements and Other Financial Information-Legal Proceedings”.
Regulation of Other Activities
In addition to mining, environmental and antitrust regulation, we are subject to comprehensive regulatory regimes for certain of our other activities, including railroad transport, electricity generation and ports.
Our railroad business is subject to regulation and supervision by the Brazilian Ministry of Transportation and the transportation regulatory agencyAgência Nacional de Transportes Terrestres(ANTT), and operates pursuant to concession contracts granted by the federal government, which impose certain limitations and obligations. As of December 31, 2011, we owned the following railroad related assets: (i) a 33.27% direct and indirect participation in MRS Logística S.A., which holds a concession to operate Brazil’s Southeastern railway system until 2026, renewable for an additional 30 years, and (ii) a 70.91% participation in Transnordestina Logística S.A., which holds a concession to operate Brazil’s Northeastern railway system until 2027, renewable for an additional 30 years.
Our electricity generation business is subject to regulation and supervision by the Brazilian Ministry of Mines and Energy, the electricity regulatory agencyAgência Nacional de Energia Elétrica (ANEEL), and theOperador Nacional do Sistema Elétrico (ONS). As of December 31, 2011, we owned the following energy related assets: (i) a 238 MW thermoelectric co-generation power plant at our Presidente Vargas Steelworks, (ii) a 48.75% participation in Itá Energética S.A. (“Itasa”), which owns and operates 60.5% of the Itá hydroelectric facility on the Uruguay river in Southern Brazil under a renewable 30-year concession until 2030, and (iii) a 17.9% participation in the consortium that built and has the right to operate the Igarapava hydroelectric facility in Southeast Brazil under a renewable 30-year concession until 2028.
Our port business is subject to regulation and supervision by the Brazilian Ministry of Transportation and the ports and navigation agencyAgência Nacional de Transportes Aquaviários (ANTAQ). As of December 31, 2011, we owned the following port related assets: (i) a concession to operate the Terminal de Carvão (“TECAR”), the solid bulks terminal at Itaguaí Port, located in the State of Rio de Janeiro, which expires in 2022, renewable for an additional 25 years, and (ii) a 99.99% participation in Sepetiba Tecon S.A. (“TECON”), which has a concession to operate the container terminal at Itaguaí Port for a 25-year term until 2023, renewable for an additional 25 years.
For further information on our logistics and energy segments, see “Item 4B. Business Overview”.
Proceedings Related to Protectionist Measures
Over the past several years, exports of steel products from various countries and companies, including Brazil and us, have been the subject of anti-dumping, countervailing duty and other trade related investigations from importing countries. These investigations resulted in duties that limit our access to certain markets. Despite the imposed limitations, our exports have not been significantly affected, as we were able to re-direct our sales from restricted markets to other markets, and also because the volume of exports or products available for ~~exports~~export has been decreasing as a result of the increased demand from our domestic market and thus present participation of exports in our total sales ~~was~~has been significantly reduced.
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~~Below~~In Brazil, we are ~~summaries~~subject to regulation and supervision by the Ministry of Development, Industry and Foreign Trade, theSecretaria de Comércio Exterior (SECEX) and theDepartamento de Defesa Comercial (DECOM). Worlwide, our exports are subject to the protectionist measures ~~to which our exports are subject.~~summarized below.
United States
Anti-dumping(AD)and Countervailing Duties (CVD). In the U.S., we are subject to regulation and supervision by the U.S. Department of Commerce (DOC), the International Trade Commission (ITC), the International Trade Administration (ITA) and the Import Administration (IA). In September 1998, U.S. authorities initiated anti-dumping and countervailing duties investigations on hot-rolled steel sheet and coil imported from Brazil and other countries. In February 1999, the ~~U.S. Department of Commerce, or~~ DOC reached a preliminary determination on the anti-dumping and countervailing duties margins. We were found to have preliminary margins of 50.66% for anti-dumping, and of 6.62% for countervailing duties.
In July 1999, Brazil and the United States signed a five-year suspension agreement, suspending the anti-dumping investigation and establishing a minimum price of US$327 per ton (delivery duty paid), subject to quarterly review by the DOC. In February 2002, the U.S. government terminated the anti-dumping suspension agreement and reinstated the anti-dumping margin of 41.27%. Also in July 1999, the Brazilian and U.S. governments signed a suspension agreement related to the countervailing duties investigation, which limited exports of hot-rolled sheets and coils from Brazil to 295,000 tons per year. At the request of the Brazilian government, the agreement was terminated in September 2004. Upon the termination of this agreement, countervailing duties of 6.35% became effective in September 2004, to be applied to imports of hot-rolled products from Brazil. In April 2004, we requested the DOC to conduct an administrative review of the anti-dumping investigation. Through this review, in April 2005, we obtained a favorable preliminary determination of “zero” margin of dumping from the DOC. Final determination was issued in October 2005 and the “zero” margin of dumping preliminarily found by the DOC was confirmed. With respect to the countervailing duties investigation, the Brazilian and U.S. governments signed, in July 1999, a suspension agreement which limited exports of hot-rolled sheets and coils from Brazil to 295,000 tons per year. At the request of the Brazilian government, the agreement was terminated in September 2004. Upon termination of this agreement, countervailing duties of 6.35% became effective regarding imports of hot-rolled products from Brazil.
Simultaneously to the administrative review, we participated in an anti-dumping and countervailing duties expiry review which involved the exports of hot-rolled sheet and coils to the U.S. The expiry review was jointly developed by the ~~International Trade Commission~~ITC and the DOC, through the ~~Import Administration- I.A.,~~IA, and was initiated in May 2004. A final determination was rendered in April 2005, retaining the anti-dumping and countervailing duties orders until May 12, 2010.
In October 2005, the DOC initiated an administrative review of the investigation of subsidies and countervailing duties involving hot-rolled products. When the petitioners denied their participation in the review, it was terminated by the DOC in February 2006.
In April 2010, ananother anti-dumping and countervailing duties expiry review was initiated and jointly developed by the DOC and ITC through the IA. In November 2010, the DOC issued the final results of the CVD sunset review. Although it was decided that subsidization will continue or recur if the order is revoked, the DOC found that the likely margin of subsidization would be zero. The final determination ~~for~~was issued in June 6, 2011 and revoked both the ADanti-dumping and ~~CVD orders~~the countervailing duties orders.
Canada
Anti-dumping. In Canada, we are ~~expected for June 2011.~~
subject to regulation and supervision by the Canadian International Trade Tribunal (CITT), the Canada
Border Services Agency (CBSA) and the Anti-dumping. and Countervailing Directorate. In January 2001, the Canadian government initiated an anti-dumping investigation process involving hot-rolled sheets and coils exported from Brazil. The investigation was concluded in August 2001, with the imposition by Canada of an anti-dumping tax of 26.3% on imports of those products from Brazil, with minimum prices to be observed. In August 2002, the ~~Canada Border and Services Agency, or the~~ CBSA initiated a revision of the values previously established and, in March 2003, the revised values were ~~issued.~~determined. These values are adjusted whenever there is an adjustment of ~~the~~ Canadian domestic prices. In February 2005, the CBSA initiated a reinvestigation of hot-rolled sheets and coils. We did not participate in this investigation.
In December 2005, the ~~Canadian International Trade Tribunal, or~~ CITT initiated an expiry review of hot-rolled products, in which we participated. A final determination was issued in August 2006, determining the continuation of the anti-dumping order for hot-rolled products. As a result, exports of our hot–rolled products to Canada are subject to anti-dumping duties of 77%.
In October 2010, the ~~Canadian International Trade Tribunal, or~~ CITT initiated an expiry review of hot-rolled products, in which CSN decided not to participate.
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~~Argentina~~

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Argentina
Anti-dumping – hot-rolled products. In Argentina, we are subject to regulation and supervision by the Ministry of Economy and Production, the Secretaria de Industria y Comercio, the Secretaria de la Pequeña y Mediana Empresa and the Subsecretaria de Política y Gestión Comercial. Argentina commenced an anti-dumping investigation of hot-rolled products from Brazil, Russia and the Ukraine in October 1998. In April 1999, the ~~Argentinean~~Argentine government applied a provisional anti-dumping order on Brazilian imports, fixing a minimum price of US$410 per ton FOB (free on board), for four months ending in August 1999.
In December 1999, the Argentine government accepted a suspension agreement of the anti-dumping measures, providing for quotas of 36,000 tons for the first year, 38,000 tons for the second and 39,000 tons for the third, fourth and fifth years, and minimum prices from US$325 to US$365 per ton CFR FO (cost, insurance and freight, free out), subject to quarterly adjustments based on the publication of the Argentine National Institute of Statistics and Census, or INDEC.
In December 2004, exporters were notified of the revision of resolution No. 1,420/1999 from the Economic, Work and Public Services Ministry of Argentina relating to the export of Brazilian hot-rolled products. In January 2005, an expiry review of the anti-dumping process was initiated to analyze the maintenance, modification and/or derogation of the action of the administrative authority of the ~~Argentinean~~Argentine government. We participated in this review.
In June 2006, Argentina published ~~resolution~~Resolution No. 412/2006 terminating the anti-dumping investigation for hot-rolled products from Brazil, Russia and the Ukraine, determiningamargin of 147.95%to ~~Brazil~~.Brazil. The application of anti-dumping duties was replaced by a suspension agreement set forth in that same ~~resolution,~~resolution. The suspension agreement was valid for five years from its publication, from June 6, 2006 until June 5, 2011. The suspension agreement expired on June 6, ~~2006.~~2011, and, as a consequence, the order is considered revoked and the exports of hot rolled to Argentina are no longer subject to anti-dumping duties.
Overview of Steel Industry
World Steel Industry
The worldwide steel industry comprises hundreds of steelmaking facilities divided into two major categories, integrated steelworks and non-integrated steelworks, ~~characterized by~~depending on the method used for producing steel. Integrated plants, which accounted for approximately 66% of worldwide crude steel production in 2008, typically produce steel by smelting in blast furnaces the iron oxide found in ore and refining the iron into steel, mainly through the use of basic oxygen furnaces or, more rarely, in electric arc furnaces. Non-integrated plants (sometimes referred to as mini-mills), which accounted for approximately 34% of worldwide crude steel production in 2008, produce steel by melting scrap metal, occasionally complemented with other metallic materials, such as direct reduction iron or hot-briquette iron, in electric arc furnaces. Industry experts expect that a lack of a reliable and continuous supply of quality scrap metal, as well as the high cost of electricity, may restrict the growth of mini- mills.
Steel continues to be the material of choice in the automotive, construction, machinery and other industries. Notwithstanding potential threats from substitute materials such as plastics, aluminum, glass and ceramics, especially for the automotive industry, steel continues to demonstrate its economic advantage. From 1990 through 2005, total global crude steel production ranged between approximately 770 million and 1.1 billion tons per year. ~~In 2008, it~~According to the World Steel Association, in 2011, production reached ~~1.33~~a new record of 1.53 billion tons, ~~representing~~which represents a ~~1.2% decrease~~6.8% increase as compared to ~~2007. In 2010, worldwide~~2010. All major producing countries, except for Japan and Spain, increased their production ~~was 1.41 billion tons, an increase of 15% compared to 2009 and a new record for global steel industry.~~levels in 2011.
China’s crude steel production in ~~2010~~2011 reached ~~627~~695 million tons, an increase of ~~9.3%~~8.9% as compared to ~~2009.~~2010. Production volume in China has ~~almost~~more than tripled in ~~in eight~~the last nine years, from 222 million tons in 2002. China’s share of world steel production ~~declined~~increased from ~~47% in 200~~9 ~~to 44%~~44.7% in 2010 ~~what is consequence of steelmaking recovery~~to 45.5% in ~~rest of world (-21% in 2009 and +20% in 2010).~~
~~Asia produced 898~~2011. In 2011, Asian countries improved their production by 7.9%, reaching 988 million tons of crude steel in 2010, representing 63.5% of world total steel production and an increase of 11.6% as compared to 2009. Overall, steel production increased in Europe, North America, South America and Commonwealth of Independent States in 2010.tons.
Brazilian Steel Industry
Since the 1940s, steel has been of vital importance to the Brazilian economy. During the 1970s, strong government investments were made to provide Brazil with a steel industry able to support the country’sindustrialization boom. After a decade of little to no investment in the sector in the 1980s, the government selected the steel sector as the first for privatization commencing in 1991, resulting in a more efficient group of companies operating today.

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A Privatized Industry
During almost 50 years of state control, the Brazilian flat steel sector was coordinated on a national basis under the auspices ofSiderbrás, the national steel monopoly. The state had far less involvement in the non-flat steel sector, which has traditionally been made up of smaller private sector companies. The larger integrated flat steel producers operated as semi autonomous companies under the control of Siderbrás and were each individually privatized between 1991 and 1993. We believe that the privatization of the steel sector in Brazil has resulted in improved financial performance, as a result of increased efficiencies, higher levels of productivity, lower operating costs, a decline in the labor force and an increase in investment.
Domestic Demand
Historically, the Brazilian steel industry has been affected by substantial fluctuations in domestic demand for steel. Although national per capita consumption varies with GDP, fluctuations in steel consumption tend to be more pronounced than changes in economic activity. ~~Per capita crude~~Crude steel consumption per capita in Brazil has increased from 95104 kilograms ~~per capita~~ in 1999 to ~~150~~147 kilograms in ~~2010, which~~2010. It is still considered low when compared to the levels inof some developed countries, such as the United States and Germany.
From 2005 to 2007, despite a good global ~~conjuncture, the~~economic scenario, Brazilian ~~economy exhibited an~~GDP grew on average ~~growth GDP of~~ 4.4%. ~~Since September~~In 2008 and 2009, overall global economic activity ~~has~~ slowed significantly ~~which impacted our fourth quarter results. Apparent~~and domestic apparent steel consumption ~~in 2008 and 2009 were~~amounted to 24.0 million tons and 18.6 million tons, respectively.In 2010, with the ~~internal~~recovery of the global economy, domestic demand ~~grew~~rose by 43%, to 26.6 million tons. On the other hand, in 2011, domestic steel demand decreased 4.2% to 25.0 million tons, mainly due to high levels of inventory held by distributors and increased indirect imports.
The Brazilian flat steel sector is shifting production to the higher value-added consumer durable sector. This sector is highly dependent on domestic consumer confidence, which, in turn, is affected by economic policies and certain expectations of the current government administration. Over the past years, automobile manufacturers made significant investments in Brazil. In 2009 and 2010, ~~the vehicles~~vehicle production recovered from the 2008 financial crisis in response ofto government incentives ~~like~~such as tax cuts.In 2011, the Brazilian market reached a record 3.6 million vehicles sold. Also, exports rose by 7.7% in the same period, generating revenues of US$15.4 billion.
Market Participants
According to ~~IBS,~~IABR (Instituto Aço Brasil), the Brazilian steel industry is composed of 2628 mills managed by 910 corporate groups, with an installed annual capacity of approximately 4745 million tons, producing a full range of flat, long, carbon, stainless and specialty steel. ~~For information on the production by the largest Brazilian steel companies, see “Item 4B. Business Overview—Competition—Competition in the Brazilian Steel Industry.”~~
Capacity Utilization
~~Mean~~There were no changes in Brazilian nominal steel production capacity in ~~2010~~2011 compared to 2010. This capacity was estimated at 42 million tons ~~(the~~(including the 5 million tons CSA facility, which started production in ~~the end of the year), what means that~~2010). The local steel industry operated at approximately 78%~~, higher than 63.4% of nominal crude steel capacity during 2009.~~ utilization in 2011, in line with the level recorded in 2010.
Exports/Imports
Brazil has been playing an important role in the export market, primarily as an exporter of semi-finished products. The Brazilian steel industry has taken several steps towards expanding its capacity to produce value-added products. Brazil’s exports of semi-finished steel products reached 5.7 million tons in 2008 and 4.6 million tons in 2009, which represented 62% and 54% of total steel exports for each period, respectively. In 2010, slabs and billets exports ~~summed~~totaled 5.3 million tons (58% of tons exported in the year). In 2011, the exports of semi-finished products reached 7.2 million tons, an increase of 36.4% as compared to 2010, representing 66% of total exports.
In ~~2010,~~2011, Brazilian steel exports totaled ~~9.0~~10.8 million tons, representing ~~38%~~34% of total Brazilian ~~steelmakers~~steelmakers’ sales (domestic plus exports) and accounting for US$ ~~5.8~~8.4 billion in export earnings for Brazil. Over the last 20 years, the Brazilian steel industry has been characterized by a structural need to export, which is demonstrated by the industry’s supply demand curve. The Brazilian steel industry has experienced periods of overcapacity, ~~cyclicalityand~~cyclicality and intense competition during the past several years. Demand for finished steel products, as measured by ~~domestic apparent~~domesticapparent consumption, has consistently fallen short of total supply (defined as total production plus imports). In ~~2010,~~2011, supply totaled ~~32.8~~35.2 million tons, as compared to apparent consumption of ~~26.6~~25.2 million tons.
48

Table of Contents
~~Steel~~
In 2011, steel imports ~~climbed~~decreased 35.9% as compared to 2010, to 3.8 million tons, which corresponds to 15% of apparent domestic consumption. In 2010, steel imports increased 154% ~~in 2010,~~ to 5.93 million tons (22% of apparent domestic consumption) as compared to 2.3 million tons in 2009 (8.6% of steel consumption), according to ~~IBS.~~IABR.
For information on the production by the largest Brazilian steel companies, see “Item 4B. Business Overview—Competition—Competition in the Brazilian Steel Industry.”
4C. Organizational Structure
We conduct our business directly and through subsidiaries. For more information on our organizational structure, see Note 2(b) to our consolidated financial statements included in “Item 18. Financial Statements.”
4D. Property, Plant and Equipment
Our principal executive offices are located in the city of São Paulo, the State of São Paulo at Avenida Brigadeiro Faria Lima, 3,400, ~~20th~~20^th floor (telephone number 55-11-3049-7100), and our main production operations are located in the city of Volta Redonda, in the State of Rio de Janeiro, located approximately 120 km from the city of Rio de Janeiro. Presidente Vargas ~~steelworks,~~Steelworks, our steel mill, is an integrated facility covering approximately 4.0 square km and located in the city of Volta Redonda in the State of Rio de Janeiro. Our iron ore, limestone and dolomite mines are located in the State of Minas Gerais, which borders the State of Rio de Janeiro to the north. Each of these mines islies within 500 km of, and is connected by rail and paved road to, the city of Volta Redonda.
The table below sets forth certain material information regarding our property as of December 31, ~~2010.~~
2011.
49
Facility

Location

Size

Use

Productive Capacity

Title
Encumbrances

~~Facility~~

~~Location~~

~~Size~~

~~Use~~

~~Productive~~
~~Capacity~~
~~Title~~
~~Encumbrances~~

Presidente Vargas ~~steelworks~~Steelworks

Volta Redonda, State of Rio de Janeiro

4.0 square km

steel mill

5.6 million tons per year

owned
None

CSN Porto Real (former GalvaSud)

Porto Real, State of Rio de Janeiro

0.27 square km

galvanized steel producer

350,000 tons per year

owned
mortgage⁽¹⁾⁽²⁾
CSN Paraná

Araucária, State of Paraná

0.98 square km

galvanized and pre-painted products

100,000 tons of pre- painted product and 220,000 tons of pickled hot-rolled coils

owned
None

Metalic

Maracanaú, State of Ceará

0.10 square km

steel can manufacturer

900 million cans per year

owned
~~mortgage~~⁽³⁾
None
Prada

São Paulo, State of São Paulo and Uberlândia, State of Minas Gerais

SP – 0.14 square km;
~~MG – 0.02 square km;~~

steel can manufacturer

1 billion cans per year

owned
None
MG – 0.02 square km;

CSN, LLC

Terre Haute, Indiana, USA

0.78 square km

cold-rolled and galvanized products

800,000 tons of cold-rolled products and 315,000 tons per year of galvanized products

owned
None

Table of Contents

Lusosider

Seixal, Portugal

0.39 square km

hot-dip galvanized, cold-rolled and tin products

240,000 tons of galvanized products and 50,000 tons of cold-rolled products per year

owned

None

Prada

Mogi das Cruzes, State of São Paulo

0.20 square km

distributor

730,000 tons per year

owned

None

Casa de Pedra mine

Congonhas, State of Minas Gerais

44.57 square km

iron ore mine

60.0 mtpy⁽⁴⁾⁽³⁾

owned⁽⁵⁾⁽⁴⁾

None

Engenho mine⁽⁶⁾⁽⁵⁾

Congonhas, State of Minas Gerais

2.87 square km

iron ore mine

5.0 mtpy

concession

None

Fernandinho mine⁽⁶⁾⁽⁵⁾

Itabirito, State of Minas Gerais

1.84 square km

iron ore mine

2.0 mtpy

concession

None

Bocaina mine

Arcos, State of Minas Gerais

4.11 square km

limestone and dolomite mines

4.0 mtpy

concession

None

ERSA mine

Ariquemes, State of Rondônia

0.015 square km

tin mine

1,800 tons

concession

None

Thermoelectric ~~co- generation~~co-generation power plant

Volta Redonda, State of Rio de Janeiro

0.04 square km

power plant

238 MW

owned

None

Itá⁽⁷⁾⁽⁶⁾

Uruguay River - Southern Brazil

9.87 square km

power plant

1,450 MW

concession

None

Igarapava⁽⁸⁾⁽⁷⁾

State of Minas Gerais

5.19 square km

power plant

210 MW

concession

None

Southeastern
~~Railway System~~⁽⁹⁾

Southern and Southeastern regions of Brazil

1,674 km of tracks

railway

concession

None

Railway System⁽⁸⁾

Transnordestina

Northern and northeastern regions of Brazil

4,238 km of tracks

railway

concession

None

TECAR at Itaguaí Port

Itaguaí, State of Rio de Janeiro

0.69 square km

raw materials

4 mtpy

concession

None

Container terminal - TECON at Itaguaí port

Itaguaí, State of Rio de Janeiro

0.44 square km

containers

2 mtpy

concession

None

Land

State of Rio de Janeiro

31.02 square km

undeveloped

owned

pledge^(10)(9)/Collateral / mortgage⁽²⁾

Land

State of Santa Catarina

6.22 square km

undeveloped

owned

pledge^(10)(9)/Collateral

Land

State of Minas Gerais

~~29.09~~34.94 square km

undeveloped

owned

None

Land

State of Piaui

506,95 square km

undeveloped

owned

None

(1) Pursuant to a loan agreement entered into by the State of Rio de Janeiro and Galvasud as of May 4, 2000.
(2) Pursuant to a loan agreement entered into by Kreditanstatt Für Wiederafbau, Galvasud and Unibanco as of August 23, 1999.
(3) ~~Pursuant to an industrial letter of credit issued by Banco do Nordeste do Brasil to Metalic, as of June 5, 2001, with maturity on February 5, 2011.~~
~~(4)~~ Information on equipment fleet installed annual ROM capacity. For information on installed annual production of products capacity, and information on mineral ~~resources~~reserves at our Casa de Pedra mine, see “—Reserves at Casa de Pedra Mine” and table under “—Casa de Pedra Mine” below.
~~(5)~~(4) Based on theManifesto de ~~Mina.~~Mina. See, “Item 4. Information on the Company ~~—A. History and Development of the Company—~~- B. Business Overview- Government Regulation and Other Legal ~~Matters—~~Matters - Mining Concessions.”
~~(6)~~(5) Property owned by our 60% consolidated investee Namisa.
~~(7)~~(6) Property 29.5% owned by us.
~~(8)~~(7) Property 17.9% owned by us.
~~(9)~~(8) We indirectly hold the concession through MRS.
~~(10)~~(9) Pledged pursuant to various legal proceedings, mainly related to tax claims.

For information on environmental issues with respect to some of the facilities described above, see “Item 4B. Business Overview—Government Regulation and Other Legal Matters—Environmental Expenditures and Claims.” In addition, for information on our plans to construct, expand and improve our facilities, see ~~Planned Investments.”~~“Item 4. Information on the Company - D. Property, Plant and Equipment —Planned Investments” and Note 2212 to our financial statements included elsewhere in this Form 20-F.

fp49a

The map above shows the locations of the Presidente Vargas ~~steelworks,~~Steelworks, the CSN Paraná, Prada, CSN Porto Real (former GalvaSud), Metalic, Lusosider, ERSA and CSN LLC facilities, our iron ore, limestone and dolomite mines, the power generating facilities in which we have an ownership interest, and the main port used by us to export steel products and import coal and coke, as well as the main railway connections.

Acquisitions and Dispositions

Riversdale

On November 24, 2009, we ~~approved the~~concluded an initial acquisition, through our subsidiary CSN Europe, ~~Ltda,~~Lda, of a ~~16.3%~~14.9% minority interest onin Riversdale Mining Limited (“Riversdale”), a mining company listed on the Australian Stock Exchange (ASX).In January2010, we obtained the approval of the Australian Government to acquire further shares of Riversdale, and concluded the second tranche of the acquisition, reaching an equity participation of 16.3%. In addition, we participated on a capital increase carried out by Riversdale in July 2010, subscribing to new shares, but maintaining the same equity percentage. We also made several share purchases in February 2011 and reached a total equity participation of 19.9% ~~by means~~. We were further diluted in 2010 and 2011, due to the exercise of ~~several purchases~~stock options issued in ~~February 10, 2010.~~favor of the management of Riversdale and of third parties. On April 20, 2011, we adhered to ~~the public offering~~a publictakeover offer for the acquisition of Riversdale’s shares conducted by Rio Tinto and, as a consequence, we sold 100% of our equity interest held in Riversdale’s capital stock, corresponding to 47,291,891 ~~(forty-seven million, two hundred, ninety-one thousand, eight hundred, ninety-one )~~ shares, at the price of A$16.50 ~~(sixteen Australian dollars and fifty cents)~~ per share, totaling A$~~780,316,201.50 (seven hundred, eighty million, three hundred, sixteen thousand, two hundred, one Australian dollars and fifty cents).~~780,316,201.50.

Segregation of Mining Assets

We are analyzing the possibility of segregating our iron ore business and correlated logistics activities into one of our subsidiaries. ~~The~~Such segregation iswould be expected to occur upon the transfer, by means of a capital increase, of assets, liabilities, rights and obligations comprising our mining and ~~correlated~~related logistics businesses as well as of investments in related operating ~~companies. The implementation of the segregation depends~~companies, and would also depend on several aspects, including certain regulatory approvals.

Alfonso Gallardo

On ~~May 19, 2011,~~January 31, 2012, we entered into, through our Spanish subsidiary CSN Steel ~~SL,~~S.L., a share purchase agreement with the Spanish group Alfonso Gallardo (“AG Group”) to establish the acquisition of all the shares held by the AG Group in (i) Cementos Balboa S.A., a cement and clinker producer located in the Extremadura region in Spain; (ii)Corrugados Azpeitia, S.L. and Corrugados Lasao, S.L.U., long steel manufacturers with plants in the Basque Country; (iii) Stahlwerk Thüringen GmbH (“SWT”), a long steel manufacturer located in Unterwellenborn, Germany, specialized in the production of steel ~~profiles, and; (iv)~~sections; and (ii) Gallardo Sections S.L.U., a ~~AG Group~~ steel ~~distributor.Subject~~distributor of SWT’s products. The total amount of the transaction was €482.5 million, without the assumption of any indebtedness.

The transaction involved assets located in Germany, which were contemplated to ~~adjustments,~~be sold pursuant to ~~the~~a share purchase agreement ~~CSN Steel SL will pay €543 million for~~executed on May 19, 2011 with the ~~acquisition~~AG Group. The transaction brought to an end the discussions between the parties regarding different interpretations of the ~~above mentioned~~earlier agreement, including termination of the related arbitral proceeding which was pending before theCámara Oficial de Comercio e Industria de Madrid.

Usiminas

On December 31, 2011, we owned, directly and indirectly, 20.14% of the preferred shares and will assume approximately €403 million in indebtedness and further adjustments. The transaction will be submitted to necessary regulatory and/or antitrust approvals, and its closing is still subject to other conditions which are inherent to transactions11.97% of ~~this nature.~~

~~Usiminas~~

~~On April 20, 2011,~~ the ~~Company announced to the market that it had increased its interest in the capital stock~~common shares of Usinas Siderúrgicas de Minas Gerais S.A. ~~– Usiminas~~ (“Usiminas”), ~~through~~resulting from various acquisitions in the ~~acquisition of common and preferred shares, to total amount of 10.01% of the common shares and 5.25% of the preferred shares.~~

~~The Company is currently~~market since mid-2010. We are assessing strategic alternatives in relation to ~~its~~our investment in Usiminas. For more information on the antitrust matters regarding our investment in Usiminas see “Item 8. Financial Information -A. Consolidated Statements and Other Financial Information Selected Financial Data - Legal Proceedings - Antitrust.”

Namisa

In 2008, as part of our sale of a 40% interest in Namisa to a consortium of Asian shareholders that currently include Itochu Corporation, JFE Steel Corporation, Kobe Steel, Ltd, Nisshin Steel Co. Ltd., Posco and China Steel Corporation, or the Asian consortium, we and the Asian consortium have entered into a shareholders’ agreement to govern our joint control of Namisa. In case of a dead-lock among the shareholders, a resolution process requires us to initiate mediation with our partners and, if no solution is reached, the matter is then submitted to be addressed directly by the senior executives of the companies in dispute. In the event the dead-lock remains, the shareholders’ agreement provides for put and call options, which entitles the Asian consortium to elect to sell all its ownership interest in Namisa to CSN and CSN to elect to buy all ownership interest of the Asian consortium in Namisa, in each case for the fair market value of the respective shares.

In addition, certain other agreements, including ~~potential additional acquisitions~~the share purchase agreement between CSN and the Asian consortium and the long-term operational agreements between Namisa and CSN, provide for certain obligations that, in case breached or not cured within the relevant cure period, may give rise, in certain situations, to the right of ~~shares~~the non-breaching party to exercise a call or a put option, as the case may be, with respect to the Asian consortium’s ownership interest in ~~percentages higher than those mentioned above.~~Namisa.

For a more detailed description of Namisa’s current corporate structure, see Note 11 to the consolidated financial statements included in “Item 18. Financial Statements.”

Capital Expenditures

We invested R$4,401 million in 2011, R$2,382 million of which was allocated as follows: Transnordestina Logística: R$1,691 million; CSN Cimentos: R$61 million; MRS Logística: R$447 million, Namisa: R$100 million and others projects: R$83 million.

The remaining R$2,019 million was expended on: maintenance and repairs: R$549 million; expansion of the Casa de Pedra mine: R$251 million; expansion of the Port of Itaguaí: R$238 million; technological improvements: R$77 million, long steel mill: R$220 million and others projects: R$684 million. For further information, see “Item 5B. Liquidity and Capital Resources-Short-Term Debt and Short-Term Investments.”

We invested R$3,636 million in 2010, R$2,201 million of which was allocated as follows: Transnordestina Logística: R$1,371 million; CSN Aços ~~Longos:~~Longos (merged into CSN in January 2011): R$275 million; CSN Cimentos: R$249 million; MRS Logística: R$199 million and other projects: R$107 million.

The remaining R$1,435 million ~~were~~was expended ~~in:~~on: maintenance and ~~repair:~~repairs: R$483 million; expansion of the Casa de Pedra mine: R$275 million; expansion of the Port of Itaguaí: R$139 million; ~~and~~ technological improvements: R$125 million and other projects: R$413 million. ~~For further information, see “Item 5B. Liquidity and Capital Resources-Short-Term Debt and Short-Term Investments.”~~

~~In 2009, we~~We invested R$1,860 million in ~~capital expenditures.~~2009, R$696 million of which was allocated as follows: Transnordestina Logística: R$141 million; CSN Aços Longos: R$183 million; CSN Cimentos: R$163 million; MRS Logística: R$125 million and other projects: R$84 million.

The remaining R$1,164 million was expended on: maintenance and repairs: R$326 million; expansion of the Casa de Pedra mine: R$426 million; expansion of the Port of Itaguaí: R$47 million; and technological improvements: R$162 million and other projects: R$203 million.

In ~~2010,~~2011, we continued to implement our strategy of developing downstream opportunities, new products and market niches by creating or expanding capacity of galvanized products for the automotive sector and by investing in a galvanizing and pre-painting plant in order to supply the construction and home appliance industries, as described in “Item 4B. Business Overview—Facilities.”

We also intend to control production costs and secure reliable sources of raw materials, energy and transportation in support of our steelmaking operations through a program of strategic investments. The principal strategic investments already made are set forth in “Item 4B. Business Overview—Facilities.”

Planned Investments

Our operating activities require a regular ~~schedule of~~ investments ~~focused on~~in equipment maintenance, technological improvements, tools, vehicles, buildings, and industrial plants, among others. ~~In addition to current~~These investments ~~the~~are classified as Sustaining (´Stay-in-Business´) Capex.

The Company also ~~makes investments~~invests to increase ~~their~~its operational efficiency and productivity, and expand ~~its~~ production capacity in its traditional ~~businesses~~flat steel, mining and logistics businesses, as well as new businesses such as cement and long steel.

In light of an improvement in the worldwide economic scenario since the second half of 2009 and higher growth projection for Brazil, and also considering our comfortable debt level and cash position, our board of directors approved, on December 2010, an investment plan for the period between 2011 and 2015.

~~Total~~Our total planned investments amount to R$~~29.1~~20.9 billion, ~~over the next five years,~~ of which:

· • R$~~13.0~~12.0 billion in our mining segment, including capacity expansion of the Casa de Pedra mine to 50 ~~Mtpa~~mtpy and ~~the expansion~~ of ~~the~~ Nacional ~~Min~~éMinérios SA (Namisa) ~~capacity~~sales to 39 ~~Mtpa,~~mtpy, in addition to the expansion of shipping capacity of ~~the port~~our Solid Bulk terminal ~~of Bulk Solids~~ in Itaguaí (TECAR) to 84 ~~Mtpa;~~mtpy. The planned investment reflects only the portion of our investment, which is proportional to our ownership percentage of 60% in Namisa;

·• R$~~4.0~~0.8 billion in our steel segment, including ~~installation~~the completion of ~~three plants of~~our long ~~products withtotal~~ ~~capacity of 1.5 million tones per year, besides completion /~~ steel plant in Volta Redonda and completion/implementation of other flat steel projects, such as ~~automotive~~a service center for the auto industry and the expansion of pre-painted capacity, ~~expansion ,~~ and the implementation of projects for operational excellence with a focus on ~~cost reduction (eg.~~reducing costs (e.g., energy efficiency);

·• R$~~770 million~~1.0 billion in our cement segment, ~~considering investment balances for the completion of the unit of~~in order to expand our grinding capacity from 2.4 million tons to 5.4 million tons and our clinker ~~in Arcos, and the installation of a new integrated unit in Arcos (both grinding and clinker);~~production capacity from 0.8 million tons to 3.0 million tons;

·• R$~~4.7~~3.1 billion in our logistics segment, including the Transnordestina railway and our container terminal (TECON); ~~and~~

· ~~R$6.7 billion~~investments in ~~business continuity and programs to improve our performance.~~

~~The investments of~~the MRS railway are not included in this plan.

~~Certain~~• R$4.0 billion in projects ~~that were previously announced, such as the greenfield slab mills in the city~~to improve performance of Itaguaí, in the State of Rio de Janeiro, and the greenfield slab mill in the city of Congonhas, in the State of Minas Gerais are being reconsidered, due to market conditions during and after the worldwide crisis in 2008 and 2009.current productive assets (“stay-in-business”).

We expect to finance these investments through our own cash, public or private financing, and/or strategic partnerships.

Our planned investments in iron ore, steel, logistics and cement are described below.

Steel

We are currently ~~implementing~~constructing a ~~unit of 500 Kt / year of~~ long steel plant in Volta Redonda, in the State of Rio de Janeiro ~~benefiting from~~with the capacity of 500 Kt per year, making use of the existent infrastructure and energy, ~~available,~~ to produce rod ~~bar~~bars (around 80%) and wire ~~rod~~rods (around 20%)~~. The production start is expected in 2013~~, and representing the entrance of CSN ininto this new market segment.

~~We plan~~ In addition to ~~install two~~this plant, we are studying the feasibility of building other long steel plants, with similar scale and product mix. The equipments are already contracted. Detailed studies are currently being developed. Once these units are installed, we expect to have a capacity of 1.5 Mt / year of long steelplants.

We ~~are~~ also ~~investing~~invested in the expansion of service centers for the automotive market in our CSN Porto Real facility, in which ~~CSN~~CSN’s market share has been successively expanded. ~~Additionally we are implementing the expansion of our CSN Porto Real facility.~~ The pre-painted plant operates at full capacity, and there are expansion projects ~~in development to promote a significant expansion,~~underway, with the ~~prospect~~intention of doubling the current ~~capacity~~.capacity.

~~The project~~

Our investment portfolio also includes important ~~projects of~~ operational excellence projects in development and deployment ~~and~~ that will ~~represent a~~lead to significant ~~benefit of~~ cost ~~reduction,~~reductions, such as: the coke battery revamp project, which we expect will make us self-sufficient in coke; an energy power substation, which will reduce our ~~transmission~~ electrical energy transmission costs; and the start-up of our blast furnace turbine project, adding 17 MW of electricity self-generation. In addition, there are several projects ~~in order~~designed to reduce ~~the~~our consumption of raw materials and increase productivity and efficiency.

Besides the organic portfolio, we constantly evaluate various options in order to accelerate our growth in the Brazilian flat steel market and ~~to strength~~strengthen our competitiveness, including the ~~implementation~~development of new plants, expansion of ~~the~~ existing ~~unities~~units and M&A options, both in Brazil and abroad.

Mining

We expect to achieve ~~a capacity~~an annual sales level of approximately 89 ~~Mtpy in~~mtpy of iron ore ~~of which~~products, including third party purchases, by increasing capacity to 50 ~~Mtpy~~mtpy in Casa de Pedra ~~mine~~ and ~~39 Mtpy~~33 mtpy in Namisa, ~~in which the Company holds 60% share.~~where projects include both concentration and pelletizing plants.

We are also investing in the expansion of TECAR to allow anfor annual ~~export~~exports of 84 ~~Mtpy~~mtpy of iron ~~ore. The~~ore, from a current capacity isof 30 ~~Mtpy. The implementation is accelerated, and the main equipments and services are already contracted. In Namisa, the projects are both concentrati~~on ~~and pelletizing plants.~~mtpy.

In addition to these projects, under implementation, we are evaluating further expansions, including increasing of the capacity of the Casa de Pedra mine and TECAR, and evaluating other options for growth, such as areas for mineral exploration, acquisition of advanced exploration projects and acquisition transactions, among others, especially in Brazil.

Logistics

In August 2006, in order to enable the implementation of a major infrastructure project led by the Brazilian federal government, our Board of Directors approved ~~a transaction to merge~~the merging of Transnordestina S.A., a company that was state-owned at the time, ~~was state-owned,~~ into and with Companhia Ferroviária do Nordeste – CFN, an affiliate of CSN that holds a 30-year concession, granted in 1998, to operate the Northeastern Railroad of the RFFSA, with 4,238 km of railway track. The surviving entity was later renamed Transnordestina Logística S.A., or Nova Transnordestina. The Nova Transnordestina Project includes an additional 1,728 km of large gauge, state-of-the-art railway track. We expect ~~the investments~~this extension will allow the company to increase the transportation of various products, ~~such as iron ore, limestone, soy beans,~~including, oil, fuels, soybeans, cotton, sugar cane, fertilizers, ~~oil~~iron ore and ~~fuels.~~limestone. The investments for the railroad expansion will be financed through several agencies, such as FINOR – Northeastern Investment Fund, SUDENE - the Northeastern Development Federal Agency and BNDES. We have obtained certain of the ~~required~~ environmental permits required, purchased ~~parts of~~certain equipment and services. Environmental, geological and land expropriation issues may result in cost overruns and delays in implementing the ~~equipments and services and implementation is advanced~~project, which, in ~~certain regions.~~turn, may adversely affect the projected return on investment.

Until 2008, Transnordestina was jointly controlled by usCSN and Taquari Participações S.A., or Taquari, pursuant to a ~~shareholders´~~shareholders’ agreement dated November 27, 1997, asand amended on May 6, 1999 and on November 7, 2003. During 2009, we increased the capital of Transnordestina ~~upon~~by disbursing ~~certain~~ advances for future capital increases. Taquari decided not to participate in such capital increases, thus being diluted and relinquishing control ~~over~~of Transnordestina.

Transnordestina is currently a ~~subsidiary~~ fully controlled ~~by us~~CSN subsidiary, and has been consolidated in our financial statements since December 2009.

~~The current investment budget is R$ 5.4 billion and it is funded through various agencies, such as FINOR - Investment Fund~~To meet its own demand, Transnordestina Logística S.A built the largest factory of broad gauge concrete sleepers in the ~~Northeast, SUDENE - Superintendency~~world, with a daily capacity of ~~Northeast Development and BNDES, and the contribution of equity.~~

~~The implementation of the~~4,800 pieces per day. This project has been conducted by Odebrecht, through an Alliance Model formed with CSN. ~~In January, 2011, there were more than 11~~,~~000 employees working in 25 sites, 1~~,~~550 heavy equipment, daily, R$ 1.7 billion already invested and around R$ 3.0 billion in contracts entered.~~

Cement

The cement plant in Volta Redonda is currently in ~~the~~its final ramp-up phase ~~and we project that~~ in ~~the next years we will~~order to reach ~~the~~ full production ~~at a pace~~ of 2.4 million tons per year. The ~~acceptance~~use of ~~the product~~slag generated by our steel operation and ~~the brand exceed the original estimates as a new entrant.~~

~~With~~ the start-up of ~~the project to produce~~our clinker ~~and gradual increase in the self-use of slag the company can significantly~~plant should gradually reduce costs, a critical element in the cement business. ~~In 2010, we established four distribution centers and completed the structuring of the sales team.~~

~~Investments in these two projects and distribution centers will sum R$ 837 million.~~

We ~~are evaluating other organic growth initiatives~~plan to expand our grinding capacity ~~by an additional~~from 2.4 million tons to 5.4 million tons and our clinker production capacity from 0.8 million tons to 3.0 million tons, ~~per year,~~ in order to capture the strong growth expected ~~with~~for the cement market in light of events such as the Soccer World Cup ofin 2014 and ~~the~~ Olympic Games in 2016, ~~considering~~as well as the strong ~~pace~~rate of construction of new housing units, commercial and infrastructure projects.

Item 4A. Unresolved Staff Comments

None.

Item 5. Operating and Financial Review and Prospects

The following discussion should be read in conjunction with our consolidated financial statements as of December 31, 2011, 2010 and 2009 and for each of the years ended December 31, 2011, 2010 and 2009 included in “Item 18. Financial ~~Statements.”~~Statements”. Our consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and are presented in thousands ofreais (R$), as explained in Note 2(a) to our consolidated financial statements included in “Item 18. Financial Statements.”

5A. Operating Results

Overview

Macro-Economic Scenario

Brazil

Brazil’s economic growth in 2010 was among the strongest in emerging countries according to IMF (International Monetary Fund), mainly due to the increased employment rate, higher individual income and the expansion of credit. According to the Brazilian Central Bank, GDP growth was 7.5% in 2010, the highest since the introduction of the Plano Real in 1994.

According to ~~Ministry of Labour, in 2010 there were 2.52 million new jobs created in Brazil, 115% more than in 2009. In December 2010,~~ the Brazilian Institute of Geography and Statistics ~~or IBGE, recorded~~(IBGE), GDP increased by 2.7% in 2011, compared to an ~~unemployment rate~~increase of ~~5.3%~~7.5% reported in 2010. According to the Institute of Applied Economic Research (IPEA), the ~~lowest since 2002. This decline, plus~~economic slowdown was due to the ~~increase~~worsening external scenario, which triggered changes in ~~earnings, helped increase consumption. IBGE figures show that~~monetary policy, including reductions in the ~~real salaries increased by 8.6% year-over-year~~Selic base interest rate. In response, the government announced the withdrawal of the macroprudential measures introduced in December 2010, ~~impacting~~such as increased capital reserves for midterm loans and credit restrictions on vehicle acquisitions. On the fiscal front, tax benefits and exemptions are being introduced that are intended to benefit several economic sectors, including industry, retail ~~sales which increase by 10.9%~~and construction.

Despite the reduced growth rate, there were several positive developments in ~~2010,~~ the ~~greatest increase~~Brazilian economy in ~~nine years.~~

However, investments in production did not increase by the same rate, according to Bacen, resulting in increased inflationary pressure. The IPCA consumer price index increased by 5.91%, 1.41 p.p. above the midpoint of the Central Bank’s target band, mainly pressured by services and food.2011. According to the ~~Brazilian Central Bank, the total volume~~Ministry of ~~financial system credit reached R$1.7 trillion in 2010,~~Trade, Industry and Development (MDIC), trade surplus totaled US$29.7 billion, corresponding to a ~~21%~~47.8% increase as compared to ~~2009,~~2010 and the highest in four years. while annual exports increased by 26.8% to a record of US$256 billion, the ~~credit/GDP ratio increased to 47%, with default rate falling~~main destinations being China (US$44.3 billion) and the United States (US$25.9 billion).

The Brazilian job market remained steady throughout the year. According to the IBGE, ~~industrial output grew by 10.5%~~the unemployment rate decreased from 5.2% in ~~2010,~~November 2011 to 4.7% in December 2011, the lowest since the creation of the Monthly Employment Survey (PME), reaching an annual average of 6.0%, another ~~strong macroeconomic indicator.~~ record and substantially lower than the 6.7% recorded in 2010. According to IPEA, another job market highlight was the 8.6% increase in average real earnings between 2002 and 2011, pushing up household consumption and fueling economic activity in the country.According to the Employment and Unemployment Registry (CAGED), 1.94 million formal job opportunities were created in 2011.

The ~~sectors that contributed most to this performance were capital goods and~~IPCA consumer ~~durables, especially vehicles and home appliance, as well as typically exporting sectors, led by commodities. Despite the government measures throughout~~price index (the main inflation rate) stood at 6.50% for the year, the~~real~~ ~~appreciated strongly against~~ highest level since 2004 and 0.59 percentage points greater than the ~~dollar~~2010 figure, but still within the tolerance band established by the Brazilian National Monetary Council for 2011. The transport sector was chiefly responsible for the upturn, while food and beverages and household articles actually recorded deflation.

The Selic base interest rate, which is set by the Monetary Policy Committee (COPOM), began 2011 at 10.75% and rose successively, until reaching 12.5% in July. Since then, due to the deterioration of the global economic scenario, especially in Europe, the reduction in the inflation rate and the slowdown in the Brazilian economy, COPOM has been reducing the basic interest rate. As of April 2012 the current rate was 9.0%.

The banking system’s outstanding credit volume totaled R$2.03 trillion in December 2011, corresponding to a 19% increase as compared to December 2010, resulting in a total loans/GDP ratio of 49.1%, as compared to 45.2% in 2010.

According to the IBGE, industrial output increased slightly by 0.3% in 2011, with 15 of the 27 sectors recording an increase. Transport equipment and vehicles sectors had the best performance, with growth of 8.0% and 2.4% respectively.

In 2011, thereal depreciated 12.6% and on December 31, 2011, the exchange rate was R$1.88 per US$1.00.

USA

According to the U.S. Department of Commerce, the U.S. economy grew by 1.7% in 2011, less than the increase of 3.0% recorded in 2010. In the fourth quarter of 2011, U.S. GDP recorded the highest growth of the year, with an annualized increase of 2.8%, representing real growth of 0.7% over the pre-crisis GDP recorded in the fourth quarter of 2007. The main contributors to GDP growth in the fourth quarter of 2011 were exports, which increased by 4.7%, individual consumption, which increased by 2%, and non-residential fixed investments, which increased by 1.7%. Consumer confidence also improved, reaching 64.5 points in December 2011, as compared to 55.2 points in November 2011.

The GDP increase in the fourth quarter of 2011 also helped to create jobs, reducing the unemployment rate to 8.5% in December, the lowest level since February 2009 and equivalent to around 13.1 million people, according to the Bureau of Labor Statistics (BLS). In 2011, the unemployment rate averaged 8.9%, an improvement over the 9.6% recorded in 2010.

Europe

High indebtedness levels in certain Eurozone countries, such as Italy, Spain, Greece, Ireland and Portugal, continue to generate uncertainties regarding the payment of sovereign debt and the solvency of the banking sector in these countries. According to the IMF, public debt as a percentage of GDP was 166% in Greece, 121% in Italy, 109% in Ireland and 106% in Portugal. At the end of February, the European Central Bank approved the transfer of €530 billion to the banking sector in order to increase liquidity in the interbanking market and credit to companies and consumers. At the beginning of March 2012, Greece was able to restructure its sovereign debt with participation of over 95% of creditors, an important step towards the ~~year,~~country’s economic stabilization.

According to the ~~Brazilian Central Bank’s FOCUS report estimated~~European Commission, GDP in the Eurozone grew by 1.4% in 2011 when compared to a ~~year-end exchange~~1.9% growth in the previous year. The Eurozone unemployment rate ofreached 10.4% in December, affecting around ~~R$1.80; however,~~16.5 million people, and the ~~actual~~inflation rate ~~was R$1.67. In February 2011, foreign reserves reached the record level of US$300 billion.~~

~~USA~~

~~The U.S. economy recovered towards~~stood at 2.7% at the end of 2011.

On the other hand, Germany recorded growth of 3% in 2011, reducing its public deficit to €26.7 billion, or 1% of GDP, with the aim of respecting the European budget discipline criteria, as reported by Destatis, the German institute of statistics. This was the first time since 2008 that Germany’s public deficit fell below the 3% imposed by the European treaties. In 2010, Europe’s leading economy posted record growth of 3.7% and a public deficit of4.3%. Other advances in 2011 included increases of 1.5% in consumption, 8.2% in exports and 8.3% in private investments in machinery and equipment, according to ~~IMF the annual GDP growth in 2010 was 2.9%, the largest increase since 2005, mainly due to the government’s fiscal incentives, higher exports and return~~preliminary figures.

Table of private investments. Nevertheless, according to IMF, unemployment remained high, recording 9.4% in December 2010, equivalent to approximately 14 million people out of work. A total of 900,000 jobs were created in 2010.

Contents

~~The growth rate~~Asia

Chinese GDP grew by 9.2% in ~~Europe continues low and there is uncertainty regarding sovereign debt and the general health of the financial system, especially inGreece, Ireland, Spain, Portugal and Italy~~. According to CRU, these four nations hold 64% of all loans granted to financial institutions in the Eurozone. According to IMF, Eurozone unemployment is still approximately 10%, or nearly 15 million people, one of the highest levels in the last 12 years. However,2011, according to ~~IMF, this is expected~~the country’s National Bureau of Statistics, as compared to ~~improve~~10.4% in ~~the coming months due~~2010. At a time when China’s trade surplus fell from US$181.5 billion, or 3.1% of GDP, in 2010, to ~~a possible increase in exports, especially in Germany, and higher consumer spending. For the first time in more than two years, inflation exceeded the~~US$160 billion, or approximately 2% ~~target stipulated by the European Central Bank, reaching 2.2% in December, with the exceptionally cold weather pressuring food and energy prices. According to CRU,~~of GDP, in 2011, ~~commodity and energy prices should continue to exert inflationary pressure, although the ECB maintained the inflationary target at 2%.~~

~~Asia~~

~~After fueling the recovery from the global financial crisis, China has gone through a cycle of strict monetary measures in an attempt to reduce inflation, which was 4.6% in 2010. Throughout 2010,~~ the government ~~adopted~~is studying measures to ~~contain growth~~boost domestic consumption. The resulting inflationary process has been kept under control by ~~increasing~~a rigid monetary policy, with limits on the granting of credit, high interest rates and reserve requirements, limiting credit and introducing energy-saving targets. Despite their restrictive nature, however, all these measures are designed to ensure that the Chinese economy grows in a sustainable manner. According to IMF, China GDP grew by 10.3% in 2010, 2% above the Chinese government’s target, and the country overtook Japan as the world’s second largest economy, with GDP of US$5.9 trillion. According to Peoples´Bank of China, China has let the Yuan appreciate by approximately 6% against the U.S. dollar since June 2010, effectively ending its two-year-long rate-fixing between the two currencies.greater control over banking reserves.

Segments

~~Segments~~Steel

~~Steel~~

According to the World Steel Association, or WSA, global crude steel production totaled ~~1.4~~1.5 billion tons in ~~2010,~~2011, a ~~15%~~6.8% increase as compared to ~~2009.~~2010 and a new record. The major steel-producing countries increased production in 2011, with the exception of Japan and Spain. Growth was especially strong in Turkey, South Korea and Italy. Nevertheless, ~~according to WSA, many steel-producing nations have still not recovered to their pre-crisis levels, China and certain other Asian countries being the exception. According to the WSA, the~~ global steel industry capacity utilization rate stood at 72% at the end of ~~2010 was approximately 74%, although~~2011, showing a continuing imbalance between production capacity and global steel product consumption still remains unbalanced. As stated by the WSA, surplus production capacity is currently approximately 500 million tons. This imbalance, together with the appreciation of the real and the existence of state government import incentives fueled Brazil's flat steel imports in 2010. Supported by higher raw material prices, especially of coal, scrap and iron ore, international steel prices began to show signs of recovery at the end of 2010, leading some steel plants to consider reactivating their blast furnaces to benefit from the upturn.consumption.

Brazil

According to the ~~IABr, apparent consumption of~~Brazilian Steel Institute (IABr), Brazilian crude steel ~~products reached the record level of 26.1~~production totaled 35.2 million tons in ~~2010, 41% higher than the previous year, and the Institute expects the figure~~2011, a 6.8% increase as compared to ~~increase by a further 6% in 2011, to 28 million tons. Annual consolidated production in 2010 totaled 32.9~~2010. Domestic steel product sales reached 21.4 million tons, ~~of crude steel and 15.2 million tons of~~a 3.4% increase as compared to 2010, while domestic rolled flat steel ~~an increase of 24% and 28% respectively, from the previous year. Consolidated domestic~~ sales ~~of rolled flat steel were 11.5 million tons in 2010, a 25% increase from 2009.~~

~~Annual flat steel exports totaled 2.3~~amounted to 11.3 million tons, in line with 2010 numbers.

Also according to the ~~previous year’s figure.~~IABr, total steel exports increased to 10.8 million tons, a 20.7% growth as compared to 2010, while flat steel exports decreased by 7% to 2.1 million tons. Steel product imports totaled 3.8 million tons, a 35.9% reduction as compared to 2010, while flat steel imports declined 43.8% to 2.3 million tons. Apparent consumption of steel products in 2011 amounted to 25.0 million tons, a 4.2% decrease as compared to 2010.

Automotive

According to ANFAVEA (the Brazilian ~~auto manufacturers’ association)~~Auto Manufacturers’ Association), vehicle production ~~reached 3.6~~in 2011 totaled 3.4 million units, ~~in 2010,~~ a ~~14%~~0.7% increase as compared to ~~2009. Annual sales totaled 3.5~~2010. Sales reached a new record of 3.6 million units, 12% more than in 2009, the seventh consecutive year of growth. In addition, Brazil closed 2010 as the world’s fourth largest vehicle manufacturer for the first time, behind China, the United States and Japan. Exported vehicles totaled 766,000 units in 2010,a 3.4% increase as compared to 475,000 in 2009. According to ANFAVEA, vehicle sales are expected to grow by 5% in 2011. Recently, the sector announced significant investments over the next years, for the expansion of product lines, increased output2010 and the ~~construction of new plants.~~eighth consecutive annual increase. Vehicle exports increased by 7.7% as compared to 2010.

56Construction

~~Construction~~

According to ~~a study by~~ the Getulio Vargas Foundation (FGV), every year 1.5 million new Brazilian families intend to purchase a home. Demand for real estate has been fueled by the expansion of the emerging middle class, higher family income, more formal jobsCBIC (Brazilian Construction Industry Association) and ~~the greater availability of credit. Housing loans from the Caixa Econômica Federal (Brazilian Saving Bank)~~Sinduscon-SP (the São Paulo Builders’ Association), the ~~mortgage lending leader, totaled R$77.8 billion~~construction sector recorded annual growth of 4.8% in ~~2010, an increase of 57.2% from 2009. LCA, a consulting firm,~~2011.

ABRAMAT (the Brazilian Building Material Manufacturers’ Association) estimates that ~~the sector grew~~construction materials sales increased by ~~13.9%~~2.9% in 2011 as compared to 2010.

Distribution

According to INDA ~~(the~~(the Brazilian ~~steel distributors’ association)~~Steel Distributors’ Association), flat steel sales by distributors totaled ~~3.8~~4.3 million tons in 2011, showing an 11.7% increase as compared to 2010, ~~an increase of 13% from 2009, with~~while purchases ~~of 4.3~~by distributors declined by 4% to 4.1 million ~~tons (+39%), resulting~~tons. This contributed to bring inventories to normalized levels: inventory levels fell by 16.8% in ~~increased inventories, which were sufficient for 4.3~~relation to December 2010, closing the year at 3.1 months of sales.

Home Appliances

The reduction in federal value-added taxes (IPI) implemented by the Brazilian government at the beginning of December 2011 had higher-than-expected results, with refrigerator, stove and washing-machine sales inincreasing by 56% as compared to November 2011 figures and by approximately 30% as compared to December 2010 ~~higher than the historical average.~~figures.

International

~~Agricultural machinery~~

According to ANFAVEA, in 2010 production of agricultural machinery increased by 34% from the previous year to 89,000 units. Annual sales were 68,000 units, 24% higher than in 2009 and the sector’s best performance since 1976, while exports increased by 27% to 19,000 units.

~~International~~

According to the WSA,crude steel output in China totaled 695.5 million tons in 2011, a 8.9% increase as compared to 2010 and a new record, accounting for 45.5% of the global total, while Japan's crude steel production decreased slightly, to 107.6 million tons, a 1.8% decrease as compared to 2010. In the European Union, production reached 177.4 million tons in 2011, corresponding to a 2.8% increase as compared to 2010, and in theU.S., crude steel production totaled ~~80.6~~86.2 million tons in ~~2010, 38.5% more than in 2009, while the~~2011, a 7.1% increase as compared to 2010. The U.S. Department of Commerce estimated steel imports ~~of 21.7~~at 25.9 million tons, upan increase of 19% as compared to 2010.

Mining

The seaborne iron ore market posted record performance in 2011, directly reflecting the 6.8% upturn in global steel production, despite the economic slowdown in Europe and natural disasters that occurred in Japan. International iron ore sales are expanding every year, fueled by ~~47%. According to WSA, U.S. steel distributors’ inventories totaled 4.2~~the urbanization process in developing countries. China imported 687 million tons out of the 1,079million tons of ore sold in ~~December 2010,~~2011, equivalent to ~~2.6 months of sales.~~

According to the WSA, Eurozone steel production reached 315 million tons in 2010, 19% up on 2009. As in the U.S., raw material cost increases have been forcing the industry to revisit pricing, resulting in increases throughout the continent. Although demand for steel has been showing signs of recovery in certain countries, there are serious doubts concerning the sustainability of these prices, principally due to weak growth prospects in most European nations.

~~According to the WSA, crude steel output in China totaled 626 million tons in 2010, 9% up from the previous year and a new record, accounting for 44%~~around 60% of the global ~~total. Japan's crude steel production increased by~~seaborne market and an 11% increase as compared to Chinese imports in 2010.

Brazil continues to occupy a ~~substantial 25% over 2009, reaching 109 million tons.~~

~~Mining~~

Atleading position in the beginning of 2010, a number of incentives focused on the intensive use of steel, to support the global economy were still in force. The commitment of the leading global economies to overcoming the crisis was crucial to the recovery of the market as a whole.seaborne iron ore market. According to CRU, as a result of the recovery, iron ore sales, mostly concentrated in the Chinese market in 2009, became more fragmented in 2010. Nevertheless, China remains an important market player. In 2010, the country imported 619SECEX (the Foreign Trade Secretariat), Brazil exported 331 million tons of ~~iron~~ ore ~~accounting~~in 2011, a 6% increase as compared to 2010, and a rate of increase that has been maintained for ~~60% of~~ the ~~seaborne market, and this figure is expected to reach 895 million tons by 2015, according to CRU.~~past five years.

~~2010 was a year of major changes in the iron ore market.~~ The traditional annual pricing system, used for over 40 years, was replaced in the first half of 2010 by a system that ~~reflects~~is subject to quarterly revisions, reflecting market oscillations and ~~is subject~~more sensitive to ~~periodic reviews~~spot price volatility. Mining companies price iron ore based on a three-month average of iron ore index values (Platts IODEX 62% CFR China) for the period ending a month before the start of the new quarter.

In 2011, iron ore prices were exceptionally volatile, especially in the fourth quarter. After climbing to over ~~time. Demand continues to outpace supply~~US$180/t at the beginning of September, prices decreased sharply, mainly because of the European economic crisis. This crisis reduced demand in the period and resulted in the shut-down of several blast furnaces on the ~~seaborne market and certain factors in 2010 helped reduce supply even further, including government restrictions on~~continent, forcing European countries to postpone part of their iron ore ~~exports in India, accompanied by~~imports. This volume was rerouted to China at the imposition of export taxes. According to Macquire, the vast majority of new projects (brownfield and greenfield) were delayed and the expected increase in available market volume did not materialize. In light of this scenario, Brazil’s iron ore exports reached the record level of 307same time as China’s imports from Australia increased substantially, reaching approximately 30 million tons in October. This increase coincided with a period of reduced crude steel production and credit restriction in China. As a result, Chinese supply peaked, leading to the collapse of international prices to approximately US$117/t at the end of October, before stabilizing between US$130/t and US$140/t, which resulted in an incompatibility between quarterly and spot prices. As a consequence, different pricing systems reflecting market oscillations and even more sensitive to spot price volatility emerged in the market. Spot price, monthly price and quarterly actual price were applied mainly in the Chinese market and major producers of iron ore are currently using different pricing methodologies.

Despite overall economic stagnation in 2011, iron ore prices reached record highs in February and presented an annual average of R$169/t, a record high annual increase of 15% compared with 2010 according to ~~LBH Group, an~~Platts Iodex.

Spot market freight costs on the Tubarão/Qingdao route remained almost flat untilthe first half of the third quarter of 2011, averagingUS$20/t.As of the middle of the quarter, however, demand peak began to have a direct impact on freights, raising the average price to around US$30/t by the end of December. In January 2012, however, freight costs once again fell back to around US$20/t, due to the winter season and Chinese New Year.

Logistics

Railway logistics

In 2011, the consolidation of rail transport as a viable and efficient means of cargo transport in Brazil continued. According to the CNT (National Transport Confederation), the total cargo transported by railis expected to reach 530 million tons in 2011, a 12.7% increase ~~of 15%~~ as compared to ~~2009.~~the 470 million tons recorded in 2010.

~~The Brazilian federal government recently launched a National Mining Program, which envisages~~Still according to the CNT, investments ~~of US$270~~in railways totaled R$3.0 billion ~~over 20 years and is designed to triple the production of iron ore, copper ore and other minerals by 2030.~~

~~Prices increased in the first half~~ in 2011, ~~fueled by growing demand~~ in ~~China and~~line with the ~~recovery of the European and North American markets.~~

58Brazilian electricity

In 2010, the electric power market was favored by Brazil’s economic performance, led by the domestic market, driven by increased employment and income, as well as the greater availability of credit. Electricity consumption increasedby 3.6% in 2011, compared to a7.8% ~~from 2009,~~ increase in 2010,according to the Ministry of Mines and ~~Energy’s~~ Energy ~~Research Company.~~

~~Industrial consumption made~~. Despite the ~~biggest contribution, increasing by 10.9% and consolidating the post-crisis recovery that begun~~slowdown in the ~~second half~~pace of ~~2009. According to EPE (Empresa de Pesquisa Energética), residential and commercial consumption recorded consistent growth of 6.3% and 5.9%, respectively, in line with recent years.~~

~~Even with the growing demand for~~ electric power ~~Brazil has been adequately incrementing its generating capacity and safely meeting~~demand growth, the ~~demand. According to the~~ AnnualEnergy Operations Plan (PEN ~~2010),~~ 2011) published by the National System Operator (ONS), forecasts average annual consumption growth of 5% over the next four years.

As a result, Brazil has been expanding its generating capacity in order to guarantee the safety of the system. According to PEN 2011, the National Integrated System’s ~~structural energy~~ projectedbalance for the next four years ~~must ensure~~ is expected to easily meetadequate supply criteria, even in under adverse hydrological ~~conditions.~~

~~This situation is largely~~conditions, thanks to the ~~result~~start-up period ofnew contracted plants andthegovernment energy auctions ~~promoted by~~, which are expected to add 30 GW to the ~~government, as well as the contracting and construction of new transmission lines, which has permitted greater energetic integration among Brazil’s various regions.~~system.

Steel Markets and Product Mix

Supply and Demand for Steel

Prices of steel are sensitive to changes in worldwide and local demand, which in turn are affected by worldwide and country-specific economic cycles, and to available production capacity. While the export price of steel (which is denominated in U.S. dollars or Euros, depending on the export destination) is the spot price, there is no exchange trading of steel or uniform pricing. Unlike other commodity products, steel is not completely fungible due to wide differences in terms of size, chemical composition, quality and specifications, all of which impact prices. Many companies (including us) discount their list prices for regular customers, making their actual transaction prices difficult for us to determine.

Historically, export prices and margins have been lower than domestic prices and margins, because of the logistics costs, taxes and tariffs. The portion of production that is exported is affected by domestic demand, exchange rate fluctuations and the prices that can be charged in the international markets.

The following table shows Brazilian steel production and apparent consumption (domestic sales plus imports) and global production and demand for the periods ~~indicated:~~

indicated⁽¹⁾:

		2010	2009	2008		2010	2009	2008

Brazilian Market(in thousands of tons)
Total Flat and Long Steel
Production		25,401	20,223	24,726		25,401	20,223	24,726
Apparent Consumption		26,104	18,576	24,048		26,104	18,576	24,048
Hot-Rolled Coils and Sheets
Production		4,592	3,474	3,926		4,592	3,474	3,926
Apparent Consumption		3,823	2,615	3,481		3,823	2,615	3,481
Cold-Rolled Coils and Sheets
Production		3,159	2,692	3,038		3,159	2,692	3,038
Apparent Consumption		3,419	2,497	2,849		3,419	2,497	2,849
Galvanized Sheets
Production		2,449	2,004	2,343		2,449	2,004	2,343
Apparent Consumption		3,243	2,262	2,478		3,243	2,262	2,478
TinPlates
Production		774	665	724		774	665	724
Apparent Consumption		634	570	623		634	570	623
Global Market(in millions of tons)
Crude Steel Production		1,414	1,224	1,330		1,414	1,224	1,330
Demand		1,284	1,134	1,309		1,284	1,134	1,309
___________	___________				___________
Source: IABr and World Steel Association, or WSA.
Source: IABr and World Steel Association, or WSA. 1. Information for 2011 was not yet available as of the date of this annual report					Source: IABr and World Steel Association, or WSA. 1. Information for 2011 was not yet available as of the date of this annual report

Product Mix and Prices

Sales trends in both the domestic and export markets are forecasted monthly based on historical data of the preceding months. CSN uses its own information system to remain current on market developments so that it can respond swiftly to fluctuations in demand.

CSN considers its flexibility in shifting between markets, and its ability to monitor and optimize inventory levels in light of changing demand, as key to its success.

We have a strategy of increasing the portion of our sales attributable to higher value-added coated products, particularly galvanized and tin plate products. Galvanized products are directed at the automotive, construction and home appliance industries. Tin plate products are used by the steel packaging market.

~~Supported by~~Overall, average steel prices increased in 2011 when compared to 2010, especially due to higher raw material prices ~~especially~~including iron ore and coal. Towards the end of ~~coal, scrap and iron ore,~~the year, however, international steel prices ~~increased at~~declined (except in the ~~close~~US market) as a consequence of ~~2010.~~expectations regarding the European crisis. Domestic prices in Brazil are aligned with the price of imported products (including aggregated import costs).

Sales Volume and Net Operating Revenues by Steel Products and Markets

The following table sets forth our steel product sales volume and net operating revenues by product and market.

Sales Volume	Sales Volume						Sales Volume
	Tons		% of Sales Volume
			In Market		Total		Tons			% of Sales Volume
	2010	2009	2010	2009	2010	2009				In Market			Total
	(in thousands of tons)		(in percentages)				2011	2010	2009	2011	2010	2009	2011	2010	2009
Domestic Sales
Slabs	51	25	1%				15	51	25	0%	1%	1%	0%	1%	1%
Hot-Rolled	1,801	1,204	44%	37%	38%	29%	1,951	1,801	1,204	46%	44%	37%	40%	38%	29%
Cold-Rolled	707	639	17%	20%	15%	16%	770	707	639	18%	17%	20%	16%	15%	16%
Galvanized	1,065	875	26%	27%	22%	21%	991	1,065	875	23%	26%	27%	20%	22%	21%
Tin Mill	512	500	12%	15%	11%	12%	489	512	500	12%		15%	10%	11%	12%

Subtotal	4,135	3,243	100%		86%	79%	4,216	4,135	3.243	100%		100%	86%		79%

Export Sales
Slabs	0	162	0%	19%	0%	4%	-		162	0%		19%	0%		4%
Hot-Rolled	1	191	0%	22%	0%	5%	13	1	191	2%	0%	22%	0%		5%
Cold-Rolled	19	4	3%	0%			49	19	4	7%	3%	0%	1%	0%	0%
Galvanized	488	397	74%	46%	10%		457	488	397	67%	74%	46%	9%	10%	10%
Tin Mill	152	114	23%	13%	3%	2%	161	152	113	24%	23%	13%	3%		2%

Subtotal	661	868	100%		14%	21%	680	661	867	100%		100%	14%		21%

Total	4,796	4,111			100%		4,896	4,796	4,110				100%		100%

Total Sales
Slabs	51	187			1%	4%	15	51	187				0%	1%	4%
Hot-Rolled	1,803	1,395			38%	34%	1,965	1,803	1,395				40%	38%	36%
Cold-Rolled	726	643			15%	16%	819	726	643				17%	15%	16%
Galvanized	1,553	1,273			32%	31%	1,447	1,553	1,273				30%	32%	31%
Tin Mill	664	614			14%	15%	649	664	613				13%	14%	15%

Total	4,796	4,111			100%		4,896	4,796	4,110				100%		100%

Net Operating Revenues
	In millions of R$			% of Net Operating Revenues
				In Market			Total
	2011	2010	2009	2011	2010	2009	2011	2010	2009
Domestic Sales
Slabs	13	41	20	0%	1%	0%	0%	1%	0%
Hot-Rolled	2,936	3,011	1,981	36%	35%	29%	32%	31%	25%
Cold-Rolled	1,412	1,387	1,172	18%	16%	17%	15%	14%	15%
Galvanized	2,178	2,559	2,085	27%	30%	31%	24%	27%	27%
Tin Plate	1,495	1,576	1,511	19%	18%	23%	16%	16%	19%

Subtotal	8,033	8,575	6,770	100%	100%	100%	87%	89%	86%

Export Sales
Slabs	-	-	123	0%	0%	11%	0%	0%	2%
Hot-Rolled	19	2	182	2%	0%	16%	0%	0%	2%
Cold-Rolled	74	27	8	6%	3%	1%	1%	0%	0%
Galvanized	786	778	553	64%	70%	49%	8%	8%	7%
Tin Plate	340	300	259	28%	27%	23%	4%	3%	3%

Subtotal	1,219	1,107	1,124	100%	100%	100%	13%	11%	14%

Total	9,252	9,682	7,894				100%	100%	100%

Total Sales
Slabs	13	41	143
Hot-Rolled	2,955	3,013	2,163
Cold-Rolled	1,486	1,414	1,180
Galvanized	2,964	3,337	2,637
Tin Plate	1,835	1,876	1,770

Subtotal	9,252	9,682	7,894				0%	0%	0%

By-Product	225	244	307				2%	2%	4%

Total	9,477	9,926	8,201				100%	100%	100%

~~The following table sets forth our steel product net revenues by product and market.~~

Net Operating Revenues

R$ (Reais)
% of Net Operating Revenues

In Market
Total

2010
2009
2010
2009
2010
2009

(in millions of R$)
(in percentages)
Domestic Sales

Slabs
41
20
0%
0%
0%
0%
Hot-Rolled
3,011
1,982
35%
29%
31%
25%
Cold-Rolled
1,387
1,172
16%
18%
14%
15%
Galvanized
2,559
2,099
30%
31%
26%
27%
Tin Mill
1,576
1,511
18%
22%
16%
19%
Subtotal
8,575
6,784
99%
100%
87%
86%
Export Sales

Slabs
0
123
0%
11%
0%
2%
Hot-Rolled
2
182
0%
16%
0%
2%
Cold-Rolled
27
8
2%
1%
0%
0%
Galvanized
778
553
70%
49%
8%
7%
Tin Mill
300
259
27%
23%
3%
3%
Subtotal
1,107
1,125
99%
100%
11%
14%
Total
9,682
7,909

98%
100%
Total Sales

Slabs
41
143
0%
2%
0%
2%
Hot-Rolled
3,013
2,163
31%
27%
30%
26%
Cold-Rolled
1,414
1,180
15%
15%
14%
14%
Galvanized
3,337
2,637
34%
33%
34%
32%
Tin Mill
1,876
1,770
19%
22%
19%
22%
Subtotal
9,682
7,894
99%
100%
98%
98%
By-Product
244
307

2%
2%
Total
9,926
8,219

100%
100%

Brazilian Macro-Economic Scenario

As a company with the vast majority of its operations currently in Brazil, we are affected by the general economic conditions of Brazil. We believe the rate of growth in Brazil is important in determining our future growth capacity and ~~our~~the results of our operations.

The following table shows ~~certain~~some Brazilian economic indicators for the periods indicated:


		Year ended December 31,					Year ended December 31,

		2010	2009		2008			2011		2010	2009

GDP growth		7.5%	(0.2%	)	5.1%	GDP growth		2.7%		7.5%	(0.2%)
Inflation (IPCA)⁽¹⁾		5.9%	4.3%		5.9%	Inflation (IPCA)⁽¹⁾		6.5%		5.9%	4.3%
Inflation (IGP-M)⁽²⁾		11.3%	(1.7%	)	9.8%	Inflation (IGP-M)⁽²⁾		5.1%		11.3%	(1.7%)
CDI⁽³⁾		9.8%	9.8%		12.4%	CDI⁽³⁾		11.6%		9.7%	9.8%
Appreciation (depreciation) of therealagainst the U.S. dollar		4.3%	25.5%		(32.0%)	Appreciation (depreciation) of therealagainst the U.S. dollar		(12.6%	)	4.3%	25.5%
Exchange rate at end of period (US$1.00)		R$1.666	R$1.741		R$2.337	Exchange rate at end of period (US$1.00)		R$1.876		R$1.666	R$1.741
Average exchange rate (US$1.00)		R$1.759	R$1.994		R$1.837	Average exchange rate (US$1.00)		R$1.675		R$1.759	R$1.994
Sources: IBGE, Fundação Getúlio Vargas, Central Bank and Bloomberg.
Sources: IBGE, Fundação Getúlio Vargas, Central Bank and CETIP.						Sources: IBGE, Fundação Getúlio Vargas, Central Bank and CETIP.
(1)The IPCA is a consumer price index measured by the IBGE.	(1)The IPCA is a consumer price index measured by the IBGE.					(1)The IPCA is a consumer price index measured by the IBGE.
(2)The IGP-M is the general market price index measured by the Fundação Getúlio Vargas.	(2)The IGP-M is the general market price index measured by the Fundação Getúlio Vargas.					(2)The IGP-M is the general market price index measured by the Fundação Getúlio Vargas.
(3)The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).	(3)The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).					(3)The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).

Effects of Exchange Rate Fluctuations

Our export revenues are substantially denominated in U.S. dollars. Our domestic revenues are denominated in Brazilianreais~~(although domestic sales prices reflect international prices with a time lag of some months)~~.

A significant portion of our cost of products sold ~~are~~is commoditized raw materials, the prices of which are denominated in U.S. dollars. The balance of our cost of products sold and our cash operating expenses (i.e., operating expenses ~~other than~~apart from depreciation and amortization) are denominated inreais.

The appreciation of the U.S. dollar against thereal has the following effects on ~~our~~the results of our operations expressed in U.S. dollars:

· ~~domestic~~Domestic revenues tend to be lower (in comparison with prior years) and this effect is magnified to the extent to which we sell more products than usual in the domestic as opposed to the export ~~markets, this effect is magnified;~~market;

· ~~the~~The impact ofrealdenominated costs of products sold and operating costs tend to be lower; and

· ~~financial~~Financial expenses are increased to the extent to which the exposure to dollar-denominated debt is not protected.

The appreciation of thereal against the U.S. dollar has the following effects on ~~our~~the results of our operations expressed in USU.S. dollars:

· ~~domestic~~Domestic revenues tend to be higher (in comparison with prior years) and this effect is magnified to the extent ~~that~~to which we sell more products than usual in the domestic ~~markets;~~market;

· ~~the~~The impact ofreal~~-denominated~~denominated costs of products sold and operating costs tends to be higher; and

· ~~financial~~Financial income is ~~higher~~increased to the extent to which the exposure to dollar-denominated debt ~~has~~is not ~~been~~ protected.

The impact of fluctuations in the~~real~~ exchange rate of thereal against other currencies on ~~our~~the results of our operations can be seen in the “foreign exchange and monetary gain (loss), net” line in our income statement, although that amount is partially offset by the net financial income (or expense) attributable to the profit (or loss) on ~~our~~the derivative transaction of our foreign currency-denominated debt. In order to minimize the effects of the exchange rate fluctuations, we often engage in derivative transactions, including currency swap and foreign currency option agreements. For a discussion of the possible impact of fluctuations in the foreign currency exchange and interest rates on our principal financial instruments and positions, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”

Effects of Inflation and Interest Rates

Inflation rates in Brazil have been significantly volatile in the past. Inflation rates remained relatively stable from 2003 to 2004, decreased in 2005 and 2006 and increased in 2007 and 2008. In 2009, for the first time since its creation in 1989, the IGP-M inflation index recorded a deflation in a calendar year, equivalent to 1.71%. In 2010 and 2011 the index increased ~~again~~11.3% and ~~closed the year at 11.3%.~~5.1%, respectively.

Inflation affects our financial performance by increasing some of our costs and expenses denominated inreais that are not linked to the U.S. dollar. Our cash costs and operating expenses are substantially denominated inreais and have tended to follow the Brazilian inflation ratio because our suppliers and service providers generally increase or decrease prices to reflect Brazilian inflation. In addition, some of ourreal-~~denominated~~ -denominated debt is indexed to take into account the effects of inflation. Under this debt, the principal amount is generally adjusted with reference to inflation indexes. In addition, a significant portion of ourreal-~~denominated~~ -denominated debt bears interest based on the Interbank Deposit Certificate (Certificado de Depósito Interbancário), or CDI, rate which is partially adjusted for inflation.

The table below shows the Brazilian general price ~~inflation~~index and the CDI rates for the periods shown.


		Year ended December 31,
						Year ended December 31,
		2010	2009	2008		2011	2010	2009

Inflation (IGP-M)⁽¹⁾		11.3%	-1.7%	9.8%		5.1%	11.3%	(1.7%)
CDI⁽²⁾		9.8%	9.8%	12.4%		11.6%	9.7%	9.8%
_______________	_______________				_______________
Source: Fundação Getúlio Vargas, or FGV, and Bloomberg.
Source: Fundação Getúlio Vargas, or FGV, and CETIP.					Source: Fundação Getúlio Vargas, or FGV, and CETIP.
(1) The IGP-M inflation is the general market price index measured by the FGV.	(1) The IGP-M inflation is the general market price index measured by the FGV.				(1) The IGP-M inflation is the general market price index measured by the FGV.
(2) The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).	(2) The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).				(2) The Interbank Deposit Rate, or CDI, represents the average interbank deposit rate performed during a given day in Brazil (accrued as of the last month of the period, annualized).

Accounting for mining production utilized by our steel production

We are currently self-sufficient inregarding the iron ore used in ~~the~~our steel production. The iron ore required is extracted from our Casa de Pedra mine, which in ~~2010 supplied~~2011 amounted to approximately ~~6.9~~6.8 million tons of its total ~~iron ore~~ironore production ~~(approximately 21.6~~of approximately 20.1 million ~~tons) to us.~~tons. The remainder orof the iron ore production is sold to third ~~party clients~~parties in Brazil and throughout the world.

The cost of iron ore sold is recorded on our income statement in the cost of goods sold line item at its extraction cost plus transport from the mine. In 2011, 2010 and 2009, these costs were R$283 million, R$239 million and R$221 million, respectively.

Critical Accounting Estimates

We prepared our consolidated financial statements as of and for the year ended December 31, ~~2010~~2011 in accordance with IFRS, as issued by the IASB. In preparing our consolidated financial statements, we make estimates concerning a variety of matters. Some of these matters are highly uncertain, and our estimates involve judgments we make based on the information available to us. In the discussion below, we have identified several of these matters for which our financial presentation would be materially affected if either (1) we used different estimates that we could reasonably have used or (2) in the future we change our estimates in response to changes that are reasonably likely to occur.

This discussion addresses only those estimates that we consider most important based on the degree of uncertainty and the likelihood of a material impact if we used a different estimate. There are many other areas in which we use estimates about uncertain matters, but the reasonably likely effect of changed or different estimates is not material to our financial presentation.

Impairment of long-lived assets, intangible assets, goodwill and ~~goodwill~~financial assets

In accordance with IAS 36 ~~“ Impairment~~“Impairment of assets”, long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

A determination of the fair value of an asset requires management to make certain assumptions and estimates with respect to projected cash inflows and outflows related to future revenues and expenditures. These assumptions and estimates can be influenced by different external and internal factors, such as economic and industry trends, interest rates and changes in the marketplace. A change in the assumptions and estimates that we use could change our estimate of the expected future net cash flows and lead to the recognition of an impairment charge in results of operations relating to our property, plant and equipment.

Assets that have an indefinite useful life, such as goodwill, are not subject to amortization and are tested annually for impairment in accordance with IAS 36 “ Impairment of assets”. Assets that are subject to ~~amortizationare~~amortization are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Goodwill is allocated to Cash-Generating Units (CGUs) for impairment testing purposes. The allocation is made to Cash-Generating Units or groups of a Cash-Generating Units that are expected to benefit from the business combination from which the goodwill arose, and the unit is not greater than the operating segment.

63Financial assets are reviewed for impairment at the end of each reporting period and we asses whether there is objective evidence that a financial asset or a group of financial assets is impaired.

The basis for calculation of depreciation is the cost of the asset less the estimated residual value upon sale. While no specific depreciation method is recommended, the method chosen should be applied consistently for all significant components of assets and allocation of the depreciation should be on a systematic basis for each one of the accounting periods that best represents the realization of the economic benefits during the usable lives of assets.

A review of the estimated useful life was conducted, and the adjustments in the depreciation of assets recorded in property, plant and equipment were made on a prospective basis as from January 1, 2010. In light of the necessity to review useful lives at least every financial year, in 2011 management performed the review for all the Company’s units. See further details in Note 1412 to our consolidated financial statements.

Fair value of business combinations

We estimate the fair value of assets acquired and liabilities assumed of our business combinations as required by IFRS 3 “Business Combination”. Accordingly, when determining the purchase price allocations of our business acquisitions, we adjust to fair value certain items such as inventories, property, plant and equipment, mines, present value of long-term assets and liabilities, among others, which are determined by independent appraisals that perform the valuations for us.

Goodwill represents the excess of the cost of an acquisition over the Company’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired company. If there is any negative goodwill determined by the acquirer in the fair value of the assets, liabilities and contingent liabilities acquired in relation to the cost of acquisition, the Company should recognize it immediately in the statement of income.

The Company elected not to remeasure the business acquisitions that occurred prior to January 1, 2009, according to the business combination exemption permitted by IFRS 1. Acquisitions subsequent to January 1, 2009 have been recognized in accordance with IFRS 3, “Business Combinations”.

Derivatives

IAS 39, “ Financial Instruments: Recognition and Measurement”, requires that we recognize all derivative financial instruments as either assets or liabilities on our balance sheet and measure such instruments at fair value. Changes in the fair value of derivatives are recorded in each period in the statement of income or in other comprehensive income, in the latter case depending on whether a transaction is designated as an effective hedge. Our derivative instruments do not qualify for hedge accounting. Changes in the fair value of any of these derivative instruments are immediately recorded in the statements of income under “Other gains (losses), net". Although the Company uses derivative for hedging purposes, it does not apply hedge accounting. With respect to the fair value measurement, we must make assumptions such as to future foreign currency exchange and interest rates. For a discussion of the possible impact of fluctuations in the foreign currency exchange and interest rates on our principal financial instruments and positions, see “Item 11. Quantitative and Qualitative Disclosures About Market Risk.”

Pension plans

We sponsor defined benefit pension plans covering some of our retirees. We account for these benefits in accordance with IAS 19, “Employee Benefits,”. The determination of the amount of our obligations for pension benefits depends on certain actuarial assumptions. These assumptions are described in Note 3028 to our consolidated financial statements and include, among others, the expected long-term rate of return on plan assets and increases in salaries. In accordance with IFRS, when the benefits of a plan are increased, the portion of the increased benefit related to past services of employees is recognized under the straight-line method over the average period until the benefits become vested. When the benefits become immediately vested, the expense is immediately recognized ~~inprofit~~in profit or loss. The Company has chosen to recognize all the actuarial gains and losses resulting from defined benefit plans immediately in other comprehensive income.

Some of the Company’s entities offered a postretirement healthcare benefit to their employees. The right to these benefits is usually contingent upon an employee remaining in employment until the retirement age as well as the completion of the minimum length of service. The expected costs of these benefits were accumulated during the employment period, and are calculated using the same accounting method used for the defined benefit pension plans.

Deferred taxes

We compute and pay income taxes based on results of operations determined under Brazilian ~~GAAP.~~Corporate Law. A deferred income tax liability is recognized for all temporary tax differences, while a deferred income tax asset ~~is recognized~~isrecognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. Deferred tax assets and liabilities are classified as long-term. Tax assets and liabilities are offset if the entity has a legally enforceable right to offset them and they are related to taxes levied by the same taxing authority. If the criterion for offset of current tax assets and liabilities is met, deferred tax assets and liabilities will also be offset. The income tax related to items recognized directly in equity in the current period or in a prior period is recognized directly in the same account. We regularly review the deferred income tax assets for recoverability and ~~establish a valuation allowance~~will only recognize these if ~~under IFRS,~~we believe that it is ~~not~~ probable that the deferred income tax assets will be realized, based on historical taxable income, projected future taxable income, and the expected timing of the reversals of existing temporary differences. ~~A change in the assumptions and estimates with respect to our expected future taxable income could result in the recognition of a valuation allowance being charged to income.~~ If we operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or discount rates, the time period over which the underlying temporary differences become taxable or deductible, or any change in its future projections, we ~~could be required to establish a valuation allowance against all or a significant portion~~reduce the carrying amount of ~~our~~ deferred income tax assets ~~resulting in a substantial increase~~to the extent that it is no longer probable that sufficient taxable profit will be available to allow the benefit of ~~our effective~~part or all of that deferred income tax ~~rate and a material adverse impact on operating results.~~asset to be realized.

Contingencies and disputed taxes

We record provisions for contingencies relating to legal proceedings with respect to which we deem the likelihood of an unfavorable outcome to be probable and the loss can be reasonably estimated. This determination is made based on the legal opinion of our internal and external legal counsel. We believe these contingencies are properly recognized in our financial statements in accordance with IAS 37 ~~“ Provision,~~“Provision, Contingent Liabilities and Contingent Assets”. We are also involved in judicial and administrative proceedings that are aimed at obtaining or defending our legal rights with respect to taxes that we believe to be unconstitutional or otherwise not required to be paid by us. We believe that these proceedings will ultimately result in the realization of contingent tax credits or benefits that can be used to settle direct and indirect tax obligations owed to the Brazilian Federal or State Governments or to settle municipal tax obligations owed to the corresponding Municipality as per our laws. We do not recognize these contingent tax credits or benefits in our financial statements until realization of such gain contingencies has been resolved. This occurs when a final irrevocable decision is rendered by the courts in Brazil. When we use contingent tax credits or benefits based on favorable temporary court decisions that are still subject to appeal to offset current direct or indirect tax obligations, we maintain the legal obligation accrued in our financial statements until a final irrevocable judicial decision on those contingent tax credits or benefits is rendered. The accrual for the legal obligation related to the current direct or indirect tax obligations offset is not reversed until such time as the utilization of the contingent tax credits or benefits is ultimately realized. The accounting for the contingent tax credits is in accordance with accounting for contingent assets under IAS 37. Our accruals include interest on the tax obligations that we may offset with contingent tax credits or benefits at the interest rate defined in the relevant tax law. The recorded accruals for these disputed taxes and other contingencies may change in the future due to new developments in each matter, such as changes in legislation, irrevocable, final judicial decisions specific to us, or changes in approach, such as a change in settlement strategy in dealing with these matters. See “Item 8A. Consolidated Statements and Other Financial Information—Legal Proceedings” for further information on the judicial and administrative proceedings in which we are involved.

Allowance for doubtful accounts

We consider a provision for bad debts in our trade accounts receivable in order to reflect our expectation as to the net realizable value thereof. This provision is estimated based on an analysis of our receivables and is periodically reviewed to maintain real expectation of collectability of our accounts receivable.

Property, Plant and Equipment

In accordance with our accounting policy, the cost of maintenance in operating assets is capitalized when it does not occur annually and results in an increase in the useful life of the asset. Depreciation is recognized on an accrual basis until the next maintenance event of the relevant asset. Expenditures for maintenance and repairs in operating assets, that are necessary to maintain assets under normal conditions of use, are charged to operating costs and expenses, as incurred.

As of December 31, 2010 and 2011 the amount capitalized was R$495 million and R$655 million respectively and the amount expended was R$856 million and R$969 million, respectively.

Recently Issued Accounting Pronouncements Adopted and Not Adopted by Us

For a description on the recently issued accounting pronouncements, see Note 2 to our consolidated financial statements contained in “Item 18. Financial Statements”. We prepared our consolidated financial statements as of and for the year ended December 31, ~~2010~~2011 in accordance with IFRS, as issued by the IASB. Our consolidated financial statements presented in our annual report on Form 20-F were previously prepared and presented in accordance with U.S. GAAP. Pursuant to IFRS 1 “First-time Adoption of International Reporting Standards”, we have used consistent accounting policies for both the current period, financial data as of and for the year ended December 31, 2010 and the comparative period, financial data as of and for the year ended December 31, 2009. These accounting policies comply with IFRS effective at December 31, 2010.

For the most significant differences and the reconciliation between our consolidated financial statements prepared in accordance with U.S. GAAP and IFRS, see, Note 4 to our consolidated financial statements included elsewhere in this Form 20-F.

Results of Operations

The following table presents certain financial information with respect to our operating results for each of the years ended December 31, 2011, 2010 and 2009 and the percentage change in each of these items comparing 2011 to 2010 and 2010 to 2009:

	Year Ended December 31,
Income Statement Data:	2011	2011	2010	2009
	(in million of US$, except per share data)	(in million of R$, except per share data)
Net operating revenues	8,807	16,520	14,451	10,978
Cost of products sold	(5,225)	(9,801)	(7,883)	(7,211)
Gross Profit	3,582	6,719	6,568	3,768
Operating expenses
Selling	(322)	(604)	(482)	(447)
General and Administrative	(307)	(576)	(537)	(480)

Other Expenses	(267)	(501)	(599)	(648)
Other Income	383	719	49	1,369
Total	(513)	(962)	(1.569)	(206)

Operating income	3,069	5,757	4,998	3,561

Financial Income (expenses), net	(1,069)	(2,006)	(1,911)	(246)


Income Before Taxes	2,000	3,751	3,087	3,315
Income Tax
Current	(73)	(136)	(363)	(577)
Deferred	28	52	(207)	(123)

Total	1,955	3,667	2,516	2,615

Net income	1,955	3,667	2,516	2,615

Loss attributable to noncontrolling interest	(21)	(39)	-	(4)

Net income attributable to Companhia Siderúrgica Nacional	1,976	3,706	2,516	2,619

Year 2011 Compared to Year 2010

In addition to the consolidated figures reported above, the Company reports its integrated operations in five business segments: steel, mining, cement, logistics (including Port and Railway) and energy. The operating resultsof each segment are disclosed separately. The information on CSN’s five business segments is derived from the accounting data, together with allocations and the apportionment of costs among the segments.

Our consolidated results for the years ended December 31, 2011 and 2010 by business segment are presented below:

Year Ended December 31,

Increase (Decrease)

2010

2009

Net operating revenues

14,451

10,978

32%
Cost of products sold

(7,687)

(7,022)

9%

Gross profit

6,764

3,956

71%
Operating expenses

Selling

(678)

(636)

7%
General and administrative

(537)

(480)

12%
Other income

92

1,417

(93%)
Other expenses

(643)

(696)

(8%)

Operating income

4,998

3,561

40%

Finance income (expenses), net

(1,911)

(246)

677%

Income before income taxes

3,087

3,315

(7%)
Income Tax

(571)

(700)

(18%)
Current

(314)

(582)

(46%)
Deferred

(257)

(118)

118%

Net income

2,516

2,615

(4%)

Non-controlling interests

(0)

(4)

(95%)

Owners of the Company

2,516

2,619

(4%)

R$ million			Logistics					Year Ended December 31, 2011
Consolidated Results	Steel	Mining	Port Logistics	Railway Logistics	Cement	Energy	Eliminations	Consolidated
Net operating revenues	9,478	5,942	143	1,023	333	183	(582)	16,520
Domestic Market	8,190	834	143	1,023	333	183	(565)	10,142
Export Market	1,287	5,108					(17)	6,378
Cost of goods sold	(7,038)	(2,185)	(85)	(667)	(268)	(105)	549	(9,801)
Gross profit	2,440	3,757	57	356	65	78	(33)	6,719
Adjusted EBITDA	2,575	3,768	45	371	20	75	(386)	6,468
R$ million			Logistics					Year Ended December 31, 2010
Consolidated Results	Steel	Mining	Port Logistics	Railway Logistics	Cement	Energy	Eliminations	Consolidated
Net operating revenues	9,926	3,615	119	838	202	114	(364)	14,451
Domestic Market	8,763	574	119	838	202	114	(364)	10,247
Export Market	1,163	3,041						4,204
Cost of goods sold	(6,226)	(1,252)	(70)	(522)	(164)	(42)	393	(7,883)
Gross profit	3,700	2,363	49	317	38	72	29	6,568
Adjusted EBITDA	3,776	2,439	38	349	9	69	(325)	6,355

66Net Operating Revenues

Mining net export revenues increased R$2,067 million, or 68.0%, from R$3,041 million in 2010 to R$5,108 million in 2011, primarily due to the increase in international iron ore prices driven by the strong demand, mainly from China, and the increase of 31.4% in sales volume, from 17,035 thousand tons in 2010 to 22,392 thousand tons in 2011.

Logistics

Logistics net operating revenues in 2011 were R$1,166 million, an increase of 21.8% as compared with the net logistics operating revenues of R$957 million reported in 2010. In 2011, net revenue from railway logistics totaled R$1,023 million and net revenue from port logistics amounted to R$143 million, while in 2010, net revenue from railway logistics totaled R$838 million and net revenue from port logistics amounted to R$119 million.

Cement

As we continue the ramp-up of our cement plant in Volta Redonda, we significantly increased sales in 2011, reaching 1,755 thousand tons, which represents a growth of 76.9% when compared to 2010.

As a consequence, in 2011, net revenues from the cement segment totaled R$333 million, an increase of 65.0% from 2010 net revenues of R$202 million.

Energy

In 2011 our net operating revenues from the energy segment totaled R$183 million, an increase of R$69 million as compared with net operating revenues of R$114 million reported in 2010 in this segment.

Cost of Products Sold

In 2011, consolidated cost of products sold amounted to R$9,801 million, representing a 24.3% increase as compared to R$7,883 million recorded in 2010.

Steel

Consolidated steel costs were R$7,038 million in 2011, representing a 13.0% increase as compared to the R$6,226 million recorded in 2010, mainly due to the increase in raw materials costs.

Other than the periodic sale of excess inventories and the purchase by our subsidiaries of semi-finished products from third parties for further processing, our cost of products sold is equivalent to our steel production cost.

The following table sets forth our steel production costs, the production costs per ton of steel and the portion of production costs attributable to the primary components of our costs of production. With the exception of coal and coke, which we import, and some metals (such as aluminum, zinc and tin) with domestic prices linked to international prices, our costs of production are mostly denominated inreais.

	2011			2010
Raw Materials	R$ million	R$ / ton	%	R$ million	R$ / ton	%
Iron Ore	283	56.6	4.7%	239	47.0	4.3%
Coal	1,249	250.5	20.9%	1,239	243.7	22.1%
Coke	575	115.3	9.6%	382	75.1	6.8%
Metals	275	55.1	4.6%	244	48.0	4.3%
Outsourced Slabs and Hot Coils	221	44.3	3.7%	272	53.5	4.9%
Pellets	276	55.3	4.6%	169	33.2	3.0%
Scrap	110	22.0	1.8%	64	12.6	1.1%
Other⁽¹⁾	237	47.5	4.0%	274	53.9	4.9%
⁽¹⁾Includes limestone and dolomite
Energy / Fuel	565	113.3	9.5%	561	110.3	10.1%
Labor	607	121.6	10.2%	570	112.1	10.2%
Services and Maintenance	716	143.5	12.0%	743	146.1	13.3%
Tools and Supplies	268	53.8	4.5%	269	52.9	4.8%
Depreciation	562	112.7	9.4%	489	96.2	8.7%
Other	27	5.5	0.5%	59	16.5	1.5%

Total Steel Cost Production	5,970	1,197.1	100.0%	5,574	1,101.3	100.0%

In 2011, our steel production costs were R$5,970 million, a 7.1%, or R$396 million, increase from the R$5,574 million reported in 2010.

We are self-sufficient in almost all the raw materials used in the production of steel. The principal raw materials we use in our integrated steel mill include iron ore, coke, coal (from which we produce most of our coke necessities), limestone, dolomite, aluminum, tin and zinc. In addition, our production operations consume water, gases, electricity and ancillary materials.

We obtain all of our iron ore requirements from our Casa de Pedra mine located in the state of Minas Gerais, and the limestone and dolomite from our Bocaina mine in the city of Arcos, in the state of Minas Gerais.

The coal and coke we consume are acquired from different international producers “See Item 4B - Raw Materials and Suppliers”. In the first half of 2011, given the mismatch between supply and demand, there was an increase in the price of some raw materials used in steelmaking.

Our coke costs increased R$193 million or 50.5%, from R$382 million in 2010 to R$575 million in 2011, corresponding to 9.6% of our steel production cost, due to the increase in consumption and higher average prices.

The costs of pellets increased R$107 million or 63%, from R$169 million in 2010 to R$276 million in 2011, principally due to increase in consumption but also due to higher average prices.

Depreciation costs increased R$73 million from R$489 million in 2010 to R$562 million in 2011, mainly due to asset additions.

Mining

Our mining costs of products sold totaled R$2,185 million in 2011, an increase of R$933 million, or 74.5%, as compared to the R$1,252 million reported in 2010, mainly due to the increase in sales volume of iron ore.

Logistics

In 2011, cost of services attributable to our logistics segment totaled R$752 million, representing a 27.0% increase as compared to the R$592 million reported in 2010, mainly due to the increase in the cost of railway logistics, which totaled R$667 million in 2011, a 27.8% increase (equivalent to R$145 million) from the R$522 million reported in 2010. The railway logistics represented 89% of the total logistics costs in 2011 and 88% of the total logistics costs in 2010. In addition, cost of services from port logistics totaled R$85 million, a 21.4% increase from the R$70 million reported in 2010.

Cement

Cost of products sold attributable to our cement segment reached R$268 million in 2011, R$104 million, or 63.4% up from the R$164 million reported in 2010, mainly due to an increase in sales, as described above.

Energy

In 2011, cost of products sold attributable to our energy segment was R$105 million, an increase of R$63 million or 150.0% as compared with the R$42 million reported in 2010.

Gross Profit

Gross profit totaled R$6,719 million in 2011, an increase of 2.3% or R$151 million as compared to R$6,568 million on 2010, due to the increase of R$2,069 million in net operating revenues, partially offset by the increase of R$1,918 million in cost of products sold.

Steel

Gross profit in the steel segment totaled R$2,440 million in 2011, a decrease of R$1,260 million, or 34.1%, from R$3,700 million in 2010, due to the increase of R$812 million in the cost of steel products sold, in light of the increase in raw material costs, and the decrease of R$448 million in steel net revenues due to the decrease in average steel prices.

Mining

Our gross profit in the mining segment increased R$1,394 million, or 59.0% from R$2,363 million in 2010 to R$3,757 million in 2011, mainly due to the increase of R$2,327 million in mining net operating revenues, caused by higher international prices and increase in sales volume, partially offset by the increase of R$933 million in cost of products sold.

Logistics

Gross profit in the logistics segment increased 12.8% from R$366 million in 2010 to R$413 million in 2011, due to the increase of R$209 million in net revenues, partially offset by the increase of R$160 million in the cost of products sold.

Cement

Gross profit in the cement segment increased R$27 million or 68.4% from R$38 million in 2010 to R$65 million in 2011, due to the increase of R$131 million in net revenues, partially offset by the R$104 million increase in the cost of products sold.

Energy

The energy segment reported in 2011 a gross profit of R$78 million, an increase of 8.3% as compared with the R$72 million reported in 2010.

Selling, General and Administrative Expenses

In 2011, we recorded selling, general and administrative expenses of R$1,180 million, a 15.8% increase from 2010. Selling expenses increased 25.3%, from R$482 million in 2010 to R$604 million in 2011, mainly due to expenses relating to iron ore freight. General and administrative expenses increased 7.3%, from R$537 million in 2010 to R$576 million in 2011.

Other operating income (Expenses)

In 2011, we recorded a net income of R$218 million in the “Other Revenue and Expenses” line-item, as compared to a net expense of R$551 million in 2010. The R$769 million increase was mostly due to the R$698 million from the sale of CSN’s entire interest in Riversdale Mining Limited in April 2011.

Operating Income

Operating income increased by 15.2%, or R$759 million, from R$4,998 million in 2010 to R$5,757 million in 2011. This increase was mainlydue to the R$698 million from the sale of CSN’s entire interest in Riversdale Mining Limited in April 2011.

Financial expenses (income), net

In 2011, our net financial expenses increased by 5.0% or R$95 million, from R$1,911 million in 2010 to RS$2,006 million in 2011, mainly due to the following items:

·Interest income increased by 11.5%, or R$74 million, from R$643 million in 2010 to R$717 million in 2011 mainly due to the increase of R$145 million in returns on financial investments, due to the increases in cash and cash equivalents. This decrease was partially offset by the decrease of R$46 million in other financial income;

·Interest expense increased by 31.1%, or R$684 million, from R$2,200 million in 2010 to R$2,884 million in 2011 mainly due to the increase of R$828 million in interests on loans and financing, partially offset by an increase of R$138 million in capitalized interest;

·Foreign exchange and monetary variation net, including operations with derivatives, moved from a loss of R$354 million in 2010 to a gain of R$161 million in 2011, mainly resulting from the depreciation of thereal against the U.S. dollar. This depreciation affects:

oOur U.S. dollar-denominated gross debt;

oOur U.S. dollar-denominated cash and cash equivalents; and

oOur trade accounts receivable and payable account receivables.

Income Taxes

We recorded an expense for income tax and social contribution of R$84 million in 2011, as compared to R$571 million in 2010. Expressed as a percentage of pre-tax income, income tax expense decreased from 18.5% in 2010 to 2.2% in 2011. Income tax expense in Brazil refers to federal income tax and social contribution tax. The statutory rates for these taxes applicable to the periods presented herein were 25% for federal income tax and 9% for the social contribution. Therefore, the balances owed for these periods totaled R$1,275 million in 2011 and R$1,050 million in 2010 (34% of income before taxes and equity in affiliated companies). Adjustments are made to these rates in order to reach the actual tax expense for the years.

For the year ended December 31, 2011, adjustments totaled R$1,190 million and were comprised of:

·a R$1,279 million adjustment related to equity income of subsidiaries at different rates or which are not taxable, which decreased tax expenses;

·tax incentives that represented a net tax adjustment of R$73 million, which decreased tax expenses;

·tax incentives of R$44 million, which decreased tax expenses;

·a R$16 million adjustment related to non taxable income from the Federal Tax Repayment Program, or REFIS, which increased tax expenses; and

·An adjustment of R$190 million related to sale of non-deductible securities, which increased tax expenses.

For the year ended December 31, 2010, adjustments totaled R$478 million and were comprised of:

·a R$121 million benefit from interest on stockholders’ equity;

·a R$217 million adjustment related to equity income of subsidiaries at different rates or which are not taxable, which decreased tax expenses;

·tax incentives that represented a net tax adjustment of R$34 million, which decreased tax expenses; and

·a R$106 million benefit related to non taxable income from the Federal Tax Repayment Program, or REFIS, adjustments.

It is not possible to predict the future adjustments to the federal income tax and social contribution at statutory rates, as they depend on interest on stockholder’s equity, tax incentives, non-taxable factors including income from offshore operations, and tax losses from offshore operations, especially when expressed as a percentage of income.

Net Income

In 2011, we had a net income of R$3,667 million, a 45.7% increase as compared to 2010. The improved results were mainly due to the R$698 million from the sale of CSN’s entire interest in Riversdale Mining Limited in April 2011.

Year 2010 Compared to Year 2009

In addition to the consolidated figures reported above, the Company reports its integrated operations in five business segments: steel, mining, cement, logistics (including Port and Railway) and energy. The operating results of each segment are disclosed separately. The information on CSN’s five business segments is derived from the accounting data, together with allocations and the apportionment of costs among the segments.

Our consolidated results for the years ended December 31, 2010 and 2009 by business segment are presented below:

R$ million			Logistics					Year Ended December 31, 2010			Logistics					Year Ended December 31, 2010
Consolidated Results	Steel	Mining	Port Logistics	Railway Logistics	Cement	Energy	Eliminations	Consolidated	Steel	Mining	Port Logistics	Railway Logistics	Cement	Energy	Eliminations	Consolidated
Net operating revenues	9.926	3.615	119	838	202	114	(364)	14.451	9,926	3,615	119	838	202	114	(364)	14,451
Domestic Market	8.763	574	119	838	202	114	(364)	10.247	8,763	574	119	838	202	114	(364)	10,247
Export Market	1.163	3.041						4.204	1,163	3,041						4,204
Cost of goods sold	(6.095)	(1.187)	(70)	(522)	(164)	(42)	393	(7.687)	(6,226)	(1,252)	(70)	(522)	(164)	(42)	393	(7,883)
Gross profit	3.831	2.428	49	317	38	72	29	6.764	3,700	2,363	49	317	38	72	29	6,568
R$ million			Logistics					Year Ended December 31, 2009
Consolidated Results	Steel	Mining	Port Logistics	Railway Logistics	Cement	Energy	Eliminations	Consolidated
Net operating revenues	8.201	1.964	144	823	60	117	(330)	10.978
Domestic Market	7.046	247	144	823	60	117	(330)	8.107
Export Market	1.156	1.716						2.872
Cost of goods sold	(5.572)	(1.179)	(76)	(464)	(61)	(43)	373	(7.022)
Gross profit	2.629	784	69	358	(1)	73	43	3.956

Adjusted EBITDA

3,776

2,439

349

(325)

6,355

R$ million			Logistics					Year Ended December 31, 2009
Consolidated Results	Steel	Mining	Port Logistics	Railway Logistics	Cement	Energy	Eliminations	Consolidated
Net operating revenues	8,201	1,964	144	823	60	117	(330)	10,978
Domestic Market	7,046	247	144	823	60	117	(330)	8,107
Export Market	1,156	1,716						2,872
Cost of goods sold	(5,692)	(1,248)	(76)	(464)	(61)	(43)	373	(7,211)
Gross profit	2,509	716	69	358	(1)	73	43	3,768

Adjusted EBITDA

2,623

811

410

(8)

(353)

3,621

Steel

Steel net operating revenues increased R$1,725 million, or 21.0%, from R$8,201 million in 2009 to R$9,926 million in 2010, mainly due to the 16.7% increase in steel sales volume from 4,110 million tons in 2009 to 4,796 million tons in 2010 and to the increase of 5.0% in the steel average prices.

Steel net domestic revenues increased 24.4%, from R$7,046 million in 2009 to R$8,763 million in 2010, due to the increase of 27.5% in domestic sales volume from 3,243 million in 2009 to 4,135 million in 2010, given the increase in demand.

Steel net export revenues increased 0.6%, from R$1,156 million in 2009 to R$1,163 million in 2010.

Mining

Mining net operating revenues increased R$1,651 million, or 84.1%, from R$1,964 million in 2009 to R$3,615 million in 2010 primarily due to higher international prices and the increase in sales volume.

Mining net domestic revenues increased R$327 million, or 132.4%, mainly due to the increase of 113.2% in domestic sales volume from 713 million tons in 2009 to 1,520 million in 2010, given the increase in demand.

Mining net export revenues increased R$1,325 million, or 77.2%, from R$1,716 million in 2009 to R$3,041 million in 2010, primarily due to the increase in international iron ore prices driven by the strong demand, mainly from China.

Logistics

Total logistics net operating revenues in 2010 achieved R$957 million, a reduction of 1.0% as compared with the net logistics operating revenues of R$967 million reported in 2009. In 2010, net revenue from railway logistics totaled R$838 million and net revenue from port logistics amounted to R$119 million, while in 2009, net revenue from railway logistics totaled R$823 million and net revenue from port logistics amounted to R$144 million.

Cement

In May 2009, we began producing cement in our new plant in Volta Redonda, adjacent to the Presidente Vargas Steelworks, adding value to the slag generated during steel production.

As we operated the plant during the whole year, in 2010 we increased significantly the sales of cement, reaching 992 thousand tons, a 193.5% increase over 2009. This increase in sales does not consider the full operation of our cement segment, which is in process of growth.

As a consequence, in 2010, net revenue from cement segment totaled R$202 million, an increase of 236.7% from 2009 net revenue of R$60 million.

Energy

In 2010 our net operating revenues from the energy segment totaled R$114 million, a decrease of R$3 million as compared with the net operating revenues of R$117 million reported in 2009 in this segment.

Cost of Products Sold

In 2010, consolidated cost of products sold amounted to R$~~7,687~~7,883 million, representing a ~~9.5%~~9.3% increase as compared to R$~~7,022~~7,211 million recorded in 2009.

Steel

Consolidated steel costs were R$~~6,095~~6,266 million in 2010, representing a 9.4% increase as compared to the R$~~5,572~~5,693 million recorded in 2009, mainly as a result of higher sales, partially offset by the greater dilution of fixed costs.

Other than the sale of excess inventories from time to time and the purchase by our subsidiaries of semi-finished products from third parties for further processing, our cost of products sold is equivalent to our steel production cost.


R$ million	2010			2009				2010			2009
Raw Materials	R$ million	R$ / ton	%	R$ million	R$ / ton	%	R$ million	R$ / ton	%	R$ million	R$ / ton	%
Iron Ore	239	47.0	4.3%	221	50.6	4.9%	239	47.0	4.3%	221	50.6	4.9%
Coal	1,239	243.7	22.1%	1,042	238.7	22.9%	1,239	243.7	22.1%	1,042	238.7	22.9%
Coke	382	75.1	6.8%	378	86.6	8.3%	382	75.1	6.8%	378	86.6	8.3%
Metals	244	48.0	4.3%	174	39.9	3.8%	244	48.0	4.3%	174	39.9	3.8%
Outsourced Slabs and Hot Coils	272	53.5	4.9%	62	14.2	1.4%	272	53.5	4.9%	62	14.2	1.4%
Pellets	169	33.2	3.0%	59	13.5	1.3%	169	33.2	3.0%	59	13.5	1.3%
Scrap	64	12.6	1.1%	100	22.9	2.2%	64	12.6	1.1%	100	22.9	2.2%
Other (1)	274	53.9	4.9%	201	46.0	4.4%	274	53.9	4.9%	201	46.0	4.4%
(1) Include limestone and dolomite
Energy / Fuel	561	110.3	10.1%	436	99.9	9.6%	561	110.3	10.1%	436	99.9	9.6%
Labor	570	112.1	10.2%	468	107.2	10.3%	570	112.1	10.2%	468	107.2	10.3%
Services and Maintenance	743	146.1	13.3%	657	150.5	14.4%	743	146.1	13.3%	657	150.5	14.4%
Tools and Supplies	269	52.9	4.8%	221	50.6	4.9%	269	52.9	4.8%	221	50.6	4.9%
Depreciation	489	96.2	8.7%	417	95.5	9.2%	489	96.2	8.7%	417	95.5	9.2%
Other	59	16.5	1.5%	120	27.5	2.6%	59	16.5	1.5%	120	27.5	2.6%

Total Steel Cost Production	5,574	1,101.3	100.0%	4,556	1,043.5	100.0%	5,574	1,101.3	100.0%	4,556	1,043.5	100.0%
(*) adjustment according to adoption of the International Financial Reporting Standards (IFRS)

In 2010, our steel production costs were R$5,574 million, a 22.3% or R$1,018 million increase from R$4,556 million reported in 2009.

We are self-sufficient in almost all the raw materials used in the steel production. The principal raw materials we use in our integrated steel mill include iron ore, coke, coal (from which we produce most of our coke necessities), limestone, dolomite, aluminum, tin and zinc. In addition, our production operations consume water, gases, electricity and ancillary materials.

We obtain all of our iron ore requirements from our Casa de Pedra mine located in the State of Minas Gerais, and the limestone and dolomite from our Bocaina mine in the city of Arcos, in the State of Minas Gerais.

The coal and coke we consume are acquired from different international producers “See Item Raw Materials and Suppliers”. During 2010, given the higher global demand for steel products, there was aan increase in the consumption and in the prices of some commodities used for steelmaking.

Our coal costs increased 18.9%, from R$1,042 million in 2009 to R$1,239 million in 2010, corresponding to 22.1% of our steel production cost, given the increase in consumption and higher average prices.

Production cost increased also due to the ~~higer~~higher consumption of hot-rolled coils acquired from third parties in 2010. Those costs increased 338.7%, from R$62 million in 2009 to R$272 million in 2010 due to the acquisition, by the company, of semi-finished products from third-parties, to face the strong steel demand after the global economic crisis. This increase in steel demand was mainly noticed in the 1st half of 2010, as compared to the same period of 2009, when the world was in the middle of the economic crisis.

The costs of metals such as aluminum, zinc and tin also increased from R$174 million in 2009 to R$244 million in 2010, given the increase in consumption and higher prices.

Other raw materials include pellets and scrap purchased in the ~~market and also limestone and dolomite that we extract from our own mines in the state of Minas Gerais.~~

market.

Mining

Our mining costs totaled R$~~1,187~~1.252 million in 2010, ~~in line~~an increase of 0.4% as compared with the R$~~1,179~~1.248 million reported in 2009, ~~despite~~due to the 6.2% increase in sales ~~volume, which was offset by the greater dilution of fixed costs.~~volume.

Logistics

In 2010, cost of services attributable to our logistics segment totaled R$592 million, representing a 9.6% (or R$52 million) increase as compared to the R$540 million reported in 2009, mainly due to the increase in the cost of services of our railway logistics, which totaled R$522 million in 2010, a 12.5% increase (or R$58 million) from the R$464 million reported in 2009. The railway logistics represented 88% of the total logistics costs in 2010 and 86% of the total logistics costs in 2009.

On the other hand, cost of services from port logistics totaled R$70 million, a 7.9% decrease from the R$76 million reported in 2009.

Cement

Cost of products sold attributable to our cement segment achieved R$164 million in 2010, R$103 million, or 168.8%, more than the R$61 million reported in 2009, due to increase in sales, as described above.

Energy

In 2010, cost of products sold attributable to our energy segment was R$42 million, in line with the R$43 million reported in 2009.

Gross Profit

Gross profit increased R$~~2,808~~2,800 million, or ~~71.0%~~74.3%, from R$~~3,956~~3,768 million in 2009 to R$~~6,764~~6,568 million in 2010, due to the increase of R$3,473 million in net operating revenues and the increase of R$~~665~~672 million in cost of products sold.

Steel

Gross profit in the steel segment increased R$~~1,202~~1,191 million, or ~~45.7%~~47.5%, from R$~~2,629~~2,509 million in 2009 to R$~~3,831~~3,700 million in 2010, due to the increase of R$1,725 million in steel net revenues, driven by the increase in sales volume and in steel average prices, partially offset by the increase of R$~~523~~533 million in the cost of steel products sold.

Mining

Our gross profit in the mining segment increased R$~~1,644~~1,647 million, or ~~209.6%~~230.1% from R$~~784~~716 million in 2009 to R$~~2,428~~2,363 million in 2010, mainly due to the increase of R$1,651 million in mining net operating revenues due to higher international prices and the increase in sales volume.

Logistics

Gross profit in the logistics segment decreased 14.3% in 2010, from R$427 million in 2009 to R$366 million in 2010, due to the decrease of 1.0% in net revenues and the increase of 9.6% in the cost of products sold.

Cement

Gross profit in the cement segment increased R$39 million, from a negative result of R$1 million in 2009 to a positive result of R$38 million in 2010, due to the increase of 236.7% in net revenues, partially offset by a 168.8% increase in the cost of products sold.

Energy

The energy segment reported in 2010 a gross profit of R$72 million, in line with the R$73 million reported in 2009.

Selling, General and Administrative Expenses

In 2010, we recorded selling, general and administrative expenses of R$~~1,215~~1,019 million, a 9%9.9% increase from 2009.

Selling expenses increased 7% 7.8%, from R$~~636~~447 million in 2009 to R$ ~~678~~482 million ~~in 2010, reflecting the stronger sales efforts~~ in 2010.

General and administrative expenses increased 12%, from R$480 million in 2009 to R$537 million in 2010.

Other operating income (Expenses)

In 2010, we recorded a net other expense of R$551 million in the “Other Revenue and Expenses” line-item, as compared to a net revenue of R$721 million in 2009. The R$1,272 million reduction was principally due to the positive non-recurring effects in 2009 of the reverse merger of Big Jump Energy ~~Participacoes~~Participações SA by our investee Namisa in the amount of R$835 million and our adherence of to the REFIS tax repayment program in the amount of R$505 million.

Operating Income

Operating income increased by 40.3%, or R$1,437 million, from R$3,561 million in 2009 to R$4,998 million in 2010. This increase was mainly due to the R$3,473 million increase in net revenues, offset by the reduction on cost of product sold in the amount of R$665 million and the R$1,272 million reduction in the “Other Revenue and Expenses” line, principally due to the positive non-recurring effects in 2009 of the reverse merger of Big Jump Energy ~~Participacoes~~Participações SA by our investee Namisa in the amount of R$835 million and our adherence of to the REFIS tax repayment program in the amount of R$505 million.

Financial expenses (income), net

In 2010, our net financial expenses increased by 676.8%, or R$1,665 million, from R$246 million in 2009 to RS$1,911 million in 2010, mainly due to the following items:

· Interest income increased by 10%, or R$57 million, from R$586 million in 2009 to ~~US$~~RS$643 million in 2010 mainly due to the increase of R$118 million in returns on financial investments, due to the increases in cash and cash equivalents. This decrease was partially offset by the decrease of R$58 million in other financial income;

· Interest expense increased by 16.3%, or R$308 million, from R$1,892 million in 2009 to ~~US$~~RS$2,200 million in 2010 mainly due to the increase of R$514 million in interests on loans and financing in local currency and the increase of R$~~128~~43 million in interests on loans and financing in foreign currency. This was partially offset by the increase of R$130 million in capitalized interests and the decrease of R$125 million in losses from derivatives instruments;

· Foreign exchange and monetary ~~loss,~~variation net, including operations with derivatives ~~decreased by 133.1%, or R$1,414 million,~~moved from a gain of R$1,060 million in 2009 to a loss of R$354 million in 2010 mainly affected by appreciation of thereal against theU.S. ~~dollar~~.dollar. This appreciation affects:

o Our U.S. dollar-denominated gross debt;

o Our U.S. dollar-denominated cash and cash equivalents; and

o Our trade accounts receivable and payable.

Income Taxes

We recorded an expense for income tax and social contribution of R$571 million in 2010, as compared to R$700 million in 2009. Expressed as a percentage of pre-tax income, income tax expense decreased from 21.1% in 2009 to 18.5% in 2010. Income tax expense in Brazil refers to the collection of federal income tax and social contribution tax. The statutory rates for these taxes applicable to the periods presented herein were 25% for federal income tax and 9% for the social contribution. Therefore, the balances owed for these periods totaled R$1,050 million in 2010 and R$1,127 million in 2009 (34% of income before taxes and equity in affiliated companies). Adjustments are made to these rates in order to reach the actual tax expense for the years.

For the year ended December 31, 2010, adjustments totaled R$479 million and were comprised of:

· a R$121 million benefit from interest on stockholders’ equity;

· a R$216 million adjustment related to equity income of subsidiaries at different rates or which are not taxable;

· tax incentives that represented a net tax adjustment of R$34 million;

· a R$106 million benefit related to non taxable income from the Federal Tax Repayment Program, or REFIS, adjustments;

For the year ended December 31, 2009, adjustments totaled R$427 million and were comprised of:

· a R$109 million benefit from interest on stockholders’ equity;

· a R$169 million benefit related to equity income of subsidiaries at different rates or which are not taxable;

· tax incentives that represented a net tax adjustment of R$12 million;

· a R$252 million benefit related to non taxable income from the Federal Tax Repayment Program, or REFIS, adjustments; and

· These increases were offset by other permanent exclusions in the amount of R$115 million, mainly by the constitution of deferred income tax on the tax loss carryfowards of the subsidiary Prada.

R$ Million	2011	2010	2009
Adjusted EBITDA	6,468	6,355	3,621
Depreciation	(929)	(806)	(780)
Other operating income (expenses)	218	(551)	721
Finance income (expenses)	(2,006)	(1,911)	(246)
Pretax income	3,751	3,087	3,315
Income tax and social contribution	(84)	(571)	(700)
Profit for the year	3,667	2,516	2,615

Adjusted EBITDA totaled R$6,468 million in 2011, an increase of 1.8% or R$113 million as compared to R$6,355 million in 2010, due to the increase in sales and average prices of iron ore, partially offset by higher costs of goods sold and lower steel prices.

Adjusted EBITDA totaled R$6,355 million in 2010, an increase of 75.5% or R$2,735 million as compared to R$3,621 million in 2009, due to the increase in steel and mining results.

5B. Liquidity and Capital Resources

Overview

Our main uses of funds are for capital expenditures, repayment of debt and dividend payments. We have historically met these requirements by using cash generated from operating activities and through the issuance of short- and long-term debt instruments. We expect to meet our cash needs for ~~2011~~2012 primarily through a combination of operating cash flow, cash and cash equivalents on hand and newly issued long-term debt instruments.

In addition, from time to time, we review acquisition and investment opportunities and will, if a suitable opportunity arises, make selected acquisitions and investments to implement our business strategy. We ~~generallymake~~generally make investments directly or through subsidiaries, joint ventures or affiliated companies, and fund these investments through internally generated funds, the issuance of debt, or a combination of such methods.

Sources of Funds and Working Capital

Cash Flows

~~Cash and~~Our free cash ~~equivalents~~flow as of December 31, 2011 and 2010 totaled R$5,178 million and ~~2009 totaled~~ R$2,268 million, ~~and R$ 1,181 million,~~ respectively.

Operating Activities

Cash provided from operations was R$ ~~2,482~~4,202 million and ~~cash used in operations was~~ R$ ~~773~~2,517 million, in ~~2010~~2011 and ~~2009~~2010 respectively. The R$ ~~3,255~~1,685 million increase in cash flow from operating activities in ~~2010~~2011 as compared to ~~2009~~2010 was mainly due to an increase of R$ ~~3,106~~1,171 million in ~~adjustments to reconcile~~ net income ~~mainly due~~cash effect and a decrease of R$514 million in our working capital allocated to an increase of financial interests of R$ 359 million, accrual for derivatives in the amount of R$ 215 million and net foreign exchange gain of R$ 2,082 million and gain with equity investment variation in 2009 in the amount of R$ 835 million due to Namisa’s results of operations, that did not occur in 2010.our business.

Investing Activities

We used cash in our investing activities in the total amount of R$5,275 million in 2011 and R$4,636 million in ~~2010 and R$ 617 million in 2009 .~~2010. The increase of R$ ~~4,019~~639 million in ~~2010~~2011 as compared to ~~2009~~2010 was mainly due to ~~acquisition of investment in Riversdale Mining Limited and acquisitions~~an increase of fixed assets to supply the projects, mainly related to: (i) the Casa de Pedra expansion; (ii) the ~~construction~~expansion of the ~~cement plant in the city~~Port of ~~Volta Redonda (State of Rio de Janeiro) and of the clinker plant in the city of Arcos (State of Minas Gerais);~~Itaguai; (iii) the construction of the long steel mill in the city of Volta Redonda (State of Rio de Janeiro) and (iv) the extension of Transnordestina ~~railroad~~railroad.

Financing Activities

Cash provided by financing activities was R$ ~~4,651~~4,741 million in ~~2010~~2011 and R$ ~~1,510~~4,616 million in ~~2009.~~2010. The R$ ~~3,141~~125 million increase in cash provided by financing activities in ~~2010,~~2011, as compared to ~~2009,~~2010, was mainly due to a ~~increase in long-term debt during the period to finance the current projects. Also in 2009, we acquired our own shares to be held in treasury in the amount~~decrease of R$ ~~1,350~~1,238 million in amortizations, almost offset by a ~~transaction not repeated~~decrease of R$931 million in ~~2010.~~issuances and an increase of R$296 millionin payments of dividends and interest on equity.

Trade Accounts Receivable Turnover Ratio

Our receivable turnover ratio (the ratio between trade accounts receivable and net operating revenues), expressed in days of sales ~~decreased~~increased to 2629 days on December 31, ~~2010~~2011 from 3126 days on December 31, ~~2009.~~2010.

Days Sales in Inventory ~~Turnover Ratio~~

Our days sales in inventory ~~turnover ratio~~ (obtained by dividing inventories by annualized cost of ~~goods~~products sold), expressed in days of cost of ~~goods~~products sold ~~increased~~decreased to ~~113~~103 days in ~~2010, as compared to 88~~2011, from 118 days in ~~2009.~~2010.

Trade Accounts Payable Turnover Ratio

The accounts payable turnover ratio (obtained by dividing trade accounts payable by annualized cost of ~~goods~~products sold), expressed in days of cost of ~~goods~~products sold, ~~decreased~~increased to 2546 days on December 31, ~~2010~~2011 from 2630 days on December 31, ~~2009.~~2010.

Liquidity Management

~~Liquidity Management~~

Given the capital intensive and cyclical nature of our industry, and the generally volatile economic environment in certain emerging markets, we have retained a substantial amount of cash on hand to run our operations, to satisfy our financial obligations, and to be prepared for potential investment opportunities. As of December 31, ~~2010,~~2011, cash and cash equivalent totaled R$ ~~10,239~~15,417 million.

We were also taking advantage of the current liquidity conditions to extend the maturity profile of our debt. These activities are unrelated to the management of any interest rate, inflation and/or foreign exchange risk exposure. Given the lack of a liquid secondary market for our short term debt instruments, we have accumulated cash instead of prepaying our debt prior to final ~~maturity.~~maturity. As of December 31, ~~2010,~~2011, short-term and long-term indebtedness accounted for ~~6.51%~~9.69% and ~~93.49%~~90.31%, respectively, of our total debt, and the average life of our existing debt was equivalent to approximately ~~nine~~8 years, considering a 40 ~~years-term~~year term for the perpetual bonds issued in September 2010.

Capital Expenditures and Investments

In ~~2010,~~2011, our capital expenditures were R$ ~~3,636~~4,401 million, of which R$1,691 million was used in ~~acquisitions~~the expansion of ~~equipment, of which~~the Transnordestina railroad, R$ ~~275~~549 million ~~was used~~in maintenance and repairs, R$251 million in the Casa de Pedra mine expansion, R$ ~~1.371 million relating to the expansion of the Transnordestina railroad, R$ 249 million in construction of the cement plant in Volta Rendonda (RJ), R$ 139~~238 million in projects relating to the Itaguaí Port expansion and R$ ~~483~~216 million in ~~maintenance.~~the construction of our long steel plant in Volta Redonda.

We expect to meet our liquidity requirements from cash generated from operations, and, if needed, the issuance of debt securities. For details on our Planned Investments see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.

Company Debt and Derivative Instruments

At December 31, ~~2010~~2011 and ~~2009,~~2010, total debt (composed of current portion of long-term debt, accrued finance charges, long-term debt and debentures) ~~aggregated~~summed R$28,067 million and R$20,206 million, ~~and R$ 14,356 million ,~~ respectively, equal to ~~258%~~333% and ~~218%~~258% of the stockholders’ equity at December 31, ~~2010~~2011 and ~~2009,~~2010, respectively. At December 31, ~~2010,~~2011, our short-term debt (composed of current portion of long-term debt including accrued finance charges and debentures) totaled R$ ~~1,345~~2,735 million and our long-term debt (composed of long-term debt and debentures) totaled R$ ~~18,862~~25,332 million. The foregoing amounts do not include debt of others for which we are contingently liable. See “Item 5E. Off-Balance Sheet Arrangements.”

At December 31, ~~2010,~~2011, approximately ~~48%~~64% of our debt was denominated inreais and substantially all of the remaining balance was denominated in U.S. dollars.

Our current policy is to protect ourselves against foreign exchange losses and interest rate losses on our debt and currently our exposure is protected through foreign exchange derivative products, including futures ~~swaps,~~ and ~~FRA-Forward Rate Agreements.~~swaps. For a description of our derivative instruments, see Note 17 to our consolidated financial statements contained in “Item 18. Financial Statements.” Also see “Item 5A. Operating Results—Results of Operations—Year ~~2010~~2011 Compared to Year ~~2009”~~2010”.

The major components of R$ ~~1,345~~2,735 million of our consolidated current portion of ~~long-term~~short-term debt outstanding at December 31, ~~2010~~2011 were:

Components	Average interest rate	Total (in million of R$)
Fixed rate notes	6.5% - 10.5%	~~108~~	119
BNDES/Finame	1.5% - 3.2%	~~329~~	456
Prepayment financing	~~1.24%~~1% - 7.5% and 104.8% - 109.5% CDI	~~676~~1,067
Debentures	9.4% + IGPM and 1% + TJLP and 103.6% - 110.8% CDI	672
CCB	1.54% and 112.5% CDI	278
Others	3.3% - ~~9.5%~~8.0%	~~232~~143
Total		~~1,345~~2,735

The major components of R$ ~~18,862~~25,332 million of our consolidated long-term debt outstanding at December 31, ~~2010~~2011 were (amounts are reflected in long-term debt):

~~Components~~

Components	Average interest rate	Total (in million of R$)
Debenture	9.4% + IGPM and 1% + TJLP and 103.6% - 110.8% CDI	2,822
Fixed rate notes	6.5% - 10.5%	5,065
BNDES/Finame	1.5% - 3.2%	1,781
Perpetual bonds	7%	1,876
Prepayment financing	1% - 7.5% and 104.8% - 109.5% CDI	6,378
CCB	112.5% CDI	7,200
Others	3.3% - 8.0%	210
Total		25,332

~~Average~~
~~interest rate~~

~~Total~~

~~(in million of R$)~~

~~Debenture~~

~~9.4% + IGPM and 1% + TJLP~~

~~1,761~~

~~Fixed rate notes~~

~~6.5% - 10.5%~~

~~4,499~~

~~BNDES/Finame~~

~~1.5% - 3.2%~~

~~1,963~~

~~Perpetual bonds~~

~~7% - 9.5%~~

~~1,666~~

~~Prepayment financing~~

~~1.24% - 7.5%~~

~~5,762~~

~~CCB~~

~~112.5% CDI~~

~~3,000~~

~~Others~~

~~3.52% - 8%~~

~~211~~

~~Total~~

~~18,862~~

The amount of interest paid in ~~2010~~2011 was R$ ~~1,867~~2,506 million.

The local debenture is a ~~real-denominated~~real-denominated debt instrument, which includes:

(i)Debentures issued in February 2006, of R$600 million six-year ~~debentures~~ bearing interest at a rate of 103.6% of the CDI rate per annum. On February 1, 2012, the Company liquidated these debentures in the amount of R$635,285 thousand (R$600,000 thousand principal amount and R$35,285 thousand in interest).

(ii)Debentures issued by our controlled company Transnordestina Logística S.A., which obtained approval by FDNE (Fundo de Desenvolvimento do Nordeste) on March 2010 for its First Private Emission of Debentures, convertible into shares, composed of eight series in total, with the overall amount of R$2,672,400. Until December 31, 2011, Transnordestina Logística S.A. had already issued 4 series in the total amount of R$1,493 million.

(iii)Debentures issued in July 2011, of R$1,150 million eight-year debentures bearing interest at a rate of 110.8% of the CDI rate per annum.

Eurodollar and Euronotes issued in accordance with Rule 144A and Regulation S under the Securities Act reflect senior unsecured debt instruments issued by us and our offshore subsidiaries, including (i) the US$300 million bonds, 10% per annum coupon, and the US$300 million notes, 8.25% per annum coupon, issued in 1997 with final maturity in 2047; (ii) the issuance in December 2003 and January 2004 of US$550 million notes, 9.75% per annum coupon with final maturity in 2013; (iii) the US$400 million notes, 10% per annum coupon,issued in September 2004 and January 2005 with final maturity in 2015, and (iv) the US$750 million notes, 6.875% per annum coupon, issued in September 2009 with maturity in 2019.

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In July 2010, we issued US$1 billion notes, 6.50% per annum coupon and maturity date in July 2020, and in September 2010 we issued a US$1 billion Perpetual Bond, 7% per annum coupon.

Pre-export agreements include the two series of the export receivables securitization program.

The series issued in June 2004, in the amount of US$59 million as of December 31, 2010, with maturity date on May 2012 and bearing interest at a rate of ~~7.43~~7.43% per annum; and the series issued in June 2005, in the amount of US$160 million as of December 31, 2010, with maturity in May 2015 and bearing interest at 6.15% per annum. In December 2011, we liquidated in advance its export receivables securitization program, in the amount of R$313,842 (R$283,857 thousand principal amount, R$2,373 in interest and R$27,612 in premium paid to creditors for the payment in advance).

We issued export credit notes, or NCEs: (i) on April 11, 2008, in the amount of R$100 million in favor of Banco do Brasil S.A., due 2013; (ii) on September 30, 2009, in the amount of R$1.0 billion, in favor of Banco do Brasil S.A., due 2014; ~~and~~ (iii) on September 30, 2009, in the amount of R$300 million, in favor of Banco do Brasil S.A., due ~~2014.~~2014; (iv) on May 21, 2010 in the amount of R$2.0 billion, in favor of Banco do Brasil S.A., through our subsidiary Congonhas Minérios S.A., due 2018. In April 2011, we issued another NCE, in the amount of R$1.5 billion; in favor of Banco do Brasil S.A., due to 2019.

~~On August 18, 2009 we~~We contracted a credit ~~facility~~facilities from Caixa Econômica Federal ~~or CEF,~~(CEF) under its special credit for large companies, in the form of a bank credit bill, or ~~CCB,~~CCB: (i) on August 18, 2009, in the amount of R$2.0 billion and to be amortized in 36 ~~months.~~

Onmonths; (ii) on February 9, 2010, ~~we contracted an additional credit facility from CEF under its special credit for large companies, in the form of a CCB,~~ in the amount of R$1.0 billion and to be amortized in 36 ~~month.~~

~~On May 21, 2010, our subsidiary Congonhas Minérios S.A. issued an NCE~~months. In 2011, we contracted two more CCBs: (i) in February 2011, in the amount of R$2.0 billion ~~in favor of Banco do Brasil S.A. The NCE will~~and to be amortized ~~over eight years~~in 94 months; and ~~is guaranteed by us.~~(ii) in August 2011, in the amount of R$2.2 billion and to be amortized in 108 months.

In January 2012, we priced, through our wholly-owned subsidiary CSN Resources S.A., an additional bond issuance in the amount of US$200 million, through the reopening of the US$1 billion bonds, at an interest rate of 6.5% p.a., due in July 2020. The offering price was 106.00% and yield was 5.6% p.a.

In March 2012, we issued promissory notes in the total amount of R$800 million.

Maturity Profile

The following table sets forth the maturity profile of our long-term debt at December 31, ~~2010:~~2011:


Maturity in	Principal Amount	Principal Amount
	(In millions of R$)	(In millions of R$)
2012	2,166
2013	2,088	2,264
2014	1,948	1,934
2015	2,188	2,346
2016	2,222	2,444
2017 and thereafter	6,584
2017		3,166
2018 and thereafter		11,302
Perpetual bonds	1,666	1,876

Total	18,862	25,332

5C. Research & Development and Innovation

In ~~the year of 2010,~~2011, CSN ~~has~~ invested R$ 5742 million in Research & Development to develop new products and maintain the company in the vanguard of value-added products. CSN is committed to ~~pursue~~pursuing technological innovation, continuous improvement, ~~and~~ systemic production processes and the generation of attractive products to market.

To meet the new demands and expectations of the market, CSN has been continuously investing in creating innovative projects aiming to surprise its clients with creative solutions involving products and services. The attitude of innovation associated with the workshop to reengineer the supply chain with the main customers has ~~been one~~beenone of the main lines of action ~~of the~~carried out by CSN R&D&D’s team to maintain and consolidate its growing market share.

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CSN, a leading company in Brazil in coated flat steel products with high added value, has been continuously investing in improvements to its processes, products and services. In its activities, the management believes ~~there is the strong performance~~ in developing new products and applications that meet current and future market ~~needs.~~needs to sustain a strong performance.

A project that demonstrates the innovative and pioneering ~~the~~ nature of CSN is the development of pre-painted steel, tocoated with Organo-Metallic film for application in fuel tanks ~~applied~~ in automobiles, replacing the post-painted tin coated steel and plastic tanks, with demand reaching a level of 500,000 tanks a year. The project was ~~designed with~~based on a new steel ~~base and~~substrate for GALVANEW^® coating, ~~application, continuous painting line at its~~continuously painted in CSN Paraná’s facilities, ~~CSN / PR Araucaria, giving properties of~~obtaining higher corrosion resistance, formability and weldability. Currently, CSN is working on improving the specification of the steel ~~base~~substrate in order to ~~achieve weight reduction of~~reduce the ~~components.~~tank’s weight.

Another project ~~was developed and~~which is finding increasing acceptance in the market is CSN Extra ~~Thin ®”~~Fino ® cold rolled steel “for new applications in white goods and steel furniture, ~~responding~~developed in response to a worldwide trend.

In the packaging segment, CSN has invested in consolidating a modern Center of Innovation that enables greater proximity to customers and bottlers presenting new concepts and design, in packages of 3 pieces cans expanded with innovative formats.

In the automotive segment, the concept of innovation, product development and new applications has been ~~the subject of priority and as~~a priority. As an example, we can ~~cite~~highlight the ~~Dual Phase Steel, which has as a main feature~~innovative and pioneering project of the reengineering of autobodies, with the aim of reducing weight ~~reduction of automobiles that enabling~~and cost. Concerning the ~~industry~~R&D for automotive applications, CSN continuously works on new products to ~~make vehicles more Lightweight, safe~~fully meet the customers’ current and future demands, with ~~reduced CO2 emissions. Besides the Dual Phase Steel CSN has developed new high-strength steels such as Bake Hardening, Microalloyedand Rephosphorizedsteel as well as new high-formability steels for exposed parts such as Super~~Advanced High Strength Steels (AHSS), Ultra Low Carbon ~~Steel to Titanium stabilized.~~Steels (extra deep drawing quality), Bake-Hardening Steels, High Resistance Interstitial Free Steels (HSS-IF), High Strength and Low Alloy (HSLA), and Rephosphorized High Strength Steels.

In the ~~Construction~~construction segment there was a significant consolidation and support of our customers for the application of CSN ~~Pre-painted Steel~~pre-painted steel in the manufacture of new construction systems for rapid assembly used extensively in the ~~UPP's~~UPP’s - Police Units Pacifier and PSUs - Emergency Care Units in the city of Rio de Janeiro. Another example of R&D in the construction segment is the new CSN GALVALUME FRAMING (CSN GLFRAMING^®) which is a high strength steel coated with 55% Al-ZN alloy with high application potential on light steel framing systems. Another highlight is the development of high strength steels to be used in the manufacture of silos for grain storage.

5D. Trend Information

Overview

~~Overview~~The

~~The recovery~~predictions for the level of global economic activity continue pointing towards a reduction in growth for the ~~global economy is being led by the emerging countries. According~~major economies in 2012, according to the Central Bank.

In Europe, the economic slowdown and the modest upturn in wages should keep inflation down, with the European Commission forecasting a decline to 2.1% in 2012. Furthermore, the World Bank believes GDP in the Eurozone will decline by 0.3% in 2012, pulled down by political uncertainties and the fiscal crisis in Eurozone countries.Economic activity in the United States has been pointing to a slow and moderate recovery.

For China, the IMF ~~China and~~expects GDP growth of 9.0% in 2012. At a time when China’s trade surplus decreased from US$181.5 billion, or 3.1% of GDP, in 2010, to US$160 billion, or approximately 2% of GDP, in 2011, the government is studying measures to boost domestic consumption.

With regards to Brazil, GDP growth is expected to reach 3.30% in 2012, while the IPCA is expected to fall to 5.27%, according to the Central Bank’s FOCUS report. COPOM indicates that there is a high possibility that the Selic will ~~maintain growth expectations~~fall to a single digit in ~~their economies until 2016~~2012, thanks to the reduction in inflation due to the ~~size~~higher-than-expected slowdown in Brazil’s economy in the second half of ~~Chinese economy and to Brazilian protectionist policy and strong domestic demand. The combination of gradual global economic recovery~~2011 and the uncertainties surrounding Europe’s financial crisis. Nevertheless, positive ~~outlook~~indications come from the expected decline in the rate of ~~domestic consumption~~default in ~~Brazil provide a favorable scenario for our business.~~

~~We expect that investments will benefit from this favorable economic scenario. In addition~~2012, fueled by the 14%increase in the minimum wage, reduced inflation, low unemployment, lower basic interest rates and reduced debt growth, according to organic growth projects, we routinely review potential acquisition opportunities and strategic alliances in all segments in which we operate in Brazil and abroad, in order to accelerate our expansion and value generation.

We have consistently presented sound financial results, and reasonable indebtedness levels. Our comfortable current cash situation provides support for organic growth, financing possible acquisitions and at the same time maintaining a special policy of dividends distribution for our shareholders, resulting in a competitive and favorable position in relation to other groups of the sector.Serasa Experian.

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Steel

~~Steel~~

~~In accordance with~~According to the World Steel Association (WSA), ~~the~~ global steel industry capacity utilization rate ~~closed the year at around 74%~~reached 72% in ~~2010,~~December 2011, although production capacity and global steel product consumption still remain highly unbalanced. ~~As stated by WSA, surplus production capacity is currently running around 500 million tonnes.~~

~~This imbalance, together with the appreciation of the real and the existence of state government import incentives fueled Brazil's flat steel imports in 2010.~~

The WSA forecasts that ~~apparent steel use will increase by 5.9% to 1,359 mmt in 2011, following the 13.2% growth in 2010. In 2012, it forecasts~~ world steel demand will increase by 5.4% in 2012, following the 14.0% growth ~~by 6.0%, reaching a new record~~in apparent use of ~~1,441 mmt. The impact of the earthquake and tsunami~~crude steel in ~~Japan may indicate a significant downward adjustment in steel use for 2011 and upward adjustment for 2012.~~2011.

In view of Brazil’s expected economic growth in the coming years, the ~~Brazilian Development Bank (BNDES) believes~~Brazil Steel Institute (IABr) forecasts crude steel ~~output~~production and apparent consumption will ~~increase by 26.5%~~reach 37.5 and ~~43.5%,~~26.7 million tons, respectively, ~~through 2014.~~in 2012.

~~In this context, we are assessing alternatives and increasing arrangements for new projects to optimize results per produced ton.~~

~~We increased our interest in higher added value products in 2010. In the next years, we will diversify our supply of greater added value products.~~

Continuing with the goal of diversifying and investing in the expected growth ~~expectation~~ of the ~~civil~~ construction industry in the domestic market, ~~our 500 Kta capacity plant for~~we are constructing a long steel plant with a capacity of 500 kta, including ~~iron bar~~rebars and wire rods in our ~~portfolio, is under construction. Additionally,~~portfolio. In addition to this plant, we are ~~considering~~studying the ~~implementation~~feasibility of ~~two new~~building other long steel plants ~~in Brazil, of 500 kta capacity each, in addition to a cold rolled unit in order to offer a more complete product portfolio to the market.~~

~~Mining~~.

~~The forecast by Macquire for~~Mining

CRU forecasts the seaborne iron ore ~~market~~trade will reach 1.43 billion tons by 2015, around 355 million tons higher than the level reached in 2011.

China published its 12^th five-year plan, which defined a new series of measures to promote the country’s development, including government subsidies for home construction and the creation and development of small and midsized enterprises. China’s urbanization push is ~~that between 2013~~expected to continue driving iron ore consumption and ~~2014 worldwide supply may exceed demand as a result of~~imports in the coming years, especially given the delays in new expansion projects inand the ~~industry.~~

~~The projected price in China for 2013~~reduced Indian export base, which is ~~U$ 141.50 per dry tonnage, according~~expected to ~~PLATTS and FIS.~~shrink further. In 2012, Chinese iron ore imports should increase by 7%, reaching the record volume of 733 million tons.

According to ~~information released by the~~ CRU, exports in Brazil show a tendency to increase until at least 2015, due to the current investments in the sector. By this time, exports should total approximately 440 million tons, an increase of 36% over current levels. For 2012, the forecast is for Brazil to export 348 million tons.

Considering this scenario, in the next years, we expect to achieve an important landmark in our mining segment, with the expansion ~~in mining and will gain~~of the Casa de Pedra mine to reach a ~~pace of~~ production capacity of 50 million tons per ~~year at our Casa de Pedra unit.~~

year. In addition, Namisa ~~continues with its~~is also undergoing expansion ~~leading~~projects, and is expected to ~~an expected~~achieve a sales level of 39 million tons per year, relying on ~~projects of~~ concentration and ~~pelletizing.~~

pelletizing plants. To ensure the production outflow, we expect the Itaguaí Port ~~will~~to reach an 84 mtpy shipment ~~capacity,~~capacity.

Cement

Prospects for the sector remain positive. The construction industry is expected to grow between 5% and 5.2% in ~~the next years.~~

~~This combined increase of production and shipment benefits from a favorable window of opportunity~~2012, according to the ~~overseas iron ore market.~~

~~We are analyzing further expansions, such as production volume of 70 mtpy in Casa de Pedra and shipment volumes of 130 mtpy in TECAR.~~

~~Cement~~

~~SNIC (the Brazilian Cement Industry Association) indicates local cement~~Getúlio Vargas Foundation (FGV), with construction material domestic sales ~~in Brazil of 59 million tonnes in 2010, 15% up from the previous year. The Southeast region consumed half of this total and the North was the bestperformer in terms of growth,~~ moving up by ~~58%. Estimates indicate~~between 4% and 5%, according to ABRAMAT. With regards to cement sales for 2012, an increase of between 7% and 8% is forecasted.

With the start-up of our clinker plant and the use of slag generated by our steel operation, we can gradually reduce costs, a ~~new record~~critical element in ~~2011, with sales increasing between 8% and 9%~~the cement business.

Our goal is to ~~65 million tonnes.~~

~~Annual exports decreased 23%, as manufacturers prioritized the domestic market.~~

~~Currently, there are 70 plants operating in Brazil, belonging to 12 national and international groups, with~~achieve a ~~joint annual installed~~production capacity of 67approximately 5.4 million ~~tonnes, sufficient to meet all of domestic demand.~~

~~Strong investments~~tons in ~~capacity expansion were also announced in 2010, the effects of which should become apparent in the second half of 2011.~~

In the coming years, ~~we expect~~to capture the ~~sector’s~~strong growth ~~will continue to be~~expected for the construction sector, fueled by increased income and employment, incentives for homebuyers, the expansion of Brazil's infrastructure and the intensification of ~~the~~ works related to the World Cup and the Olympic Games.

Our product and brand have had excellent acceptance. With the conclusion of the clinker production project and the gradual increase in the use of own slag we expect to be able to significantly reduce our costs.

We are considering alternatives for organic growth in order to take advantage of our crushing capacity (2.8 million tons per year) through the increase of clinker production. Our goal is to produce approximately 5.4 million tons per year in Brazil in the next years, to capture the strong growth expected in the market due to the World Cup and the Olympic Games, in addition to the strong pace of construction of new housing and commercial units, as well as infrastructure projects. For details on our ~~Plan~~Planned Investments see “Item 4D. Property, Plant and Equipment – Capital Expenditures – ~~Plan~~Planned Investments”.

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5E. Off-Balance Sheet Arrangements

In addition to the debt that is reflected on our balance sheet, we are contingently liable for the off-balance concession payments related to the activities of TECON. The following table summarizes all of the off-balance sheet obligations for which we are contingently liable and which are not reflected under liabilities in our consolidated financial statements:

Contingent Liability with Respect to Consolidated and Non-Consolidated Entities as of December 31, ~~2010~~2011

Aggregate Amount

Maturity

(In million of R$)
Guarantees of Debt:

Transnordestina

1,152

2011-2028

Contingent Liability for Concession Payments⁽¹⁾:

Sepetiba Tecon

318

2026
Transnordestina

99

2027
Solid Bulks Terminal - TECAR

1,514

2022
       MRS Logística S.A

3,502

2026
Total

5,433

”Take-or-Pay” Contractual Obligations

MRS Logística S.A.

986

2016
White Martins Gases Industriais Ltda.

532

2016
Companhia Estadual de Gás do Rio de Janeiro – CEG Rio

529

2012
Ferrovia Centro Atlântica – FCA

438

2013
Vale S/A

519

           2014
Companhia Paranaense de Gás - COMPAGÁS

165

           2024
Companhia Paranaense de Energia - COPEL

98

           2024
       ALL

18

2012
       K&K Tecnologia

79

2023
       Harsco Metals Ltda

99

2014
Total

3,463

Total Contingent Liability with Respect to Consolidated and Non-consolidated Entities:

10,048

	Aggregate Amount	Maturity
	(In million of R$)
Guarantees of Debt:
Transnordestina	1,368	2012-2028

Contingent Liability for Concession Payments⁽¹⁾:
Sepetiba Tecon	310	2026
Transnordestina	100	2027
Solid Bulks Terminal - TECAR	1,362	2022
MRS Logística S.A	1,145	2026
Total	2,917
”Take-or-Pay” Contractual Obligations
MRS Logística S.A.	1,152	2016
White Martins Gases Industriais Ltda.	468	2016
Companhia Estadual de Gás do Rio de Janeiro – CEG Rio	280	2012
Ferrovia Centro Atlântica – FCA	351	2013
Vale S/A	470	2014
Companhia Paranaense de Gás - COMPAGÁS	173	2024
Companhia Paranaense de Energia - COPEL	70	2024
ALL	4	2012
K&K Tecnologia	79	2023
Harsco Metals Ltda	75	2014
Siemens	51	2013
Total	3,173

Total Contingent Liability with Respect to Consolidated and Non-consolidated Entities:

7,458

(1) Other consortia members are also jointly and severally liable for these payments.

Guarantees

We guarantee the loans BNDES has granted to Transnordestina in May and December 2005, and in January 2006, all of which mature by May 2028, adjusted based on the TJLP plus 1.5% per annum. The total outstanding amount of the debt as of December 31, ~~2010~~2011 was R$~~1,152~~1,368 million.

Concessions

Sepetiba Tecon

We own 99.99% of Sepetiba Tecon S.A., or TECON, which holds a concession to operate, for a 25-year term (renewable for additional 25 years), the container terminal at the Itaguaí Port. As of December 31, ~~2010,~~2011, R$ ~~318~~310 million of the cost of the concession was outstanding and payable over the next 18 years of the lease. For more information see “Item 4D. Property, Plant and Equipment – Capital Expenditures – Planned Investments”.

Transnordestina

As of December 31, ~~2010,~~2011, we held ~~76.45%~~70.91% of the capital stock of Transnordestina S.A., which has a 30-year concession granted in 1998 to operate Brazil’s Northeastern railway system. The Northeastern railway ~~system covers~~systemcovers 4,238 km of track and operates in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte. It also connects with the region’s leading ports, thereby offering an important competitive advantage through opportunities for intermodal transportation solutions and made-to-measure logistics projects. As of December 31, ~~2010,~~2011, R$ 99100 million was outstanding over the remaining 16-year term of the concession.

Table of Contents

Solid Bulks Terminal

We hold the concession to operate TECAR, a solid bulks terminal, one of four terminals that form the Itaguaí Port, located in the State of Rio de Janeiro, for a term expiring in 2022 and renewable for another 25 years. Itaguaí Port, in turn, is connected to the Presidente Vargas ~~steelworks,~~Steelworks, Casa de Pedra and ~~CFM~~Namisa by the southeastern railway system. Our imports of coal and coke are made through this terminal. Under the terms of the concession, we undertook to load and unload at least 3.0 million tons of bulk cargo annually. Among the approved investments that we announced is the development and expansion of the solid bulks terminal at the Itaguaí Port to ~~also~~ handle up to 84 million tons of iron ore per year.

MRS Logística S.A

Concession for a period of 30 years, renewable for another 30 years, for transporting iron ore from the mines of Casa de Pedra in MGMinas Gerais and coke and coal from the Port of Itaguaí (RJ) to Volta Redonda and transportation of exports back to the Ports of Itaguaí and Rio de Janeiro. As of December 31, ~~2010,~~2011, R$ ~~3,502~~1,145 million was outstanding.

Contractual Obligations

Namisa

~~Namisa~~

Port Operating Services Agreement.

On ~~December 30,~~October 21, 2008, ~~we received approximately R$5.3 billion as prepayment under~~CSN entered into an agreement ~~with Namisa with a term~~for the provision of ~~34 years. Under this agreement, we are required to render~~ port services to Namisa ~~which consists~~for a 35-year period, consisting of ~~transporting~~receiving, handling, storing and shipping Namisa’s iron ore in annual volumes that range from 18.0 million tons to 39.0 million ~~tons~~tonnes. On December 30, 2008, CSN has received the amount of ~~iron ore annually.~~approximately R$5.3 billion as an advance for part of the payments due for the services to be provided under this agreement. The ~~price of~~amounts charged for these port services isare reviewed on a quarterly ~~reviewed~~basis and ~~prospectively~~ adjusted considering the changes in the market price of iron ore.

High Silica ROM

On ~~December 30,~~October 21, 2008, ~~we received approximately R$ 1.6 billion as prepayment for~~CSN entered into an agreement ~~with Namisa with a term~~for the supply of ~~30 years. Under this agreement, we are required to provide~~ high silica crude iron ore ROM to Namisa for a period of 35 years in ~~a volume~~volumes that ~~ranges~~range from ~~42.0~~27.5 million tons to ~~54.0~~46.5 million tons per year. ~~Depending on the market price for high silica crude iron ore ROM, we may receive additional or lower amounts under this agreement.~~

~~Low Silica ROM~~

On December 30, 2008, weCSN received approximately R$ ~~424 million~~1.6 billion as ~~prepayment~~an advance for part of the payments due for the supplies to be made under this agreement. The supply price is reviewed on a quarterly basis and adjusted considering the changes in the market price of iron ore.

Low Silica ROM

On October 21, 2008, CSN entered into an agreement ~~with Namisa with a term~~for the supply of ~~35 years. Under this agreement, we are required to provide~~ low silica crude iron ore ROM to Namisa for an effective period of 9 years in ~~a volume~~volumes that ~~ranges~~range from ~~2.8~~8 million tons to ~~5.04~~30.6 million tons per year. ~~Depending~~On December 30, 2008, CSN received approximately R$424 million as an advance for part of the payments due for the supplies to be made under this agreement. The supply price is reviewed on a quarterly basis and adjusted considering the changes in the market price ~~for low silica crude~~of iron ~~ore ROM, we may receive additional or lower amounts under this agreement.~~ore.

“Take-or-Pay” Contractual Obligations

MRS Logística S.A.

Transportation of Iron Ore, Coal and Coke to Volta Redonda

The volume set for iron ore and pellets is 8,280,000 tons per year and for coal, coke and other reduction products is 3,600,000 tons per year. ~~It is accepted variation~~Variation of up to 10%, is accepted, with a guarantee of payment of at ~~least 90%~~least90%, but the ~~compromise~~obligation is for each item individually. MRS, on the other hand, is required to transport at least 80% of the volume established by the agreement. The agreement expires on September 12, 2012.

Transportation of Iron Ore for Export from Itaguaí

The volume set is ~~8,000,000~~40,000,000 tons per ~~year. It is accepted variation of up to approximately 5% of~~year for the ~~volume set,~~first three years, with gradual increases for the following years, with a guarantee of payment of at least 80%. We may increase or decrease the volume set in the agreement every year by up to 10% and 15%, respectively, taking into consideration the volume ~~actually transported~~informed in the previous year. ~~The~~This agreement expires on ~~May 31, 2016.~~November 30, 2026.

The amounts to be paid under both contracts are calculated by a tariff model that assures competitive prices.

For both contracts we have flexibility to renegotiate the ~~Take or Pay~~“take-or-pay,” if the volume is not reached. As we are a shareholder of MRS, the minimum amounts to be paid under the contract terms are calculated by a tariff model that ~~assure~~assures competitive prices.

Transportation of Steel Products

The volume set is 2,750,000 tons per year. The agreement covers the transportation of steel products from the Presidente Vargas Steelworks to third party terminals, and expires on May 31, 2016.

Cement Transportation - CSN CIMENTOS

We and MRS are negotiating new values for this contract.

White Martins Gases Industriais Ltda.

To secure gas supply (oxygen, nitrogen and argon), in 1994 we signed a 22-year “take-or-pay” agreement with White Martins Gases Industriais, by which we are committed to acquire at least 90% of the gas volume guaranteed in the agreement with White Martins’ plant. Under the terms of the agreement, we are not required to advance funds raised against future processing charges if White Martins is unable to meet its financial obligations.

Companhia Estadual de Gás do Rio de Janeiro

To secure natural gas supply, in 2007 we ~~have~~ signed a five-year “take-or-pay” agreement with CEG Rio, by which we are committed to acquire at least 70% of the gas volume guaranteed in the agreement with CEG Rio. Under the terms of the agreement, we are not required to advance funds raised against future processing charges if CEG Rio is unable to meet its financial obligations. In addition, if we do not acquire the minimum volume agreed, the amount paid which relates to that difference may be compensated in future years, including one year after the ~~contract~~contract’s expiration.

Ferrovia Centro Atlântica - FCA

Transportation of Reduction Products

This agreement covers transportation of reduction products from the city of Arcos to the city of Volta Redonda. Volume set for reduction products is 1,900,000 tons per year, which may vary higher or lower by up ~~or down by~~to 5%. ~~The~~This agreement will expire on August 31, 2013.

Transportation of Clinker

This agreement covers transportation of clinker products from the city of Arcos to the city of Volta Redonda. As of 2012, volume set for clinker is 738.000 tons per year This agreement will expire on April 19, 2020.

Vale S.A.

To secure pellets supply, in 2009 we signed a 5-year “take-or-pay” agreement with Vale, by which we are committed to acquire at least 90% of the pellets volume guaranteed in an agreement with Vale. Under the terms ~~of the~~ofthe agreement, we are not required to advance funds raised against future processing charges if Vale is unable to meet its financial obligations.

Companhia Paranaense de Gás - COMPAGÁS

We and Companhia Paranaense de Gás entered into a 20-year contract to secure natural gas supply. According to the “take or pay” clause, we are committed to acquire at least 80% of the annual natural gas volume contracted from Companhia Paranaense de Gás.

Companhia Paranaense de Energia – COPEL

To secure energy supply, we entered into a 20-year agreement with Companhia Paranaense de Energia. According to the “take or pay” clause, we are committed to acquire at least 80% of the annual energy volume contracted from Companhia Paranaense de Energia.

América Latina Logística - ALL

This agreement covers transportation of steel products from Volta Redonda to CSN Paraná. Volume set for steel products is 20,000 tons per month, which may vary higher or lower by up ~~or down by~~to 10%. ~~The~~This agreement ~~will expire on~~was initially valid until March 30, 2012, but CSN renegotiated and it is now valid until June 30, 2012.

K&K Tecnologia

CSN undertakes to acquire at least 3,000 metric tons of blast furnace mud for processing at CSN's mud concentration plant.

Harsco Metals Ltda

The Harsco Metals Ltda. undertakes to perform the Scrap recovery Services resulting from the process of production of pig iron and steel from CSN / UPV, receiving by this process the equivalent in value the result of multiplying the unit price (U.S.$/ t) by the total Liquid Steel CSN’s Mill production, with a guarantee of a minimum production of liquid steel corresponding to 400,000 tons.

5F. Tabular Disclosure of Contractual Obligations

The following table represents our long-term contractual obligations as of December 31, ~~2010:~~2011:


	Payment due by period					Payment due by period
	(In millions of R$)					(In millions of R$)
					More					More
Contractual obligations		Less than			than 5		Less than			than 5
	Total	1 year	1-3 years	3-5 years	years
						Total	1 year	1-3 years	3-5 years	years
Long-term accrued finance
charges⁽¹⁾	12,372	1,514	2,869	2,182	5,807	19,540	2,181	4,146	3,360	9,853
Taxes payable in installments	1,444	652	134	166	492	2,095	277	471	458	889
Long-term debt	18,781	2,133	4,013	4,385	8,250	25,187	2,232	4,231	5,574	13,150
“Take-or-Pay” contracts	3,463	920	1,773	535	235	3,173	1,069	1,570	371	163
Concession agreements⁽⁵⁾	5,433	339	745	1,153	3,196
Derivatives swap agreements⁽²⁾						8	5	3	0	0
Concession agreements⁽³⁾						2,917	220	697	705	1,295

Purchase obligations:
Raw materials⁽²⁾	1,228	811	359	36	22
Maintenance⁽³⁾	106	62	45	0	0
Utilities/Fuel⁽⁴⁾	1,553	445	616	244	247
Raw materials⁽⁴⁾						1,816	1,072	699	11	35
Maintenance⁽⁵⁾						33	212	121	0	0
Utilities/Fuel⁽⁶⁾						1,756	685	456	334	282
Total	2,887	1,317	1,020	280	269	3,905	1,969	1,275	345	316

(1)	These accrued finance charges refer to the cash outflow related to the contractual interest expense of our long-term debt and were calculated using the contractual interest rates taken forward to the maturity dates of each contract.
(2)	~~Refer~~Derivative swap agreements were calculated based on market prices, on December 31, 2011, for futures with similar maturity to our derivative swap agreements.
(3)	Refers to TECON, TECAR, MRS and Transnordestina’s concessions agreements
(4)	Refers mainly to purchases of coal, tin, aluminum and zinc, which comprise part of the raw materials for steel manufacturing and take-or-pay contracts.
~~(3)~~(5)	We have outstanding contracts with several contractors in order to maintain our plants in good operation conditions; due to the strong demand for specialized maintenance service, the term of some of these contracts is for more than one year.
~~(4)~~(6)	~~Refer~~Refers mainly to natural gas, power supply and cryogenics, which are provided by limited suppliers; and with some of which we maintain long-term contracts.
~~(5)~~	~~Refers to TECON, TECAR, MRS and Transnordestina’s concessions agreements.~~

5G. Safe Harbor

See “Forward-Looking Statements.”

Item 6. Directors, Senior Management and Employees

6A. Directors and Senior Management

General

We are managed by our Board of Directors (Conselho de Administração), which consists ~~of seven~~ofseven to ~~eleven members,~~elevenmembers, and our Board of Executive Officers (Diretoria Executiva), which consists of two to nine Executive Officers with no specific designation (one of ~~which~~whom is the Chief Executive Officer). In accordance with our bylaws (Estatuto Social), each Director is elected for a term of one year by our shareholders at an annual shareholders’ meeting. Our bylaws require our employees to be represented by one Director on the Board of Directors. The members of the Board of Executive Officers are appointed by the Board of Directors for a two-year term.

Our Board of Directors is responsible for ~~the formulation of business plans~~setting general guidelines and policies for our business and our Board of Executive Officers is responsible for the implementation of ~~specific operating decisions.~~such guidelines and policies and for our day-to-day operations. As of the date of this annual report, our Board of Directors was comprised of one Chairman, one Vice Chairman and ~~five~~four members, and our Board of Executive Officers was comprised of our Chief Executive Officer ~~our Chief Financial Officer~~ and ~~three~~five Executive Officers.

Our Directors and Executive Officers as of the date of this annual report are:

Name	Position	First Elected on	Last Elected on
~~Name~~	~~Position~~	~~First Elected to our Board on~~	~~Last Elected to our Board on~~

*Board of Directors*
Benjamin Steinbruch	Chairman	April 23, 1993	April ~~29, 2011~~ 27, 2012
Jacks Rabinovich	Vice Chairman	April 23, 1993	April ~~29, 2011~~
			27, 2012
Fernando Perrone	Member	September 26, 2002	April ~~29, 2011~~27, 2012
Antonio Francisco dos Santos	Member	December 23, 1997	April ~~29, 2011~~27, 2012
Yoshiaki Nakano	Member	April 29, 2004	April ~~29, 2011~~27, 2012
Gilberto Sayão da Silva	Member	April 30, 2009	April ~~29, 2011~~27, 2012
Alexandre Gonçalves Silva* Rubens dos Santos	Member	~~November 9, 2010~~ April 27, 2012	April ~~29, 2011~~27, 2012

*Board of Executive Officers*
Benjamin Steinbruch	Chief Executive Officer	April 30, 2002	August ~~06, 2009~~
~~Paulo Penido Pinto Marques~~	~~Chief Financial Officer~~	~~May 7, 2009~~	~~May 12, 2009~~2, 2011
Enéas Garcia Diniz	Executive Officer	June 21, 2005	August ~~06, 2009~~
~~Alberto Monteiro de Queiroz Netto~~	~~Executive Officer~~	~~September 1, 2009~~	~~September 1, 2009~~2, 2011
José Taragano	Executive Officer	December 15, 2009	~~December 15, 2009~~August 2, 2011
David Moise Salama	Executive Officer	August 2, 2011	August 2, 2011
Luis Fernando Barbosa Martinez	Executive Officer	August 2, 2011	August 2, 2011
Juarez Saliba de Avelar	Executive Officer	October 26, 2011	October 26, 2011

*Mr. Carneiro Neto used to be a member of our Board of Directors until July 2010, when he passed away. Mr. Gonçalves Silva was elected Director in place of Mr. Carneiro Neto.

The next election for our Board of Directors is expected to take place in April ~~2012, and we~~2013. We are unable to anticipate when the next election for our Board of Executive Officers is expected to take place.

Board of Directors

Benjamin Steinbruch. ~~Member~~Mr. Steinbruch has been a member of ~~the~~our Board of Directors since April 23, 1993, ~~holding also~~and has simultaneously held the ~~position~~positions of ~~President of the Board~~Chairman since April 28, 1995 and CEO since April 30, 2002. He is also CEO of Vicunha ~~Steel~~Siderurgia S.A., member of the Administrative Board of the Portuguese Chamber, 1^st Vice-President of the Federation of Industries of the State of São Paulo - FIESP since September 2004, member of ~~FIESP~~FIESP’s Superior Strategic Board, advisor to the Robert Simonsen Institute, ~~director~~and advisor of ~~IEDI -~~the Institute for Industrial Development ~~Studies.~~Studies - IEDI. Over the past five years, he served as ~~Director~~ Chairman of the Board of Directorsand CEO of Vicunha Siderurgia ~~S.A~~.S.A.,~~Director and Officer~~ Vice Chairman of ~~Vicunha Steel~~the Board of Directors of Textília S.A., Director ~~and CEO~~ of Vicunha Aços S.A., Vicunha Steel S.A. Vicunha S.A., Elizabeth S.A. – Indústria Têxtil, Vicunha Participações S.A., Vicunha Participações S.A., Officer of Rio Purus Participações S.A., and Officer of Rio Iaco (all these companies belong to the controlling group of CSN), Director of Prada Metallurgical Company ~~Inal Nordeste S.A.~~ and Nacional Minérios S.A. ~~(all~~(both controlled by CSN) ~~and~~, member of the Deliberative Council of the CSN ~~Foundation. Graduated~~Foundation and Administrator of Fazenda Alvorada de Bragança Agro-Pastoril Ltda., Ibis Agrária Ltda., Ibis II Empreendimentos Ltda., Ibis Participações e Serviços Ltda., Haras Phillipson Ltda.. Mr. Steinbruch graduated from the Business School of ~~the~~ Fundação Getúlio Vargas – FGV/SP and specialized in Marketing and Finance also from ~~the~~ Fundação ~~Getulio~~Getúlio Vargas - FGV/SP.

Jacks Rabinovich. Mr. Rabinovich ~~was born on September 20, 1929, and~~ has been a member of our Board of Directors since April 23, 1993 and Vice Chairman since April 24, ~~2001, currently holding the position of Vice President. Graduated~~2001. Mr. Rabinovich graduated in Civil Engineering from Universidade Mackenzie ~~University, with~~- SP, and has a specialization in Textile Engineering from the Lowell Institute, Massachusetts - USA.

Fernando Perrone. Mr. Perrone has been a member of our Board of Directors since September 26, 2002, and a member of our Audit Committee since June 24, 2005, where he currently holds the position of President. He was our Infrastructure and Energy Executive Officer from July 10, 2002, to October 2, ~~2002.~~2002 . Over the past five years, he served as member of the Board of Directors of Profarma - Pharmaceuticals Distributor S.A., member of the Board of Directors of João Fortes Engenharia S.A., and member of the Management Board of Energia Sustentável ~~S.A..Graduated~~S.A. Mr. Perrone graduated in Business from a program sponsored by "Chimica" Bayer S.A., ~~also~~ holds a Law degree from ~~the~~ Universidade Federal Fluminense – UFF/RJ, and has a ~~specialization~~graduate degree in Economics in the area of Capital Markets from ~~the~~ Fundação Getulio ~~Vargas.~~Vargas – FGV/SP.

Antonio Francisco dos Santos. Mr. Santos ~~was born on December 6, 1950, and~~ has been a member of our Board of Directors since ~~November~~December 23, 1997. ~~Mr. Santos was~~He is currently Chairman and Chief Executive Officer of CSN’s Employee Investment Club (Clube de Investimento CSN). Over the past five years he served as Planning and Support Officer of CSN, and Coordinator and Chief of Industrial Engineering, Chief of Production Planning and member of the Board of Directors of the Caixa Beneficente dos Empregados of CSN, or CBS, our pension ~~plan, until 2008. He is currently Chairman and Chief Executive Officer of the Board of the CSN Employee Investment Club (~~~~Clube de Investimento CSN~~~~). Over the past five years he served as Planning and Support Officer of CSN and President of CSN Invest. Graduated~~plan. Mr. Santos graduated in Business ~~with~~and holds a ~~specialization~~graduate degree in Organization and Finance, both byfrom the ~~Coordinator~~Coordination of Graduate Studies and Research - CECOP, and an MBA in Industrial Strategy and Business Management from Universidade Federal Fluminense ~~- UFF.~~– UFF/RJ.

Yoshiaki Nakano. Mr. Nakano has been a member of our Board of Directors since April 29, 2004, and a member of our Audit Committee since June 24, 2005. Over the past five years, Mr. Nakano has been a professor at the School of Economics of Fundação Getulio Vargas ~~and~~– FGV/SP a board member of the Fundação de Amparo à Pesquisa do Estado de São Paulo – ~~FAPESP; board~~FAPESP, a member of the Conselho Superior de Economia (COSEC), of FIESP/~~IRS;~~Instituto Roberto Simonsen, and a member of the Consulting Board of the Grupo Pão de Açúcar. Previously, Mr. Nakano served as Special Secretary for ~~EconomicAffairs~~Economic Affairs in the Ministry of ~~Finance. Graduated~~Finance and as Finance Secretary of the State of São Paulo. Mr. Nakano graduated in Business Administration from Fundação Getulio Vargas and has an MBA and a Ph.D. from Cornell University, USA.

Gilberto Sayão da Silva. Mr. Sayão has been a member of our Board of Directors since April 30, 2009. He is currently a partner at Vinci Partners Investimentos Ltda., and a member of its Executive Committee. Between 2003 and 2009, Mr. Sayão served as the Chief Executive Officer of UBS Pactual Alternative Investments, a subsidiary of UBS Pactual Asset Management. He is currently on the Board of Directors of several companies, such as PDG Realty SA and Equatorial Energia S.A. (none of these being part of CSN´s economic group). He graduated from the Engineering School of the Pontificia Universidade Catolica doof Rio de Janeiro - PUC / RJ.

~~Alexandre Gonçalves Silva~~Rubens dos Santos. Mr. ~~Gonçalves Silva~~Santos has been a member of our Board of Directors since April 27, 2012. He currently serves as Administrator for Vicunha Petroquímica Ltda and ~~Audit Committee since November 9, 2010. Over~~Fibracel Têxtil Ltda. He is also Executive Officer for Pajuçara Confecções S.A., Vicpetro S.A., VRS S.A. and Finobrasa Agro-Industrial S.A.. Additionally, Mr. Santos is the ~~last five years he was CEO of General Eletric do Brasil Ltda. and member~~Chairman of the Board of Directors of ~~TAM~~VTA Andina S.A.., and a board member of National Steel S.A., ~~PDG Realty S.A. Empreendimentos e~~Vicunha Participações ~~Equatorial Energia~~ S.A., ~~Fundições Tupy~~Vicunha Siderurgia S.A., Fibra Empreendimentos Imobiliários S.A., Transnordestina Logística S.A., Vicunha Aços S.A., Vicunha Steel S.A., Vicunha S.A., Elizabeth S.A. Indústria Têxtil and ~~Fibria Celulose S.A.~~La Internacional S.A.. Mr. ~~Gonçalves Silva also was Advisor of the Global Infrastructure Partners (New York). He~~Santos is graduated ~~from the Mechanical Engenireeng School of Pontificia Universidade Católica do Rio de Janeiro – PUC/RJ.~~in Accounting.

Board of Executive Officers

In addition to Mr. Steinbruch, the following ~~persons~~people were members of our Board of Executive Officers as of the date of this annual report:

~~Paulo Penido Pinto Marques~~. Mr. Marques was elected our Chief Financial Officer on May 12, 2009 and is also responsible for the Controlling, Enterprise Risk Management and Insurance departments, holding the position of Executive Officer for Investors Relations. Prior to joining CSN, Mr. Marques was Finance, Investor Relations and Information Technology Vice-President of Usinas Siderúrgicas de Minas Gerais S.A. - USIMINAS, Financial Officer of Usiminas Mecânicas S.A., board member of~~Associação Brasileira das Companhias Abertas~~, Financial Officer of the Companhia Siderúrgica Paulista - COSIPA, Officer of Mineração J. Mendes, Controlling Officer of Fasal S.A. and Officer of Consórcio Siderurgia Amazonia Ltd. (controller of Sidor - Venezuela). Mr. Marques has also participated in the Board of Executive Officers or the Board of Directors of the following companies: Usiparts - automotive systems, Unigal, Rio Negro - steel trade and industrialization. He was also Vice-President at Financing Area, Credit and Risk of JP Morgan (Morgan Guaranty Trust Co. of New York), Officer of Relationship with companies and Financial Institutions Area of BankBoston, Officer of Investments of Corporate Banking of Citibank. Graduated from the Electrical Engineering School of the Federal University of Minas Gerais.

Enéas Garcia Diniz. Mr. Diniz holds the position of Executive Officer in charge of ~~in charge of Production areasince~~the production area since June 21, 2005. He has been serving CSN since 1985, previously acting as General Manager of Hot Rolling, General Manager of Maintenance, Metallurgy Director and General Director of the Presidente Vargas ~~steelworks. Graduated~~Steelworks. Mr. Diniz graduated in Mechanical Engineering from ~~the~~ Pontificia Universidade Católica do Rio de Janeiro - PUC / RJ, ~~further specialized~~furtherspecialized in Business Management ~~in the~~from Universidade Federal Fluminense ~~in Rio de Janeiro~~- UFF/RJ and has aan MBA from the Fundação Dom Cabral Business School of Belo Horizonte.

~~Alberto Monteiro de Queiroz Netto~~ was elected Executive Officer of the Treasury on September 01, 2009. He is also President of CBS Previdência. He was Chief Financial Officer of Bank of Brazil conglomerate, President of BB DTVM - Asset Management, President of BESC DTVM - Administradora de Recursos, Vice President of the National Association Investment Bank’s (ANBID) and Chairman of Best Practices for Marketing Industry Investment Funds. He was Director of the Board of BB Securities in London, and the Bank of Brazil Broker Dealer in New York and Officer of BB Fund in Cayman. He was also President of the Board of Directors of Petróleo Petrobahia, member of the Board of Directors of Eletricidade da Bahia – Coelba, Neoenergia e BESC TV, member of the Audit Committe of Gerdau, Cielo (formerVisanet), Coelba e Cosern e member Deliberative Committee of Fundo de Pensão do Banco do Brasil (PREVI). Graduated from the Business School of the Fundação Getulio Vargas (RJ), where he further specialized in Business Administration and obtained MBA in Corporate Finance. He also holds a Banking Specialist degree from the University of São Paulo Business School (FEA-USP).

José Taragano.Mr. Taragano was elected Executive Officer on December 15, 2009, being in charge of the ~~Chairman for Projects at CSN.~~projects area. He ~~was~~previously served as COO - Executive VP of Operations of Brenco - Companhia Brasileira de Energia Renovável, Executive and Business Officer of Klabin ~~SA. He was~~S.A., Worldwide Environment, Health & Safety Officer of Alcoa Inc. in New York / Pittsburgh, Officer of Primary ~~Products /Aluminum,~~Products/Aluminum, Alumina & Chemical Products and Director of Quality and Human Resources and Superintendent foof Production of Alcoa Latin America in São ~~Paulo. He was also~~Paulo, Chairman of CEMPRE – Compromisso Empresarial para a Reciclagem, ~~served at~~member of the Healthy People 2010 Business Advisory ~~Comitee~~Committeein Washington and acted as ~~independent counsel~~Independent Director at the Board of ECOSORB. HeMr. Taragano graduated in Metallurgical Engineering from Pontifícia Universidade Católica of Rio de Janeiro - PUC-RJ, has aan MBA in Marketing from the Administration Institute Foundation of Universidade de São Paulo / FIA-USP and further education at MIT / Sloan Executive Program and Harvard Business School / Finance for Senior Executives.

David Moise Salama. Mr. Salama was elected Executive Officer on August 2, 2011, being in charge of the investor relations area. He has been serving CSN since 2006, having previously acted as Investor Relations Manager. Prior to joining CSN, Mr. Salama acted as Financial Controller Officer at Tecnisa Engenharia e Comércio, Birmann Comércio e Empreendimentos and Goldfarb Comércio e Construções, was the head of consolidated financial information of Unilever Brasil and acted as senior auditor at PricewaterhouseCoopers. He is a member of the National Investor Relations Institute and of the Brazilian Institute of Investor Relations. Mr. Salama graduated in Accounting and has an MBA in Finance, both from the School of Economics, Business and Accounting of the Universidade de São Paulo / FEA-USP.

Luis Fernando Barbosa Martinez. Mr. Martinez was elected Executive Officer on August 2, 2011, being in charge of the steel products commercial area. He has been serving CSN since 2002, having previously acted as Sales Officer. Mr. Martinez is also President of the Brazilian Association of Steel Packaging - ABEAÇO. Prior to joining CSN, Mr. Martinez was a Sales Officer at Alcan Alumínio do Brasil S.A., having worked in such company for 14 years in different departments (processing, quality, product/market development and sales).He also acted as Executive Officer of the Brazilian Center of Steel Construction - CBCA and of the Brazilian Association of Metallic Construction - ABCEM. Mr. Martinez graduated in Metallurgical Engineering from Instituto Mauá de Tecnologia – IMT, has a graduate degree in Industrial Management from the School of Production Engineering of the Universidade de São Paulo, and also graduated from the Corporate Management Development Program at Alcan Aluminum Limited, Montreal, Canadá.

Juarez Saliba de Avelar. Mr. Avelar was elected Executive Officer on October 26, 2011 and is in charge of the new businesses area. Mr. Avelar previously worked at CSN from 2003 to 2010, having acted as Ports and Railroads Officer, Mining Officer, Mineral Resources Officer and New Businesses Officer. Prior to 2003, Mr. Avelar was the President of Ferteco Mineração, Officer of the Southern and Northern Systems of Vale S.A. and, from January 2010 to August 2011, acted as Chief Executive Officer of Steel do Brasil Participações S.A. Mr. Avelar is also a Director of Transnordestina Logística S.A. Mr. Avelar graduated in Mining Engineering from Universidade Federal de Minas Gerais - UFMG.

There are no family relationships between any of the persons named above. The address for all of our directors and executive officers is Av. Brigadeiro Faria Lima, 3400, ~~20th~~20^th floor, Itaim Bibi, city of São Paulo, State of São Paulo, Brazil (telephone number 55-11-3049-7100).

Indemnification of Officers and Directors

There is no provision for or prohibition against the indemnification of officers and directors in Brazilian law or in our bylaws. Officers are generally not individually liable for acts performed within the course of their duties. We either indemnify or maintain directors and officers liability insurance insuring our Directors,our ~~Chief Executive Officer, our Chief Financial Officer and our other~~ Executive Officers and certain key employees against liabilities incurred in connection with their respective positions with us.

6B. Compensation

For the year ended December 31, ~~2010,~~2011, the aggregate compensation paid by us to all members of our Board of Directors and the members of our Board of Executive Officers for services in all capacities was R$~~17.9~~23.7 million, which includes salaries, bonuses, profit sharing arrangements and benefits, such as medical assistance, pension plan and life insurance, among others. See “—Item 6D. Employees” for a brief description of our profit sharing arrangements.

We are the principal sponsor of CBS, our employee pension plan. CBS had an excess of plan assets over pension benefit obligations of R$ ~~333~~230 million in ~~2010.~~2011. The fair value of the resources of CBS, totaled R$ ~~2,316~~2,384 million as of December 31, ~~2010,~~2011, and projected benefit obligations were R$ ~~1,983~~2,154 million. See Note 3029 to our consolidated financial statements contained in “Item 18. Financial Statements.”

6C. Board Practices

Fiscal Committee and Audit Committee

Under Brazilian Corporate Law, shareholders may request the appointment of a Fiscal Committee (Conselho Fiscal), which is a corporate body independent of management and our external auditors. The primary responsibility of the Fiscal Committee is to ~~review~~monitor management’s activities, ~~and~~review the financial statements, and report its findings to the shareholders. Our shareholders did not request the installation of a Fiscal Committee at the Annual Shareholders’ Meeting held on April ~~29, 2011.~~27, 2012.

In June 2005, an Audit Committee ~~(Comitê~~(Comitê de ~~Auditoria)~~Auditoria) was appointed in compliance with SEC’s rules, which is composed of ~~three~~ independent members of our Board of Directors.

The Audit Committee is responsible for recommending to the Board of Directors the appointment of the independent auditors, reporting on our auditing policies and our annual ~~auditing~~audit plan prepared by our internal auditing team, as well as monitoring and evaluating the activities of the external auditors. Our Audit Committee has also been tasked with identifying, prioritizing and submitting actions to be implemented by our Executive Officers, ~~and~~ analyzing ~~the~~our annual report and our financial statements, and making recommendations to our Board of Directors.

The Audit Committee is currently composed of Mr. Fernando Perrone, Mr. Yoshiaki Nakano and Mr. ~~Alexandre Silva~~Antonio Francisco dos Santos and is constantly assisted by an outside consultant.

For information on the date of election and term of office of the members of our Board of Directors and Board of Executive Officers, see “Item 6A. Directors and Senior Management.”

Service Contracts

We permit our directors to continue to participate in our employee pension plan after ceasing to be a director of our Company.

6D. Employees

As of December 31, ~~2008,~~ 2009, 2010 and ~~2010,~~2011, we had ~~16,549,~~ 16,903, 19,217 and ~~19,217~~20,791 employees, respectively. As of December 31, ~~2010,~~2011, approximately ~~3.213~~3,307 of our employees were members of the steelworkers’ union of Volta Redonda and region, which is affiliated with the Central Única dos Trabalhadores, or CUT, a national union. We believe we have a good relationship with CUT. We have collective bargaining agreements, renewable annually on May 1^st of every ~~May 1.~~year. Moreover, we have members affiliated towith other unions, such as the ~~Engineer~~Engineers’ Union with 4841 members, the ~~Accountant~~Accountants Union with 610 members and the ~~Workers~~Workers’ Unions from Arcos, Casa de Pedra, Camaçari, Recife and Araucária, with a total of ~~312~~344 members. ~~On the others company’s~~At all other companies controlled by CSN, such as Prada, Ersa, Namisa and ~~Metalic,~~Transnordestina, we have a total of ~~945~~1,435 members.

In March 1997, we established an employee profit sharing plan. All employees participate in the plan, and earn bonuses based on our reaching certain goals for each year, including a minimum EBITDA margin, as well as other measures such as sales, cost control, productivity and inventory levels, as appropriate for each sector based on its nature.

6E. Share Ownership

The Steinbruch family, which includes Mr. Benjamin Steinbruch, our Chairman and Chief Executive Officer holds an indirect majority ownership interest in Vicunha Siderurgia and Rio Iaco Participações, our controlling shareholder.

All our Executive Officers and members of our Board of Directors held an aggregate of ~~1,559~~1,558 shares of our outstanding common shares as of ~~April 30,~~December 31, 2011.

Item 7. Major Shareholders and Related Party Transactions

7A. Major Shareholders

On ~~March~~December 31, 2011, our capital stock was composed of ~~1,483,033,685~~1,457,970,108 common shares. Our capital stock is entirely composed of common shares ~~including 25,063,577~~and each common ~~shares held in treasury.~~ share entitles the holder to one vote at our shareholders’ meetings.

The following table sets forth, as of ~~March~~December 31, 2011, the number of our common shares owned by all persons known to us that own more than 5% of our outstanding common shares as of such date:

	Common Shares		Common Shares

		Percent of		Percent of
	Shares Owned	Outstanding	Shares Owned	Outstanding
Name of Person or Group		Shares⁽²⁾		Shares

Vicunha Siderurgia S.A.⁽¹⁾	697,719,990	47.86%	697,719,990	47.86%
Rio Iaco Participações	58,193,503	3.99%
Rio Iaco Participações S.A.⁽¹⁾			58,193,503	3.99%

(1)	Owned indirectly by the Steinbruch family, which includes MrMr. Benjamin Steinbruch, Chairman of our Board of Directors and CEO, as well as other members of his family.
~~(2)~~	~~It does not include common shares held in treasury.~~

7B. Related Party Transactions

From time to time we conduct transactions with companies directly or indirectly owned by our principal shareholders or members of our Board of Directors. See “Item 4. Information on the Company ~~—A.~~– A. History and Development of the Company,” “Item 4B. Business Overview,” “Item 4D. Property, Plant and Equipment – Acquisitions and Dispositions”, “Item 6A. Directors and Senior Management” ~~and~~, “Item 7A. Major Shareholders” and Note 54 to the consolidated financial statements included in “Item 18. Financial Statements.”

Item 8. Financial Information

8A. Consolidated Statements and Other Financial Information

See “Item 3. Key Information—Selected Financial Data” and “Item 18. Financial Statements” for our consolidated financial statements.

Legal Proceedings

In the ordinary course of our business, we are party to several proceedings, both administrative and judicial, which we believe are incidental and arise out of our regular course of business. We believe that the outcome of the proceedings to which we are currently a party will not have a material adverse effect on our financial position, results of operations and cash flows. We have established provisions for all amounts in dispute that represent a probable loss based on the legal opinion of our internal and external legal ~~counsel.~~counsels.

Labor Contingencies

As of December 31, ~~2010,~~2011, the Company ~~is defendant~~and its subsidiaries are defendants in~~11,238~~ 12,993 labor claims, for which a provision has been recorded in the amount of R$ ~~188.2~~223 million. Most of the claims are related to alleged joint ~~liability between~~liabilitybetween us and our independent contractors, wage equalization, differences of 40% fine on the FGTS deposits regarding pre-retirement periods and due to inflation purge, additional payments for unhealthy and hazardous activities, overtime and profit sharing differences from 1997 to 1999 and from 2001 to 2003.

Civil Contingencies

~~Civil Contingencies~~

These are mainly claims for indemnities within the civil judicial processes in which we are involved. Such proceedings, in general, result of occupational accidents, diseases and contractual disputes related to our industrial activities. As of December ~~31,2010,~~31, 2011, the amount relating to probable losses for these contingencies was R$ ~~80.~~394 million.

We also classify as civil contingencies the a~~dministrative~~administrative and judicial proceedings filed against us for alleged violation of environmental statutes, mainly as a result of our industrial activities, claims for regularization, ~~indeminification~~indemnification or imposition of fines. As of December 31, ~~2010,~~2011, the amount relating to probable losses for civil contingencies relating to environmental issues was R$ ~~500 thousand.~~6.9 million.

Tax Contingencies

Among our tax contingencies there are charges for alleged non-payment of income tax and social contribution taxes in Brazil, for which a provision of R$ ~~1,911~~253 million has been recorded in ~~2010.~~2011.

Refis

In November 2009, we adhered to the Tax Recovery Program (REFIS) established by the Federal Government in order to settle our tax and social security liabilities through a special settlement and installment payment system. Management’s decision took into consideration the economic benefits provided by the REFIS, such as discounts and fines exemptions, as well as the high costs of maintaining pending lawsuits. Joining the REFIS allows us to pay a reduced amount of the fines, interest and legal charges that were previously due. On December 31, 2011, the position of the debt under the REFIS, recorded under taxes payable in installments, was R$2,095 million (R$1,444 million in 2010).

Refis - IPI premium credit over exports

The IPI premium tax credits relate to export sales made during 1992 to 2002. Tax laws allowed Brazilian companies to recognize IPI premium tax credits until 1983, when an act of the executive branch of the Brazilian government cancelled such benefits and prohibited companies from recognizing ~~these~~such credits. We challenged the constitutionality of the executive branch’s action ~~by obtaining,~~and obtained, in August 2003, a favorable decision from a Brazilian trial court that authorized the use of IPI premium tax credits. However, in August 2009, the Brazilian Federal Supreme Court, or STF, issued a decision with effects of general repercussion establishing that the IPI premium ~~credit was~~tax credits were only ~~effective~~recognizable until October 1990. Accordingly, the credits accrued after ~~1990~~such date should not behave been recognized and, ~~in view~~as a result, our board of ~~this STF decision,~~directors approved the ~~Company’s Board~~inclusion of ~~Directors approved including~~ this matter in the ~~taxrecovery program for tax debts introduced~~REFIS. In June 2011, the inclusion of the discussed amounts in the REFIS was ratified by ~~Provisional Measure 470/09 and Law 11941/09, which entails benefits in terms of reduction of fines, interest and legal charges.~~

the proper authorities.

Refis - Social Contribution on Net Income from Export Revenues

We filed a lawsuit challenging the assessment of Social Contribution on Net Income charged on income from export revenues based on Constitutional Amendment No. 33/~~01 and~~01. Despite an initial decision in March 2004 ~~we obtained an initial decision~~ authorizing the exclusion of these export revenues from ~~referred calculation~~the taxable basis - as well as the offsetting of amounts paid as from ~~2001. The lower court decision was favorable~~2001 - in August 2010 the Brazilian Federal Supreme Court, or STF, ruled unfavorably in another proceeding unrelated to us but that discussed the same subject matter (RE 564413). Accordingly, and following the ~~proceeding is waiting for trial~~recommendation of our external counsel, the ~~appeal filed by the Federal Government in the Regional Federal Court. At~~remaining amount of R$402 million (as of December 31, ~~2010, the amount of suspended liability and the offset credits based on the referred proceedings~~2010) was ~~R$ 402 million, as compared to R$ 1,240 million at December 31, 2009, already adjusted by the SELIC 2010. Such reduction arose out of the inclusion~~included in REFIS ~~of debts related to the offset of amounts paid as of 2001 and debts related to the exclusion of export revenues from taxable basis. The valid~~in June 2011. This inclusion ~~of such debts in REFIS is subject to ratification~~was already ratified by the proper ~~authorities, which we expect will take place as~~authorities.

Table of mid-2011, as set forth in Ordinance No. 2/2011. We still claim the exclusion of profits derived from exports from the calculation basis of the Social Contribution, according to the initial decision obtained by us.Contents

~~Refis~~

~~In November 2009, we adhered to the Tax Recovery Program(REFIS)~~established by Federal Government in order to settle its tax and social security liabilities through a special settlement and installment payment system. Management’s decision took into consideration the economic benefits provided by the REFIS, such as discounts and fines exemptions, as well as the high costs of maintaining pending lawsuits. Joining the special tax programs reduced the amount of fines, interest and legal charges previously due. On December 31, 2010, the position of the debts under the Federal REFIS, recorded under taxes payable in installments, was R$ 1,444.2 million (R$ 826.8 million in 2009).

Antitrust

In October 1999, CADE fined us, ~~R$22 million~~ claiming that certain practices adopted by us and other Brazilian steel companies ~~until~~up to 1997 allegedly comprised a cartel. We challenged the cartel allegation and the imposition of the fine judicially and, inon June 2003, obtained a partially favorable judgment by a federal trial court. CADE appealed the trial court decision and, on June ~~14,~~ 2010, a federal appellate court in Brasília held a judgment reversing the trial court’s decision and confirming the cartel allegation as well as the fine imposed by ~~CADE.~~CADE in the amount of R$65 million. We have asked the appellate court to clarify its decision and we will only know the exact content of the judgment, including the rate for adjustment of the fine amount, when the appellate court clarifies its decision. Accordingly, we have not yet recorded any provision in connection with this fine. We believe we have grounds for reversal of the judgment and intend to appealappealed the decision of the appellate court to the Brazilian Superior Court of Justice. We have not yet recorded any provision in connection with this fine.

In September 2011, CSN received a request from Secretaria de Direito Econômico (SDE) to provide information related to the acquisition of shares of Usinas Siderúrgicas de Minas Gerais S.A. – Usiminas in order to evaluate a possible concentration act. In October 2011, SDE involved Conselho Administrativo de Defesa Econômica (CADE) and Secretaria de Acompanhamento Econômico (SEAE) on the subject. CSN has been providing the requested information to such antitrust bodies.

On April 11, 2012 CADE issued an injunctive order barring us from, among others, acquiring more Usiminas shares or exercising our voting rights on the shares we already own. We are analyzing alternatives to preserve our rights.

Other Legal Proceedings

The ~~company~~Company and its subsidiaries are defendants in other proceedings at administrative and judicial levels, in the approximate amount of R$ ~~4.2 billion,~~6,881 million, of which R$ ~~2.9 billion related~~5,196 million relate to tax contingencies, R$ ~~303~~570 million to civil contingencies, and R$ ~~958~~1,115 million to labor and social security contingencies. The assessments made by legal counsel define these contingencies as entailing a risk of possible loss and, therefore, no provision was recorded in conformity with Management’s ~~judgement.~~judgment.

The Company is also a defendant in an arbitration proceeding at the International Court of Arbitration - ICC that discusses potential damages suffered by the plaintiff due to a breach of contract in the estimated amount of R$84 million. The proceeding is in the discovery phase. This case is classified as entailing a risk of possible loss and, therefore, no provision was recorded in conformity with Management’s judgment.

For further information on our legal proceedings and contingencies, see Note 2119 to our consolidated financial statements.

Dividend Policy

General

Subject to certain exceptions set forth in Brazilian Corporate Law, our bylaws require that we pay a yearly minimum dividend equal to 25% of our adjusted net profits, calculated in accordance with Brazilian Corporate Law.

Proposals to declare and pay dividends in excess of the statutory minimum dividend requirement are generally made at the recommendation of our Board of Directors and ~~approval~~approved by the vote of our shareholders. Any such proposal will be dependent upon our results of operations, financial condition, cash requirements for our business, future prospects and other factors deemed relevant by our Board of Directors. Until December 2000, it had been our policy to pay dividends on our outstanding common shares not less than the amount of our required distributions for any particular fiscal year, subject to ~~any~~a determination by our Board of Directors that such distributions would be inadvisable in view of our financial condition. In December 2000, our Board of Directors decided to adopt a policy of paying dividends equal to all legally available net profits, after taking into consideration the following priorities: (i) our business strategy; (ii) the performance of our obligations; (iii) the accomplishment of our required investments; and (iv) the maintenance of our good financial status.

Pursuant to a change in Brazilian tax law effective January 1, 1996, Brazilian companies are also permitted to pay limited amounts of interest on stockholders’ equity to holders of equity securities and to treat these payments as an expense for Brazilian income tax purposes. These payments may be counted in determining if the statutory minimum dividend requirement has been met, subject to shareholder approval.

For dividends declared during the past ~~two~~three years, see “Item 3A. Selected Financial Data.”

At our Annual Shareholders’ Meeting of April ~~29, 2011,~~27, 2012, our shareholders approved the payment of dividends and interest on shareholders’ equity relating to ~~2010,~~2011, in the total amount of R$~~1,856.8 million (R$1,500~~1,200 million as ~~dividends and R$356.8 million as interest on shareholders’ equity).~~dividends.

Amounts Available for Distribution

At each Annual Shareholders’ Meeting, our Board of Directors is required to recommend how our earnings for the preceding fiscal year are to be allocated. For purposes of Brazilian Corporate Law, a company’s income net ~~income after~~of income tax and social contribution for any one fiscal year, ~~net of~~ any accumulated losses from prior fiscal years and amounts allocated to employees’ and management’s participation in earnings, represents its “net profits” for that fiscal year.

In accordance with Brazilian Corporate Law, an amount equal to 50% of our net profits as further (i) reduced by amounts allocated to the legal reserve; (ii) reduced by amounts allocated to the contingency ~~reserve;~~reserve and the tax incentive reserve, if any; and (iii) increased by the eventual reversion of ~~the~~any contingency reserves constituted in prior years, will be available for distribution to shareholders ~~or the Distributable Amount,~~ in any particular ~~year.~~year (“Distributable Amount”).

Legal Reserve. Under Brazilian Corporate Law, we are required to maintain a “legal reserve” to which ~~web~~we must allocate 5% of our “net profits” for each fiscal year until the amount of the reserve equals 20% of our paid-in capital. However, we are not required to make any allocations to our legal reserve in a year in which the legal reserve, when added to our other established capital reserves, exceeds 30% of our capital stock. ~~Any net losses may be offset with the amounts allocated to the legal reserve.~~ The amounts allocated to such reserve must be approved by our shareholders in the Annual Shareholders’ Meeting, and may be used to increase our capital stock or to offset losses and, therefore, ~~they~~ are not available for the payment of dividends.

Discretionary (or Statutory) Reserves. Under Brazilian Corporate Law, any corporation may provide in its by-laws for the creation of additional reserves, provided that the maximum amount that may be allocated to such reserves, the purpose of such reserves and the allocation criteria of ~~the reserve~~such reserves are specified. ~~These reserves may~~There can not be ~~allocated for~~any allocation to such reserves if ~~such reserve~~it affects ~~the~~ payment of the Mandatory Dividend (as defined ~~bellow)~~below). Our by-laws currently provide that our Board of Directors may propose to our shareholders the deduction of at least 1% from our net profits to be allocated to a Working Capital and Investments Reserve. Constitution of such reserve will not affect payment of the Mandatory Dividend. Our by-laws do not provide for ~~this~~any other discretionary reserve.

Contingency Reserve. Under Brazilian Corporate Law, a percentage of our “net profits” may be allocated to a contingency reserve for estimable losses that are considered probable in future years. Any amount so allocated in a prior year must either be reserved in the fiscal year in which the loss had been anticipated if the loss does not occur as projected or be written off in the event that the anticipated loss occurs.

Tax Incentive Reserve. Our shareholders in a shareholders’ meeting may, ~~as proposed by management,~~following a management’s proposal, allocate to ~~the~~a tax incentive reserve ~~part~~the portion of our “net profits” resulting from donations or governmental grants for investments, which may be excluded from the taxable basis of athe Mandatory Dividend (as defined ~~bellow)~~below). Our by-laws currently do not provide for such reserve.

Unrealized ~~Income~~Profits Reserve. Under Brazilian Corporate Law, the amount by which the ~~distributable amount~~Mandatory Dividend exceeds our realized net ~~income~~profits in a given fiscal year may be allocated to an unrealized profits ~~reserves.~~reserve. Brazilian Corporate Law defines ~~realized “net~~“realized net profits” for the period as the amount by which our “net profits” exceeds the sum of (i) positive equity net results and (ii) the net profits, gains or returns that will be ~~received by us~~realized after the end of the subsequent fiscal year. “Net profits” allocated to the unrealized profits ~~reserves~~reserve must be added to the next ~~mandatory dividend~~Mandatory Dividend (as defined below) distribution after those profits have been realized, if they have not been used to absorb losses in subsequent periods.

Retained Earnings Reserve. Under Brazilian Corporate Law, our shareholders may decide at a general shareholders’ meeting to retain a portion of our net ~~income~~profits that is provided for in a previously approved capital expenditure budget. No allocation of net ~~income~~profits may be made to the retained earnings reserve in case such allocation affects the payment of a ~~mandatory dividend.~~Mandatory Dividend (as defined below).

The balance of our profit reserves, except those for contingencies, tax incentives and unrealized profits, shall not be greater than our capital stock. If such reserves reach this limit, the manner in which such surplus is used will be decided at a shareholders’ meeting.

For purposes of determining reserve amounts, the calculation of “net profits” and allocations to reserves for any fiscal year are determined on the basis of financial statements prepared in accordance with Brazilian Corporate Law. The consolidated financial statements included herein have been prepared in accordance with ~~U.S. GAAP~~IFRS and, although our allocations to reserves and dividends will be reflected in the financial statements, investors will not be able to calculate the allocations or required dividend amounts from the consolidated financial statements.

Capital Reserve.Under Brazilian Corporate Law, the capital reserve consists of ~~premium~~premiums from the issuance of shares, goodwill reserves from mergers, sales of founders' shares, and sales of warrants, ~~premium from the issuance of debentures, tax and fiscal incentives and gifts.~~. Amounts allocated to our capital reserve are not taken into consideration for purposes of determining Mandatory Dividends (as defined ~~bellow)~~below). Our capital stock is not currently represented by founders' shares. In ~~addition, the remaining balance in~~our case, any amounts allocated to the capital reserve may only be used to increase our capital stock, to absorb losses that surpass accumulated profits and ~~the~~ profit reserves, or to redeem, reimburse or purchase shares.

Mandatory Dividend

Under our bylaws, we are required to distribute to shareholders as dividends in respect of each fiscal year ending on December 31, to the extent profits are available for distribution, an amount equal to at least 25% of the Distributable Amount (the “Mandatory Dividend”) in any particular year, ~~(the~~which amount ~~of which~~ shall include any interest paid on capital during that ~~year).~~year. See “Additional Payments on Shareholders’ Equity” below. In addition to the Mandatory Dividend, our Board of Directors may recommend that shareholders receive an additional payment of dividends from other funds legally ~~available therefore.~~available. Any payment of interim dividends ~~will~~may be netted against the amount of the Mandatory Dividend for that fiscal year. Under Brazilian Corporate Law, if the Board of Directors determines prior to the Annual Shareholders’ Meeting that payment of the Mandatory Dividend for the preceding fiscal year would be inadvisable in view of our financial condition, the Mandatory Dividend does not need ~~not~~to be paid. That type of determination must be reviewed by the Fiscal ~~Council,~~Committee, if one exists, and reported, together with the appropriate explanations, to the shareholders and to the CVM. Mandatory dividends not distributed as described above shall be registered as a special reserve and, if not absorbed by losses in subsequent fiscal years, shall be paid as a dividend as soon as our financial condition allows for it.

Payment of Dividends

We are required to hold Annual Shareholders’ Meetings within the first four months after the end of our fiscal year at which an annual dividend may be declared. Additionally, our Board of Directors may declare interim dividends. Under Brazilian Corporate Law, dividends are generally required to be paid to the holder of record on a dividend declaration date within 60 days following the date the dividend was declared, unless a shareholders’ resolution sets forth another date of payment, which, in either case, must occur prior to the end of the fiscal year in which the dividend was declared. A shareholder has a three-year period from the dividend payment date to claim dividends (or interest on shareholders’ equity as described under “Additional Payments on Shareholders’ Equity” below) in respect of its shares, after which we will no longer be liable for the dividend payments.

Our payments of cash distributions on common shares underlying the ADSs will be made in Brazilian currency to our ADR custodian on behalf of our ADR depositary, which will then convert the proceeds into U.S. dollars and will cause the U.S. dollars to be delivered to our ADR depositary for distribution to holders of ADSs.

Additional Payments on Shareholders’ Equity

Since January 1, 1996, Brazilian companies have been permitted to pay interest on shareholders’ equity to holders of equity securities and to treat those payments as a deductible expense for Brazilian income tax purposes. The amount of interest payable on capital is calculated based on the TJLP – Long Term Interest Rate, as determined by the Central Bank, and applied to each shareholder’s portion of net equity. Brazilian Corporate Law establishes that current earnings are not included as part of the net equity.

The TJLP is determined by the Central Bank on a quarterly basis. The TJLP is based on the annual profitability average of Brazilian public internal and external debt. The TJLP rate for the fourth quarter of ~~2009~~2011 was 6%.

Interest on shareholders’ equity is deductible up to the ~~extent it does not exceed 50% of either~~greater of the following amounts: (i) 50% of the net ~~income,~~profits, as determined for accounting purposes, for the current period of interest payment after the deduction of the social contribution on net profits and before the provision for income tax and the deduction of the amount of such interest; orand (ii) 50% of the balance of accumulated earnings and profits reserves from prior years.

8B. Significant Changes

None

Item 9. The Offer and Listing

9A. Offer and Listing Details

Our capital stock is comprised of common shares without par value (ações ordinárias). On January 22, 2008, our shareholders approved a one-for-three split of our common shares. As a result of this stock split, each common share of our capital stock as of January 22, 2008 became represented by three common shares after the split. The same ratio of one common share for each ADS was maintained.

On March 25, 2010, our shareholders approved a two-for-one split of our common shares. As a result of this stock split, each common share of our capital stock as of March 25, 2010 became represented by two common shares after the split. The same ratio of one common share for each ADS was maintained. See “Item 10.B. Memorandum and Articles of Association.”

The following table sets forth information concerning the high and low closing sale prices and the average daily trading volume of our common shares on the BM&FBOVESPA (per common share) and the ADSs on the NYSE for the periods indicated.

Common Shares⁽¹⁾

American Depositary Shares⁽¹⁾

US$ per Share⁽²⁾

Volume

US$ per ADS

Volume

High

Low

(Inthousands)

High

Low

(Inthousands)
2006:

Year end

6.19

3.49

4,216
6.23

3.57

5,596
2007:

Year end

14.90

4.67

5,330
15.28

4.71

6,977
2008:

Year end

25.63

4.12

5,761
25.51

3.94

9,222
2009:

Year end

18.45

6.03

4,936
18.61

6.00

7,218
2010:

First quarter

20.03

14.25

4,739
20.00

14.01

6,577
Second quarter

20.81

13.37

4,035
20.76

13.16

6,386
Third quarter

17.37

14.53

3,143
17.67

14.34

4,353
Fourth quarter

17.78

15.21

2,666
18.21

15.54

4,202
Year end

20.81

13.37

3,637
20.76

13.16

5,360
2011

First quarter

17.98

15.24

3,036
18.33

15.41

4,377
Second quarter

16.81

11.60

3,169
17.22

11.81

4,453
Third quarter

12.55

7.89

3,780
12.62

7.94

5,932
Fourth quarter

9.66

7.23

3,683
9.89

7.31

4,573
Year End

17.98

7.23

3,422
18.33

7.31

4,840
2012

First quarter

10.83

8.09

3,958
10.88

8.53

5,486

Month Ended:

October 31, 2011

9.66

7.23

4,623
9.89
7.46
5,858
November 30, 2011

9.51

7.54

3,650
9.70
7.55
4,319
December 31, 2011

8.84

7.35

2,819
8.76
7.31
3,542
January 31, 2012

10.54

8.09

3,626
10.54
8.53
5,393
February 29, 2012

10.83

10.05

4,290
10.88
10.10
5,595
March 31, 2012

10.78

9.45

3.989
10.73
9.46
5,470

Common Shares⁽¹⁾

American Depositary Shares⁽¹⁾

US$ per Share⁽²⁾

Volume

US$ per ADS

Volume

High

Low

(In thousands)

High

Low

(In thousands)

2005:

Year end

4.49

2.45

5,771

4.47

2.47

5,095
2006:

Year end

6.27

3.46

4,216

6.29

3.49

5,605
2007:

Year end

15.00

4.58

5,330

15.35

4.58

6,980
2008:

First quarter

20.93

11.88

5,171

20.99

12.16

8,521
Second quarter

26.21

17.76

4,617

26.23

17.75

6,895
Third quarter

21.87

8.24

6,323

21.78

9.21

11,038
Fourth quarter

10.51

4.07

6,887

10.41

3.93

10,390
Year end

26.21

4.07

5,761

26.23

3.93

9,219
2009:

First quarter

9.27

6.03

5,967

9.30

5.92

9,217
Second quarter

13.29

7.31

5,039

13.25

7.27

7,088
Third quarter

15.45

9.83

4,573

15.53

9.73

6,226
Fourth quarter

19.20

14.57

4,145

19.07

14.47

6,417
Year end

19.20

6.03

4,930

19.07

5.92

7,214
2010:

First quarter

18.38

13.08

          4,800

19.17

13.86

        6,742
Second quarter

19.09

12.67

          4,114

19.90

13.24

        6,524
Third quarter

16.46

13.77

          3,253

17.49

14.44

        4,555
Fourth quarter

16.85

14.42

          2,687

18.02

15.49

        4,533
Year end

19.09

12.67

3,713

19.90

13.24

5,589
2011

January 31

17.03

15.66

1,119

18.14

16.45

1,729
February 28

15.20

16.15

919

17.11

16.08

1,396
March 31

15.52

14.44

1,018

16.55

15.25

1,432
First quarter

17.03

14.44

3,055

18.14

15.25

4,556
April 30

15.93

14.35

995

17.04

15.21

1,126

Source: Economática.
(1)	Prices and volumes of our common shares and ADSs have been adjusted to reflect the two-for-one stock split occurred in March 2010 whereby each common share of our capital stock on March 25, 2010 became represented by two common shares. See “Item 10.B. Memorandum and Articles of Association.”
(2)	U.S. dollar amounts have been translated fromreaisat the exchange rates in effect on the respective dates of the quotations for the common shares set forth above. These U.S. dollar amounts may reflect exchange rate fluctuations and may not correspond to changes in nominalreaisprices over time.

As of ~~June 14, 2011,~~April 18, 2012, the closing sale price (i) per common share on the BM&FBOVESPA wasR~~$19.58~~ of R$17.27 and (ii) per ADS on the NYSE was of US$~~12.59.~~9.22. The ADSs are issued under a deposit agreement and JP Morgan Bankserves as depositary under that agreement.

As of ~~March~~December 31, 2011, approximately ~~364~~374 million, or approximately ~~24.6%~~25.6%, of our outstanding common shares were held through ADSs. Substantially all of these ADSs were held of record by The Depository Trust Company. In addition, our records indicate that on that date there were approximately ~~402~~154 record holders (other than our ADR depositary) with addresses in the U.S., holding an aggregate of approximately ~~476~~53 million common shares, representing ~~32.1%~~3.6% of our outstanding common shares.

9B. Plan of Distribution

Not applicable.

9C. Markets

The principal trading market for our common shares is ~~the~~ BM&FBOVESPA. Our ADSs trade on the NYSE under the symbol “SID.”

Trading on the BM&FBOVESPA and NYSE

CSN shares traded in the market are comprised of ordinary shares without nominal value. Ordinary shares are traded on the Brazilian Stock Exchange, BM&FBOVESPA, under the code CSNA3. Our ADSs, each one representing an ordinary share, are traded on the New York Stock Exchange, NYSE, under the code SID.

In 2000, the BM&FBOVESPA was reorganized through the execution of a memoranda of understanding by the Brazilian stock exchanges. Under the memoranda, all securities in Brazil are now traded only on the BM~~&FBOVESPA, with the exception of electronically traded public debt securities and privatization auctions, which are traded on the Rio de Janeiro Stock Exchange.~~

&FBOVESPA. When shareholders trade in common and preferred shares on the BM&FBOVESPA, the trade is settled in three business days after the trade date without adjustment of the purchase price for inflation. The seller is ordinarily required to deliver the shares to the exchange on the third business day following the trade date. Delivery of and payment for shares are made through the facilities of ~~the clearinghouse,~~~~Companhia Brasileira de Liquidação e Custódia,~~~~or CBLC, a subsidiary of the BM&FBOVESPA.~~

The BM&FBOVESPA was a nonprofit entity owned by its member brokerage firms until August 2007. Since then, Bovespa Holding S.A. became a public company with shares negotiated on the BM&FBOVESPA. Trading on the BM&FBOVESPA is conducted through an electronic trading system called Megabolsa from 10:00 a.m. to 5:00p.m., or from 11:00 a.m. to 6:00 p.m., São Paulo time, during daylight savings time in Brazil, for all securities traded on all markets. This system is a computerized system that links electronically with the seven smaller regional exchanges. The BM&FBOVESPA also permits trading from 5:45 p.m. to 7:00 p.m., or from 6:45 p.m. to 7:30 p.m., São Paulo time, during daylight savings time in Brazil, on an online system connected to traditional and internet brokers called the “after market.” Trading on the after market is subject to regulatory limits on price volatility and on the volume of shares transacted through internet brokers. There are no specialists or officially recognized market makers for our shares in Brazil.

In order to better control volatility, the BM&FBOVESPA adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes, one hour or for a period to be determined by BM&FBOVESPA whenever the BM&FBOVESPA’s ~~index, or Ibovespa index, falls below the limits of 10%, 15% or 20%, respectively, in relation to the index registered in the previous trading session.~~clearinghouse.

The BM&FBOVESPA is significantly less liquid than the NYSE or other major exchanges in the world. As of December ~~2010,~~2011, the aggregate market capitalization of the BM&FBOVESPA was equivalent to R$~~2.6~~2.3 trillion (or US$~~1.5~~1.2 trillion). In contrast, as of ~~April 2010,~~December 2011, the aggregate market capitalization of the NYSE was US$~~25.44~~11.8 trillion. The average daily trading volume of the BM&FBOVESPA and NYSE for ~~April 2010~~December 2011 was of approximately R$~~5.6~~6.0 billion (or US$3.2 billion) and US$~~80.1~~53.7 billion, respectively. Although any of the outstanding shares of a listed company may trade on the BM&FBOVESPA, in most cases fewer than half of the listed shares are actually available for trading by the public, since the remaining shares are generally being held by small groups of controlling persons, by government entities or by one principal shareholder. See “Item 3. Risk Factors—Risks Relating to the ADSs and Our Common Shares—The relative volatility and illiquidity of the Brazilian securities markets may substantially limit the ability of holders of our common shares or ADSs to sell the common shares underlying the ADSs at the time and price they desire.”

As of December 31, ~~2010,~~2011, we accounted for approximately ~~1.88%~~0.95% of the market capitalization of all listed companies on the BM&FBOVESPA.

The following table reflects the fluctuations in the Ibovespa index during the periods indicated:

Ibovespa Index


	High	Low	Close	High	Low	Close

2005	33,629	23,610	33,456
2006	44,674	32,057	44,473	44,526	32,847	44,473
2007	65,790	41,179	63,886	65,790	41,179	63,886
2008	73,516	29,435	37,550	73,516	29,435	37,550
2009	69,349	36,234	68,588	69,349	36,234	68,588
2010	72,995	58,192	69,304	72,995	58,192	69,304
2011 (through March 31)	71,632	64,217	68,586
2011				71,632	48,668	56,754

2012 (through March 31)

68,394

57,829

64,510

The IBOVESPA index closed at ~~68,586~~64,510 on March 31, ~~2011.~~2012. Trading on the BM&FBOVESPA by nonresidents of Brazil is subject to certain limitations under Brazilian foreign investment legislation. See “Item 10D. Exchange Controls.”

Regulation of the Brazilian Securities Markets

The Brazilian securities markets are regulated by ~~the~~ CVM, which has authority over stock exchanges and the securities markets ~~generally,~~in general, and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities market is governed by Law No. 6,385 dated December 7, 1976, as amended, or the Brazilian Securities Law, ~~and~~ Brazilian Corporate Law and regulations issued by ~~the~~ CVM.

Under Brazilian Corporate Law, a company is either public, acompanhia aberta, such as ~~us,~~CSN, or private, acompanhia fechada. All public companies are registered with ~~the~~ CVM and are subject to reporting and regulatory requirements.

Trading in securities on the BM&FBOVESPA may be suspended at the request of a company in anticipation of a material announcement. The company should also suspend its trading on international stock exchanges where its securities are traded. Trading may also be suspended on the initiative of the BM&FBOVESPA or ~~the~~ CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to the inquires by ~~the~~ CVM or the BM&FBOVESPA.

The Brazilian Securities Law and the regulations issued by ~~the~~ CVM provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation, as well as protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as the United States securities markets or markets in certain other jurisdictions.

Disclosure Requirements

According to Law No 6,385, a publicly held company must submit to ~~the~~ CVM and BM&FBOVESPA certain periodic information, including annual and quarterly reports prepared by management and independent auditors. This legislation also requires uscompanies to file with ~~the~~ CVM ~~our shareholders’~~shareholder agreements, notices of shareholders’ meetings and copies of the related minutes.

Pursuant to ~~the~~ CVM Resolution No. 358, of January 3, 2002, ~~the~~ CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information in the trading and acquisition of securities issued by publicly held companies.

Such requirements include provisions that:

· ~~establish~~Establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders, resolutions of the shareholders at a shareholders’ ~~meeting and~~meetingand of management of the company, or any other facts related to ~~our~~a company’s business (whether occurring within the company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;

· ~~specify~~Specify examples of facts that are considered to be material, which include, among others, the execution of agreements providing for the transfer of control of the company, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the company, and any corporate restructuring undertaken among related companies;

· ~~oblige~~Oblige the ~~officer of~~ investor relations officer, controlling shareholders, other officers, directors, members of the audit committee and other advisory boards to disclose material facts;

· ~~require~~Require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;

· ~~require~~Require the acquirer of a controlling stake in a corporation to ~~publish~~disclose material facts, including its intentions as to whether or not to de-list the corporation’s shares within one ~~year;~~year from the acquisition of such controlling stake;

· ~~establish~~Establish rules regarding disclosure requirements in the acquisition and disposal of a material ownership interest; and

· ~~forbid~~Forbid trading on the basis of material non-public information.

Pursuant to ~~the~~ CVM Rule No. ~~480~~480. of December 7, 2009, ~~the~~ CVM ~~expand~~expands the quantity and ~~improve~~improves the quality of information reported by issuers in Brazil. This Rule represents a significant step forward in providing the ~~marketwith~~market with greater transparency over securities issuers. For that purpose, the Annual Information Report (IAN) was replaced by a more comprehensive and opinative reference form (Formulário de Referência), which ~~comprised~~comprises the information requested byIAN and ~~added~~ several other data required under CVM Rule No. ~~400~~400. of December 29, 2003, ~~that~~which were ~~only~~previously subject to disclosure only upon a public offering.

The reference form (Formulário de Referência) is in line with the Shelf Registration System recommended by the International Organization Securities Commission (IOSCO) and adopted in other countries (England and the United States, among others), by means of which the information regarding an specific issuer is consolidated into one document and is subject to periodic update (the “Shelf Document”). This mechanism offers the investor the possibility to analyze one single document for relevant information about the issuer.

CVM Rule No. ~~480~~480. also created two groups of issuers per type of securities traded. Group A issuers are authorized to trade in any securities, whereas Group B issuers must not trade in stocks, depositary receipts (BDRs, Units) and securities convertible or exchangeable into stocks or depositary receipts. The greater extend of Group A authorization is followed by more stringent disclosure and reporting requirements. We, as issuers of stocks, are part of Group A.A and, as such, are subject to more stringent disclosure and reporting requirements.

CVM has also enacted Rule No. ~~481~~481. of December 17, 2009 to regulate two key issues involving general meetings of shareholders in publicly held companies: (i) the extent of information and documents to be provided in support of call notices (subject to prior disclosure to shareholders); and (ii) proxy solicitation for exercise of voting rights.

CVM Rule No. ~~481~~481. is intended to (i) improve the quality of information ~~disclosure~~disclosed by publicly held companies to shareholders and to the market in general, favoring the use of Internet as a vehicle to that end; (ii) make the exercise of voting rights less costly and foster the participation of shareholders in general meetings, specially for companies with widely dispersed capital; and, consequently (iii) facilitate the oversight of corporate businesses.

9D. Selling Shareholders

Not applicable.

9E. Dilution

Not applicable.

9F. Expenses of the Issue

Not applicable.

Item 10. Additional Information

10A. Share Capital

Not applicable.

10B. Memorandum and Articles of Association

Registration and Corporate Purpose

We are registered with the Department of Trade Registration under number 15,910. Our corporate purpose, as set forth in Article 2 of our bylaws, is to manufacture, transform, market, import and export steel products and steel derived by-products, ~~from the manufacturing plant,~~ as well as to explore other activities that are directly or indirectly related to our corporate purpose, including: mining, cement and carbochemical business activities, the manufacture and assembly of metallic structures, construction, transportation, navigation and port activities.

Pursuant to our bylaws, a director may not vote on a proposal, arrangement or contract in which the director’s interests conflict with our interests. In addition, our shareholders must approve the ~~total~~ compensation of our management and, in case a global amount is fixed, our Board of Directors is responsible for allocating individual amounts of management compensation. There is no mandatory retirement age for our directors. ~~Brazilian Corporate Law requires that a director must be a shareholder of the company, but there is no minimum amount of shares required.~~ A detailed description of the general duties and powers of our Board of Directors may be found in “Item 6A. Directors and Senior Management.”

Description of Capital Stock

Set forth below is certain information concerning our capital stock and a brief summary of certain significant provisions of our bylaws and Brazilian Corporate Law applicable to our capital stock. This description does not purport to be complete and is qualified by reference to our bylaws and to Brazilian law. For further information, see our bylaws, which have been filed as an exhibit to this annual report.

Capital Stock

On August 2, 2011 we cancelled 25,063,577 of our shares which were held in treasury at that time. On December 31, ~~2010,~~2011 our capital stock was composed of ~~1,483,033,685~~1,457,970,108 common ~~shares, including 25,063,577 common shares held in treasury.~~

On November 1, 2010 we cancelled 27.325.535 of our shares which were held on treasury at that time. On April 30, 2011 our capital stock was composed by 1,483,033,685 common shares including 25.063.577~~common shares held in treasury.~~shares. Our bylaws authorize the Board of Directors to increase the capital stock up to 2,400,000,000 common shares without an amendment to our ~~bylaws by means of a vote at our shareholders’ meeting.~~bylaws. There are currently no classes or series of preferred shares issued or outstanding. We may purchase our own shares for purposes of cancellation or to hold them in treasury subject to certain limits and conditions established by the CVM and Brazilian Corporate Law. See “Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.”

Liability for Further Capital Calls

Pursuant to Brazilian Corporate Law, a shareholder’s liability is generally limited to the issue price of the subscribed or purchased shares. There is no obligation of a shareholder to participate in additional capital calls.

Voting Rights

Each common share entitles the holder to one vote at our shareholders’ meetings. According to a CVM ruling, shareholders that represent at least 5% of our common shares may request cumulative voting in an election of our Board of Directors. Pursuant to Brazilian Corporate Law, shareholders holding at least 15% of our common shares have the right to appoint a member of our Board of Directors.

Shareholders’ Meetings

Pursuant to Brazilian Corporate Law, the shareholders present at an annual or extraordinary shareholders’ meeting, convened and held in accordance with Brazilian Corporate Law and our bylaws are empowered to decide all matters relating to our corporate purpose and to pass any resolutions they deem necessary for our protection and well-being.

In order to participate in a shareholders’ meeting, a shareholder must be a record owner of the share on the day the meeting is held, and may be represented by a proxy.

Shareholders’ meetings are called, convened and presided over by the Chairman or Vice-Chairman of our Board of Directors. Brazilian Corporate Law requires that our shareholders’ meeting be convened by publication of a notice in theDiário Oficial do Estado ~~do Rio~~ de ~~Janeiro~~São Paulo, the official government publication of the State of ~~Rio de Janeiro,~~São Paulo, and in a newspaper of general circulation in Brazil and in the city in which our principal place of business is located, currently the Jornal Valor Econômico, at least 15 days prior to the scheduled meeting date and no fewer than three times. We have changed to the ~~Jornal Valor Econômico~~Diário Oficial do Estado de São Paulo as a result of the transfer of our ~~main means of disclosing legal notices after~~headquarters to São Paulo and as approved by our shareholders ~~approved~~ by unanimous vote ~~such change~~ at our shareholders’ meeting held on ~~April 29,2010.~~May 30, 2011. Both notices must contain the agenda for the meeting and, in the case of an amendment to our bylaws, an indication of the subject matter.

In order for a shareholders’ meeting to be held, shareholders representing a quorum of at least one-fourth of the voting capital must be present, except for meetings convened to amend our bylaws, where shareholders representing at least two-thirds of the voting capital must be present. A shareholder may be represented at a shareholders’ meeting by means of a proxy, appointed not more than one year before the meeting, who must be a either a shareholder, a company officer or a lawyer. For public companies, such as we are, the proxy may also be a financial institution. If no quorum is present, notice must be given in the manner described above, no fewer than eight days prior to the scheduled meeting date. On second notice, the meeting may be convened without a specific quorum requirement, subject to the minimum quorum and voting requirements for certain matters, as described below. A holder of shares with no voting rights may attend a shareholders’ meeting and take part in the discussion of matters submitted for consideration.

Except as otherwise provided by law, resolutions passed at a shareholders’ meeting require a simple majority vote, abstentions not considered. Pursuant to Brazilian Corporate Law, the approval of shareholders representing at least one-half of the issued and outstanding voting shares is required for the following actions: (i) to create a new class of preferred shares or disproportionately increase an existing class of preferred shares relative to the other classes of preferred shares, to change a priority, preference, right, privilege or condition of redemption or amortization of any class of preferred shares or ~~creation of~~to create any class of non-voting preferred shares that has a priority, preference, right, condition or redemption or amortization superior to an existing class of shares (in ~~this case,~~these cases, a majority of the issued and outstanding shares of the affected class is also required); (ii) to reduce the ~~mandatory dividend;~~Mandatory Dividend; (iii) to change our corporate purpose; (iv) to merge into or consolidate with another company or to spin-off our assets; (v) to dissolve or liquidate our Company; (vi) to cancel any liquidation procedure; (vii) to ~~create~~authorize the issuance of founders’ shares; and (viii) to participate in a centralized group of companies as defined under Brazilian Corporate Law.

Pursuant to Brazilian Corporate Law, shareholders voting at a shareholders’ meeting have the power to: (i) amend our bylaws; (ii) elect or dismiss members of our Board of Directors (and members of the Fiscal ~~Council)~~Committee) at any time; (iii) receive and approve the annual management accounts, including the allocation of net profits and the distributable amounts for payment of the mandatory dividends and allocation to the various reserve accounts; (iv) authorize the issuance of debentures in general; (v) suspend the rights of a shareholder who has violated Brazilian Corporate Law or our bylaws; (vi) accept or reject the valuation of assets contributed by ~~a shareholder~~ashareholder in consideration of the subscription of shares in our capital stock; (vii) authorize the issuance of founders’ shares; (viii) pass resolutions ~~to reorganize the~~authorizing reorganization of our legal form, ~~of, merge, consolidate~~a merger, consolidation or split of the company, ~~to dissolve~~dissolution and ~~liquidate~~liquidation of the company, ~~to elect~~election and ~~dismiss its~~dismissal of our liquidators and to examine their accounts; and (ix) authorize management to declare the company insolvent and to request arecuperação judicial orrecuperação extrajudicial (a procedure involving protection from creditors similar in nature to a reorganization under the U.S. Bankruptcy Code), among others.

Redemption Rights

Our common shares are not redeemable, except that a dissenting and adversely affected shareholder is entitled, under Brazilian Corporate Law, to obtain redemption upon a decision made at a shareholders’ meeting by shareholders representing at least one half of the issued and outstanding voting shares to: (i) create a new class of preferred shares or to disproportionately increase an existing class of preferred shares relative to the other classes of preferred shares (unless these actions are provided for or authorized by our bylaws); (ii) modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or to create a new class with greater privileges than an existing class of preferred shares; (iii) reduce the mandatory distribution of dividends; (iv) change our corporate purpose; (v) merge us with another company or consolidate us; (vi) transfer all of our shares to another company in order to make us a wholly-owned subsidiary of that company (incorporação); (vii) approve the acquisition of control of another company at a price that exceeds certain limits set forth under Brazilian Corporate Law; (viii) approve our participation in a centralized group of companies as defined under Brazilian Corporate Law; (ix) conduct a spin-off that results in (a) a change of corporate purpose, (b) a reduction of the ~~mandatory dividend~~Mandatory Dividend or (c) any participation in a group of companies as defined under Brazilian Corporate Law; or (x) in the event that the entity resulting from (a) a merger or consolidation, (b) anincorporação as described above or (c) a spin-off of a listed company fails to become a listed company within 120 days of the shareholders’ meeting at which the decision was taken. The right ofo f redemption lapses 30 days after publication of the minutes of the relevant shareholders’ meeting. We would be entitled to reconsider any action giving rise to redemption rights within 10 days following the expiration of those rights, if the redemption of shares of ~~dissentingshareholders~~dissenting shareholders would jeopardize our financial stability. Law No. 9,457 dated May 5, 1997, which amended Brazilian Corporate Law, contains provisions which, among others, restrict redemption rights in certain cases and allow companies to redeem their shares at their market value, subject to certain requirements. According to ~~our bylaws,~~Brazilian Corporate Law, the reimbursement value of the common shares must equal the ~~market~~book value, which is determined by ~~a valuation report in accordance with Brazilian Corporate Law, of~~dividing our ~~capital stock divided~~net assets by the total number of shares issued by us, excluding treasury ~~shares.~~shares (if any).

Preemptive Rights

Except as provided for in Brazilian Corporate Law (such as in the case of mergers and public offerings), our bylaws allow each of our shareholders a general preemptive right to subscribe to shares in any capital increase, in proportion to his or her ownership interest. A minimum period of 30 days following the publication of notice of a capital increase is allowed for the exercise of the right and the right is ~~negotiable.~~transferable. In the event of a capital increase that would maintain or increase the proportion of capital represented by common shares, holders of ADSs will have preemptive rights to subscribe only to newly issued common shares. In the event of a capital increase that would reduce the proportion of capital represented by common shares, holders of ADSs will have preemptive rights to subscribe for common shares, in proportion to their ownership interest, only to the extent necessary to prevent dilution of their interest in us.

Form and Transfer

As our common shares are in registered form, the transfer of shares is governed by the rules of Article 31, paragraph 3, of Brazilian Corporate Law, which provides that a transfer of shares is effected by a transfer recorded in a company’s share transfer records upon presentation of valid share transfer instructions to the company by a transferor or its representative. When common shares are acquired or sold on a Brazilian stock exchange, the transfer is effected on our records by a representative of a brokerage firm or the stock exchange’s clearing system. Transfers of shares by a non-Brazilian shareholder are made in the same way and are executed by ~~that~~such shareholders’ local agent.

Table of Contents
The BM&FBOVESPA operates a central clearing system. A holder of our common shares may choose, at its discretion, to participate in this system and, in that case, all shares elected to be put into this system will be deposited in the custody of the BM&FBOVESPA (through a Brazilian institution duly authorized to operate by the Central Bank and having a clearing account with the BM&FBOVESPA). The fact that those common shares are held in the custody of the BM&FBOVESPA will be reflected in our register of shareholders. Each participating shareholder will, in turn, be registered in our register of beneficial shareholders maintained by the BM&FBOVESPA and will be treated in the same way as registered shareholders.
Limitations on Ownership and Voting Rights by non-Brazilians Shareholders
There are no restrictions on ownership or voting of our common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit those amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally require, among other things, obtaining a Certificate of Registration under the Brazilian National Monetary Council’s Resolution No. 2,689 or its direct foreign investment regulations. See “Item 10D. Exchange Controls.”
Share Ownership Disclosure
There are no provisions in our bylaws governing the ownership threshold above which shareholder ownership must be disclosed. CVM regulations require the disclosure of (i) the acquisition of ~~(i)~~ 5% of ~~the voting~~any class of capital stock of a listed company and any subsequent acquisition or disposition of at least 5% of any such class of capital stock, (ii) ~~additional acquisitions by~~acquisition of control of a ~~controlling shareholder~~listed company and (iii) the ownership of shares of capital stock of a listed company by members of ~~the~~such company’s Board of Executive Officers, ~~members~~Board of ~~the~~Directors, Audit Committee, Fiscal ~~Council~~Committee (if any) and any other consulting or technical body (if any) and certain relatives of those persons.
10C. Material Contracts

~~None~~

None.

10D. Exchange Controls

There are no restrictions on ownership or voting of our common shares by individuals or legal entities domiciled outside Brazil. However, the right to convert dividend payments and proceeds from the sale of common shares into foreign currency and to remit those amounts outside Brazil is subject to exchange control restrictions and foreign investment legislation which generally require, among other things, obtaining a Certificate of Registration under the Brazilian National Monetary Council’s Resolution No. 2,689 or its direct foreign investment regulations.

Resolution No. 2,689 dated March 31, 2000, introduced new rules to facilitate foreign investment in Brazil. The principal changes for foreign investors entering the Brazilian market include:

· the removal of restrictions on investments by portfolio composition (e.g., equities, fixed income and derivatives); and

· permission for foreign individuals and corporations to invest in the Brazilian market, in addition to foreign institutional investors.

Prior to Resolution No. 2,689, foreign investors had to leave and reenter the country in order to switch their investments from equity to fixed income. Now foreign investors can freely switch their investments without leaving the local market. Foreign investors registered with the CVM and acting through authorized custody accounts and a legal representative may buy and sell any local financial product traded on the local exchanges and registered on the local clearing systems, including shares on the BM&FBOVESPA, without obtaining separate Certificates of Registration for each transaction. Pursuant to Resolution No. 2,689, as amended, investors are also generally entitled to favorable tax treatment. See “Item 10E. Taxation—Brazilian Tax Considerations.”

A Certificate of Registration has been issued in the name of JP Morgan Chase Bank N.A., as our ADR depositary, and is maintained by theItaú Corretora de Valores S.A., our ADR custodian, on behalf of our ADR depositary. Pursuant to the Certificate, our ADR custodian and our ADR depositary are able to convert dividends and other distributions with respect to the common shares represented by ADSs into foreign currency and remit ~~the proceeds~~theproceeds outside Brazil. In the event that a holder of ADSs surrenders its ADSs for common shares, that holder will be entitled to continue to rely on our ADR depositary’s Certificate of Registration for only five business days after the surrender, following which the holder must obtain its own Certificate of Registration. Thereafter, unless the common shares are held pursuant to Resolution No. 2,689 or direct foreign investment regulations, the holder may not be able to convert into foreign currency and remit outside Brazil the proceeds from the disposition of, or distributions with respect to, those common shares, and the holder generally will be subject to less favorable Brazilian tax treatment than a holder of ADSs. See “Item 10E. Taxation—Brazilian Tax Considerations.”

A non-Brazilian holder of common shares may experience delays in obtaining a Certificate of Registration, which may delay remittances abroad. This kind of delay may adversely affect the amount, in U.S. dollars, received by the non-Brazilian holder.

Under current Brazilian legislation, the Brazilian government may impose temporary restrictions on remittances of foreign capital abroad in the event of a serious imbalance or an anticipated serious imbalance of Brazil’s balance of payments. For approximately nine months in 1989 and early 1990, the Brazilian government froze all dividend and capital repatriations held by the Central Bank that were owed to foreign equity investors in order to conserve Brazil’s foreign currency reserves. These amounts were subsequently released in accordance with Brazilian government directives. See “Item 3D. Risk Factors—Risks Relating to our Common Shares and ADSs—If holders of ADSs exchange the ADSs for common shares, they risk losing the ability to remit foreign currency abroad and Brazilian tax advantages.”

For a description of the foreign exchange markets in Brazil, see “Item 3A. Selected Financial Data– Exchange Rates.”

10E. Taxation

The following is a summary of certain U.S. federal income and Brazilian tax consequences of the acquisition, ownership and disposition of our common shares or ADSs by an investor that holds ~~the~~such common shares or ADSs. This summary does not purport to address all material tax consequences of the acquisition, ownership ~~anddisposition~~and disposition of our common shares or ADSs, does not take into account the specific circumstances of any particular ~~investors~~investor and does not address certain investors that may be subject to special tax rules.

This summary is based on the tax laws of the United States (including the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed Treasury regulations thereunder, published rulings and court decisions) and Brazil as in effect on the date hereof, which are subject to change (or changes in interpretation), possibly with retroactive effect. In addition, this summary is based in part upon the representations of our ~~ADR~~ADSs depositary and the assumption that each obligation in our deposit agreement and any related agreement will be performed in accordance with its terms.

Although there is, at present, no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may result in such a treaty. Both countries have been accepting the offset of income taxes paid in one country against the income tax due in the other based on reciprocity. No assurance can be given, however, as to whether or when an income tax treaty will enter into force or how it will affect the U.S. Holders, as defined below, of our common shares or ADSs.

~~The~~This discussion does not address any aspects of U.S. taxation (such as estate tax, gift tax and Medicare tax on net investment income) other than federal income taxation or any aspects of Brazilian taxation other than income, gift, inheritance and capital taxation. Prospective investors are urged to consult their own tax advisors regarding the Brazilian and U.S. federal, state and local ~~and regarding Brazilian and other~~ tax consequences of the acquisition, ownership and disposition of our common shares and ADSs.

Brazilian Tax Considerations

The following discussion summarizes the principal Brazilian tax consequences of the acquisition, ownership and disposition of common shares or ADSs by a holder that is not domiciled in Brazil for purposes of Brazilian taxation (a “Non-Resident Holder”). It is based on Brazilian law as currently in effect. Any change in such law may change the consequences described below, possibly with retroactive effect. This discussion does not ~~specifically address~~specificallyaddress all of the Brazilian tax considerations applicable to any particular Non-Resident Holder. Each Non-Resident Holder of common shares or ADSs should consult their own tax advisor concerning the Brazilian tax consequences of an investment in our common shares or ADSs.

A Non-Resident Holder of ADSs may withdraw them in exchange for common shares in Brazil. Pursuant to Brazilian law, the Non-Resident Holder may invest in common shares under Resolution 2,689, of January 26, 2000, of the National Monetary Council ~~or a 2,689 Holder.~~(a “2,689 Holder”).

Taxation of Dividends and Interest on Shareholders’ Equity

Dividends, including stock dividends and other dividends, paid by us (i) to our ~~ADR~~ADSs depositary in respect of the common shares underlying the ADSs or (ii) to a Non-Resident Holder in respect of common shares, are currently not subject to Brazilian withholding income tax, as far as such amounts are related to profits generated on or after January 1, 1996. Dividends relating to profits generated prior to January 1, 1996 may be subject to Brazilian withholding income tax at varying rates, depending on the year ~~the~~such profits have been generated.

Since 1996, Brazilian companies have been permitted to pay limited amounts of interest on shareholders' equity to holders of equity securities and to treat those payments as a deductible expense for purposes of its Brazilian income tax and social contribution on net profits tax basis. For tax purposes, this interest is limited to the daily pro rata variation of the Brazilian Federal Government's Long-Term Interest Rate (“TJLP”), as determined by the Central Bank from time to time, multiplied by the net equity value of the Brazilian company, and the amount of the deduction may not exceed the greater of (i) 50% of the net income (before taking into account the amounts attributable to shareholders as interest on shareholders' equity and the provision of corporate income tax but after the deduction of the provision of the social contribution on net profits) related to the period in respect of which the payment is made; or (ii) 50% of the sum of retained profits and profits reserves as of the date of the beginning of the fiscal year in respect of which the payment is made. Payments of interest on shareholders' equity are decided by the shareholders on the basis of the recommendations of our Board of Directors.

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Payment of interest on shareholders' equity to a Non-Resident Holder is subject to withholding income tax at the rate of 15%, or 25% if the Non-Resident Holder is domiciled in a tax haven.

For this purpose, a “tax haven” or ‘low-tax regime” is a country or location (1) that does not impose income tax, (2) where the income tax rate is lower than 20% or (3) where the local legislation imposes restrictions on disclosing the shareholding composition or ownership of the investment (“Tax Haven Jurisdiction”). These payments of interest on shareholders' equity may be included, at their net value, as part of any mandatory dividend. To the extent payment of interest on shareholders' equity is so included, the corporation is required to distribute to shareholders an additional amount to ensure that the net amount received by them, after payment of the applicable Brazilian withholding income tax, plus the amount of declared dividends is at least equal to the mandatory dividend.

In addition, Law No. 11,727, of June 23, 2008, or Law No. 11,727, introduced a broader concept of tax haven jurisdiction applicable to transactions subject to Brazilian transfer pricing rules, with the creation of the privileged tax regime concept (which came into effect on January 1, 2009).

Due to the recent enactment of this Law and the lack of relevant regulation issued by the Brazilian tax authorities, we are not able to ascertain if this privileged tax regime concept will also be applied to non-resident investors such as a Non-Resident Holder. We recommend prospective investors to consult their own tax advisors from time to time about the changes implemented by Law 11,727 and by any Brazilian tax law or regulation with respect to the concept of tax haven jurisdiction. If the tax authorities determine that payments of interest on shareholders' equity made to a Non-Resident Holder will benefit from a privileged tax regime, the withholding income tax rate applicable to such payments could be of 25%.

No assurance can be given that our board of directors will not recommend that future distributions of income should be made by means of interest on shareholders' equity instead of dividends.

Taxation of Gains

According to Law No. 10,833/03, the gains recognized on a disposition of assets located in Brazil, such as our common shares, by a Non-Resident Holder, are subject to withholding income tax in Brazil. This rule is applicable regardless of whether the disposition is conducted in Brazil or abroad and/or if the disposition is or is not made to an individual or entity resident or domiciled in Brazil.

As a general rule, capital gains realized as a result of a disposition transaction are the positive difference between the amount realized on the disposition of the common shares and the respective acquisition cost.

Capital gains realized by Non-Resident Holders on the disposition of common shares sold on the Brazilian stock exchange (which includes the transactions carried out on the organized over-the-counter market):

· are exempt, when realized by a Non-Resident Holder that (i) is a 2,689 Holder and (ii) is not resident or domiciled in a Tax Haven Jurisdiction;

· are subject to income tax at a rate of 15% in case of gains realized by (A) a Non-Resident Holder that (i) is not a 2,689 Holder and (ii) is not resident or domiciled in a Tax Haven Jurisdiction; or (B) a Non-Resident Holder that (i) is a 2,689 Holder and (ii) is resident or domiciled in a Tax Haven Jurisdiction; and

· are subject to income tax at a rate of up to 25% in case of gains realized by a Non-Resident Holder that (i) is not a 2,689 Holder and (ii) is resident or domiciled in a Tax Haven Jurisdiction.

A withholding income tax of 0.005% will apply and can be offset against any income tax due on the capital gain. Such withholding does not apply to a 2,689 Holder that is not resident or domiciled in a Tax Haven Jurisdiction.

Any other gains realized on the disposition of common shares that are not carried out on the Brazilian stock exchange:

· are subject to income tax at a rate of 15% when realized by any Non-Resident Holder that is not resident or domiciled in a Tax Haven Jurisdiction, whether or not such holder is a 2,689 Holder; and

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· are subject to income tax at a rate of up to 25% when realized by a Non-Resident Holder that is resident or domiciled in a Tax Haven Jurisdiction, whether or not such holder is a 2,689 Holder.

In the cases described above, if the gains are related to transactions conducted on the Brazilian non-organized over-the-counter market with intermediation, the withholding income tax of 0.005% will also apply and can be offset against any income tax due on the capital gain.

Any exercise of preemptive rights relating to common shares will not be subject to Brazilian withholding income tax. Gains realized by a Non-Resident Holder on the disposition of preemptive rights will be subject to Brazilian income tax according to the same rules applicable to disposition of common shares.

In the case of a redemption of common shares or a capital reduction, the positive difference between the amount received by the Non-Resident Holder and the acquisition cost of the common shares redeemed inreais is treated as capital gain derived from the sale or exchange of shares not carried out on a Brazilian stock exchange market and is therefore subject to income tax at the rate of 15%, or 25%, as the case may be.

Sale of ADSs by U.S. Holders to Other Non-Residents in Brazil

As discussed above, pursuant to Law No. 10,833, the sale of assets located in Brazil involving Non-Resident Holders is subject to Brazilian withholding income tax. We believe that the ADSs do not fall within the definition of assets located in Brazil for the purposes of Law No. 10,833, and, thus, should not be subject to the Brazilian withholding tax. However, due to the lack of any administrative or judicial guidance, there is no assurance that such position would prevail.

Gains on the Exchange of ADSs for Common Shares

The withdrawal of ADSs in exchange for common shares is not subject to Brazilian income tax, assuming compliance with applicable regulation regarding the registration of the investment with ~~Brazilian~~ Central Bank.

Gains on the Exchange of Common Shares for ADSs

The deposit of common shares in exchange for the ADSs may be subject to Brazilian withholding income tax on capital gains if the amount previously registered with the Central Bank as a foreign investment in common shares or, in the case of other market investors under Resolution No. 2,689, the acquisition cost of the common shares, as the case may be, is lower than:

· the average price per common share on the Brazilian stock exchange on which the greatest number of such common shares were sold on the day of deposit; or

· if no common shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of common shares were sold during the 15 preceding trading sessions.

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The difference between the amount previously registered, or the acquisition cost, as the case may be, and the average price of the common shares, calculated as set forth above, is considered a capital gain subject to income tax at a rate of 15%, or 25% if the Non-Resident Holder is resident or domiciled in a Tax Haven Jurisdiction.

Tax on Financial Transactions

The Tax on Financial Transactions(Imposto sobre Operações de Crédito, Câmbio e Seguro ou relativas a Títulos ou Valores Mobiliários), or “IOF”, is imposed on foreign exchange, securities, credit and insurance transactions.

IOF on Foreign Exchange Transactions

Tax on foreign exchange transactions, or “IOF/Exchange”, may be levied on foreign exchange transactions (conversion of foreign currency inreais and conversion ofreais into foreign currency), affecting either or both the inflow or outflow of investments. Currently, the general IOF/Exchange rate applicable to ~~most~~ foreign currency exchange transactions is 0.38%.

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However, foreign exchange transactions entered into as of December 30, 2010 by foreign investors in connection with inflows of proceeds to Brazil related to investments carried out in the Brazilian financial and capital markets~~or under the regulations issued by the Monetary Council of Brazil~~ are subject to the IOF/Exchange at rates ranging from 2% to 6% (outflow related to the return of such investment is subject to a zero percent rate). The 2% rate is levied on the trading in a Brazilian stock exchange (including over-the-counter trasactions) except for fixed income transactions with derivatives. The acquisition or subscription of shares through public offerings registered for trading on a Brazilian stock exchange is also subject to such rate. A zero rate applies to payments of dividends and interest on shareholders' equity received by foreign investors with respect to investments in the Brazilian financial and capital markets, such as investments made by 2,689 Holders.
The Brazilian Government may increase the rate of the IOF/Exchange to a maximum rate of 25% of the amount of the foreign exchange transactions at any time, but such an increase will only apply in respect to future foreign exchange transactions.
Currently, for most foreign exchange transactions related to this type of investment, the IOF/Exchange rate is zero.
IOF on Bonds and Securities Transactions
IOF may also be levied on transactions involving bonds and securities, or “IOF/Securities”, including those carried out on a Brazilian stock, futures or commodities exchanges. The rate of the IOF/Securities applicable to most transactions involving common shares is currently zero percent. Since November 19, 2009, the IOF/Securities levies at a rate of 1.5% on transfer of shares traded on the Brazilian stock exchange with the specific purpose of enabling ~~the issuance of depositary receipts to be traded outside Brazil starting November 19, 2009.~~
The rate of the IOF/Securities applicable to most transactions involving common shares is currently zero percent. In particular, the IOF/Securities levies at a rate of 1.5% on the transfer of shares traded in the Brazilian stock exchange with the purpose of the issuance of depositary receipts to be traded outside Brazil. The Brazilian Government may increase the rate of the IOF/Exchange up to 1.5% per day at any time, but such an increase will only apply in respect of future transactions.
Other Brazilian Taxes
There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of common shares or ADSs by a non-Brazilian holder, except for gift and inheritance taxes which are levied by some states of Brazil on gifts made or inheritances bestowed by individuals or entities not resident or domiciled in Brazil to individuals or entities resident or domiciled within that state in Brazil. There are no Brazilian stamp, issue, registration or similar taxes or duties payable by holders of common shares or ADSs.
U.S. Federal Income Tax Considerations
The summary discussion below is applicable to you only if you are a “U.S. Holder” (as defined below) that is not domiciled in Brazil (or domiciled or resident in a tax haven jurisdiction) for purposes of Brazilian taxation and, in the case of a holder of common shares, that has registered its investment in common shares with the Central Bank as a U.S. dollar investment.
For purposes of this discussion, a U.S. Holder is any beneficial owner of common shares or ADSs that is (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) organized under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax without regard to its source, or (iv) a trust if a U.S. court is able to exercise primary supervision over administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or if the trust validly elects under applicable Treasury regulations to be taxed as a U.S. person. A “Non-U.S. Holder” is any beneficial owner of common shares or ADSs that is an individual, corporation, estate or trust who is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.

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If a partnership holds our common shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A prospective investor who is a partner of a partnership holding our shares should consult its own tax advisor.
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In general, and taking into account the earlier assumptions, for U.S. federal income tax purposes, holders of ADRs evidencing ADSs will be treated as the owners of the common shares represented by those ADSs, and exchanges of common shares for ADSs, and ADSs for common shares, will not be subject to U.S. federal income tax.
Taxation of Dividends
U.S. Holders
Under the U.S. federal income tax laws, and subject to the passive foreign investment company (“PFIC”) rules discussed below, U.S. Holders will include in gross income, as dividend income, the gross amount of any distribution paid by us (including payments considered “interest” in respect of stockholders’ equity under Brazilian law) (before reduction for Brazilian withholding taxes) out of our current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) when the distribution is actually or constructively received by the U.S. Holder, in the case of common shares, or by our ~~ADR Depositary,~~ADSs depositary, in the case of ADSs. Distributions in excess of current and accumulated earnings and profits, as determined under U.S. federal income tax principles, will be treated as a return of capital to the extent of the U.S. Holder’s adjusted tax basis in the common shares or ADSs and thereafter as capital gain, which will be either long-term or short-term capital gain depending on whether the U.S. holder held the common shares or ADSs for more than one year. We do not intend to maintain calculations of our earnings and profits under U.S. federal income tax principles and, unless and until such calculations are made, U.S. Holders should assume all distributions are made out of earnings and profits and constitute dividend income.
The dividend income will not be eligible for the dividends-received deduction generally allowed to U.S. corporations in respect of dividends received from other U.S. corporations. Subject to certain exceptions for short-term and hedged positions certain non-corporate U.S. Holders (including individuals) may qualify for a maximum 15% rate of tax in respect of “qualified dividend income” received before January 1, 2013. Dividend income with respect to the ADSs will be qualified dividend income, provided that, in the year that a non-corporate U.S. Holder receives the dividend, the ADSs are readily tradable on an established securities market in the United States, and we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a PFIC. Based on existing Internal Revenue Service (“IRS”) guidance, it is not entirely clear whether dividends received with respect to the common shares not held through ADSs will be treated as qualified dividend income, because the common shares are not themselves listed on a U.S. exchange.
The amount of the dividend distribution includible in gross income of a U.S. Holder will be the U.S. dollar value of thereal payments made, determined at the spotreal/U.S. dollar rate on the date such dividend distribution is includible in the gross income of the U.S. Holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includible in gross income to the date such payment is converted into U.S. dollars will be treated as ordinary income or loss from sources within the United States and will not be eligible for the special tax rate applicable to qualified dividend income.
Dividends received by most U.S. holders will constitute foreign source “passive income” for foreign tax credit purposes. Subject to limitations under U.S. federal income tax law concerning credits or deductions for foreign income taxes and certain exceptions for short-term and hedged positions, any Brazilian income tax withheld from dividends paid by us would be treated as a foreign income tax eligible for credit against a U.S. Holder’s U.S. federal income tax liability (or at a U.S. Holder’s election, may be deducted in computing taxable income if the U.S. Holder has elected to deduct all foreign income taxes paid or accrued for the relevant taxable year). The rules with respect to foreign tax credits are complex and U.S. Holders are urged to consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
The U.S. Treasury Department has expressed concern that intermediaries in connection with depositary arrangements may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. persons who are holders of depositary shares. Accordingly, investors should be aware that the discussion above ~~regarding the~~regardingthe availability of foreign tax credits for Brazilian income tax withheld from dividends paid with respect to common shares represented by ADSs could be affected by future action taken by the U.S. Treasury Department.
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Distributions of additional common shares to U.S. Holders with respect to their common shares or ADSs that are made as part of a pro rata distribution to all our stockholders generally will not be subject to U.S. federal income tax.
Non-U.S. Holders
Dividends paid to a Non-U.S. Holder in respect of common shares or ADSs will not be subject to U.S. federal income tax unless those dividends are effectively connected with the conduct of a trade or business within the United States by the Non-U.S. Holder (and are attributable to a permanent establishment maintained in the United States by the Non-U.S. Holder, if an applicable income tax treaty so requires as a condition for the Non-U.S. Holder to be subject to U.S. taxation on a net income basis in respect of income from common shares or ADSs), in which case the Non-U.S. Holder generally will be subject to U.S. federal income tax in respect of the dividends in the same manner as a U.S. Holder. Any such effectively connected dividends received by a corporate Non-U.S. Holder may also, under certain circumstances, be subject to an additional “branch profits tax” (at a 30% rate or at a reduced rate as may be specified by an applicable income tax treaty).
Taxation of Capital Gains
U.S. Holders
Subject to the PFIC rules discussed below, upon a sale, redemption or other taxable disposition of common shares or ADSs, a U.S. Holder will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the U.S. dollar value of the amount realized (before deduction of any Brazilian tax) and the U.S. Holder’s adjusted tax basis (determined in U.S. dollars) in the common shares or ADSs. Generally, the U.S. Holder’s gain or loss will be capital gain or loss. Capital gain of a non-corporate U.S. Holder that is recognized before January 1, 2011 is generally taxed at a maximum rate of 15% where the property is held for more than one year. The deductibility of capital losses is subject to limitations under the Code.
If a Brazilian income tax is withheld on the sale, exchange or other taxable disposition of common shares or ADSs, the amount realized by a U.S. Holder will include the gross amount of the proceeds of that sale, exchange or other taxable disposition before deduction of the Brazilian tax. Capital gain or loss, if any realized by a U.S. Holder on the sale, exchange or other taxable disposition of common shares or ADSs generally will be treated as U.S. source gain or loss for U.S. foreign tax credit purposes. Consequently, in the case of a gain from the disposition of a share or ADS that is subject to Brazilian income tax (see “Taxation – Brazilian Tax Considerations – Taxation of Gains”), the U.S. Holder may not be able to benefit from the foreign tax credit for that Brazilian income tax (i.e., because the gain from the disposition would be U.S. source income), unless the U.S. Holder can apply the credit against U.S. federal income tax payable on other income from foreign sources. Alternatively, the U.S. Holder may take a deduction for the Brazilian income tax if it does not elect to claim a foreign income tax credit for any foreign taxes paid or accrued during the taxable year.
Non-U.S. Holders. A Non-U.S. Holder will not be subject to U.S. federal income tax in respect of gain recognized on a sale, exchange or other taxable disposition of common shares or ADSs unless:
·        the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States (and is attributable to a permanent establishment maintained in the United States by that Non-U.S. Holder, if an applicable income tax treaty so requires as a condition for that Non-U.S. Holder to be subject to U.S. taxation on a net income basis in respect of gain from the sale or other disposition of the common shares or ADSs); or
·        in the case of a Non-U.S. Holder who is an individual, that Non-U.S. Holder is present in the United States for 183 or more days in the taxable year of the sale and certain other conditions apply.

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Effectively connected gains realized by a corporate Non-U.S. Holder may also, under certain circumstances, be subject to an additional branch profits tax (at a 30% rate or at a reduced rate as may be specified by an applicable income tax treaty).
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Passive Foreign Investment Companies
Based on current estimates of our gross income, gross assets and the nature of our business, we believe that our common shares and ADSs should not be treated as stock of a PFIC for U.S. federal income tax purposes. There can be no assurances in this regard, however, because the application of the relevant rules is complex and involves some uncertainty. The PFIC determination is made annually and is based on the portion of our assets and income that is characterized as passive under the PFIC rules. Moreover, our business plans may change, which may affect the PFIC determination in future years.
In general, we will be a PFIC with respect to a U.S. Holder if, for any taxable year in which the U.S. Holder held our ADSs or common shares, either (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value (determined on the basis of a quarterly average) of our assets is attributable to assets that produce or are held for the production of passive income. For this purpose, passive income generally includes, among other things, dividends, interest, royalties, rents (other than certain rents and royalties derived in the active conduct of a trade or business), annuities and gains from assets that produce passive income. If a foreign corporation owns at least 25% by value of the stock of another corporation, the foreign corporation is treated for purposes of the PFIC tests as owning its proportionate share of the assets of the other corporation, and as receiving directly its proportionate share of the other corporation’s income.
If we are treated as a PFIC, a U.S. Holder that did not make a “mark-to-market election” or “QEF election,” each as described below, would be subject to special rules with respect to (a) any gain realized on the sale or other disposition of common shares or ADSs and (b) any “excess distribution” by CSN to the U.S. Holder (generally, any distributions to the U.S. Holder in respect of the common shares or ADSs during a single taxable year that are greater than 125% of the average annual distributions received by the U.S. Holder with respect to the common shares or ADSs during the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the common shares or ADSs). Under these rules, (i) the gain or excess distribution would be allocated ratably over the U.S. Holder’s holding period for the common shares or ADSs, (ii) the amount allocated to the taxable year in which the gain or excess distribution was realized would be taxable as ordinary income, (iii) the amount allocated to each prior year, with certain exceptions, would be subject to tax at the highest tax rate in effect for that year and (iv) the interest charge generally applicable to underpayments of tax would be imposed in respect of the tax attributable to each such prior year.
If we are treated as a PFIC and, at any time, we invest in non-U.S. corporations that are classified as PFICs (each, a “Subsidiary PFIC”), U.S. Holders generally will be deemed to own, and also would be subject to the PFIC rules with respect to, their indirect ownership interest in that Subsidiary PFIC. If we are treated as a PFIC, a U.S. Holder could incur liability for the deferred tax and interest charge described above if either (1) we receive a distribution from, or dispose of all or part of our interest in, the Subsidiary PFIC or (2) the U.S. Holder disposes of all or part of its common shares or ADSs.
The special PFIC tax rules described above will not apply to a U.S. Holder if the U.S. Holder makes an election (i) to “mark-to-market” with respect to the common shares or ADSs (a “mark-to-market election”) or (ii) to have us treated as a “qualified electing fund” (a “QEF election”). The QEF election is not available to holders unless we agree to comply with certain reporting requirements and provide the required annual information statements. The QEF and mark-to-market elections only apply to taxable years in which the U.S. Holder’s common shares or ADSs are treated as stock of a PFIC. Our ADR Depositary has agreed to distribute the necessary information to registered holders of ADSs.
A U.S. Holder may make a mark-to-market election, if the common shares or ADSs are regularly traded on a “qualified exchange.” Under applicable U.S. Treasury regulations, a “qualified exchange” includes a national securities exchange, such as the New York Stock Exchange, that is registered with the SEC or the national market system established under the Exchange Act. Also, under applicable Treasury Regulations, PFIC securities traded on a qualified exchange are regularly traded on such exchange for any calendar year during which such stock is traded,other than inde minimisquantities, on at least 15 days during each calendar quarter. We cannot assure you that the common shares or ADSs will be eligible for a mark-to-market election.

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A U.S. Holder that makes a mark-to-market election must include for each taxable year in which the U.S. Holder’s common shares or ADSs are treated as shares of a PFIC, as ordinary income, an amount equal to the excess of the fair market value of the common shares or ADSs at the close of the taxable year over the U.S. Holder’s adjusted tax basis in the common shares or ADSs, and is allowed an ordinary loss for the excess, if any, of ~~theadjusted~~the adjusted tax basis over the fair market value of the common shares or ADSs at the close of the taxable year, but only to the extent of the amount of previously included mark-to-market inclusions (not offset by prior mark-to-market losses). These amounts of ordinary income will not be eligible for the favorable tax rates applicable to qualified dividend income or long-term capital gains. A U.S. Holder’s tax basis in the common shares or ADSs will be adjusted to reflect any such income or loss amounts. Although a U.S. Holder may be eligible to make a mark-to-market election with respect to its common shares or ADSs, no such election may be made with respect to the stock of any Subsidiary PFIC that such U.S. Holder is treated as owning, because such Subsidiary PFIC stock is not marketable. Thus, the mark-to-market election will not be effective to avoid all of the adverse tax consequences described above with respect to any Subsidiary PFICs. U.S. Holders should consult their own tax advisors regarding the availability and advisability of making a mark-to-market election with respect to their common shares of ADSs based on their particular circumstances.
~~106~~
A U.S. Holder that makes a QEF election will be currently taxable on its pro rata share of our ordinary earnings and net capital gain (at ordinary income and capital gain rates, respectively) for each of our taxable years, regardless of whether we distributed the income and gain. The U.S. Holder’s basis in the common shares or ADSs will be increased to reflect taxed but undistributed income. Distributions of income that had previously been taxed will result in a corresponding reduction of tax basis in the common shares or ADSs and will not be taxed again as a distribution to the U.S. Holder.
In addition, notwithstanding any election that a U.S. Holder makes with regard to the common shares or ADSs, dividends that a non-corporate U.S. Holder receives from us will not constitute qualified dividend income if we are a PFIC either in the taxable year of the distribution or the preceding taxable year.
Special rules apply with respect to the calculation of the amount of the foreign tax credit with respect to excess distributions by a PFIC or, in certain cases, QEF inclusions.
A U.S. Holder who owns common shares or ADSs during any year that we are a PFIC must file IRS Form 8621.
Backup Withholding and Information Reporting
U.S. Holders
Dividends paid on, and proceeds from the sale, redemption or other taxable disposition of common shares or ADSs to a U.S. Holder generally will be subject to information reporting and backup withholding, unless, in the case of backup withholding, the U.S. Holder provides an accurate taxpayer identification number or in either case otherwise establishes ~~and~~an exemption. The amount of any backup withholding collected from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that certain required information is timely furnished to the IRS.
Recently enacted legislation requires certain U.S. Holders to report information with respect to their investment in certain “foreign financial assets,” which would include an investment in our common shares, not held through a custodial account with a U.S. financial institution to the IRS. Investors who fail to report required information could become subject to substantial penalties. Prospective investors are encouraged to consult with their own tax advisors regarding the possible implications of this new legislation on their investment in our common shares.

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Non-U.S. Holders
~~Non-U.S. Holders~~
If common shares are held by a Non-U.S. Holder through the non-U.S. office of a non-U.S. related broker or financial institution, backup withholding and information reporting generally would not be required. Information ~~reporting,~~reporting, and possibly backup withholding, may apply if the common shares are held by a Non-U.S. Holder through a U.S., or U.S.-related, broker or financial institution, or the U.S. office of a non-U.S. broker or financial institution and the Non-U.S. Holder fails to provide appropriate information. Information reporting and backup withholding generally will apply with respect to ADSs if the Non-U.S. Holder fails to timely provide appropriate information. Non-U.S. Holders should consult their tax advisors regarding the application of these rules.
~~107~~
10F. Dividends and Paying Agents
Not applicable.
10G. Statement by Experts
Not applicable.
10H. Documents on Display
We are subject to the information requirements of the Exchange Act and accordingly file reports and other information with the SEC. Reports and other information filed by us with the SEC may be inspected and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can obtain further information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov. You may also inspect our reports and other information at the offices of the NYSE, 11 Wall Street , New York, New York 10005, on which our ADSs are listed. For further information on obtaining copies of our public filings at the NYSE, you should call (212) 656-5060. We also file financial statements and other periodic reports with the CVM.
10I. Subsidiary Information
Not required.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to a number of different market risks arising from our normal business activities. Market risk is the possibility that changes in interest rates, currency exchange rates, commodities prices will adversely affect the value of financial assets, liabilities, expected future cash flows or earnings. We developed policies aimed at managing the volatility inherent to certain of these natural businessexposures. We use financial instruments, such as derivatives, in order to achieve the main goals established by our Board of Directors to minimize the cost of capital and maximize the returns on financial assets, while observing, as determined by our Board of Directors, parameters of credit and risk. Derivatives are contracts whose value is derived from one or more underlying financial instruments, indices or prices defined in the contract. Only well-understood, conventional derivative instruments are used for these purposes. These include futures and options traded on regulated exchanges and “over-the-counter” swaps, options and forward contracts.
Market Risk Exposures and Market Risk Management
Our treasury department is responsible for managing our market risk exposures. We use some internal controls in order to:
·        help us understand market risks;
·        reduce the likelihood of financial losses; and
·        diminish the volatility of financial results.
The principal tools used by our treasury department are:
·        “Sensitivity Analysis,” which measures the impact that movements in the price of different market variables such as interest rates and exchange rates will have in our earnings and cash flows; and

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·        “Stress Testing,” which measures the worst possible loss from a set of consistent scenarios to which probabilities are not assigned. The scenarios are deliberately chosen to include extreme changes in interest and currency exchange rates.
Following is a discussion of the primary market risk exposures that we face together with an analysis of the exposure to each one of them.

Interest Rate Risk
We are exposed to interest rate risk on short- and long-term instruments and as a result of refinancing of fixed-rate instruments included in our consolidated debt. Consequently, as well as managing the currency and maturity of debt, we manage interest costs through a balance between lower-cost floating rate debt, which has inherently higher risk, and more expensive, but lower risk, fixed-rate debt. We can use swaps, options and other derivatives to achieve the desired ratio between floating-rate debt and fixed-rate debt. The desired ratio varies according to market conditions: if interest rates are relatively low, we will shift towards fixed rate debt.
We are basically exposed to the following floating interest rates:
·        U.S. dollar LIBOR, due to our floating rate U.S. dollar-denominated debt (usually trade-finance related), to our cash position held offshore in U.S. dollars, which is invested in short-term instruments,
·        TJLP (Long Term Interest Rate), due toreal-denominated debt indexed to this interest rate, and
·        CDI (benchmark Brazilian real overnight rate), due to our cash held in Brazil (onshore cash) and to our CDI indexed debt.
Exposure as of December 2011* (amortization)

Notional

2012

2013

2014

2015

2016

Thereafter

US dollar LIBOR

2,444

547

178

308

400

547

464

US dollar fixed rate

7,362

298

1,071

14

756

52

5,171

CDI

14,008

1,045

546

1,446

1,041

1,707

8,223

TJLP

3,231

382

335

101

90

95

2,228

Other

495

26

43

65

60

43

258

Exposure as of December 2010* (amortization)

Notional

2011

2012

2013

2014

2015

Thereafter

US dollar LIBOR

2,694

522

611

158

274

342

787

US dollar fixed rate

6,374

72

33

951

12

671

4,635

CDI

7,102

1

1,045

546

1,446

1,012

3,052

TJLP

2,939

306

338

338

115

95

1,747

Other

809

191

118

101

112

83

204

*All figures in R$ million.
Exposure as of December 2010* (amortization)

Notional

2011

2012

2013

2014

2015

Thereafter
US dollar LIBOR

2,229

488

460

130

271

279

601

US dollar fixed rate

6,734

134

113

1.011

77

702

4,697

CDI

7,000

0

1.033

533

1.433

1.000

3.000

TJLP

1,268

210

244

251

42

29

492

Exposure as of December 2009* (amortization)

Notional

2010

2011

2012

2013

2014

Thereafter
US dollar LIBOR

2,679

183

897

958

326

315

0

US dollar fixed rate

5,224

364

143

117

1,055

80

3,465

CDI

3,999

0

667

2,366

532

434

0

TJLP

1,377

200

200

235

242

40

460

* All figures in Reais (R$) . Because we primarily use Brazilian GAAP controls, the numbers shown in the table do not add up to 100%
Table of ~~our debt and might differ, within some margin, from the numbers shown in this report.~~Contents
Our cash and cash equivalent were as follows:

December 31, 2010

December 31, 2009

Exposure

Cash inreais:

2,635

2,131

CDI
Cash in U.S. dollars:

4,556

1,850

LIBOR

December 31, 2011

December 31, 2010

Exposure
Cash inreais:

2,690

2,635

CDI
Cash in U.S. dollars:

6,784

4,556

LIBOR

The table below shows the average interest rate and the average life of our debt.

December 2010

December 2009

Average rate %

Average life

Average rate %

Average life

U.S. dollar LIBOR*

2.23

3.15

2.52

2.36
U.S. dollar fixed rate

7.41

14.91 (with perpetual bond)

8.27

15.81 (with perpetual bond)
Euro fixed rate

N/A

N/A

N/A

N/A
UMBNDES*

N/A

N/A

N/A

N/A
CDI

110.58 of CDI

4.61

112.53 of CDI

2.46
IGPM*

N/A

N/A

N/A

N/A
TJLP*

2.21

5.58

3.00

5.57

December 2011

December 2010

Average rate %

Average life

Average rate %

Average life
U.S. dollar LIBOR

3.14

3.20

2.23

3.15
U.S. dollar fixed rate

6.37

14.37 (with perpetual bond)

7.41

14.91 (with perpetual bond)
Euro fixed rate

N/A

N/A

N/A

N/A
UMBNDES

N/A

N/A

N/A

N/A
CDI

111.21 of CDI

5.19

110.58 of CDI

4.61
TJLP

1.70

5.58

2.21

5.58

~~109~~

        ~~The Company~~        We entered into cross-currency swap agreements to hedge liabilities indexed to ~~US Dollar~~the U.S. dollar from Brazilian ~~Real~~ real fluctuations, which are ~~mostly~~ affected by market, economic, political, regulatory and geopolitical conditions, among others. The gains and losses from these contracts are directly related to exchange (dollar) and CDI fluctuations. ~~The~~For the duration of our U.S. dollar fixed-rate derivatives, ~~increased from 40 days as of December 31, 2009 to 54 days as of December 31, 2010 (see~~see tables ~~below).~~below.

Notional

Average interest rate

Average maturity
As of December 31, 2010

(in U.S. dollar million,

(U.S. dollar)

(days)

unless otherwise indicated)

Swaps (U.S. dollar fixed - rate versus CDI)

1,178

2.29%

54

Notional

Average interest rate

Average maturity
As of December 31, 2009

(in U.S. dollar million,

(U.S. dollar)

(days)

unless otherwise indicated)

Swaps (U.S. dollar fixed - rate versus CDI )

1,520

0.8823%

40

* daily reset

Notional

Average interest rate

Average maturity
As of December 31, 2011

(in U.S. dollar million,

(U.S. dollar)

(days)

unless otherwise indicated)

Swaps (U.S. dollar fixed - rate versus CDI)

293

3.45%

782
Swaps (U.S. dollar fixed - rate versus CDI)

75

3.23%

691
Swaps (U.S. dollar fixed - rate versus CDI)

(100)

2.39%

32

Notional

Average interest rate

Average maturity
As of December 31, 2010

(in U.S. dollar million,

(U.S. dollar)

(days)

unless otherwise indicated)

Swaps (U.S. dollar fixed - rate versus CDI )

1,178

2.29%

54

Foreign Currency Exchange Rate Risk
Fluctuations in exchange rates can have significant effects on our operating results. Therefore, exchange rate fluctuations affect the values of ourreal-denominated assets, the carrying and repayment costs of ourreal-denominated financial liabilities, ourreal-denominated production costs, the cost ofreal-denominated capital items and the prices we receive in the Brazilian market for our finished steel products. We attempt to manage our net foreign exchange rate exposures, trying to balance our non-real denominated assets with our non-real denominated liabilities. We use derivative instruments to match our non-real denominated assets to our non-real denominated liabilities, but at any given time we may still have significant foreign currency exchange rate risk exposure.
Our exposure to the U.S. dollar is due to the following contract categories:
·        U.S. dollar-denominated debt;
·        offshore cash;
·        currency derivatives (in the case of options, we use the delta as a measure of exposure);
·        U.S. dollar indexed accounts payable and receivable (usually related to international trade, i.e., imports and exports); and

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·        offshore investments: assets that we bought offshore and that are denominated in U.S. dollars on our balance sheet.

December 31, 2010

December 31, 2009

U.S. dollar Liabilities

5,803

4,660
loans and financing

5,735

4,597
trade accounts payable

8

32
other

60

31

U.S. dollar Assets

5,903

4,530
offshore cash and cash equivalents

4,240

1,908
derivatives (swaps and NDFs)

1,402

2,170
trade accounts receivable

33

107
offshore investments (net of cash)

97

184
other

131

161
Total U.S. dollar Exposure

100

131

December 31, 2011

December 31, 2010
U.S. dollar Liabilities

5,367

5,803
loans and financing

5,300

5,735
trade accounts payable

11

8
other

56

60

U.S. dollar Assets

6,525

5,903
offshore cash and cash equivalents

5,613

4,240
derivatives (swaps and NDFs)

485

1,402
         trade accounts receivable

-

33
         offshore investments (net of cash)

288

97
         other

139

131
Total U.S. dollar Exposure

1,158

100
~~110~~

Our exposure to the Euro is due to the following contract categories:
·Euro-denominated debt;
·offshore cash;
·U.S. dollar indexed accounts payable and receivable (usually related to international trade, i.e., imports and exports); and
·offshore investments: assets that we bought offshore and that are denominated in Euros on our balance sheet
December 31, 2011
December 31, 2010
Euro Liabilities
1
-
trade accounts payable
1
-
Euro Assets
98
-
derivatives (swaps and NDFs)
(90)
-
offshore investments (net of cash)
8
-
Total Euro Exposure
(82)
-
Our exposure to the Australian Dollar is due to the following contract categories:
·offshore cash;
December 31, 2011
December 31, 2010
AUD Liabilities
-
-
AUD Assets
303
-
offshore cash and cash equivalents
303
-
Total AUD Exposure
303
-

Offshore investments

We have capitalized our offshore subsidiaries domiciled in U.S. dollar-based countries with equity investments, and those investments are accounted as U.S. dollar investments. The result is that they work as assets indexed to the U.S. dollar from an earnings perspective.

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Commodity Price Risk

Fluctuations in the price of steel and some of the commodities used in producing steel, such as zinc, aluminum, tin, coal, coke and energy, can have an impact on our earnings. Currently, we are not hedging our exposure to commodity prices. Our biggest commodity price exposure is the price of steel and coal, but there are no liquid instruments that provide an effective hedge against their price fluctuations.

Sensitivity analysis

The economic environment in which we operate determines the main factors taken into consideration to establish risk scenarios. In the Brazilian economic environment, exchange rate variation is the most notable market risk.

Thereal exchange rate ~~has significant volatility.~~is significantly volatile. Between ~~1999~~2001 and ~~2008~~2011 the~~real~~ exchange rate had an average annual volatility of ~~22%~~19.7%.

·Sensitivity analysis of the US dollar-to-real exchange swap

For the consolidated foreign exchange operations with US Dollar Fluctuation risk, the sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of 31 December, 2011 recorded as assets in the amount of R$37 million and liabilities in ~~four years during this period volatility was~~the amount of ~~approximately 50%, including 2008.~~R$847 thousand.

To develop our sensitivity analysis we analyze ~~five~~four different scenarios of exchange rate variation. Based on the foreign exchange rate of December 31, ~~2010~~2011 of R$~~1.6662~~1.8758 per US$1.00, adjustments were estimated for ~~five~~four scenarios: scenario 1: ~~Probable scenario, rate of R$1.6736 per US$1.00; scenario 2:~~ (25% of Real appreciation) rate of R$~~1.2497~~1.4069 per US$1.00; scenario 3:2: (50% of Real appreciation) rate of R$~~0.8331~~0.9379 per US$1.00; scenario 4:3: (25% of Real devaluation) rate of R$ ~~2.0828;~~2.3448; scenario 5:4: (50% of Real devaluation) rate of R$ ~~2.4993.~~2.8137.

December 31, 2010
Risk
Scenario
Reference
Exchange
Additional

Value
Rates
Results

(In million of US$)

(In million of R$)

1,178
1.6662

Foreign Exchange swaps
Fluctuation of US$
1

1.6736
9

2

1.2497
(491)

3

0.8331
(981)

4

2.0828
491

5

2.4993
981

(1,151)
1.6662

Exchange position - BRL
Functional currency
Fluctuation of US$
1

1.6736
(9)
(not including exchange derivatives above)

2

1.2497
479

3

0.8331
958

4

2.0828
(479)

5

2.4993
(958)

99
1.6662

Consolidated exchange position
Fluctuation of US$
1

1.6736
-
(including exchange derivatives above)

2

1.2497
(41)

3

0.8331
(83)

4

2.0828
41

5

2.4993
83

~~111~~


December 31, 2011			Reference	Exchange	Additional
(In millions of US$,			Value	Rates	Results
except for exchange rates)	Risk	Scenario

Net current swap	US Dollar fluctuation		267	1.8758
		1		1.4069	(126)
		2		0.9379	(251)
		3		2.3448	126
		4		2.8137	251

Exchange position functional
currency BRL	US Dollar fluctuation		890	1.8758
		1		1.4069	(417)
		2		0.9379	(835)
		3		2.3448	417
		4		2.8137	835

Consolidated exchange position	US Dollar fluctuation		1,158	1.8758
		1		1.4069	(543)
		2		0.9379	(1.086)
		3		2.3448	543
		4		2.8137	1.086

·Sensitivity analysis of the euro-to-dollar exchange swap

For the consolidated foreign exchange operations with Euro fluctuation risk, the sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair valuesas of December 31, 2011 recorded as assets in the amount of R$13 million.

For consolidated exchange transactions with Euro fluctuation risk, based on the foreign exchange rate on December 31, ~~2010,~~2011, of R$ ~~2.2280~~2.4342 per €$ 1.00, adjustments were estimated for ~~five~~four scenarios: scenario 1: ~~Probable scenario, rate of R$2.2188 per €$ 1.00; scenario 2:~~ (25% of Real appreciation) rate of R$~~1.6710~~1.8257 per €$ 1.00; scenario 3:2: (50% of Real appreciation) rate of R$~~1.1140~~1.2171 per €$1.00; scenario 4:3: (25% of Real devaluation) rate of R$ ~~2.7850;~~3.0428; scenario 5:4: (50% of Real devaluation) rate of R$ ~~3.3420.~~3.6513.

December 31, 2010
Risk
Scenario
Reference
Exchange
Additional

Value
Rates
Results

(in million of EUR)

(in million of R$)

90
2.2280

Foreign Exchange swaps
Fluctuation of EURO
1

2.2188
(1)

2

1.6710
(50)

3

1.1140
(100)

4

2.7850
50

5

3.3420
100

6
2.2280

Exchange position - BRL
Functional currency
Fluctuation of EURO
1

2.2188
(0)
(not including exchange derivatives above)

2

1.6710
(3)

3

1.1140
(6)

4

2.7850
3

5

3.3420
6

96
2.2280

Consolidated exchange position
Fluctuation of EURO
1

2.2188
(1)
(including exchange derivatives above)

2

1.6710
(53)

3

1.1140
(106)

4

2.7850
53

5

3.3420
106

~~112~~


December 31, 2011			Reference	Exchange	Additional
(In millions of EUR,			Value	Rates	Results
except for exchange rates)	Risk	Scenario

Net current swap	EURO fluctuation		(90)	2.4342
		1		1.8257	55
		2		1.2171	110
		3		3.0428	(55)
		4		3.6513	(110)

Exchange position functional
currency BRL	EURO fluctuation		6	2.4342
		1		1.8257	(4)
		2		1.2171	(8)
		3		3.0428	4
		4		3.6513	8

Consolidated exchange position	EURO fluctuation		(84)	2.4342
		1		1.8257	51
		2		1.2171	102
		3		3.0428	(51)
		4		3.6513	(102)

·Sensitivity analysis of exchange exposure to Australian dollar

For the consolidated foreign exchange operations with Australian dollar fluctuation risk, the sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair valuesas of 31 December, 2011.

For consolidated exchange transactions with Australian dollar fluctuation risk, based on the foreign exchange rate on December 31, 2011, of R$ 1.9116 per €$ 1.00, adjustments were estimated for four scenarios: scenario 1: (25% of Real appreciation) rate of R$1.4337 per €$ 1.00; scenario 2: (50% of Real appreciation) rate of R$0.9558 per €$ 1.00; scenario 3: (25% of Real devaluation) rate of R$ 2.3895; scenario 4: (50% of Real devaluation) rate of R$ 2.8674.


December 31, 2011			Reference	Exchange	Additional
(In millions of A$,			Value	Rates	Results
except for exchange rates)	Risk	Scenario

Exchange position functional
currency BRL	Australian dollar fluctuation		303	1.9116
		1		1.4337	(145)
		2		0.9558	(289)
		3		2.3895	145
		4		2.8674	289

·Sensitivity analysis of exchange dollar-to-euro swap

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2011 recognized in assets, amounting to R$6 million.

To develop our sensitivity analysis we analyze four different scenarios for the real-euro parity volatility. Based on the foreign exchange rate of December 31, 2011 of R$1.3141 per US$1.00, adjustments were estimated for four scenarios: scenario 1: (25% of Real appreciation) rate of R$0.9856 per US$1.00; scenario 2: (50% of Real appreciation) rate of R$0.6571 per US$1.00; scenario 3: (25% of Real devaluation) rate of R$ 1.6426; scenario 4: (50% of Real devaluation) rate of R$ 1.9712.


December 31, 2011			Refe rence	Exchange	Additional
(In millions of US$,			Value	Rate s	Results
except for exchange rates)	Risk	Scenario

Net current swap	US Dollar fluctuation		35	1.3141
		1		0.9856	(12)
		2		0.6571	(23)
		3		1.6426	12
		4		1.9712	23

Exchange position functional
currency EURO	US Dollar fluctuation		(35)	1.3141
		1		0.9856	12
		2		0.6571	23
		3		1.6426	(12)
		4		1.9712	(23)

Consolidated exchange position	US Dollar fluctuation		-	1.3141
		1		0.9856	-
		2		0.6571	-
		3		1.6426	-
		4		1.9712	-

Sensitivity analysis of interest rate swaps

In millions of R$, except for ~~nocional~~notional amount

Nocional
2010
US$ million Risk Probable 25% 50%
Swapsof interest rate libor vs CDI 150 (Libor) US$ (2) (27) (32)

Nocional 31.12.2011
Million US$ Risk 25% 50% 25% 50%
Swap of interest rate libor vs CDI 108 (Libor) US$ (26) (31) 26 30
·Sensitivity analysis of changes in interest rate
The Company considers the effects of ana 5% increase or decrease ~~of 5%~~ in interest rates on its outstanding ~~loans,~~borrowings, financing and debentures as atof December 31, ~~2010~~2011 in the consolidated financial statements.
In millions of R$

Impact on Profit or Loss
2010 2009
Variation on interest rates
TJLP 6 6
Libor 7 7
CDI 42 17

Impact on profit or loss
% p.a 2011 2010
Changes in interest rates
TJLP 6.00 1,372 6,465
Libor 0.81 7,941 7,102
CDI 10.87 72,607 42,103
Share market price risk
·The Company is exposed to the risk of changes in ~~the price of shares~~equity prices due to the investments made and classified as available-for-sale.

The ~~sensitivity~~Company considers as probable scenario the amounts recognized at market prices as of December 31, 2011. Sensitivity analysis is based on the assumption of maintaining as probable scenario the market values as of ~~31/12/2010 as probable scenario.~~December 31, 2011. Therefore, ~~not impacting~~there is no impact on the ~~above-mentioned~~ financial instruments classified as available for ~~sale.~~sale already presented above. The Company considered the following scenarios ~~presented below~~ for volatility of the shares.
- Scenario 1: (25% appreciation of ~~shares appreciation)~~shares);
- Scenario 2: (50% appreciation of ~~of shares appreciation)~~shares);
- Scenario 3: (25% devaluation of ~~shares devaluation)~~shares);
- Scenario 4: (50% devaluation of ~~shares devaluation).~~shares);


		Impacty on profit and equity
Companies	Probable	25%	50%	25%	50%
Usiminas	(768)	509	1,019	(509)	(1,019)
Panatlântica	1	3	5	(3)	(5)
	(767)	512	1,024	(512)	(1,024)

~~In millions of R$~~

Impact on Equity
Companies 25% 50% 25% 50%
Usiminas 205 410 (205) (410)
Riversdale Mining Limited 103 206 (103) (206)
Planatlântica 3 5 (3) (5)
311 621 (311) (621)

Item 12. Description of Securities Other Than Equity Securities

American Depositary Shares

~~The~~JP Morgan Chase Bank, N.A. serves as the depositary for our ADSs. ADR holders are required to pay various fees to the depositary, and the depositary may refuse to provide any service for which a fee is assessed until the applicable fee has been paid.

ADR holders are required to pay the depositary amounts in respect of expenses incurred by the depositary or its agents on behalf of ADR holders, including expenses arising from compliance with applicable law, taxes or other governmental charges, facsimile transmission or conversion of foreign currency into U.S. dollars. In this case, the depositary may decide inat its sole discretion to seek payment by either billing holders or by deducting the fee from one or more cash dividends or other cash distributions.

ADR holders are also required to pay additional fees for certain services provided by the depositary, as set forth in the table below.

Depositary service		Fee payable by ADR holders
Issuance and delivery of ADRs, including in connection with share distributions, stock splits		~~USD~~ US$5.00 for each 100 ADSs (or portion thereof)
Distribution of dividends		~~USD~~ US$5.00 for each 100 ADSs
Deposit of securities, including in respect of share, rights and other distributions		~~USD~~ US$5.00 for each 100 ADSs (or portion thereof)
Withdrawal of deposited securities		~~USD~~ US$5.00 for each 100 ADSs (or portion thereof)

Direct and indirect payments by the depositary

The depositary reimburses us for certain expenses we incur in connection with the ADR program, subject to a ceiling agreed between us and the depositary from time to time. These reimbursable expenses currently include legal and accounting fees, listing fees, investor relations expenses and fees payable to service providers for the distribution of material to ADR holders. For the year ended December 31, ~~2010,~~2011, such reimbursements totaled US$~~520 thousand.~~1.1 million.

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

~~114~~

Item 14. Material Modification to the Rights of Security Holders and Use of Proceeds

None.

PART II

Item 15. Controls and Procedures

Disclosure Controls and Procedures

We have carried out an evaluation under the supervision of our management, including our Chief Executive Officer and ~~Chief~~Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and our ~~Chief~~Principal Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) collected and communicated to management, including the Chief Executive Officer and the ~~Chief~~Principal Financial Officer, to allow timely decisions regarding required disclosure as of the end of our most recent fiscal year.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.

Our internal control over financial reporting is a process designed by, or under the supervision of, our Audit Committee, principal executive and principal financial officers, and effected by our board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect material misstatements on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, ~~2010~~2011 based on the criteria established in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations – COSO – of the Treadway Commission. Based on the assessment, management has concluded that, as of December 31, ~~2010,~~2011, our internal control over financial reporting is effective.

Attestation Report of the Independent Registered Public Accounting Firm

For the report of KPMG Auditores Independentes, our independent registered public accounting firm, dated ~~June 17, 2011,~~April 27, 2012, on the effectiveness of our internal control over financial reporting as of December 31, ~~2010,~~2011, see “Item 18. Financial Statements”.

Changes in internal control over financial reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

~~115~~

Item 16. [Reserved]

16A. Audit Committee Financial Expert

After reviewing the qualifications of the members of our Audit Committee, ~~our Board~~ourBoard of Directors has determined that all three members of our Audit Committee qualify as an “audit committee financial expert,” as defined by the SEC. In addition, all of the members of ~~out~~our Audit Committee meet the applicable independence requirements both under Brazilian Corporate Law and under the NYSE rules.

Our Audit Committee is permanently assisted by a consultant, who renders financial and consulting services, among others, to the members of our Audit Committee.

16B. Code of Ethics

We have adopted a Code of Ethics in 1998, reinforcing our ethical standards and values that apply to all of our employees, including executive officers and directors.

Given its importance, the Code of Ethics was updated during year 2011 and copies of the Code of Ethics were distributed to each employee of the organization, to our Board of Directors and our Audit Committee members, who have signed a Commitment Letter, which reinforces the compromise with the established values.

There was no amendment to or waiver from any provision of our Code of Ethics in ~~2010.~~2011. Our Code of Ethics is in compliance with the SEC requirements for codes of ethics for senior financial officers. A copy of our Code of Ethics is available on our websites www.csn.com.br or www.csn.com.br/ir.

16C. Principal Accountant Fees and Services

Our interaction with our independent auditors with respect to the contracting of services unrelated to the external audit is based on principles that preserve the independence of the auditors and are otherwise permissible under applicable rules and regulations. For the fiscal years ended December 31, ~~2010~~2011 and ~~2009,~~2010, KPMG Auditores Independentes acted as our independent auditors.

The following table describes the services rendered and the related fees.


	Year ending December 31,		Year Ended December 31,
	2010	2009	2011	2010
	(In thousands of R$)		(In thousands of R$)
Audit fees	2,649	4,496	2,654	2,649
Audit – related fees	774	195	285	774
Tax fees	89	145	142	89

Total	3,512	4,836	3,081	3,512

Pre-approval Policies and Procedures

Our Board of Directors and Audit Committee must approve before we engage independent auditors to provide any audit or permitted non-audit services to us or our subsidiaries.

16D. Exemptions from the Listing Standards for Audit Committees

We are in full compliance with the listing standards for audit committee pursuant to Exchange Act Rule 10A- 3. For a discussion on our audit committee, see “Item 6. Directors, Senior Management and Employees—Board Practices—Fiscal Committee and Audit Committee.”

16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Since the beginning of 2004, in accordance with the limits and provisions of ~~CVM’s~~CVM Instruction No. 10/80, our Board of Directors approved a number of share buyback programs.

~~On May 6, 2010, our Board~~In 2011, we did not carry out any form of ~~Directors approved a new~~ share buyback, ~~program, authorizing us to acquire up to 28,874,810 of our shares. As of the date of this annual report no shares were acquired~~either through ~~this buyback program.~~publicly announced plans or programs or otherwise.

16F. Change in Registrant’s Certifying Accountant

~~None.~~As previously disclosed in our current report on Form 6-K furnished on March 27, 2012, our board of directors, pursuant to applicable CVM regulation regarding auditor rotation, approved the rotation of KPMG as independent registered public accounting firm and the engagement of Deloitte Touche Tohmatsu Auditores Independentes, or Deloitte, to serve as our new independent registered public accounting firm as from the first quarter of 2012 for the fiscal year ending December 31, 2012 and future fiscal years until new auditor rotation is required.

16G. Corporate Governance

Significant Differences between our Corporate Governance Practice and NYSE Corporate Governance Standards

We are subject to the NYSE corporate governance listing standards. As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies. Under the NYSE rules, we are required only to: (i) have an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our Chief Executive Officer of any material non-compliance with any corporate governance rules, and (iii) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies. The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

Majority of Independent Directors

The NYSE rules require that a majority of the board of directors must consist of independent directors. Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company. Brazilian law does not have a similar requirement. Under Brazilian law, neither our board of directors nor our management is required to test the independence of directors before their election to the board. However, both Brazilian Corporate Law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors. While our directors meet the qualification requirements of Brazilian Corporate Law and the CVM, we do not believe that a majority of our directors would be considered independent under the NYSE test for director independence. Brazilian Corporate Law requires that our directors be elected by our shareholders at an annual shareholders’ meeting.

Executive Sessions

NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management present. Brazilian Corporate Law does not have a similar provision. According to Brazilian Corporate Law, up to one-third of the members of the board of directors can be elected from management. ~~Mr.Benjamin~~Mr. Benjamin Steinbruch, our Chief Executive Officer, is also the Chairman of our Board of Directors. There is ~~no requirement~~norequirement that non-management directors meet regularly without management. As a result, the non-management directors on our Board of Directors do not typically meet in executive ~~session.~~sessions without management present.

Nominating and Corporate Governance Committee

NYSE rules require that listed companies have a nominating and corporate governance committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company. We are not required under Brazilian Corporate Law to have, and currently we do not have, a nominating and a corporate governance committee.

Compensation Committee

NYSE rules require that listed companies have a compensation committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to the chief executive officer’s compensation, evaluating the chief executive officer’s performance, approving the chief executive officer’s compensation levels and recommending to the board non-chief executive officer compensation, incentive-compensation and equity-based plans. We are not required under applicable Brazilian law to have, and currently do not have, a compensation committee. Under Brazilian Corporate Law, the total amount available for compensation of our directors and executive officers and for profit-sharing payments to our executive officers is established by our shareholders at the annual shareholders’ meeting. The board of directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members.

Audit Committee

NYSE rules require that listed companies have an audit committee that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding audit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities. However, as a foreign private issuer, we need only to comply with the requirement that the audit committee meet the SEC rules regarding audit committees for listed companies to the extent compatible with Brazilian corporate law. We have established an Audit Committee, which is equivalent to a U.S. audit committee, and provides assistance to our Board of Directors in matters involving our accounting, internal controls, financial reporting and compliance. Our Audit Committee recommends the appointment of our independent auditors to our Board of Directors and reviews the compensation of, and coordinates with, our independent auditors. They also ~~reports~~report on our auditing policies and our annual ~~auditing~~audit plan prepared by our internal auditing ~~team,~~team. Our Audit Committee also evaluates the effectiveness of our internal financial and legal compliance controls, and is comprised of up to three ~~members~~independent directors elected by our Board of Directors for a one-year term of office. The current members of our Audit Committee are Fernando Perrone, Yoshiaki Nakano and ~~Alexandre Gonçalves Silva.~~Antonio Francisco dos Santos. All members of our Audit Committee satisfy the audit committee membership independence requirements set forth by the SEC and the NYSE. All members of our Audit Committee have been determined by our Board of Directors to qualify as an “audit committee financial expert” within the meaning of the rules adopted by the SEC relating to the disclosure of financial experts on audit committees in periodic filings pursuant to the Exchange Act. For further information on our Audit Committee, see “Item 6. Directors, Senior Management and Employees—Board Practices—Fiscal Committee and Audit Committee.”

Code of Business Conduct and Ethics

NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers. Applicable Brazilian law does not have a similar requirement. We have adopted a Code of Ethics applicable to all our employees, including our executive officers and directors. We believe this code addresses the matters ~~requiredto~~required to be addressed pursuant to the NYSE rules. For a further discussion of our Code of Ethics, see “Item 16B. Code of Ethics.”

~~118~~

Shareholder Approval of Equity Compensation Plans

NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions. We currently do not have any such plan and, pursuant to our bylaws, we would require shareholder approval to adopt an equity compensation plan.

Corporate Governance Guidelines

NYSE rules require that listed companies adopt and disclose corporate governance guidelines. We have adopted the following corporate governance guidelines, either based on Brazilian law, our Code of Ethics or institutional handbook:

· insider trading policy for securities issued by us;

· disclosure of material facts;

· disclosure of annual financial reports;

· confidential policies and procedures; and

·Sarbanes-Oxley Disclosure Committee’s duties and activities.

Item 16H. Mine Safety Disclosure

Not applicable as none of our mines are located in the United States and as such are not subject to the Federal Mine Safety and Health Act of 1977 or the Mine Safety and Health Administration.

Item 17. Financial Statements

We have responded to Item 18 in lieu of responding to this item. See “Item 18. Financial Statements.”

PART III

Item 18. Financial Statements

The following consolidated financial statements of the Registrant, together with the report of KPMG Auditores Independentes thereon, are filed as part of this annual report.


		Page

~~Reports~~Report of Independent Registered Public Accounting Firm		FS-R1
Consolidated financial statements:
Balance sheets as of December 31, ~~2010~~2011 and ~~2009 and January 1, 2009~~2010		FS- 1
Statements of income for the years ended December 31, 2011, 2010 and 2009		FS- 3
Statements of cash flows for the years ended December 31, 2011, 2010 and 2009		FS-4
Statements of changes in shareholders’ equity for the years ended December 31, 2011, 2010 and 2009		FS-5
Statements of comprehensive income for the years ended December 31, 2011, 2010 and 2009. Notes to consolidated financial statements		FS-6 FS-7

Item 19. Exhibits


Exhibit		Description
Number
1.1+		Bylaws of CSN, as amended to date.
2.1		Form of Amended and Restated Deposit Agreement dated as of November 1, 1997 as amended and restated as of November 13, 1997, among Companhia Siderúrgica Nacional, JP Morgan Chase Bank, N.A. (as successor to Morgan Guaranty Trust Company of New York), as successor depositary, and all holders from time to time of American Depositary Receipts issued thereunder ~~(iorporated~~(incorporated by reference from the Registration Statement on Form F-6 (333-7818) filed with the SEC).
2.2		Form of Amendment No. 1 to the Deposit Agreement ~~(inorporated~~(incorporated by reference from the Registration Statement on Form F-6EF (333-115078) filed with the SEC on April 30, 2004).
2.3		Form of Amendment No. 2 to Deposit Agreement, including the form of American Depositary Receipt ~~(iorporated~~(corporate by reference from the Registration Statement on Form F-6POS ~~Filed~~ filed with the SEC on January 5, 2011)
8.1+		List of subsidiaries
10.1*		Equity Swap Agreement, originally dated as of July 11, 2008 between CSN Madeira Ltda. and Goldman Sachs International. (incorporated by reference from the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on June 30, 2009).
10.2*		Share Purchase Agreement, dated October 21, 2008, among CSN, Big Jump Energy Participações S.A., Itochu Corporation, JFE Steel Corporation, Nippon Steel Corporation, Sumitomo Metal Industries, Ltd., Kobe Steel, Ltd., Nishin Steel Co., Ltd., and Posco. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.2*+		Amendment to the Share Purchase Agreement, dated June 30, 2011.
10.3*		Shareholders Agreement of Nacional Minérios S.A., dated October 21, 2008, between CSN and Big Jump Energy Participações S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.4*+		Amendment to the Shareholders’ Agreement of Nacional Minérios S.A., dated June 30, 2011.
10.5*		High Silica ROM Iron Ore Supply Contract, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.510.6		Low Silica ROM Iron Ore Supply Contract, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.610.7		Iron Ore Supply Contract, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
10.710.8		Port Operating Services Agreement, dated October 21, 2008, between CSN and Nacional Minérios S.A. (incorporated by reference from Amendment No. 1 to the Annual Report on Form 20-F for the year ended December 31, 2008, filed with the SEC on March 18, 2010)
12.1+		Section 302 Certification of Chief Executive Officer.
12.2+		Section 302 Certification of ~~Chief~~Principal Financial Officer.
13.1+		Section 906 Certification of Chief Executive Officer.
13.2+		Section 906 Certification of ~~Chief~~Principal Financial Officer.
15.1+		Management’s report dated ~~June 17, 2011,~~April 27, 2012, on the effectiveness of our internal control over financial reporting as of December 31, ~~2010.~~2011.
~~15.2~~ 16.1+		~~Consent of Golder Associates S.A. (incorporated by reference~~Letter from KPMG Auditores Independentes to the ~~Annual Report on Form 20-F for~~Securities and Exchange Commission, dated April 27, 2012, regarding the ~~year ended December 31, 2008, filed with the SEC on June 30, 2009).~~change in certifying accountant.
* Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Exchange Act of 1934, as amended. + Filed herewith.

~~119~~

SIGNATURE

The registrant hereby certifies that it meets all the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


~~June 17, 2011~~ April 27, 2012	Companhia Siderúrgica Nacional
	~~By:~~	~~/s/ Benjamin Steinbruch~~
		~~Name:~~/s/	Benjamin Steinbruch
	Name:	Benjamin Steinbruch
	Title:	Chief Executive Officer

	~~By:~~ /s/	~~/s/ Paulo Penido Pinto Marques~~Rogério Leme Borges dos Santos
	Name:	~~Paulo Penido Pinto Marques~~Rogério Leme Borges dos Santos
	Title:	~~Chief~~Controller / Principal Financial Officer

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

Companhia Siderúrgica Nacional

We have audited the accompanying consolidated balance sheets of Companhia Siderúrgica Nacional and subsidiaries (“the Company”) as of December 31, ~~2010~~2011 and ~~2009 and January 1, 2009,~~2010, and the related consolidated statements of income, changes in shareholders’ equity, comprehensive income and cash flows for each of the years in the ~~two-year~~three-year period ended December 31, ~~2010.~~2011. We also have audited the Company’s internal control over financial reporting as of December 31, ~~2010,~~2011, based on the criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)”. The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control ~~Over~~over Financial Reporting. Our responsibility is to express an opinion on these consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Companhia Siderúrgica Nacional and subsidiaries as of December 31, ~~2010~~2011 and ~~2009 and January 1, 2009,~~2010, and the results of their operations and their cash flows for each of the years in the ~~two-year~~three-year period ended December 31, ~~2010,~~2011, in conformity with International Financial ~~Reporting~~Report Standards, as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, ~~2010,~~2011, based on the criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway ~~Commission.~~Commission (COSO)”.

KPMG Auditores Independentes

São Paulo, SP - Brazil
April 27~~June 17, 2011~~, 2012

FS-R1


Companhia Siderúrgica Nacional and Subsidiaries
Consolidated Balance Sheet
Thousands of Brazilian reais

Assets
	Note	2011	2010
CURRENT ASSETS
Cash and cash equivalents	5	15,417,393	10,239,278
Trade receivables	6	1,616,206	1,367,759
Inventories	7	3,734,984	3,355,786
Recoverable taxes		584,273	473,787
Other current assets	8	591,450	357,078
Total current assets		21,944,306	15,793,688

NON-CURRENT ASSETS
Long-term receivables
Short-term investments measured at fair value		139,679	112,484
Trade receivables		10,043	58,485
Deferred income taxes	9	1,840,773	1,592,941
Receivables from related parties		0	479,120
Other non-current assets	10	2,866,226	3,676,080
		4,856,721	5,919,110

Investments	11	2,088,225	2,103,624
Property, plant and equipment	12	17,377,076	13,776,567
Intangible assets	13	603,374	462,456
Total non-current assets		24,925,396	22,261,757

TOTAL ASSETS		46,869,702	38,055,445

The accompanying notes are an integral part of these consolidated financial statements.

~~Companhia Siderúrgica Nacional and Subsidiaries~~

~~Consolidated Balance Sheets~~

~~Thousands of Brazilian reais~~

~~Assets~~

FS-1

Note 2010 2009 01/01/09
ASSETS
CURRENT ASSETS
Cash and cash equivalents 6 10,239,278 7,970,791 9,151,409
Trade accounts receivable 7 1,367,759 1,327,941 1,788,712
Inventories 8 3,355,786 2,605,373 3,621,249
Recoverable taxes 473,787 744,774 462,141
Prepaid expenses 12,997 15,814 27,945
Other current assets 9 344,081 170,780 2,893,049
Total current assets 15,793,688 12,835,473 17,944,505

NON-CURRENT ASSETS
Long-term receivables
Investment Securities 112,484
Trade accounts receivable 58,485 212,486 375,772
Deferred income taxes 10 1,592,941 1,957,058 1,596,905
Prepaid pension cost 115,755 105,921 125,011
Receivables from related parties 5 479,120 479,120 11,828
Other non-current assets 11 3,306,094 3,222,637 2,598,233
5,664,879 5,977,222 4,707,749

Investments 12 2,103,624 321,902 1,512
Property, plant and equipment 14 13,776,567 11,133,347 10,071,834
Intangible assets 15 462,456 457,559 526,796
Total non-current assets 22,007,526 17,890,030 15,307,891

TOTAL ASSETS 37,801,214 30,725,503 33,252,396


Companhia Siderúrgica Nacional and Subsidiaries
Consolidated Balance Sheet
Thousands of Brazilian reais

Liabilities and shareholders´ equity
	Note	2011	2010
SHAREHOLDERS' EQUITY AND LIABILITIES
CURRENT LIABILITIES
Payroll and related taxes		202,469	164,799
Trade payables		1,232,075	623,233
Taxes payable		325,132	275,991
Borrowings and financing	14	2,702,083	1,308,632
Other payables	16	1,728,445	1,854,952
Provisions for tax, social security, labor and civil risks	19	292,178	222,461
Other provisions		14,565	5,887
Total current liabilities		6,496,947	4,455,955

NON-CURRENT LIABILITIES
Borrowings and financing	14	25,186,505	18,780,815
Other payables	16	5,593,520	4,321,666
Deferred income taxes	9	37,851
Provisions for tax, social security, labor and civil risks	19	346,285	2,016,842
Employee Benefits	29	469,050	367,839
Other provisions		322,374	289,640
Total non-current liabilities		31,955,585	25,776,802

Equity	21
Issued capital		1,680,947	1,680,947
Capital reserves		30	30
Earnings reserves		7,671,620	6,119,798
Other comprehensive income/(loss)		-1,366,776	-168,015
Total equity attributable to owners of the Company		7,985,821	7,632,760

Non-controlling interests		431,349	189,928

Total equity		8,417,170	7,822,688

TOTAL EQUITY AND LIABILITIES		46,869,702	38,055,445


The accompanying notes are an integral part of these consolidated financial statements.

FS-2


Companhia Siderúrgica Nacional and Subsidiaries
Consolidated Statements of Income
Thousands of Brazilian reais


	Note	2011	2010	2009
Net Revenue from sales and/or services	23	16.519.584	14.450.510	10.978.364
Cost of sales and/or services	24	-9.800.844	-7.882.726	-7.210.774

Gross profit		6.718.740	6.567.784	3.767.590

Operating expenses		-961.818	-1.569.438	-206.358
Selling expenses	24	-604.108	-481.978	-447.129
General and administrative expenses	24	-575.585	-536.857	-480.072
Other operating income	25	719.177	48.821	1.368.594
Other operating expenses	25	-501.302	-599.424	-647.764
Share of profits of subsidiaries				13

Profit before finance income (costs) and taxes		5.756.922	4.998.346	3.561.232
Finance income	26	717.450	643.140	586.025
Finance costs	26	-2.723.253	-2.554.598	-832.460

Profit before income taxes		3.751.119	3.086.888	3.314.797

Income tax and social contribution	9	-83.885	-570.697	-699.616

Profit from continuing operations		3.667.234	2.516.191	2.615.181

Profit for the year attributed to:
Companhia Siderúrgica Nacional		3.706.033	2.516.376	2.618.934
Non-controlling interests		-38.799	-185	-3.753

Earnings per common share - (reais/share)
Basic	28	2.54191	1.72594	1.75478
Diluted	28	2.54191	1.72594	1.75478


The accompanying notes are an integral part of these consolidated financial statements.

FS-3


Companhia Siderúrgica Nacional and Subsidiaries
Consolidated Statement of Cash Flow
Thousands of Brazilian reais


	Note	2011	2010	2009

Profit for the year		3,667,234	2,516,191	2,615,181
Accrued charges on borrowings and financing		2,650,622	1,489,191	1,130,089
Depreciation/ depletion / amortization	12.b)	948,251	814,034	797,341
Proceeds from write-off and disposal of assets		54,727	5,827	70,494
Realization of available-for-sale investments		-698,164
Deferred income tax and social contribution	9	-52,542	207,268	122,152
Provision of swaps/forwards transactions		110,009	126,492	-88,986
Gain/(loss) on change in percentage equity interest				-835,115
Provision for actuarial liabilities		-11,412	2,393	-47,622
Provision for tax, social security, labor and civil risks		62,746	199,558	99,157
Inflation adjustment and exchange differences		-250,083	57,119	-2,024,573
Allowance for doubtful debts		189	-46,675	1,527
Other provisions		-19,651	-80,570	399,076
Cash generated from operations		6,461,926	5,290,828	2,238,721

Trade receivables		-339,427	143,250	-51,082
Inventories		-410,264	-794,331	926,260
Receivables from related parties		471,666
Recoverable taxes		16,700	297,424	-317,968
Trade payables		544,300	11,964	-1,137,203
Payroll and related taxes		-47,072	-36,757	15,257
Taxes payable		135,765	-101,723	263,734
Taxes in installments - REFIS		-296,304	-414,473	-103,775
Judicial deposits		-20,253	-33,822	-737,041
Contingent liabilities		120,951	16,868	-422,375
Interest paid		-2,145,400	-1,190,423	-992,280
Interest paid on swap transactions		-360,976	-676,163	-742,700
Other		70,168	4,662	376,306
Increase (decrease) in assets and liabilities		-2,260,146	-2,773,524	-2,922,867

Net cash generated by (used in) operating activities		4,201,780	2,517,304	-684,146

Receipt/payment in derivative transactions		-57,157	395,346	248,966
Disposal of investments		1,310,171
Net effects of equity swap				1,420,322
Investments		-2,126,493	-1,370,016	-284,232
Property, plant and equipment	12	-4,400,825	-3,635,911	-1,996,759
Intangible assets	13	-707	-25,216	-5,628
Net cash used in investing activities		-5,275,011	-4,635,797	-617,331

Borrowings and financing	14	7,824,012	8,754,779	7,582,823
Repayments to financial institutions - principal	14	-1,469,206	-2,706,982	-2,783,313
Dividends and interest on capital		-1,856,381	-1,560,795	-2,027,600
Treasury shares				-1,350,307
Capital contribution by non-controlling shareholders		242,290	128,811
Net cash generated by financing activities		4,740,715	4,615,813	1,421,603

Exchange rate changes on cash and cash equivalents		1,510,631	-228,833	-1,300,744

Increase (decrease) in cash and cash equivalents		5,178,115	2,268,487	-1,180,618
Cash and cash equivalents at the beginning of the year		10,239,278	7,970,791	9,151,409
Cash and cash equivalents at the end of the year		15,417,393	10,239,278	7,970,791

The accompanying notes are an integral part of these consolidated financial statements.

FS-4


Companhia Siderúrgica Nacional and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
Thousands of Brazilian reais

	Paid-in Capital	CapitalReserve	EarningsReserve	Retained earnings	Other comprehensive income	Equity	Non-Controling interests	Consolidated Equity
At December 31, 2008 as reported	1,680,947	30	3,768,756	1,012,732	200,124	6,662,589		6,662,589
Impact of restated of prior years				(176,185)		(176,185)		(176,185)
At December 31, 2008	1,680,947	30	3,768,756	836,547	200,124	6,486,404		6,486,404
Unrealized Gain/Loss - Investiments					(602)	(602)		(602)
IFRS adjustments			485,816	175,257	(200,124)	460,949		460,949
Opening balance at January 1, 2009	1,680,947	30	4,254,572	1,011,804	(602)	6,946,751		6,946,751
Approval of prior year’s proposed dividends			(485,816)			(485,816)		(485,816)
Profit for the year				2,618,934		2,618,934	(3,753)	2,615,181
Alocation of profit for the year
Declared dividends (R$1,028.82 per thousand shares)				(1,500,000)		(1,500,000)		(1,500,000)
Interest on capital (R$219.46 per thousand shares)				(319,965)		(319,965)		(319,965)
Reserves			1,847,522	(1,847,522)
Proposal to the General Meeting			1,178,635			1,178,635		1,178,635
Comprehensive income					(585,113)	(585,113)		(585,113)
Repurchase of treasury shares as per EGM 8/13/2009			(1,350,308)			(1,350,308)		(1,350,308)
Cancelation of treasury shares as per EGM 8/21 and 9/14/2009
Non-controlling interests							86,813	86,813
Other				3,332		3,332		3,332
Balances at December 31, 2009	1,680,947	30	5,444,605	(33,417)	(585,715)	6,506,450	83,060	6,589,510
Approval of prior year’s proposed dividends			(1,178,635)			(1,178,635)		(1,178,635)
Profit for the year				2,516,376		2,516,376	(185)	2,516,191
Allocation of profit for the year				(272,297)		(272,297)		(272,297)
Declared dividends (R$186.76 per thousand shares)				(356,800)		(356,800)		(356,800)
Interest on capital (R$244.72 per thousand shares)				(1,227,703)		(1,227,703)		(1,227,703)
Additional dividends proposed (R$842.06 per thousand shares)			1,227,703			1,227,703		1,227,703
Investment reserve			626,159	(626,159)
Cancelation of treasury shares			(34)			(34)		(34)
Comprehensive income					417,700	417,700		417,700
Non-controlling interests							107,053	107,053
Balances at December 31, 2010	1,680,947	30	6,119,798		(168,015)	7,632,760	189,928	7,822,688
Approval of prior year’s proposed dividends			(1,227,703)			(1,227,703)		(1,227,703)
Profit for the year				3,706,033		3,706,033	(38,799)	3,667,234
Allocation of profit for the year
Declared dividends (R$635.48 per thousand shared)				(926,508)		(926,508)		(926,508)
Additional dividends proposed (R$599.12 per thousand shares)			273,492	(273,492)
Other comprehensive income					(1,198,761)	(1,198,761)		(1,198,761)
Recognition of reserves			2,506,033	(2,506,033)
Non-controlling interests							280,220	280,220
Balances at December 31, 2011	1,680,947	30	7,671,620		(1,366,776)	7,985,821	431,349	8,417,170

The accompanying notes are an integral part of these consolidated financial statements.

FS-5

~~FS-1~~

~~Companhia Siderúrgica Nacional and Subsidiaries~~

~~Consolidated Balance Sheets~~

~~Thousands of Brazilian reais~~

~~Liabilities and shareholders’ equity~~

Note 2010 2009 01/01/09
SHAREHOLDERS’ EQUITY AND LIABILITIES
CURRENT LIABILITIES
Payroll and related charges 164,799 134,190 117,994
Trade accounts payable 521,156 504,223 1,939,205
Taxes payable 275,991 336,804 333,811
Current portion of long-term debt 16 1,308,632 1,113,920 3,302,055
Other accounts payables 18 1,854,952 1,618,574 3,563,466
Provisions for tax, social security, labor and 21 222,461 189,517 161,144
civil risks
Other 107,964 100,838 76,688
Total current liabilities 4,455,955 3,998,066 9,494,363

NON-CURRENT LIABILITIES
Long-term debt and debentures 16 18,780,815 13,153,681 8,681,098
Other accounts payables 18 4,067,435 3,666,323 3,930,613
Deferred income taxes 10 30,040 2,181
Provisions for tax, social security, labor and 21 2,016,842 2,838,670 3,747,601
civil risks
Employee benefits 30 367,839 317,145 364,140
Other 22 289,640 132,068 85,649
Total non-current liabilities 25,522,571 20,137,927 16,811,282

Shareholders’ Equity 23
Common stock 1,680,947 1,680,947 1,680,947
Capital surplus 30 30 30
Earnings reserves 6,119,798 5,444,605 4,254,572
Retained earnings (33,417) 1,011,804
Other comprehensive income (168,015) (585,715) (602)
Total shareholders’ equity attributable to
owners of the Company 7,632,760 6,506,450 6,946,751

Noncontrolling interests 189,928 83,060

Total shareholders’ equity 7,822,688 6,589,510 6,946,751

TOTAL SHAREHOLDERS’ EQUITY AND
LIABILITIES 37,801,214 30,725,503 33,252,396


Companhia Siderúrgica Nacional and Subsidiaries
Consolidated Statements of Comprehensive Income
Thousands of Brazilian reais


	2011	2010	2009
Profit for the year	3,667,234	2,516,191	2,615,181

Other comprehensive income	-1,198,761	417,700	-585,113
Exchange differences arising on translation of foreign operations, net of taxes	195,046	-69,270	-618,723
Actuarial gains/(losses) on defined benefit plan, net of taxes	-74,331	-28,603	-3,275
Net change in fair value of available-for-sale financial assets, net of taxes	-621,312	515,573	36,885
Net change in fair value of available-for-sale financial assets transferred to profit or loss	-698,164	0	0

Comprehensive income for the year	2,468,473	2,933,891	2,030,068

Attributable to:
Companhia Siderúrgica Nacional	2,507,272	2,934,076	2,033,821
Non-controlling interests	-38,799	-185	-3,753

The accompanying notes are an integral part of these consolidated financial statements.

~~FS-2~~

~~Companhia Siderúrgica Nacional and Subsidiaries~~

~~Consolidated Statements of Income~~

~~Thousands of Brazilian reais~~

Note 2010 2009

NET OPERATING REVENUES 25 14,450,510 10,978,364
Cost of products sold (7,686,742) (7,022,119)

GROSS PROFIT 6,763,768 3,956,245

OPERATING EXPENSES (1,765,422) (395,013)
Selling (677,962) (635,784)
General and administrative (536,857) (480,072)
Equity in results of affiliated companies 13
Other expenses 26 (643,081) (695,905)
Other income 26 92,478 1,416,735

Operating income 4,998,346 3,561,232
Finance income (expenses), net 27 (1,911,458) (246,435)

Income before income taxes 3,086,888 3,314,797

Income tax benefit (expense)
Current 10 (313,371) (581,735)
Deferred 10 (257,326) (117,881)

Net income 2,516,191 2,615,181

Net income attributable to:
Compania Siderúrgica Nacional 2,516,376 2,618,934
Noncontrolling interests (185) (3,753)

Basic and diluted earnings per common share
Basic 29 1.72594 1.75478
Diluted 29 1.72594 1.75478

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~FS-3~~

~~Companhia Siderúrgica Nacional and Subsidiaries~~

~~Consolidated Statement of Cash Flows~~

~~Thousands of razilian reais~~

2010 2009
- Net income for the year 2,516,191 2,615,181
- Provision for charges on loans and financing 1,489,191 1,130,089
- Depreciation and amortization 806,169 780,152
- Gain (loss) on disposal of assets 5,827 70,494
- Deferred income tax expense (benefit) 257,326 117,881
- Provision for swap/forward transactions 126,492 (88,986)
- Gain/loss on change in percentage equity interest - (835,115)
- Allowance for doubtful accounts (46,675) 1,527
- Provision for actuarial liabilities 2,393 (47,622)
- Accrual for contingencies 199,558 99,157
- Inflation adjustment and foreign exchange gains (losses), net 57,119 (2,024,573)
- Other (72,705) 416,265
Cash flows from operating activities 5,340,886 2,234,450

- Trade accounts receivables 143,250 (51,082)
- Inventories (794,331) 926,260
- Taxes for offset 247,366 (313,697)
- Trade accounts payables 11,964 (1,137,203)
- Payroll and related charges (36,757) 15,257
- Taxes payable (101,723) 263,734
- Taxes payable in installments - Refis (414,473) (103,775)
- Judicial deposits (33,822) (737,041)
- Contingent liabilities 16,868 (422,375)
- Interest paid (1,190,423) (992,280)
- Interest paid on swap transactions (676,163) (742,700)
- Other (30,107) 287,433
Changes in assets and liabilities (2,858,351) (3,007,469)

Net cash provided by (used in) operating activities 2,482,535 (773,019)

- Receipts/payments on derivative transactions 395,346 248,966
- Net effects of equity swap - 1,420,322
- Investments (1,370,016) (284,232)
- Property, plant and equipment (3,635,911) (1,996,759)
- Intangible assets (25,216) (5,628)
Net cash used in investing activities (4,635,797) (617,331)

- Loans and financing 8,789,548 7,671,696
- Financial institutions - principal (2,706,982) (2,783,313)
- Dividends and interest on shareholders' equity (1,560,795) (2,027,600)
- Capital contribution in subsidiaries by non-controlling shareholders 128,811 -
- Treasury shares - (1,350,307)
Net cash provided by financing activities 4,650,582 1,510,476

Effects of changes in exchange rates on cash and cash equivalents (228,833) (1,300,744)

Increase (decrease) in cash and cash equivalents 2,268,487 (1,180,618)
Cash and cash equivalents, beginning of year 7,970,791 9,151,409
Cash and cash equivalents, end of year 10,239,278 7,970,791

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~FS-4~~

~~Companhia Siderúrgica Nacional and Subsidiaries~~

~~Consolidated Statements of Changes in Shareholders’ Equity~~

~~Thousands of Brazilian reais~~

Profit reserves Comprehensive Income

Unrealized gain
Cumulative Gain (loss) on (loss) on Companhia
Common Capital Legal Retained Treasury Retained translation defined benefit available-for-sale Siderúrgica Non-controlling
Stock reserve reserve earnings Dividends Reserve Total stock earnings adjustment pension plan securities Total Nacional interests Total equity
At December 31, 2008 - as reported 1.680.947 30 336.190 2.493.493 - 1.658.115 4.487.798 (719.042) 1.012.732 200.124 200.124 6.662.589 6.662.589

Impact of restatement of prior years (176.185) (176.185) (176.185)
Balances at December 31, 2008 1.680.947 30 336.190 2.493.493 - 1.658.115 4.487.798 (719.042) 836.547 200.124 - - 200.124 6.486.404 - 6.486.404

Unrealized gain/loss- Investment (602) (602) (602) (602)
IFRS adjustments 485.816 485.816 175.257 (200.124) (200.124) 460.949 460.949

Opening balance at January 1, 2009 1.680.947 30 336.190 2.493.493 485.816 1.658.115 4.973.614 (719.042) 1.011.804 (602) - - (602) 6.946.751 - 6.946.751
-
Approval of proposed dividends (485.816) (485.816) - (485.816) (485.816)
Profit for the year 2.618.934 - 2.618.934 (3.753) 2.615.181
Allocation of profit for the year - - -
- Declared dividends (R$1,028.82 per thousand shares) (321.365) - (321.365) (321.365)
- Interest on capital (R$219.46 per thousand shares) (319.965) - (319.965) (319.965)
- Reserves 1.285.864 561.658 1.847.522 (1.847.522) - - -
- Proposal to the General Meeting 1.178.635 1.178.635 (1.178.635) - - -
Comprehensive income (618.723) (3.275) 36.885 (585.113) (585.113) (585.113)
Repurchase of treasury shares as per EGM 8/13/2009 (1.350.308) - (1.350.308) (1.350.308)
Cancelation of treasury shares as per EGM 8/21 and 9/14/2009 (877.791) (877.791) 877.791 - - -
Non-controlling interests - - 86.813 86.813
Other 3.332 - 3.332 3.332
Balances at December 31, 2009 1.680.947 30 336.190 3.779.357 1.178.635 1.341.982 6.636.164 (1.191.559) (33.417) (619.325) (3.275) 36.885 (585.715) 6.506.450 83.060 6.589.510
- -
Approval of proposed dividends (1.178.635) (1.178.635) - (1.178.635) (1.178.635)
Profit for the year 2.516.376 - 2.516.376 (185) 2.516.191
Allocation of profit for the year - - -
- Declared dividends (R$186.76 per thousand shares) (272.297) - (272.297) (272.297)
- Interest on capital (R$244.72 per thousand shares) (356.800) - (356.800) (356.800)
- Dividends proposed to the General Meeting (R$842.06 per thousand shares) 1.227.703 1.227.703 (1.227.703) - - -
Investment reserve 626.159 626.159 (626.159) - - -
Cancelation of treasury shares (621.417) (621.417) 621.383 - (34) (34)
Comprehensive income (69.270) (28.603) 515.573 417.700 417.700 417.700
Non-controlling interests - - - 107.053 107.053
Balances at December 31, 2010 1.680.947 30 336.190 3.779.357 1.227.703 1.346.724 6.689.974 (570.176) - (688.595) (31.878) 552.458 (168.015) 7.632.760 189.928 7.822.688

~~The accompanying notes are an integral part of these consolidated financial statements.~~

~~FS-5~~

~~Companhia Siderúrgica Nacional and Subsidiaries~~

~~Consolidated Statements of Comprehensive Income~~

~~Thousands of Brazilian reais~~

2010

2009

Profit for the year
2,516,191

2,615,181

Other comprehensive income
     417,700

   (585,113)
Cumulative foreign currency translation adjustments and

exchange gain on investments in foreign operations, net of taxes
    (69,270)

   (618,723)
Pension plan, net of taxes
    (28,603)

       (3,275)
Available-for-sale financial assets, net of taxes
    515,573

       36,885

Comprehensive income for the year
2,933,891

2,030,068

Attributable to:

Company Siderúrgica Nacional
2,933,891

2,030,068
Non-controlling interests
-

-

~~The accompanying notes are an integral part of these consolidated financial statements.~~

FS-6

(expressed In thousands of reais – R$, ~~except~~unless otherwise stated)

1.DESCRIPTION OF BUSINESS

Companhia Siderúrgica Nacional is a publicly-held company incorporated on April 9, 1941, under the laws of the Federative Republic of Brazil (Companhia Siderúrgica Nacional, its subsidiaries and ~~jointly-controlled subsidiaries~~jointly controlled entities collectively referred to herein as "CSN" or the “Company”)..The Company’s registered office social is located at Avenida Brigadeiro Faria Lima, 3400 – São Paulo, SP.

CSN is a Company with shares listed on the São Paulo Stock Exchange ~~(IBOVESPA)~~(BOVESPA) and the New York Stock Exchange (NYSE). Accordingly, it reports its information to the Brazilian Securities Commission (CVM) and the U.S. Securities and Exchange Commission (SEC).

The main operating activities of CSN are divided into 5 (five) segments as follows:

•·Steel:

The Company’s main industrial facility is the Presidente Vargas Steel Mill (“UPV”), located in the city of Volta Redonda, State of Rio de Janeiro. This segment consolidates the operations related to the production, distribution and sale of flat steel, metallic packaging and galvanized ~~steel, with~~steel. In addition to the facilities in Brazil, CSN has operations in ~~Brazil,~~ the United States and Portugal aimed at gaining markets and performing excellent services for final consumers. Its steels are used in the home ~~appliance,~~appliances, civil construction and automobile industries.

•·Mining:

The production of iron ore is developed in the city of Congonhas, in the State of Minas Gerais. It further mines ~~limestone and dolomite in branches in the State of Minas Gerais and~~ tin in the State of Rondônia to supply the needs of UPV, with the excess of these raw materials being sold to subsidiaries and third ~~parties. CSN~~parties.CSN holds a concession to operate TECAR, a solid bulk maritime terminal, of the 4 (four) terminals that form the Itaguaí Port, ~~of Itaguaí,~~ located in Rio de Janeiro. Importations of coal and coke are carried out through this terminal.

•·Cement:

The Company entered the cement market boosted by the synergy between this new activity and its already existing businesses. Next to the Presidente Vargas Steel Mill in Volta Redonda (RJ), it installed a new business unit: CSN Cimentos, which ~~is already producing~~produces CP-III type cement by using slag produced by the UPV blast furnaces in Volta Redonda. ~~At present~~Explores also limestone and dolomito Arches drive in the ~~clinker~~State of Minas Gerais, to feed the needs of UPV and CSN Cement, and the surplus of such raw materials is sold to subsidiaries and third parties.

During 2011, the Clinker used in ~~manufacturing~~ the manufacture of cement iswas purchased from third parties, ~~though it will begin to be produced~~however, by ~~CSN Cimentos in~~the end of 2011, with the ~~conclusion~~completion of the first stage of the Clinker plant in Arcos (MG), ~~where~~this has already filled the needs of grinding of CSN ~~further has a limestone quarry.~~Cimentos located in Volta Redonda.

•·~~Logistics~~Logistics:

Railroads:

CSN has equity interests in two railroad companies: MRS Logística, which manages the former Southeast Network of Rede Ferroviária Federal S.A. (RFFSA), and Transnordestina Logística, which operates the former Northeast Network of the RFFSA in the states of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

Ports:

In the State of Rio de Janeiro, the Company operates the Container Terminal known as Sepetiba Tecon at the ~~Port of~~ Itaguaí. Port. Located in the Bay of Sepetiba, this port has privileged highway, railroad and maritime access.

~~FS-7~~

Tecon handles the shipments of CSN steel products, movement of containers, as well as storage, consolidation and deconsolidation of cargo.

•·Energy:

As energy is fundamental in its production process, the Company has invested in assets for generation of electric power to guarantee its self-sufficiency.

For further details on strategic investments in the Company’s segments, see ~~Notes 12, 13 and 28~~Note 27 – ~~Business~~ Segment ~~Reporting.~~Information.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ~~AND PRACTICES~~

(a)Basis of ~~presentation~~preparation

The consolidated financial statements have been prepared and are being presented in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB).

These are the first financial statements presented by the Company in accordance with IFRS. The main differences between the accounting practices previously disclosed including the reconciliations of equity and profit for the year, are described in Note 4.2, 4.3 and 4.4.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in the notes to this report and refer to the allowance for doubtful ~~accounts,~~debts, provision for inventory losses, provision for labor, civil, tax, environmental and social security risks, depreciation, amortization, depletion, provision for impairment, deferred taxes, financial instruments and employee benefits. Actual results may differ from these estimates.

The financial statements are presented in thousands of reais (R$). Depending on the applicable IFRS standard, the measurement criterion used in preparing the financial statements considers the historical cost, net realizable value, fair value or recoverable amount.

Some balances for the financial years 2009 and 2010 were reclassified to permit a better comparability with 2011.

The consolidated financial statements were approved by the Board of Directors and authorized for issue on ~~June 16, 2011.~~April 26, 2012.

(b)Consolidated financial statements

The accounting policies have been consistently applied to all consolidated companies.

The consolidated financial statements for the years ended December 31, ~~2009~~2011 and 2010 include the following direct and indirect subsidiaries and jointly-controlled subsidiaries, as well as the exclusive funds Diplic and Mugen:

·Companies


	Equity interest (%)
Companies	12/31/2011	12/31/2010	Main activities
Direct interest: full consolidation
CSN Islands VII Corp.	100.00	100.00	Financial transactions
CSN Islands VIII Corp.	100.00	100.00	Financial transactions
CSN Islands IX Corp.	100.00	100.00	Financial transactions
CSN Islands X Corp.	100.00	100.00	Financial transactions
CSN Islands XI Corp.	100.00	100.00	Financial transactions
CSN Islands XII Corp.	100.00	100.00	Financial transactions
Tangua Inc.	100.00	100.00	Financial transactions
International Investment Fund	100.00	100.00	Equity interests and financial transactions
CSN Minerals S. L.(1)	100.00	100.00	Equity interests
CSN Export Europe, S.L. (2)	100.00	100.00	Financial transactions, product sales and equity interests
CSN Metals S.L. (3)	100.00	100.00	Equity interests and financial transactions
CSN Americas S.L. (4)	100.00	100.00	Equity interests and financial transactions
CSN Steel S.L. (5)	100.00	100.00	Equity interests and financial transactions
TdBB S.A	100.00	100.00	Dormant company
Sepetiba Tecon S.A.	99.99	99.99	Port services
Mineração Nacional S.A.	99.99	99.99	Mining and equity interests
CSN Aços Longos S.A.- merged by Parent Company on 1/28/2011		99.99	Manufacture and sale of steel and/or metallurgical products
Florestal Nacional S.A.(6)	99.99	99.99	Reforestation
Estanho de Rondônia S.A.	99.99	99.99	Tin mining
Cia Metalic Nordeste	99.99	99.99	Manufacture of packaging and distribution of steel products
Companhia Metalúrgica Prada	99.99	99.99	Manufacture of packaging and distribution of steel products
CSN Cimentos S.A.	99.99	99.99	Cement manufacturing
Inal Nordeste S.A.- merged by Parent Company on 5/30/2011		99.99	Service center for steel products
CSN Gestão de Recursos Financeiros Ltda.	99.99	99.99	Dormant company
Congonhas Minérios S.A.	99.99	99.99	Mining and equity interests
CSN Energia S.A.	99.99	99.99	Sale of electric power
Transnordestina Logística S.A.	70.91	76.45	Railroad logistics
Indirect interest: full consolidation
CSN Aceros S.A.	100.00	100.00	Equity interests
Companhia Siderurgica Nacional LLC	100.00	100.00	Steel
CSN Europe Lda.(7)	100.00	100.00	Financial transactions, product sales and equity interests
CSN Ibéria Lda.	100.00	100.00	Financial transactions and equity interests
CSN Portugal, Unipessoal Lda. (8)	100.00	100.00	Financial transactions and product sales
Lusosider Projectos Siderúrgicos S.A.	100.00	100.00	Equity interests
Lusosider Aços Planos, S. A.	99.94	99.94	Steel and equity interests
CSN Acquisitions, Ltd.	100.00	100.00	Financial transactions and equity interests
CSN Resources S.A.(9)	100.00	100.00	Financial transactions and equity interests
CSN Finance UK Ltd	100.00	100.00	Financial transactions and equity interests
CSN Holdings UK Ltd	100.00	100.00	Financial transactions and equity interests
CSN Handel GmbH(10)	100.00		Financial transactions, product sales and equity interests
Itamambuca Participações S. A. - merged by CSN Cimentos em 5/30/2011		99.99	Mining and equity interests
Companhia Brasileira de Latas (11)	59.17		Sale of cans and containers in general and equity interests
Rimet Empreendimentos Industriais e Comerciais S. A.(11)	58.08		Production and sale of steel containers and forestry
Companhia de Embalagens Metálicas MMSA (11)	58.98		Production and sale of cans and related activities
Empresa de Embalagens Metálicas - LBM Ltda. (11)	58.98		Sales of containers and holding interests in other entities
Empresa de Embalagens Metálicas - MUD Ltda. (11)	58.98		Production and sale of household appliances and related products
Empresa de Embalagens Metálicas - MTM do Nordeste (11)	58.98		Production and sale of cans and related activities
Companhia de Embalagens Metálicas - MTM (11)	58.98		Production and sale of cans and related activities
Direct interest: proportionate consolidation
Nacional Minérios S.A.	60.00	60.00	Mining and equity interests
Itá Energética S.A.	48.75	48.75	Generation of electric power
MRS Logística S.A.	27.27	22.93	Railroad transportation
Consórcio da Usina Hidrelétrica de Igarapava	17.92	17.92	Electric power consortium
Aceros Del Orinoco S.A.	22.73	22.73	Dormant company
CBSI - Companhia Brasileira de Serviços de Infraestrutura (12)	50.00		Provision of services
Indirect interest: proportionate consolidation
Namisa International Minerios SLU	60.00	60.00	Equity interests and sales of products and minerals
Namisa Europe, Unipessoal Lda.	60.00	60.00	Equity interests and sales of products and minerals
MRS Logística S.A.	6.00	10.34	Railroad transportation
Aceros Del Orinoco S.A.	9.08	9.08	Dormant company
Aloadus Handel GmbH (10)	60.00		Financial transactions, product sales and equity interests

Equity interest (%)

Companies

2010

2009

Main activities

Direct interest: full consolidation

CSN Islands VII

100.00

100.00

Financial transactions
CSN Islands VIII

100.00

100.00

Financial transactions
CSN Islands IX

100.00

100.00

Financial transactions
CSN Islands X

100.00

100.00

Financial transactions
CSN Islands XI

100.00

100.00

Financial transactions
CSN Islands XII

100.00

100.00

Financial transactions
Tangua

100.00

100.00

Financial transactions
International Investment Fund

100.00

100.00

Equity interests and financial transactions
CSN Minerals (1)

100.00

100.00

Equity interests
CSN Export

100.00

100.00

Financial transactions, sale of products and equity interests
CSN Metals (2)

100.00

100.00

Equity interests and financial transactions
CSN Americas (3)

100.00

100.00

Equity interests and financial transactions
CSN Steel

100.00

100.00

Equity interests and financial transactions
TdBB S.A

100.00

100.00

Dormant company
Galvasud - Merged on 1/29/2010

99.99

Steel-making
Sepetiba Tecon

    99.99

99.99

Port services
Mineração Nacional

    99.99

99.99

Mining and equity interests
CSN Aços Longos - Merged on 1/28/2011

    99.99

99.99

Manufacture and sale of steel and/or metallurgical products
Florestal Nacional (4)

    99.99

99.99

Reforestation
Estanho de Rondônia - ERSA

    99.99

99.99

Tin mining
Cia Metalic Nordeste

    99.99

99.99

Manufacture of packaging and distribution of steel products
Companhia Metalúrgica Prada

    99.99

99.99

Manufacture of packaging and distribution of steel products
CSN Cimentos

    99.99

99.99

Manufacture of cement
Inal Nordeste - Merged on 05/30/2011

    99.99

99.99

Service center for steel products
CSN Gestão de Recursos Financeiros

   99.99

99.99

Dormant company
Congonhas Minérios

    99.99

99.99

Mining and equity interests
CSN Energia

    99.99

99.90

Sale of electric power
Transnordestina Logística

    76.45

84.34

Railroad logistics
Special partnership - Extinguished on 11/30/2010

39.47

Equity interests

Indirect interest: full consolidation

CSN Aceros

100.00

100.00

Equity interests
CSN Cayman - Liquidated on 8/31/2010

100.00

Financial transactions, sale of products and equity interests
CSN IRON - Extinguished on 1/31/2010

100.00

Financial transactions and equity interests
Companhia Siderurgica Nacional LLC

100.00

100.00

Steel-making
CSN Europe (5)

100.00

100.00

Financial transactions, sale of products and equity interests
CSN Ibéria

100.00

100.00

Financial transactions and equity interests
CSN Portugal (6)

100.00

100.00

Financial transactions and sale of products
Lusosider Projectos Siderúrgicos

100.00

100.00

Equity interests
Lusosider Aços Planos

    99.94

99.94

Steel-making and equity interests
CSN Acquisitions

100.00

100.00

Financial transactions and equity interests
CSN Resources (7)

100.00

100.00

Financial transactions and equity interests
CSN Finance UK Ltd

100.00

100.00

Financial transactions and equity interests
CSN Holdings UK Ltd

100.00

100.00

Financial transactions and equity interests
Energy I - Liquidated on 8/31/2010

99.99

Equity interests
Itamambuca Participações   - Merged on 05/30/2011

    99.99

99.99

Mining and equity interests
Special partnership - extinguished on 11/30/2010

60.53

Equity interests

Direct interest: proportional consolidation

Nacional Minérios (NAMISA)

    59.99

59.99

Mining and equity interests
Itá Energética

    48.75

48.75

Genaration of electric power
MRS Logística

    22.93

22.93

Railroad transportation
Consórcio da Usina Hidrelétrica de Igarapava

   17.92

17.92

Electric power consortium
Aceros Del Orinoco

    22.73

22.73

Dormant company

Indirect interest: proportional consolidation

Namisa International Minerios SLU

    60.00

60.00

Equity interests and sale of products and ores
Namisa Europe

    60.00

60.00

Equity interests and sale of products and ores
Pelotização Nacional - Merged on 12/30/2010

59.99

Mining and equity interests
MG Minérios - Merged on 12/30/2010

59.99

Mining and equity interests
MRS Logística

    10.34

10.34

Railroad transportation
Aceros Del Orinoco

      9.08

    9.08

Dormant company

~~(1) New corporate name of CSN Energy, changed on December 15, 2010.~~
~~(2) New corporate name of CSN Overseas, changed on December 15, 2010.~~
~~(3) New corporate name of CSN Panamá, changed on December 15, 2010.~~
~~(4) New corporate name of Itaguaí Logística, changed on December 27, 2010.~~
~~(5) New corporate name of CSN Madeira, changed on January 8, 2010.~~
~~(6) New corporate name of Hickory, changed on January 8, 2010.~~
(1) New corporate name of CSN Energy S.à.r.l., changed on December 15, 2010.
(2) New corporate name of CSN Export S.à.r.l., changed on August 9, 2011.
(3) New corporate name of CSN Overseas S.à.r.l., changed on December 15, 2010.
(4) New corporate name of CSN Panamá S.à.r.l., changed on December 15, 2010.
(5) New corporate name of CSN Steel S.à.r.l., changed on December 17, 2010.
(6) New corporate name of Itaguaí Logística S.A., changed on December 27, 2010.
(7) New corporate name of CSN Madeira Lda., changed on January 8, 2010.
(8) New corporate name of Hickory-Comércio Internacional e Serviços Lda., changed on January 8, 2010.
(9) New corporate name of CSN Cement S.à.r.l., changed on June 18, 2010.
(10) Companies that became subsidiaries on November 3, 2011.

(11)Companies that became subsidiaries on July 12, 2011.

(12)Equity interest acquired on December 5, 2011.

~~FS-9~~

•·Exclusive funds

Equity interest in
capital social (%)
Special purpose entities

2010

2009

Principal activities
Direct equity interest: full consolidation

DIPLIC - Fundo de investimento multimercado
100.00

100.00

Multimarket Investment fund
Mugen - Fundo de investimento multimercado
100.00

100.00

Multimarket investment fund


	Interest held
Exclusive funds	12/31/2011	12/31/2010	Main activities
Direct interest: full consolidation
DIPLIC - Fundo de investimento multimercado	100.00	100.00	Investment fund
Mugen - Fundo de investimento multimercado	100.00	100.00	Investment fund

In preparing the ~~consolidated~~ financial statements the following consolidation procedures have been applied:

Unrealized gains on transactions with subsidiaries ~~jointly-controlled subsidiaries~~ and ~~affiliated companies~~jointly controlled entities are eliminated to the extent of CSN’s equity interests in the related entity in the consolidation process. Unrealized losses are eliminated in the same manner as unrealized gains, although only to the extent that there are indications of impairment. The base date of the financial statements of the subsidiaries, ~~jointly-controlled subsidiaries~~jointly controlled entities and ~~affiliated~~affiliated companiesis the same as that of the Company, and their accounting policies are in line with the policies adopted by the Company.

•·Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Company has the power to determine the financial and operating policies, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are actually exercisable or convertible are taken into consideration when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date when control is transferred to the Company and are deconsolidated from the date when such control ceases.

•~~Affiliated companies~~

Affiliated companies are all entities over which the Company has significant influence, but not control, generally accompanying a shareholding of 20% to 50% of the voting rights. Investments in its affiliated companies are accounted for under the equity method of accounting and are initially recognized at cost. The Company’s investment in affiliated companies includes goodwill identified on acquisition, plus the investor’s share of the profit or loss of the investee after the acquisition and other changes in the value of the net assets, less any accumulated impairment loss.

•·~~Jointly-controlled subsidiaries~~Joint controlled entities

The financial statements of ~~jointly-controlled subsidiaries~~jointly controlled entities are included in the consolidated financial statements from the date when shared control starts through the date when shared control ceases to exist. ~~Jointly-controlled subsidiaries~~Jointly controlled entities are ~~proportionally~~proportionately consolidated.

·Transactions and non-controlling interests

The Company treats transactions with non-controlling interests as transactions with owners of Company equity. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains and losses on disposals to non-controlling interests are also recognized directly in equity, in line item “Valuation adjustments to equity”.

When the Company no longer holds control, any retained interest in the entity is remeasured to its fair value, with the change in the carrying amount recognized in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognized in other comprehensive income in respect of that entity are accounted for as if the Company had directly disposed of the related assets or liabilities. This mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss.

(c)Foreign currencies

i.Functional ~~currency~~ and ~~reporting~~presentation currency

Items included in the financial statements of each one of ~~CSN’s~~the Company’s subsidiaries are measured using the currency of the primary economic environment in which ~~each~~the subsidiary operates ~~("the~~ (“functional ~~currency"~~currency”). The ~~consolidated~~ financial statements are presented in Brazilian reais (R$), which is the Company’s functional currency and ~~also~~ the Group’s ~~reporting~~presentation currency.

ii. ~~Transactions~~Balances and ~~balances~~transactions

Transactions in foreign currencies are translated into the functional currency using the exchange rates in effect at the dates of the transactions or valuation on which items are remeasured. Foreign exchange gains and losses resulting from the

~~FS-10~~

settlement of these transactions and from the translation at exchange rates in effect as atas of December 31, ~~2010~~2011 of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, ~~of income,~~ except when they are recognized in ~~shareholders’~~ equity as qualifying cash flow hedges and qualifying net investment hedges.

The asset and liability balances ~~of balance sheet accounts~~ are translated at the exchange rate in effect at the end of the reporting ~~period, with~~period. As of December 31, 2011, US$ ~~1.00 being~~1 is equivalent to R$1.8758 (R$1.6662 as atof December 31, ~~2010 (R$ 1.7412 as at December 31, 2009)~~2010), ~~Euro 1.00 being~~EUR 1 is equivalent to R$2.4342 (R$2.2280 as of December 31, 2010), A$1 is equivalent to R$1.9116 (R$ ~~2.5073 in 2009),~~1.6959 as of December 31, 2010) and JPY ~~1.00 being~~1 is equivalent to R$0.02431 (R$0.0205 ~~(R$ 0.0188 in 2009)~~as of December 31, 2010).

All other foreign exchange gains and losses, including foreign exchange gains and losses related to loans and cash and cash equivalents, are presented in the income statement as finance income or costs.

Changes in the fair value of monetary securities denominated in foreign currency, classified as available-for-sale, are segregated into translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. ~~Translation~~Exchange differences related to changes in amortized cost are recognized in profit or loss, and other changes in the carrying amount are recognized in equity.

~~Translation~~

Exchange differences on non-monetary financial assets and liabilities ~~such as investments in shares~~ classified as measured at fair value through profit or loss are recognized in profit or loss as part of the gain or loss on the fair value. ~~Translation~~Exchange differences on non-monetary financial assets, such as investments in shares classified as ~~available- for-sale,~~available-for-sale, are included in comprehensive income in equity.

iii.Group companies

The results and financial position of all the Group’s entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the reporting currency are translated into the reporting currency as follows:

•·Assets and liabilities ofin each balance sheet presented ~~are~~have been translated at the ~~closing~~exchange rate at the ~~balance sheet date.~~end of the reporting period.

•·Income and expenses of each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates in effect at the transaction dates, in which case income and expenses are translated at the rate in effect at the transaction dates); and

•·All resulting exchange differences are recognized as a separate component in other comprehensive income.

On consolidation, exchange differences resulting from the translation of monetary items with characteristics of net investment in foreign operations are recognized in equity. When a foreign operation is partly disposed of or sold, exchange differences previously recorded in other comprehensive income are recognized in the income statement as part of the gain or loss on sale.

(d)Cash and cash equivalents

Cash and cash equivalents include cash on hand and in banks and other short-term highly liquid investments redeemable within 90 ~~(ninety)~~ days from the end of the reporting period, readily convertible into a known amount of cash and subject to an insignificant risk of change in value. Certificates of deposit that can be redeemed at any time without penalties are considered as cash equivalents.

(e)Trade ~~accounts receivable~~receivables

Trade ~~accounts receivable~~receivables are initially recognized at ~~the amounts billed,~~fair value, including the related taxes and ~~ancillary expenses, and~~expenses. Foreign currency-denominated trade ~~accounts receivable in foreign currency~~receivables are ~~inflation~~ adjusted at the exchange rate in effect at the end of the reporting period. The allowance for doubtful ~~accounts~~debts was ~~recorded~~recognized in an amount considered sufficient to cover any losses. Management’s assessment takes into consideration the customer’s history and financial ~~situation,~~position, as well as the opinion of our legal counsel regarding the collection of these receivables for ~~recording~~recognizing the allowance.

~~FS-11~~(f)Inventories

~~(f) Inventories~~

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average cost method on the acquisition of raw materials. The costs of finished products and work in process comprise raw materials, labor and other direct costs (based on the normal production capacity). Net realizable value represents the estimated selling price in the normal course of business, less estimatedcosts of completion and costs necessary to make the sale. Losses for slow-moving or obsolete inventories are ~~recorded~~recognized when considered appropriate.

Stockpiled inventories are accounted for as processed when removed from the mine. The ~~Company holds spare parts that will be used within its operating cycle which are classified as other current assets rather than inventories.~~cost of finished products comprises all direct costs necessary to transform stockpiled inventories into finished products.

(g)Investments ~~in affiliated companies and other investments~~

~~In the case of foreign~~

Foreign exchange ~~gains or losses~~differences arising on translating foreign investments that ~~involve~~have a functional currency different from the Company’s, as well as adjustments to pension plans and available-for-sale investments that impact the ~~changes~~subsidiaries’ equity, are recognized in other comprehensive income, in the ~~value of the investment that result exclusively from foreign exchange gains or losses are recognized under “Cumulative foreign currency translation adjustments” in the~~ Company’s ~~shareholders’~~ equity, and are only recognized in profit or loss when the investment is ~~sold~~disposed of or written off ~~as a~~due to impairment loss. Other investments are ~~stated~~recognized and maintained at cost or fair value.

When necessary, the accounting policies of ~~the~~ subsidiaries and ~~jointly-controlled subsidiaries~~jointly controlled entities are changed to ensure consistency and uniformity of criteria with the policies adopted by the Company.

(h)Business combination

The acquisition method is used to account for each business combination conducted by the Company. The consideration transferred for acquiring a subsidiary is the fair value of the assets transferred, liabilities incurred and equity instruments issued by the Company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement, where applicable. Acquisition-related costs are recognized in profit or loss, as incurred. Identifiable assets acquired and liabilities assumed in a business combination are initially measured at their fair values at the acquisition date. The Company recognizes non-controlling interests in the acquiree according to the proportional non-controlling interest held in the fair value of the acquiree’s new assets (see note 3).

(i)Property, plant and equipment

Property, plant and equipment are ~~stated~~carried at cost of acquisition, formation or construction, less accumulated depreciation or depletion and any ~~impairment.~~impairment loss. Depreciation is calculated under the straight-line method based on the remaining economic useful economic lives of assets, as mentioned in note ~~14, and~~12. The depletion of mines is calculated based on the quantity of ore mined. Land is not depreciated since ~~their~~its useful life is considered indefinite. However, if the tangible assets are mine-specific, they are depreciated over the economic useful lives for such assets. The Company recognizes in the ~~carrying amount~~carryingamount of property, plant and equipment the cost of replacement, reducing the carrying amount of the part that it is replacing if it is probable that future economic benefits embodied therein will revert to the Company, and if the cost of the asset can be reliably measured. All other disbursements are expensed as incurred. Borrowing costs related to funds obtained for construction in progress are capitalized until these projects are completed.

If some components of ~~the~~ property, plant and equipment have different useful lives, these components are separately recognized ~~separately~~ as property, plant and equipment items.

Gains and losses on disposal are determined by comparing the sale value less the residual value and are recognized in ~~“Other~~‘Other operating ~~income/expenses”~~income (expenses)’.

~~Costs for the development of new ore deposits or for the expansion of the capacity of mines already~~

Mineral rights acquired are classified as other assets in ~~operation are capitalized~~property, plant and ~~amortized using the units produced (mined) method, based on the probable and proven quantities of ore.~~ equipment.

Exploration expenditures are recognized as expenses until the viability of mining activities is established; after this period subsequent development costs are capitalized. Exploration and valuation expenditures include:

~~(i)~~ ·Research and analysis of exploration area historical data;

·Topographic, geological, geochemical and geophysical studies;

·Determine the mineral asset’s volume and quality/ grade of deposits;

·Examine and test the extraction processes and methods;

·Topographic surveys of transportation and infrastructure needs;

·Market studies and financial studies.

The costs for the development of new mineral deposits or capacity expansion in mines in operations are capitalized and amortized using the produced (extracted) units method based on the probable and proven ore quantities.

The development stage includes:

·Drillings to define the ore body;

·Access and draining plans;

·Advance removal of overburden (top soil and waste material removed prior to initial mining of the ore body) and waste material (non-economic material that is intermingled with the ore body). This is often referred to as stripping.

Stripping costs (the costs associated with the removal of overburdened and other waste materials) incurred during the development of a mine, before production commences, are capitalized as part of the depreciable cost of developing the property. Such costs are subsequently amortized over the useful life of the mine based on proven and probable reserves.

Post-production stripping costs are included in the cost of the inventory produced (that is extracted), at each mine individually during the period that stripping costs are incurred.

The Company holds spare parts that will be used to replace parts of property, plant and equipment and that will increase the asset’s useful life and the useful life of which exceeds 12 months. These parts are classified in property, plant and equipment and not in inventories.

(j)Intangible assets

Intangible assets comprise assets acquired from third parties, including through business combinations and/or those internally generated.

These assets are recognized at cost of acquisition or formation, less amortization calculated ~~under the~~on a straight-line ~~method~~basis based on the exploration or recovery periods.

Intangible assets with indefinite useful lives and goodwill based on expected future profitability are not amortized.

•·Goodwill

Goodwill represents the ~~excess~~positive difference between the amount paid and/or payable for the acquisition of ~~the cost of an acquisition over~~a business and the net fair ~~value~~values of the assets and liabilities of the ~~acquired subsidiary.~~acquiree. Goodwill on acquisitions of subsidiaries is ~~included in “Intangible assets”~~recognized as ‘Intangible assets’ in the ~~consolidated~~ financial statements.

~~FS-12~~

•·~~Computer software~~Software

Software licenses ~~acquired~~purchased are capitalized based on the costs incurred to ~~buy~~purchase the software and ~~bring them to~~make it ready for use. These costs are amortized ~~under the~~on a straight-line ~~method~~basis over the estimated economic useful lives.

~~(j)~~ (k)Impairment of non-financial assets

Assets ~~that have an indefinite~~with infinite useful ~~life,~~lives, such as goodwill, are not subject to amortization and are annually tested ~~annually~~ for impairment. Assets ~~that are~~ subject to amortization are ~~reviewed~~tested for impairment when whenever events or changes in circumstances indicate that their carrying ~~amount~~amounts may not be recoverable. An impairment loss is recognized inat the amount by which the carrying amount of ~~the~~an asset exceeds its recoverable amount. The recoverable amount is the higher of the fair value of an asset less costs to sell and its value in use. For impairment ~~assessment~~testing purposes, assets are grouped at ~~the~~their lowest levels for which there are separately ~~identified~~identifiable cash flows ~~(CGUs)~~(Cash Generating Units - CGUs). Non-financial assets, except goodwill, that are considered impaired are subsequently reviewed for possible reversal of the impairment at the reporting date.

~~(k)~~ (l)Employee benefits

i.(i). Employee ~~Benefits~~ benefits

Defined contribution plans

A defined contribution plan is as a post-employment benefit plan whereby an entity pays fixed contributions to a separate entity (pension fund) and will not have any legal or constructive obligation to pay additional amounts. Obligations for contributions to defined contribution pension plans are recognized as employee benefit expenses in the income statement for the periods during which services are provided by employees. Contributions paid in advance are recognized as an asset on condition that either cash reimbursement or reduction in future payments is available. Contributions to a defined contribution plan that is expected to mature ~~12 (twelve)~~twelve (12) months after the end of the period in which the employee provides services are discounted to their present values.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Company’s net obligation regarding defined pension benefit plans is calculated individually for each plan by estimating the value of the future benefit that the employees accrue as return for services provided in the current period and in prior periods; such benefit is discounted to its present value. Any unrecognized costs of past services and the fair values of any plan assets are deducted. The discount rate is the yield presented at the end of the reporting period for top line debt securities whose maturity dates approximate the terms and conditions of the Company’s obligations and which are denominated in the same currency as ~~the one~~theone in which it is expected that the benefits will be paid. The calculation is made annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit for the Company, the asset to be recognized is limited to the total amount of any unrecognized costs of past services and the present value of the economic benefits available in the form of future plan reimbursements or reduction in future contributions to the plan. In calculating the present value of economic benefits, consideration is given to any minimum funding requirements that apply to any Company plan. An economic benefit is available to the Company if it is realizable during the life of the plan or upon ~~liquidation~~settlement of the plan’s liabilities.

Some of the Company’s entities offered a postretirement healthcare benefit to its employees. The right to these benefits is usually contingent to their remaining in employment until the retirement age and the completion of the minimum length of service. The expected costs of these benefits are accumulated during the employment period, and were calculated using the same accounting method used for defined benefit pension plans. These obligations are annually evaluated by qualified independent actuaries.

When the benefits of a plan are increased, the portion of the increased benefit related to past services of employees is recognized ~~under the~~on a straight-line ~~method~~basis over the average period until the benefits become vested. When the benefits become immediately vested, the expense is ~~immediately~~ recognized in profit or loss.

The Company has chosen to recognize all the actuarial gains and losses resulting from defined benefit plans immediately in other comprehensive ~~income.~~income and only registered in income statement if the plan is extinguished.

ii.Profit sharing and ~~bonuses~~bonus

Employee profit sharing isand executives’ variable compensation are linked to the achievement of operating and financial ~~targets,~~targets. The Company, when such goals are met, recognizes a liability and an expense substantially allocated to ~~the~~ production cost ~~when~~and, where applicable, ~~and~~ to general and administrative expenses.

~~(l)~~ (m)Provisions

Provisions are recognized when: (i) the Company has a present legal or constructive obligation as a result of past events, (ii) it is probable that an outflow of resources will be required to settle a present obligation, and (iii) the amount can be reliably measured. Provisions are determined discounting the expected future cash flows based on a pre-tax discount rate that reflects current market assessments of the time value of money and, ~~when~~where appropriate, the specific risks of the liability. ~~The increase in the provision due to passage of time is recognized as finance costs.~~

~~(m)~~ (n)Concessions

The Company has government concessions and their payments are classified as operating leases.

~~(n)~~ (o)Share capital

Common shares are classified asin equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of taxes.

When the Company or any ~~Group company~~of its subsidiaries buys Company shares (treasury shares), the amount paid, including any directly attributable additional costs (net of income tax), is deducted from equity attributable to owners of the Company until the shares are canceled or reissued. When these shares are subsequently reissued, any amount received, net of any directly attributable additional transaction costs and the related income tax and social contribution effects, is included in equity attributable to owners of the Company.

~~(o) Operating revenue~~

~~The operating~~(p)Revenue recognition

FS-15

Operating revenue from the sale of goods in the normal course of ~~the Company’s~~ business ~~activities~~ is measured at the fair value of the consideration received or receivable. Revenue is recognized when there is convincing evidence that the most significant risks and rewards of ownership of goods have been transferred to the buyer, it is probable that future economic benefits will flow to the entity, the associated costs and possible return of goods can be reliably estimated, there is no continued involvement with the goods sold, and the amount of the operating revenue can be reliably measured. If it is probable that discounts will be granted and the value thereof can be reliably measured, then the discount is recognized as a reduction of the operating revenue as sales are recognized. Revenue from services provided is recognized as it is realized.

The appropriate timing for transfer of risks and rewards varies depending on the individual terms and conditions of the sales contract. For international sales, this timing depends on the type of ~~incoterm~~term of the contract.

~~(p)~~ (q)Finance income and ~~expenses~~finance costs

Finance income includes interest income from funds invested (including available-for-sale financial assets), dividend income (except for dividends received from investees accounted for under the equity method in ~~the~~ Company), gains on disposal of

~~FS-14~~

available-for-sale financial assets, changes in the fair value of financial assets measured at fair value through profit or loss, and gains on hedging instruments that are recognized in profit or loss. Interest income is recognized in profit or loss under the effective interest method. Dividend income is recognized in profit or loss when the Company’s right to receive payment has been established. Distributions received from investees accounted for ~~under~~by the equity method reduce the investment value.

Finance costs comprise interest expenses on ~~loans,~~borrowings, net of the discount to present value of the provisions, dividends on preferred shares classified as liabilities, losses in the fair value of financial instruments measured at fair value through profit or loss, impairment losses recognized in financial assets, and losses on hedging instruments that are recognized in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are measured through profit or loss under the effective interest method.

Foreign exchange gains and losses are reported on a net basis.

~~(q)~~ (r)Income tax and social contribution

~~The current~~

Current and deferred Income Tax and Social Contribution are calculated at the rates of 15% (plus a 10% surtax on taxable profit exceeding R$ 240 for income tax and 9% on taxable profit for social contribution on net profit, and consider the offset of income tax and social contribution are calculated based on the tax ~~loss carry forwards, limited to 30%~~law enacted or substantially enacted by the end of the reporting period, including in the countries where the Group entities operate and generate taxable profit. Management periodically assesses the positions assumed in the tax calculations with respect to situations where applicable tax regulations are open to interpretations. The Company recognizes provisions, when appropriate, based on the estimated payments to tax authorities.

The income tax and social contribution expense comprises current and deferred taxes. The current ~~tax~~ and ~~the~~ deferred ~~tax~~taxes are recognized in profit or loss unless they are related to business combinations or items directly recognized in equity.

Current tax is the expected tax payable or receivable on taxable profit or loss for the year at tax rates that have been enacted or substantially enacted by the end of the reporting period and any adjustment to taxes payable in relation to prior years.

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax is not recognized for the following temporary differences: initial recognition of assets and liabilities in a transaction that is not a business combination and does not affect either the accounting or taxable profit or loss, and differences associated with investments in subsidiaries and controlled entities when it is probable that they will not reverse in the foreseeable future. Moreover, a deferred tax liability is not recognized for taxable temporary differences resulting in the initial recognition of goodwill. The deferred tax is measured at the rates that are expected to be applied on temporary differences when they reverse, based on the laws ~~that have~~thathave been enacted or substantially enacted by the end of the reporting period.

FS-16

Current income tax and social contribution are carried at their net amounts by the taxpayer, in liabilities when there amounts payable or in assets when prepaid amounts exceed the total amount due at the end of the reporting period.

Deferred tax assets and liabilities are offset ifwhen there is a ~~legal~~legally enforceable right to ~~offset~~set off current tax assets against current tax liabilities and ~~assets and~~when they relate to income taxes ~~assessed~~levied by the same ~~taxing~~taxation authority on the same entity subject to ~~the~~ taxation.

A deferred income tax and social contribution asset is recognized for all tax losses, tax credits, and temporary differences to the extent that it is probable that taxable profits will be available against which those tax losses, tax credits, and deductible temporary differences ~~that have not been utilized when it is probable that future profits subject to taxation will~~can be ~~available against which they will be~~ utilized.

Deferred income tax and social contribution assets are reviewed at the end of each reporting period and reduced to the extent that their realization ~~thereof~~ is no longer probable.

~~(r)~~ (s)Earnings per share

Basic earnings per share are calculated by means of the profit for the year attributable to owners of the Company and the weighted average number of common shares outstanding in the related period. Diluted earnings per share are calculated by means of the average number of shares outstanding, adjusted by instruments potentially convertible into shares, with diluting effect, in the reported periods. The Company does not have any instruments potentially convertible into shares and, accordingly, diluted earnings per share are equal to basic earnings per share.

~~FS-15~~

(t)

~~(s)~~ Environmental and restoration costs

The Company recognizes a provision for the costs of recovery of areas and fines when a loss is probable and the amounts of the related costs can be reliably measured. Generally, the period for providing for the amount to be used in recovery coincides with the end of a feasibility study or the commitment to adopt a formal action plan.

Expenses related to compliance with environmental regulations are charged to profit or loss or capitalized, as appropriate. Capitalization is considered appropriate when the expenses refer to items that will continue to benefit the Company and that are basically related to the acquisition and installation of equipment to control and/or prevent pollution.

~~(t)~~ (u)Research and development

All these costs are recognized in the income statement when incurred, except when they meet the criteria for capitalization. Expenditures on research and development of new products for the year ended December 31, ~~2010~~2011 amounted to R$6,532 (R$4,314 ~~(R$ 2,515 in 2009)~~for the year ended December 31, 2010).

~~(u)~~ (v)Financial instruments

i) ~~Classification~~Financial assets

Financial assets are classified ~~under the~~into following categories: measured at fair value through profit or loss, loans and receivables, held-to-maturity, and ~~available-for-sale.~~available-for- sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at the time of initial recognition.

·Financial assets at fair value through profit or loss

FS-17

Financial assets at fair value through profit or loss are financial assets held for active and frequent trading. Derivatives are also categorized as held for trading and, accordingly, are classified in this category unless they have been designed as cash flow hedging instruments. Assets in this category are classified in current assets.

·Loans and receivables

This category ~~includes~~include loans and receivables that are non-derivative financial assets with fixed or determinable payments not quoted in an active market. They are included in current assets, except those with maturity of more than 12 months after the end of the reporting period (which are classified as non-current assets). Loans and receivables ~~comprise~~include loans to ~~affiliated companies,~~associates, trade ~~accounts receivable, other~~ receivables and cash and cash equivalents, except short-term investments. Cash and cash equivalents are recognized at fair value. Loans and receivables are carried at amortized cost using the effective interest ~~rate~~ method.

·Held-to-maturity ~~financial~~ assets

These are basically financial assets acquired with the positive intent and ability to hold to maturity. Held-to-maturity investments are initially recognized at their value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortized cost using the effective interest method, less any impairment loss.

·Available-for-sale financial assets

These are non-derivative financial assets, designated as available-for-sale, that are not classified in any other category. They are included in non-current assets when they are strategic investments of the Company, unless Management intends to dispose of the investment within up to 12 months from the end of the reporting period. Available-for-sale financial assets are recognized at fair value.

~~ii)~~ ·Recognition and measurement

~~FS-16~~

Regular purchases and sales of financial assets are recognized at the trading date - the date on which the Company undertakes to buy or sell the asset. Investments are initially recognized at their fair value, plus transaction costs for all financial assets not classified as at fair value through profit or loss. Financial assets at fair value through profit or loss are initially recognized at their fair value and the transaction costs are charged to the income statement. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred, in the latter case, provided that the Company has transferred significantly all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortized cost using the effective interest method.

Gains or losses resulting from changes in the fair value of financial assets at fair value through profit or loss are presented in the income statement under “finance income” in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognized in the income statement as part of other finance income when the Company’s right to receive the dividends has been established.

Changes in the fair value of monetary securities denominated in a foreign currency and classified as available-for-sale are segregated into translation differences resulting from changes in the amortized cost of the security and other changes in the carrying amount of the security. ~~Translation~~Exchange differences on monetary securities are recognized in profit or loss, while ~~translation~~exchange differences on non-monetary securities are recognized in equity. Changes in the fair value of monetary and non-monetary securities classified as available-for-sale are recognized in other comprehensive ~~income.~~income and are only recognized in profit or loss when the investment is sold or written off as a loss.

Interest on available-for-sale securities, calculated under the effective interest method, is recognized in the income statement as part of other income. Dividends from available-for-sale equity instruments, such as shares, are recognized in the income statement as part of other finance income when the Company’s right to receive payments has been established.

FS-18

The fair values of publicly quoted investments are based on ~~the actual~~current purchase prices. If the market for a financial asset (and for instruments not listed on a stock exchange) is not active, the Company establishes the fair value by using valuation techniques. These techniques include the use of recent transactions contracted with third parties, ~~references~~reference to other instruments that are substantially similar, analysis of discounted cash flows, and ~~models for~~ pricing ~~options~~models that make ~~the greatest possible~~maximum use of ~~information generated by the~~ market inputs and ~~contain the minimum~~relies as little as possible ~~amount of information generated by the management of the entity itself.~~on entity-specific inputs.

At the end of the reporting period the Company assesses whether there is objective evidence of impairment of a financial asset or group of financial assets. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security to a level below its cost is considered as an indication that the securities are impaired. If there is such evidence for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on the financial asset previously recognized in profit or loss – is removed from equity and recognized in the income statement. Impairment losses recognized in the income statement on equity instruments are not reversed through the income statement.

•ii)~~Offset of financial instruments~~

Financial assets and liabilities are set off and the net amount is reported in the balance sheet when there is a legally enforceable right to set off the recognized amount and the intention to settle on a net basis, or to realize the asset and settle the liability simultaneously.

•Impairment of financial assets

~~Assets measured at amortized cost~~

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is ~~impaired.~~ impaired.

·Assets measured at amortized cost

A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial

~~FS-17~~

recognition of the asset (a ~~"loss event"~~“loss event”) and such loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

The criteria used by CSN to determine whether there is objective evidence of an impairment loss ~~include the following:~~include:

·significant financial difficulty of the issuer or counterparty;

·a breach of contract, such as a default or delinquency in interest or principal payments;

• ·the ~~Issuer,~~issue, for economic or legal reasons relating to the borrower’s financial difficulty, grants to the borrower a concession that the lender would not otherwise consider;

• ·it becoming probable that the borrower will enter bankruptcy or other financial reorganization;

• ·the disappearance of an active market for that financial asset ~~due~~ because of ~~the~~ financial difficulties; or

• ·observable data indicating that there is a measurable decrease in the estimated future cash flows ~~based on~~from a portfolio of financial assets since the initial recognition of such assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

- adverse changes in the payment status of ~~the~~ borrowers in the portfolio;

- national or local economic conditions that correlate with defaults on the assets in the portfolio.

The amount of the loss is measured as the difference between the carrying amount of the asset and the present value of estimated future cash flows (excluding future credit losses that have not ~~yet~~ been incurred) discounted at the original effective interest rate of the financial asset. The carrying amount of the asset is reduced and the amount of the loss is recognized in the income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate to measure an impairment loss is the current effective interest rate determined pursuant to the contract. As a practical expedient, the Company ~~can~~may measure ~~the~~ impairment ~~based~~ on the ~~fair value~~basis of an ~~instrument~~instrument’s fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively ~~related~~ to an event ~~that occurred~~occurring after the impairment was recognized (such as an improvement in the debtor’s credit rating), the ~~reversal of the~~previously recognized impairment loss is reversed and recognized in the consolidated income statement.

·Assets classified as available-for-sale

CSN assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the Company uses the criteria mentioned above.

FS-19

In the case of equity ~~instruments (shares)~~securities classified as available-for-sale, a significant or prolonged decline in the fair value of ~~the security~~an investment in an equity instrument below its cost is also objective evidence ~~that~~of impairment.Determining what is considered a “significant” or “prolonged” decline requires judgment. For this judgment we assess, among other factors, the ~~assets are impaired.~~ historical changes in the equity prices, the duration and proportion in which the fair value of the investment is lower than its cost, and the financial health and short-term prospects of the business for the investee, including factors such as: industry and segment performance, changes in technology, and operating and financial cash flows.If there is any of this evidence of ~~this type for~~impairment of available-for-sale financial assets, the cumulative ~~loss –~~ loss—measured as the difference between the acquisition cost and the current fair value, less any impairment loss on the financial asset previously ~~recognized~~recorded in profit or ~~loss –~~ loss—is ~~removed~~reclassified from equity and recognized in the income statement. If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increases and the increase can be objectively related to an event ~~that occurred~~occurring after the impairment loss was recognized in profit or loss, the impairment loss is reversed through the income statement.

CSN tested for impairment its available-for-sale investment in Usiminas shares (see note 15).

iii)Financial liabilities

Financial liabilities are classified into the following categories: measured at fair value through profit or loss and other financial liabilities. Management determines the classification of its financial liabilities at the time of initial recognition.

~~iii)~~ ·Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss are financial liabilities held for trading or designated as at fair value through profit or loss.

Derivatives are also classified as trading securities, unless they have been designated as effective hedging instruments.

·Other financial liabilities

Other financial liabilities are measured at amortized cost using the effective interest method.

The Company holds the following non-derivative financial liabilities: borrowings, financing and debentures, and trade payables.

·Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the balance sheet when there is a legally enforceable right to set off recognized amounts and the intention to either settle them on a net basis or to realize the asset and settle the liability simultaneously.

iv)Derivative ~~financial~~ instruments and hedging activities

•~~Foreign exchange gain on foreign operations~~

Any gain or loss on the instrument related to the effective portion is recognized in capital. The gain or loss related to the ineffective portion is immediately recognized in the income statement under "Other gains (losses), net".

~~Gains and losses accumulated in equity are included in the income statement when the foreign operation is partially disposedof or sold.~~

~~FS-18~~

• Derivatives measured at fair value through profit or loss

~~Our~~

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any of these derivative instruments are immediately recognized in the income statement under ~~"Other~~“Other gains (losses), ~~net"~~net”. ~~Although~~Even though the Company uses derivatives for hedging purposes, it does not apply hedge accounting.

~~(v)~~ ·Foreign exchange gains or losses on foreign operations

Any gain or loss on the instrument related to the effective portion is recognized in equity. The gain or loss related to the ineffective portion is immediately recognized in the income statement under “Other gains (losses), net”.

Gains and losses accumulated in equity are included in the income statement when the foreign operation is partially disposed of or sold.

FS-20

(w)Segment information

An operating segment is a component of the Group committed to the business activities from which it can obtain revenues and incur expenses, including revenues and expenses related to transactions with any other components of the Group. All the operating results of operating segments are reviewed regularly by the Executive Officers of CSN to make decisions regarding funds to be allocated to the segment and assessment of its performance, and for which there is distinct financial information available (see Note ~~28)~~27).

~~(w)~~ (x)Government grants

Government grants are not recognized until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received, when they will be recognized in profit or loss on a systematic basis over the periods in which the Company recognizes as expenses the related costs ~~for which~~ the grants are ~~intended.~~intended to compensate.

The Company has state tax incentives in the North and Northeast regions that are recognized in profit or loss as a reduction of the corresponding costs, expenses and ~~expenses.~~taxes.

~~(x)~~ (y)New standards and interpretations ~~that have~~issued and not yet ~~been~~ adopted

Several ~~IFRS~~ standards, amendments ~~to standards~~ and IFRS interpretations issued by the IASB ~~are~~have not yet become effective for the year ended December 31, ~~2010,~~2011, as follows:

• Standard	Description	~~Limited exemption from Comparative~~ Effective date
Amendments to IFRS 7	Disclosures ~~for First-time Adopters;~~– Transfers of Financial Assets	July 1, 2011
• IFRS 9	Financial Instruments	~~Improvements to IFRS 2010;~~ January 1, 2013
• IFRS 10	Consolidated Financial Statements	~~IFRS 9 Financial Instruments;~~ January 1, 2013
• IFRS 11	Joint Arrangements	~~Prepayment of a minimum fund requirement (Amendment to IFRIC 14); and~~ January 1, 2013
• IFRS 12	Disclosure of Interests in Other Entities	January 1, 2013
IFRS 13	Fair Value Measurement	January 1, 2013
Amendments to IAS ~~32 Classification of rights issues.~~

~~The Company has not yet estimated the extent of the impact of these new standards on its financial statements.~~

~~3. RESTATEMENT OF THE 2008 AND 2009 FINANCIAL STATEMENTS~~

• ~~Restatement – Health Care Plan~~

Up to December 31, 2009, costs on the health care plan provided by the Company to former employees retired up to 1997 were recorded monthly as incurred, without any recognition of the constructive obligation resulting from probable future payments to be made.

Upon adoption of the IFRS and the detailed review of the policies and contracts that link some post-retirement payment to employees, a need to recognize the constructive obligation was identified. Therefore, the Company decided to make retrospective adjustments to the financial statements for 2008 and 2009 issued in accordance with USGAAP.

~~The balances of the accounts affected by the restatement as at January~~ 1 ~~2009 are as follows:~~

~~FS-19~~

~~The balances of the accounts affected by the restatement as at December 31, 2009 are as follows:~~

Published
(US$ thousand)

Exchange
rate

Published
(R$ thousand)

Adjustments
(R$ thousand)

Adjusted
(R$ thousand)

Adjusted
(US$ thousand)
Non-Current Assets

Deferred income tax and social contribution
152,189

1.7412

264,991

107,829

372,820

214,117
Non-Current Liabilities

Provision for pension fund - Post-employment benefits
-

1.7412

-

317,145

317,145

182,142
Equity
        4,263,762

1.7412

         7,424,062

(209,316)

      7,214,746

4,143,548
Income statement

Other income (expenses)
(46,854)

1.9935

          (93,403)

           (14,800)

      (108,203)

        (54,278)
Deferred income tax and social contribution
51,820

1.9935

        103,303

                5,032

         108,335

           54,344
Profit for the year
        1,280,778

1.9935

         2,553,231

             (9,768)

      2,543,463

      1,275,878

In addition, the statements of comprehensive income, changes in equity, cash flows and value added, as well as Note 30 (Employee Benefits), Note 10 (Deferred Income Tax and Social Contribution) and Note 4.4 (Equity) have been adjusted to show the book balances and disclosures after the corrections mentioned in the paragraph and tables above.

~~4. TRANSITION TO IFRS~~

~~4.1. Application of the first-time adoption of IFRS~~

As disclosed in Note 2(a), the consolidated financial statements for the year ended December 31, 2010 are the first annual consolidated financial statements in conformity with IFRS. The Company has applied IFRS 1 in preparing these consolidated financial statements.

~~The transition date is January 1, 2009. Management has prepared the opening balance sheets in accordance with IFRS at that date, pursuant to the accounting policies defined in Note 2.~~

~~In preparing these financial statements, the Company applied the relevant mandatory exceptions and certain optional exemptions in relation to full retrospective application.~~

In preparing its opening balance sheet under IFRS, as mentioned in Note 3, the Company adjusted the amounts previously presented in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which are the accounting practices for the previously published consolidated financial statements in our annual report on Form 20-F.

~~4.2. Exemptions from some requirements of other IFRS~~

~~FS-20~~

~~The Company elected to apply the following exemptions in relation to retrospective application of other IFRS, in accordance to IFRS 1:~~

~~(a) Exemption from requirements for employee benefits – Defined benefit plan~~

~~The Company elected to recognize all the past actuarial gains and losses up to the transition date against the retained earnings account. The application of this exemption is detailed in Note 30.~~

~~(b) Exemption from requirements for business combination in accordance with IFRS 3~~

~~(c) Exemption from requirements for fair value as deemed cost of property, plant and equipment:~~

The Company elected not to measure its property, plant and equipment and intangible assets at fair value at the transition date, maintaining them at their historical costs of acquisition, adjusted by inflation indices through December 31, 1997, in conformity with standards IAS 21 and IAS 29. The application of this exemption is detailed in Note 14.

~~4.3. Explanation of the transition to IFRS~~

~~(a) Business combinations~~

As previously mentioned, the Company elected not to remeasure the business acquisitions that occurred prior to January 1, 2009, according to the business combination exemption permitted by IFRS 1. Acquisitions subsequent to January 1, 2009 have been recognized in accordance with IFRS 3, “Business Combinations”.

~~(b) Deferred charges~~

~~With respect to the pre-operating expenses recorded prior to the transition date, the Company elected to recognize the net balance in retained earnings at the transition date.~~

Up to December 31, 2008, the Company adopted as accounting practice the capitalization of pre-operating expenditures in the group of deferred charges. Pre-operating expenditures that were not attributed to the cost of property, plant and equipment items or the formation of intangible assets were immediately expensed.

~~Part of the expenditures previously recorded as deferred charges related to pre-operating expenditures attributable to the cost of certain assets has been allocated to property, plant and equipment.~~

~~(c) Deferred taxes~~

The deferred income tax is recognized based on the estimated future effect of temporary differences and income tax and social contribution tax loss carryforwards. A deferred income tax liability is recognized for all temporary tax differences, while a deferred income tax asset is recognized only to the extent that it is probable that future taxable profit will be available against which the deductible temporary difference can be utilized. Deferred tax assets and liabilities are classified as long-term. Tax assets and liabilities are offset if the entity has a legally enforceable right to offset them and they are related to taxes levied by the same taxing authority. If the criterion for offset of current tax assets and liabilities is met, deferred tax

~~FS-21~~

~~assets and liabilities will also be offset. The income tax related to items recognized directly in equity in the current period or in a prior period is recognized directly in the same account.~~

~~(d) Property, plant and equipment~~

~~i. Cost~~

• ~~Option for adoption of historical cost~~

The Company did not elect to use the deemed cost for measuring its property, plant and equipment, due to the fact that its property, plant and equipment as presented in accordance with previous accounting practices already met in a material manner the main requirements for recognition, measurement and presentation under IAS 16, based principally on the fact that: (i) the internal controls in the area of property, plant and equipment already included at the transition date (January 1, 2009) periodic reviews as to the best estimate of useful life and residual value of the main classes of its property, plant and equipment; (ii) the procedures in place for measurement of property, plant and equipment under previous accounting practices were reviewed and confirmed as to the compliance with the measurement requirements of IAS 16, including, but not limited to, regarding non-recording of foreign exchange gains (losses), non-indexation in periods in which Brazil’s economy was considered hyper-inflationary, etc; and (iii) the segmentation and classification of the main items of the property, plant and equipment subject to depreciation already took into consideration the impacts of differentiated depreciation of the main components of the property, plant and equipment.

Moreover, the Company’s Management believes that the accounting practice of measuring property, plant and equipment at historical cost less the best estimate of depreciation and the provision for impairment, when required, is an accounting practice that best reflects its property, plant and equipment.

• ~~Hyper-inflation during 1996 and 1997~~

The accounting for hyper-inflation, in accordance with previous BR GAAP, was applied in line with IAS 29 during the period in which Brazil was classified as a hyper-inflationary economy, for local purposes, through 1995. However, in accordance with IFRS, the Brazilian economy still met the definition of hyper-inflationary in 1996 and 1997. The effect of the recognition of these two additional years has been reflected in the transition adjustments.

• ~~Loans costs~~

Property, plant and equipment are stated at cost, including capitalized interest incurred during the construction of new facilities. Foreign exchange gains (losses) on loans denominated in foreign currency are capitalized to property, plant and equipment when they reflect an adjustment in the interest rate.

~~ii. Depreciation~~

~~(e) Earnings per share~~

~~The calculation of basic and diluted earnings per share (EPS) is required for entities with shares, or potential shares, traded on a stock exchange.~~

~~FS-22~~

~~Basic EPS are the amounts for profit or loss attributable to equity holders of the Parent Company in the period, divided by the weighted average number of shares outstanding.~~

Diluted EPS are calculated by adjusting the numerator used in calculating basic EPS and the average number of shares outstanding (denominator) for the effects all potential dilutive shares outstanding. CSN does not have any instruments that are potentially convertible into shares with a diluting effect in the reported periods and, therefore, diluted earnings per share are equal to basic earnings per share.

The data for the current period and prior periods for basic and diluted EPS are adjusted for those transactions that do not involve the conversion of potential shares that change the number of shares without a corresponding change in equity. Basic and diluted EPS also are adjusted for bonus issues and share splits or reverse share splits that occur after the end of the reporting period, but prior to the authorization for issue of the financial statements. The number of shares is adjusted as if the event had occurred at the beginning of the first reported period.

~~(f) Dividends and interest on shareholders’ equity~~

Dividends proposed or declared after the end of the reporting period, but prior to the authorization for issue of the financial statements, should not be recognized as liabilities, unless they meet the definition of liabilities at the end of the reporting period.

~~(g) Reclassifications~~

~~Under IFRS, the following reclassifications to the consolidated financial statements have also been made:~~

~~i. Reclassifications in the balance sheet between BR GAAP and IFRS:~~

•~~Judicial deposits are presented as an item of non-current assets and not net of the provisions for contingencies;~~
•~~Restricted accounts are classified as judicial deposits;~~
•~~Taxes recoverable and payable are presented at their net amounts;~~
•~~Deferred taxes are reclassified as non-current;~~
•~~Deferred tax assets and liabilities will be offset only when the entity has a legally enforceable right to do so and if they are related to taxes levied by the same taxing authority.~~

~~ii. Reclassifications in the income statement between BR GAAP and IFRS:~~

•~~Finance income (expenses) is presented after operating profit in finance income (expenses), net.~~

~~FS-23~~

~~4.4. Reconciliation of the consolidated financial statements adjusted to IFRS with those previously disclosed~~

~~i. Balance Sheet as at January 1, 2009~~

1/1/2009

BRGAAP Published
BRGAAP Republished
IFRS

IFRS

Reclassifications
Adjustments

ASSETS

Current assets
18,352,070

      18,352,070

             (432,746)

       25,181

       17,944,505
Cash and cash equivalents
   9,151,409

         9,151,409

         9,151,409
Trade accounts receivable
   1,086,557

         1,086,557

         1,086,557
Inventories
   3,622,775

         3,622,775

      (1,526)

         3,621,249
Income tax and social contribution for offset
     128,055

            128,055

            128,055
Deferred income tax and social contribution
     739,227

            739,227

             (739,227)


Proposed dividends receivable
        42,890

              42,890

       26,707

              69,597
Guarantee margin for financial instruments
  2,570,050

         2,570,050

         2,570,050
Other current assets
   1,011,107

         1,011,107

               306,481

         1,317,588
Non-current Assets
13,145,369

      13,236,131

            2,113,702

    (41,942)

       15,307,891
Long-term receivables
       2,490,802

        2,581,564

                2,113,702

            12,483

         4,707,749
Deferred income tax and social contribution
     753,831

            844,593

               739,227

       13,085

         1,596,905
Recoverable taxes
      302,831

            302,831

            302,831
Judicial deposits
      740,341

            740,341

            1,366,910

         2,107,251
Trade accounts receivable
      376,374

            376,374

         (602)

            375,772
Prepaid expenses
      125,011

            125,011

            125,011
Other
      192,414

            192,414

                   7,565

            199,979
Investments in affiliated companies and other investments
         1,512

               1,512

                1,512
Property, plant and equipment
10,083,777

      10,083,777

                 21,708

    (33,651)

       10,071,834
Intangible assets
      526,796

           526,796

            526,796
Deferred charges
        42,482

              42,482

               (21,708)

    (20,774)


TOTAL ASSETS
31,497,439

      31,588,201

            1,680,956

    (16,761)

         3,252,396

SHAREHOLDERS EQUITY AND LIABILITIES

Current Liabilities
   9,633,228

        9,633,228

               320,243

(459,108)

         9,494,363
Trade accounts payable
   1,939,205

        1,939,205

         1,939,205
Loans and financing
   2,916,759

        2,916,759

               340,868

         3,257,627
Debentures
       44,428

             44,428

              44,428
Payroll and related charges
     117,994

           117,994

            117,994
Taxes payable
      333,811

           333,811

            333,811
Taxes payable in installments
      249,930

           249,930

            249,930
Provision for pension fund
        54,818

             54,818

               (54,818)


Dividends payable
   1,790,642

        1,790,642

(459,108)

         1,331,534
Provisions for tax, social security, labor and civil risks
       91,710

             91,710

                 69,434

            161,144
Equity swap financial instruments
   1,596,394

        1,596,394

         1,596,394
Other
      497,537

           497,537

               (35,241)

            462,296
Non-current Liabilities
15,201,622

      15,468,569

            1,360,713

    (18,000)

       16,811,282
Loans and financing
   8,040,773

       8,040,773

                   7,565

         8,048,338
Debentures
      632,760

            632,760

            632,760
Provisions for tax, social security, labor and civil risks
  2,450,126

         2,450,126

            1,297,475

         3,747,601
Provision for environmental risks
        71,425

              71,425

                 14,224

              85,649
Deferred income tax and social contribution

                     855

1,326

                2,181
Taxes payable in installments
      795,052

            795,052

            795,052
Amounts due to related parties
  2,878,200

         2,878,200

         2,878,200
Employee benefits
        62,750

            329,697

                 54,818

(20,375)

            364,140
Other
      270,536

            270,536

               (14,224)

1,049

            257,361
Shareholders Equity
   6,662,589

        6,486,404



460,347

         6,946,751
Common stock
   1,680,947

         1,680,947

         1,680,947
Capital reserve
               30

                     30

                     30
Earnings reserve
   3,682,865

         3,682,865

                 85,891

485,816

         4,254,572
Additional dividends proposed

485,816

            485,816
Other
   3,682,865

         3,682,865

85,891

         3,197,049
Retained earnings

         (176,185)

1,212,855

(24,866)

         1,011,804
Carrying value adjustment
   1,298,747

        1,298,747

(1,298,746)

(603)

                 (602)
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES
31,497,439

       31,588,201

1,680,956

(16,761)

      33,252,396

~~FS-24~~

~~ii. Reconciliation of shareholders equity BRGAAP x IFRS as at January 1, 2009~~

	Presentation of Items of Other Comprehensive Income	~~Note~~	~~1/1/2009~~July 1, 2012
~~Shareholders equity in accordance with BRGAAP~~Amendments to IAS 12	Deferred Taxes - Recovery of Underlying Assets		~~6,486,404~~ January 1, 2012
~~IFRS adjustments:~~IAS 19 (revised in 2011)	Employee Benefits		January 1, 2013
~~Deferred charges~~IAS 27 (revised in 2011)	Separate Financial Statements	~~4.3 b~~	~~(44,113)~~ January 1, 2013
~~Capitalized exchange gains (losses)~~IAS 28 (revised in 2011)	Investments in Associates and Joint Ventures	~~4.3 d~~	~~(194,368)~~ January 1, 2013
~~Inflation adjustment for hyperinflationary period~~IFRIC 20	Stripping Costs in the Production Phase of a Surface Mine	~~4.3 d~~	~~180,635~~
~~Depreciation~~		~~4.3 d~~	~~637~~
~~Excess dividends (mandatory minimum)~~		~~4.3 f~~	~~485,816~~
~~Pension plan - Private~~		~~4.2 a~~	~~50,035~~
~~Pension plan - Health care plan~~		~~4.2 a~~	~~(29,661)~~
~~Deferred income tax and social contribution on IFRS adjustments~~		~~4.3 c~~	~~11,759~~
~~Other adjustments, net~~			~~(393)~~
~~Shareholders equity in accordance with IFRS~~			~~6,946,751~~

~~FS-25~~

~~iii. Balance Sheet as at December 31, 2009~~

12/31/2009

BRGAAP Published
BRGAAP Republished
IFRS

IFRS

Reclassifications

Adjustments

ASSETS

Current Assets
13,568,594

   13,568,594

                (749,273)

         16,152

12,835,473
Cash and cash equivalents
     7,970,791

       7,970,791

       7,970,791
Trade accounts receivable
     1,186,315

         1,186,315

       1,186,315
Inventories
     2,588,946

         2,588,946

                         (35)

              16,462

       2,605,373
Income tax and social contribution for offset
        398,172

            398,172

          398,172
Deferred income tax and social contribution
        749,272

            749,272

                (749,272)


Other current assets
        675,098

            675,098

                            34

                (310)

        674,822
Non-current Assets
15,598,630

   15,695,676

                2,241,576

        (47,222)

17,890,030
Long-term receivables
   3,640,162

     3,737,208

                2,241,573

         (1,559)

    5,977,222
Deferred income tax and social contribution
     1,112,299

         1,209,345

                   749,272

             (1,559)

       1,957,058
Recoverable taxes
        236,852

            236,852

          236,852
Judicial deposits
     1,214,670

         1,214,670

                1,492,301

       2,706,971
Trade accounts receivable
        212,486

            212,486

          212,486
Receivables from subsidiaries
        479,120

            479,120

          479,120
Prepaid expenses
        105,921

            105,921

          105,921
Other
        278,814

            278,814

          278,814
Investments in affiliated companies and other investments
       321,889

         321,889

                13

       321,902
Property, plant and equipment
11,145,530

   11,145,530

                     17,846

       (30,029)

11,133,347
Intangible assets
      457,580

        457,580

               (21)

       457,559
Deferred charges
          33,469

              33,469

                  (17,843)

           (15,626)


TOTAL ASSETS
   29,167,224

       29,264,270

                1,492,303

           (31,070)

   30,725,503

SHAREHOLDERS EQUITY AND LIABILITIES

Current Liabilities
   5,128,196

     5,128,196

                     48,897

   (1,179,027)

    3,998,066
Trade accounts payable
      504,223

        504,223

       504,223
Loans and financing
   1,160,407

     1,160,407

                  (77,146)

    1,083,261
Debentures
        30,659

          30,659

         30,659
Amounts due to related parties
        80,062

          80,062

         80,062
Payroll and related charges
        134,190

          134,190

       134,190
Taxes payable
        336,804

          336,804

       336,804
Taxes payable in installments
        582,190

          582,190

       582,190
Provision for pension fund
          57,158

            57,158

                  (57,158)


Dividends payable
     1,562,085

       1,562,085

    (1,179,006)

       383,079
Provisions for tax, social security, labor and civil risks
          83,462

            83,462

                   106,055

       189,517
Other
        596,956

          596,956

                     77,146

                 (21)

       674,081
Non-current Liabilities
   18,445,535

     18,730,965

                1,443,406

          (36,444)

     20,137,927
Loans and financing
   12,547,840

     12,547,840

                  (18,729)

     12,529,111
Debentures
        624,570

            624,570

          624,570
Provisions for tax, social security, labor and civil risks
     1,452,422

         1,452,422

                1,386,248

       2,838,670
Provision for environmental risks
        116,544

            116,544

                     15,524

          132,068
Deferred income tax and social contribution
          28,325

              28,325

                1,715

            30,040
Taxes payable in installments
        437,231

            437,231

          437,231
Amounts due to related parties
     2,980,772

         2,980,772

       2,980,772
Employee benfits
          12,788

            298,218

                     57,158

           (38,231)

          317,145
Other
        245,043

            245,043

                       3,205

                     72

          248,320
Shareholders Equity attributed to CSN
     5,510,433

       5,322,049



       1,184,401

       6,506,450
Share capital
     1,680,947

         1,680,947

       1,680,947
Capital reserve
                 30

                     30

                   30
Earnings reserve
     4,211,770

         4,211,770

                     54,200

         1,178,635

       5,444,605
Additional dividends proposed
-

-

         1,178,635

       1,178,635
Other
     4,211,770

         4,211,770

                     54,200

       4,265,970
Retained earnings

         (188,384)

                   150,604

                4,363

          (33,417)
Carrying value adjustment
      (382,314)

       (382,314)

               (204,804)

              1,403

       (585,715)
Non-controlling interests
          83,060

            83,060

            83,060
Shareholders equity
     5,593,493

       5,405,109



       1,184,401

       6,589,510

TOTALSHAREHOLDERS EQUITY AND LIABILITIES
29,167,224

     29,264,270

                1,492,303

           (31,070)

     30,725,503

~~FS-26~~

~~iv. Reconciliation of equity BRGAAP x IFRS as at December 31, 2009~~

	~~Note~~	~~12/31/2009~~
~~Shareholders equity in accordance with BRGAAP~~		~~5,405,109~~
~~IFRS adjustments:~~
~~Deferred charges~~	~~4.3 b~~	~~(37,163)~~
~~Capitalized exchange gains (losses)~~	~~4.3 d~~	~~(173,145)~~
~~Inflation adjustment for hyperinflationary period~~	~~4.3 d~~	~~164,323~~
~~Depreciation~~	~~4.3 d~~	~~637~~
~~Excess dividends (mandatory minimum)~~	~~4.3 f~~	~~1,178,635~~
~~Pension plan~~		~~69,947~~
~~Pension plan - Health care plan~~		~~(31,714)~~
~~Deferred income tax and social contribution on IFRS adjustments~~	~~4.3 c~~	~~(3,277)~~
~~Other adjustments, net~~		~~16,158~~
~~Shareholders equity in accordance with IFRS~~		~~6,589,510~~

~~v. Income statement for the year ended December 31, 2009~~

12/31/2009

BRGAAP Published
BRGAAP Republished
IFRS adjustments
IFRS
Net operating revenues
10,978,364

10,978,364



      10,978,364
Cost of Products sold
(7,045,504)

(7,045,504)

          23,385

     (7,022,119)
Depreciation, depletion and amortization
   (751,266)

   (751,266)

             4,102

         (747,164)
Other
(6,294,238)

(6,294,238)

           19,283

      (6,274,955)
GROSS PROFIT
   3,932,860

   3,932,860

           23,385

        3,956,245
Operating Expenses/Income
   (400,455)

   (412,480)

           17,467

         (395,013)
Selling
   (635,784)

   (635,784)



         (635,784)
Depreciation and amortization
       (6,250)

       (6,250)

             (6,250)
Other
   (629,534)

   (629,534)

         (629,534)
General and administrative
   (483,067)

   (483,067)

             2,995

         (480,072)
Depreciation and amortization
     (29,733)

     (29,733)

             2,995

           (26,738)
Other
   (453,334)

   (453,334)

         (453,334)
Other operating income
   1,416,756

   1,416,756

               (21)

        1,416,735
Other operating expenses
   (698,360)

   (710,385)

          14,480

         (695,905)
Equity in results of affiliated companies
-

-

                 13

                    13
OPERATING INCOME
   3,532,405

   3,520,380

           40,852

        3,561,232
Finance income (expenses)
   (246,435)

(246,435)



         (246,435)
Finance income
      586,025

      586,025

           586,025
Finance expenses
   (832,460)

   (832,460)



         (832,460)
Inflation adjustment and foreign exchange gains (losses), net
   1,060,055

   1,060,055

        1,060,055
Finance costs
(1,892,515)

(1,892,515)

      (1,892,515)
INCOME BEFORE INCOME TAXES
   3,285,970

   3,273,945

           40,852

        3,314,797
Current income tax and social contribution
   (581,735)

   (581,735)

         (581,735)
Deferred income tax and social contribution
   (109,323)

   (103,993)

        (13,888)

         (117,881)
Deferred income tax
     (83,497)

     (79,578)

        (10,211)

           (89,789)
Deferred social contribution
     (25,826)

     (24,415)

          (3,677)

           (28,092)
Net incomeattributable to:
   2,594,912

   2,588,217

           26,964

        2,615,181

Companhia Siderúrgica Nacional
  2,598,665

   2,591,970

        2,618,934
Noncontrolling interests
       (3,753)

       (3,753)

             (3,753)

~~FS-27~~

~~vi. Reconciliation of profit BRGAAP x IFRS for the year ended December 31, 2009~~

	~~Note~~	~~2009~~
~~Net income in accordance with BR GAAP~~		~~2,588,217~~
~~IFRS adjustments:~~
~~Deferred assets~~	~~4.3 b~~	~~7,519~~
~~Capitalized exchange gains (losses)~~	~~4.3 d~~	~~23,545~~
~~Inflation adjustment for hyperinflationary period~~	~~4.3 d~~	~~(16,312)~~
~~Pension plan~~	~~4.2 a~~	~~14,481~~
~~Deferred income tax and social contribution on IFRS adjustments~~	~~4.3 c~~	~~(13,887)~~
~~Other adjustments, net~~		~~11,618~~
~~Net income in accordance with IFRS~~		~~2,615,181~~

~~vii. Reconciliation of cash flows BRGAAP x IFRS for the year ended December 31, 2009~~

2009

BRGAAP Published
BRGAAP Republished
IFRS adjustments
IFRS
Cash flows from operating activities:

Profit for the year
2,594,912

2,588,217

26,964

2,615,181
Adjustments to profit for the year

to cash provided by operating activities:

- Inflation adjustment and exhcange gains (losses), net
(2,024,573)

(2,024,573)

(2,024,573)
- Provision for charges on borrowings and financing
1,130,089

1,130,089

1,130,089
- Depreciation/depletion/amortization
787,249

787,249

(7,097)

780,152
- Gain (loss) on disposal of assets
70,494

70,494

70,494
- Gains (losses) on change in percentage equity interest
(835,115)

(835,115)

(835,115)
- Deferred income tax and social contribution
109,324

103,994

13,887

117,881
- Provision for losses on trade receivables
1,527

1,527

1,527
- Provision for actuarial liabilities - CBS
(47,622)

(47,622)

(47,622)
- Provision for swap transactions
(88,986)

(88,986)

(88,986)
- Provision for contingencies
99,157

99,157

99,157
- Other provisions
437,994

450,019

(33,754)

416,265

2,234,450

2,234,450



2,234,450
- Trade accounts receivable
(51,082)

(51,082)

(51,082)
- Inventories
926,260

926,260

          926,260
- Taxes for offset
(313,697)

(313,697)

        (313,697)
- Taxes payable
263,734

263,734

          263,734
- Taxes payable in installments - Refis program
(103,775)

(103,775)

        (103,775)
- Trade accounts payable
(1,137,203)

(1,137,203)

     (1,137,203)
- Payroll and payroll taxes
15,257

15,257

            15,257
- Contingent liabilities
(422,375)

(422,375)

        (422,375)
- Judicial deposits
(737,041)

(737,041)

        (737,041)
- Interest paid
(992,280)

(992,280)

        (992,280)
- Interest paid on swap transactions
(742,700)

(742,700)

        (742,700)
- Other
287,433

287,433

          287,433
Changes in assets and liabilities
(3,007,469)

(3,007,469)



     (3,007,469)
Net cash provided by operating activities
(773,019)

(773,019)



        (773,019)

- Net effects of equity swap
1,420,322

1,420,322

       1,420,322
- Swap transactions carried out
248,966

248,966

          248,966
- Investments
(284,232)

(284,232)

        (284,232)
- Property, plant and equipment
(1,996,759)

(1,996,759)

     (1,996,759)
- Intangible assets
                (5,628)

(5,628)

            (5,628)
Net cash used in investing activities
           (617,331)

(617,331)



        (617,331)

- Loans and financing
           7,671,696

7,671,696

       7,671,696
- Interest on shareholders’ equity
          (2,027,600)

(2,027,600)

     (2,027,600)
- Treasury shares
          (1,350,307)

(1,350,307)

     (1,350,307)
- Financial institutions - principal
(2,783,313)

(2,783,313)

(2,783,313)
Net cash used in financing activities
            1,510,476

1,510,476



       1,510,476

Exchange gains (losses) on cash and cash equivalents
          (1,300,744)

(1,300,744)

     (1,300,744)

Increase (decrease) in cash and cash equivalents
          (1,180,618)

(1,180,618)



     (1,180,618)
Cash and cash equivalents at beginning of year
             9,151,409

9,151,409

       9,151,409
Cash and cash equivalents at end of year
            7,970,791

7,970,791



       7,970,791

~~FS-28~~

~~4.5. Additional reconciliation between US GAAP and IFRS~~

~~Reconciliations between the U.S. GAAP and IFRS figures presented in the consolidated financial statements as of December 31, 2009 and as of January 1, 2009.~~

~~I. Summary of main differences between U.S. GAAP and IFRS.~~

~~a) Exchange variation on foreign operations~~

Under U.S. GAAP and IFRS, part of the net investment in a foreign operation must be long-term in nature. The parties to the transaction can include not only the parent and / or any subsidiaries of the group, but also equity-method investees (affiliated companies). Loan payable to a subsidiary that the parent does not intend to repay is similar to a capital distribution, which reduces the parent’s net investment in the subsidiary. Therefore, we have compared the amount payable to subsidiaries with the net equity of these entities. Unlike IFRS, under US GAAP, the excess of such balances did not meet the definition of net investment and, consequently, the corresponding foreign exchange effect of this piece of the payable has to be recognized in the statement of income.

~~b) Pension plan~~

~~US GAAP, in accordance with “SFAS 158”, included in ASC Subtopic 715-20,~~~~Compensation - Retirement Benefits - Defined Benefit Plans -General~~, requires an entity to recognize in its statement of financial position the overfunded or underfunded status of its defined benefit employee pension and postretirement plans, measured as the difference between the fair value of the plan assets and the benefit obligation. “SFAS 158” (ASC Subtopic 715-20) also requires an entity to recognize changes in the funded status of a defined benefit employee pension or postretirement plan within accumulated other comprehensive income, net of tax, to the extent such changes are not recognized in earnings as components of periodic net benefit cost.

According to IFRS the asset resulting from the actuarial valuation was not recorded by the Company since there is no clear evidence of its realization, in accordance with IAS 19 – Employee benefits.

~~c) Business combination (Goodwill)~~

According to US GAAP, goodwill represents the difference between the amount paid and the carrying amount attributed to the net assets acquired; however, goodwill is the difference calculated between the net fair value of the assets acquired and liabilities assumed, including intangible assets.

The Company applied the exemption relating to the standard for business combinations described in IFRS 1 and, accordingly, elected not to remeasure and restate the business combinations that occurred prior to January 1, 2009, the transition date. Accordingly, the goodwill for IFRS purposes corresponds to the amount recorded in BR GAAP and amortized until December 31, 2008.

~~d) US GAAP differences in equity method investees~~

According to U.S. GAAP, the Company used the equity method of accounting for all long-term investments for which it owns at least 20% of the investee’s outstanding voting stock or has the ability to exercise significant influence over operating and financial policies of the investee. Investments in which the Company has a majority interest, but, through shareholders’ agreements, does not have effective management control are also accounted for under the equity method. Under IFRS, the Company uses proportionate consolidation for jointly controlled entities, thereby resulting in non-controlling results, using thegross method. The difference between previous accounting practice and IFRS in investees refers mainly to business combination adjustments.

~~FS-~~29

e)~~Minimum dividends liability~~

According to US GAAP and IFRS, dividends proposed or declared after the end of the reporting period, but prior to the authorization for issue of the financial statements, should not be recognized as liabilities, unless they meet the definition of liabilities at the end of the reporting period.

The Brazilian Securities and Exchange Commission (CVM) Resolution 624, issued in January 2010, determined that the exchange rate variations of monetary items characterized as net investment in a foreign operation should be recognized within equity in the parent company financial statements, with application on December 31, 2009 and retrospectively to the year 2008. Previously, those effects were required to be recognized only in the consolidated financial statements resulting in a difference between net income at the consolidated financial statements and the net income for statutory purposes (the latter is the basis for the determination of minimum dividends). Therefore, due to the change in Company’s statutory net income of 2008, in the IFRS financial statements there was a reclassification of the additional minimum dividends which were recognized as a liability in the opening balance, without changing the total dividends distributed for that year.

~~f) Deferred taxes~~

The tax effect of the adjustments included in the reconciliation of net income and shareholders’ equity from IFRS to US GAAP is calculated by applying the applicable tax rate to the pretax adjustments where such adjustments have a tax effect. The applicable tax rate is the tax rate expected to apply at the time the temporary difference will reverse based on the specific tax jurisdiction in which the reversal will occur.

~~II. Reconciliation of net income under IFRS x U.S. GAAP for the year ended December 31, 2009.~~

		~~12/31/2009~~
~~Net income in accordance with IFRS~~		~~2,615,181~~January 1, 2013

These standards, amendments and interpretations are effective for annual reporting periods beginning on or after 2012 and 2013 and were not used in preparing these financial statements. No material impact of these new Standards on the Group’s financial statements are expected, except for IFRS 9Financial Instruments, which can change the classification and measurement of the financial assets held by the Group, IFRIC 20Shipping Costs in the Production Phase of a Surface Mine, which can impact the accounting of waste stripping in non-current assets, and IFRS 10, IFRS 11 and IFRS 12, which can impact the entities currently consolidated and/or proportionately consolidated by the Group. The Company does not expect to early adopt this standard and its impact has not yet been measured.

3.BUSINESS COMBINATION

FS-21

On July 12, 2011, CSN conducted, through its wholly-owned subsidiary “Prada”, a capital increase in Companhia Brasileira de Latas (“CBL”) through the capitalization of receivables. As a result, the Company became the holder of CBL’s control, with an equity interest equivalent to 59.17% of its voting capital, represented by 784,055,451 common shares (“Acquisition”).

The acquisition of CBL’s control will generate operating and administrative synergies that will result in a decrease in production costs, logistics costs, and administrative costs.

As mentioned in Note 2(i), the acquisition method was used to account for identifiable assets acquired, liabilities assumed, and non-controlling interests. Non-controlling interests in CBL equivalent to 40.83% were proportionately determined, based on the fair value of identifiable assets acquired and liabilities assumed. Some of the non-controlling shareholders are in the corporate structure of CSN’s parent group.

The purchase price of R$43,316 was allocated between identified assets acquired and liabilities assumed, measured at fair value. In the asset and liability identification process were considered the intangible assets that were not recognized in the acquirees’ books. The transaction costs are represented by consulting services and lawyers’ fees totaling R$485, which have been allocated to profit or loss as incurred.

The tables below show the allocation of identifiable assets acquired and liabilities assumed recognized at the acquisition date, the purchase price considered on the acquisition of CBL’s control, and the calculation of the resulting goodwill.


Assets acquired and liabilities assumed	Carrying amounts	Adjustments to fair value	Total fair value
Current assets	62,182	(7,465)	54,717
Non-current assets (*)	44,718	89,449	134,167
Current liabilities	(144,225)	10,522	(133,703)
Non-current liabilities (**)	(567,469)	351,035	(216,434)
Total assets acquired and liabilities assumed	(604,794)	443,541	(161,253)

(*) Comprising mainly the fair value adjustment to property, plant and equipment amounting to R$90,572. Total fair value of property, plant and equipment was measured at R$123,518.

(**) Comprising mainly the fair value adjustment to receivables from CSN amountingto R$388,640.

The fair value adjustments made based on the corporate balance sheet to prepare the opening balance sheet were adjusted after the completion of the valuation report in December 2011.

~~Exchange variation onforeign operations~~	~~4.5.a~~	~~(137,046)~~
~~Business combination (Goodwill)~~	~~4.5 c~~	~~23,137~~
~~US GAAP differences in equity method investees~~	~~4.5.d~~	~~37, 669~~
~~Deferred taxes~~	~~4.5 f~~	~~(12,807)~~
~~Other~~		~~17,329~~
~~Net income in accordance with U.S. GAAP (Restated - note 3)~~Goodwill arising on acquisition		~~2,543,463~~
~~Post-employment health benefits adjustments~~	~~Note 3~~	~~9,768~~
~~Net income in accordance with U.S. GAAP~~ (-) Book value of CBL		(604,794)
(+) Fair value adjustments to assets acquired and liabilities assumed		443,541
(=) Total fair value of assets acquired and liabilities assumed		(161,253)

~~2,553,231~~Purchase price considered		43,316

(=) Goodwill arising on acquisition		204,569

~~III. Reconciliation~~

Goodwill arising on the acquisition comprises mainly the expected synergies generated by the business combination of ~~shareholders’ equity~~Prada Embalagens with CBL, as described in note 13.

The business combination with Companhia Brasileira de Latas, which took place on July 12, 2011, is under ~~IFRS x U.S. GAAP as~~review of ~~January 1, 2009 and December 31, 2009.~~Conselho Administrativo de Defesa Econômica, or CADE, (Brazilian antitrust agency).

12/31/2009

01/01/2009
Shareholders’ equityin accordance withIFRS

    6,589,510

     6,946,751

Dividends
4.5 e
-

               324,233
Pension plan
4.5 b
         516,746

              (128,306)
Business combination (Goodwill)
4.5 c
            179,645

               156,508
US GAAP differences in equity method investees
4.5 d
               158,269

               230,359
Deferred taxes
4.5 f
                   (229,505)

                 46,923
Other

81

               (23,469)
Shareholders’ equityin accordance with U.S. GAAP (Restated - note 3)

            7,214,746

          7,552,999
Post-employment health benefits adjustments
Note 3
                209,316

               195,762
Shareholders’ equityin accordance with U.S. GAAP

            7,424,062

          7,748,761

~~FS-30~~

4.RELATED-PARTY BALANCES AND TRANSACTIONS

~~5. TRANSACTIONS WITH RELATED PARTIES~~

a)Transactions with Holding Company

Vicunha Siderurgia S.A. is a holding company set up for the purpose of holding equity interests in other ~~companies. It~~companies and is the Company’s ~~principal~~main shareholder, ~~holding~~with 47.86% of the voting shares.

On December 27, 2010, Rio IACO acquired 58,193,503 shares of Caixa Beneficente dos Empregados da CSN ~~distributed dividends~~(“CBS”) and ~~paid interest on shareholders’ equity to Vicunha Siderurgia in the amount indicated in the following table, according to the percentage equity interest held by Vicunha Siderurgia in CSN, at the end~~currently holds 3.99% of CSN’s issued capital, and became part of the ~~reporting period.~~control group.

Company

Mandatory minimum dividend
Proposed interest on shareholders’ equity
Dividends paid
Interest on shareholders’ equity paid
Additional dividends proposed

Total in 2010

130,701

170,813

717,834

33,499

587,524
Total in 2009

153,805

153,121

689,747

243,060

564,095

~~The ownership structure of~~

·Liabilities


					Paid
Companies	Mandatory minimum dividend	Proposed additional dividend	Proposed interest on capital	Total	Dividends	Interest on capital
Vicunha Siderurgia	443,386	130,881		574,267	717,835	170,746
Rio Iaco	36,981	10,916		47,897	59,871	14,241
Total at 12/31/2011	480,367	141,797		622,164	777,706	184,987
Total at 12/31/2010	141,174	636,509	184,985	962,668	717,834	33,499

Vicunha ~~Siderurgia~~Siderurgia’s corporate structure is as follows (unaudited information):

Vicunha Aços S.A. – holds 99.99% of Vicunha Siderurgia S.A.

Vicunha Steel S.A. – holds 66.96% of Vicunha Aços S.A.

National Steel S.A. – holds 33.04% of Vicunha Aços S.A.

CFL Participações S.A. – holds 40% of National Steel S.A. and 39.99% of Vicunha Steel S.A.

Rio Purus Participações S.A. – holds 60% of National Steel ~~and~~S.A., 59.99% of Vicunha Steel S.A.

~~CFL~~ and 99.99% of Rio Iaco Participações S.A. ~~– holds 40% of National Steel and 39.99% of Vicunha Steel S.A.~~

~~National Steel – holds 33.04% of Vicunha Aços~~

~~Vicunha Steel – holds 66.96% of Vicunha Aços~~

~~Vicunha Aços – holds 99.99% of Vicunha Siderurgia~~

b)Transactions with ~~jointly-controlled subsidiaries~~jointly controlled entities

The Company’s strategic areas of mining, logistics and energy maintain equity interests in companies under joint control. The characteristics, objectives and transactions with these companies are as ~~follows:~~follows. The consolidated information is presented according to the criteria set out in note 2.

•·Assets

Companies

Trade receivables

Intercompany loans (*)

Total
Nacional Minérios

18,597

496,438

515,035
MRS Logística

518

518
Total in 2010

19,115

496,438

515,553
Total in 2009

10,989

492,689

503,678


Companies	Trade receivables	Intercompany *loan ()**	Total
Nacional Minérios S.A.	31,338		31,338
MRS Logística S.A.	403		403
Total at 12/31/2011	31,741		31,741
Total at 12/31/2010	19,115	496,438	515,552

(*) ~~Intercompany loan in the amount~~In 2011 total payments of Nacional Minérios S.A. to CSN amounted to R$ ~~1,197,800~~1,278,457 (loan non-consolidated corresponds to R$~~479,120), beginning~~ 511,382) of which R$53,800 was paid in January ~~28, 2009~~related to interest and ~~bearing interest~~R$1,224,657 in April related to early settlement as provided for in the ~~amount of R$ 43,295 as at December 31, 2010. Interest is levied on the nominal amount of this agreement, corresponding to 101% of the CDI Cetip rate, with due date on January 31, 2012.~~related agreement.

·Liabilities

FS-23

~~FS-31~~

Liabilities

Companies

Advances from customers
Intercompany loans / Current accounts
Other

Total
Nacional Minérios
3,169,817

7,369

3,177,186
MRS Logística

36,846

36.846
Itá Energética

6,726

6,726
Total in 2010

3,169,817

7,369

43,572

3,220,758
Total in 2009

3,055,463

5,364

55,766

3,116,593



Companies	Advances from customers	Trade payables	Other payables	Total
Nacional Minérios S.A.	3,270,663		2,404	3,273,067
MRS Logística S.A.		7,085	6,562	13,647
Total at 12/31/2011	3,270,663	7,085	8,966	3,286,714
Total at 12/31/2010	3,169,817	7,369	6,725	3,183,911

Nacional Minérios: The ~~customer~~ advance from customers received from ~~the jointly-controlled subsidiary~~jointly controlled entity Nacional Minérios S.A. refers to the contractual obligation for supply of iron ore and port services. The agreement is subject to interest rate of 12.5% p.a. and expires in ~~June~~September 2042. ~~The amount falling due in 2011 corresponds to R$ 325,099.~~

MRS Logística: InWe have recorded in other payables ~~we have recorded~~ the amount accrued to cover contractual expenses for take or pay and block rates relating to the railroad transportation agreement.

Itá Energética: These liabilities refer to the supply of electric power, which is billed under normal terms applicable to the Brazilian energy market, regulated by the Electric Power Trading Chamber.

•·~~Results~~Profit or loss

Companies

Income

Expenses

Sales

Interest, inflation adjustment and exchange gains (losses)
Total

Purchases

Interest, inflation adjustment and exchange gains (losses)
Total
Nacional Minérios

277,751

45,997

323,728

9,515

373,606

383,121
MRS Logística

248,039

248,039
Itá Energética

79,067

79,067
Total in 2010

277,751

45,977

323,728

336,621

373,606

710,227
Total in 2009

203,553

42,163

245,716

600,851

359,340

960,191


Companies	Revenues			Expenses
	Sales	Interest	Total	Purchases	Interest	Total
	Sales	Interest	Total	Purchases	Interest	Total

Nacional Minérios S.A.	378,020	16,965	394,985	6,296	385,622	391,918
MRS Logística S.A.				279,545		279,545
Itá Energética S.A.				28,267		28,267
Total at 12/31/2011	378,020	16,965	394,985	314,108	385,622	699,730
Total at 12/31/2010	277,751	45,977	323,729	336,623	373,606	710,229

The main transactions carried out by the Company with its ~~jointly-controlled subsidiaries~~jointly controlled entities are sales and purchases of products and services, which include the supply of iron ore, the provision of port services and railroad transportation, as well as the supply of electric power for ~~CSN’s~~ operations.

c) Other related parties

•·CBS Previdência

The Company is the ~~principal~~main sponsor of this ~~not-for-profit~~non-profit entity established in July ~~1960. Its principal objective is paying~~1960, primarily engaged in the payment of benefits that supplement the official government Social Security benefits to participants. In its capacity as sponsor, CSN carries out transactions involving the payment of contributions and recognition of actuarial liabilities calculated in defined benefit plans, as detailed in Note ~~30.~~29.

•·Fundação CSN

The Company develops socially responsible policies concentrated today in Fundação CSN, of which it is the sponsor. The transactions between the parties relate to the operating and financial support for Fundação CSN to carry out the social projects undertaken mainly in the locations where the Company operates.

~~FS-32~~

Banco Fibra is under the ~~same ownership~~control structure of Vicunha Siderurgia and the financial transactions carried out with this bank are limited to current account operations and investments in fixed-income securities.

•~~CBL – Companhia Brasileira de Latas~~

~~CBL – Companhia Brasileira de Latas~~·Ibis Participações e Serviços

Ibis Participações e Serviços is under the control of a ~~company engaged in~~Board member of the manufacture of steel metallic packaging for the food and chemical industries, supplying to the main companies in the market. CSN has shares in this company because it is a holder of CBL debentures, representing an equity interest of 0.0053%.Company.

The balances ~~of the~~and transactions between the Company and these entities are as follows:

·Companhia de Gás do Ceará

A natural gas distributor under the control structure of Vicunha Siderurgia.

i) Assets and ~~Liabilities~~liabilities

Assets

Liabilities

Companies

Banks/Marketable securities
Receivables

Current account
Total

Actuarial liabilities
Payables

Total
CBS Previdência

367,839

367,839
Fundação CSN

1,199

1,199

37

37
Banco Fibra

94

94

Usiminas

12,455

12,455

16,096

16,096
Panatlântica

12,227

12,227

Total in 2010

94

24,682

1,199

25,975

367,839

16,133

383,972
Total in 2009

37

906

943

317,145

90

317,235


Companies	Assets			Liabilities
	Banks/Short-term investments	Trade receivables	Total	Actuarial liabilities	Trade payables	Total
	Banks/Short-term investments	Trade receivables	Total	Actuarial liabilities	Trade payables	Total
CBS Previdência (Note 29)				11,673		11,673
Fundação CSN		1,504	1,504		321	321
Banco Fibra	72		72
Usiminas (Note 11)		28,509	28,509		170	170
Panatlântica (Note 11)		24,858	24,858
Companhia de Gás do Ceará					40	40
Total at 12/31/2011	72	54,871	54,943	11,673	531	12,204
Total at 12/31/2010	86	25,881	25,967		16,133	16,133

~~Results~~ii) Profit or loss

Income

Expenses / Cost
Companies

Sales / Interest income
Other income
Total

Pension fund expenses
Purchases / Other expenses
Total
CBS Previdência

90

90

86,199

86,199
Fundação CSN

2,385

2,385
Banco Fibra

680

680

CBL

84,350

84,350

37,672

37,672
Usiminas

103,486

103,486

18,594

18,594
Panatlântica

224,795

224,795

Total in 2010

413,311

90

413,401

86,199

58,651

144,850
Total in 2009

97,487

190

97,677

77,515

1,305

78,820


Companies	Revenues		Expenses
	Sales / Interest income	Total	Pension fund expenses	Purchases/ Other expenses	Total
	Sales / Interest income	Total	Pension fund expenses	Purchases/ Other expenses	Total
CBS Previdência (Note 29)			51,595		51,595
Fundação CSN				2,650	2,650
Banco Fibra	35	35
Usiminas (Note 11)	310,479	310,479		7,971	7,971
Panatlântica (Note 11)	264,653	264,653
Ibis Participações e Serviços				8,961	8,961
Companhia de Gás do Ceará				2,570	2,570
Total at 12/31/2011	575,167	575,167	51,595	22,152	73,747
Total at 12/31/2010	413,401	413,401	82,041	58,651	140,692

e)d) Key management personnel

The key management personnel, who have authority and responsibility for planning, directing and controlling the Company’s activities, include the members of the Board of Directors and the ~~statutory Executive Officers.~~executive officers. The following is information on the compensation of such personnel and the related balances as atof December 31, ~~2010.~~2011.


	2010	2009	12/31/2011	12/31/2010
	Results	Results	P&L	P&L
Short-term benefits for employees and officers	17,881	21,926	23,728	17,881
Post-employment benefits	81	75	91	81
Other long-term benefits	n/a	n/a	n/a	n/a
Severance benefits	n/a	n/a	n/a	n/a
Share-based compensation	n/a	n/a	n/a	n/a
	17,962	22,001	23,819	17,962

n/a – not applicable

~~n/a – not applicable~~

f)e) Policy ofon investments and payment of dividends and interest on ~~shareholders’ equity and distribution of dividends~~capital

At a meeting held on December 11, 2000, the Board of Directors decided to adopt a profit distribution policy ~~of distributing earnings~~ which, after compliance with the provisions contained in 6404/76, as amended by Law 9457/~~97) are complied with,~~97, will entail the distribution of all the profit to the Company’s shareholders, provided that the following priorities are preserved, irrespective of their order: (i) carrying out the business strategy; (ii) fulfilling its obligations; (iii) making the required investments; and (iv) maintaining a healthy financial situation of the Company.

6. 5.CASH AND CASH EQUIVALENTS


	2010	2009	12/31/2011	12/31/2010
Current Assets
Current
Cash and cash equivalents
Cash and banks	156,580	142,045	101,360	156,580

Marketable securities
Short-term investments
In Brazil:
Government bonds	477,529	3,339,972	646,594	477,529
Fixed-income investments and debentures	2,134,364	1,304,713
Private securities and debentures (*)			2,017,019	2,134,364
	2,611,893	4,644,685	2,663,613	2,611,893
Abroad:
Time deposits	7,470,805	3,184,061	12,652,420	7,470,805
Total marketable securities	10,082,698	7,828,746

Total short-term investments			15,316,033	10,082,698
Cash and cash equivalents	10,239,278	7,970,791	15,417,393	10,239,278

The funds available in the Company and subsidiaries set up in Brazil are basically invested in exclusive investment funds, with repurchase agreements backed by Brazilian government bonds with immediate liquidity. In addition, a significant part of the funds of the Company and its foreign subsidiaries is invested in time deposits with leading banks.

~~Fixed Income:Investments~~

The exclusive funds managed by BTG Pactual Serviços Financeiros S.A. DTVM and their assets collateralize possible losses on investments and transactions carried out. The funds’ unit holders also guarantee the funds’ equity in the event of losses arising from changes in interest and exchange rates, or other financial assets.

(*) Private securities: short–term investments amounting to R$1,952,274 as of December 31, 2011 (R$2,079,549 as of December 31, 2010) backed by Bank Certificates of ~~Bank~~ Deposit, ~~(CDBs)~~which yield pegged to the Interbank Certificates of Deposit rate (CDI).

Debentures: investments amounting to R$64,745 as of December 31, 2011 (R$54,815 as of December 31, 2010), ~~with~~of jointly controlled entity MRS, which yield ~~based on~~pegged to the ~~variation in the Certificate~~Interbank Certificates of ~~Interbank~~ Deposit rate (CDI) ~~rate.~~

~~Debentures:Investments in debentures made by the jointly-controlled subsidiary MRS in the amount of R$ 54,815, with yield based on the variation in the CDI rate,~~, in securities issued by the following banks: Santander, Votorantim, Safra, Itaú BBA and Bradesco.

7. 6.TRADE ~~ACCOUNTS RECEIVABLE~~RECEIVABLES

2010

2009
Trade accounts receivable

Third parties

Domestic market
846,507

977,239
Foreign market
530,356

359,355
Doubtful debt allowance
(117,402)

(164,077)

1,259,461

1,172,517
Related parties (Note 5)

13,798

1,259,461

1,186,315

Other receivables

Loans to jointly-controlled subsidiaries
17,318

13,569
Other receivables
        90,980

      128,057

      108,298

      141,626

   1,367,759

   1,327,941

~~FS-34~~


	12/31/2011	12/31/2010
Trade receivables
Third parties
Domestic market	982,129	846,507
Foreign market	701,807	530,356
Allowance for doubtful debts	(124,939)	(117,402)
	1,558,997	1,259,461
Related parties (Note 4 - b)
	1,558,997	1,259,461
Other receivables
Receivables from subsidiaries and jointly controlled entities	1,557	17,318
Other receivables	55,652	90,980
	57,209	108,298
	1,616,206	1,367,759

In order to meet the needs of some customers in the domestic market, related to the extension of the payment term for billing of steel, in common agreement with ~~the~~CSN’s internal commercial policy ~~of the CSN Group~~ and maintenance of its very short-term receipts (up to 14 days), at the request of the customer, transactions are carried out for assignment of receivables without co-obligation negotiated between the customer and banks with common relationship, where ~~the~~ CSN ~~Group~~ assigns the trade notes/bills that it issues to the banks with common relationship.

Due to the characteristics of the transactions for assignment of receivables without co-obligation, after assignment of the customer’s trade notes/bills and receipt of the funds from the closing of each transaction, ~~the~~ CSN ~~Group~~ settles the trade ~~accounts receivable~~receivables and becomes entirely free of the credit risk on the ~~transactions.~~transaction.

~~These transactions total~~

This transaction totals R$262,367 as of December 31, 2011 (R$247,680 as atof December 31, ~~2010 (R$ 235,204 in 2009)~~2010), less the trade ~~accounts receivable.~~receivables.

The changes in the ~~provision~~Company’s allowance for ~~losses on the Company’s trade accounts receivable~~doubtful debts are as follows:

2010

2009
Opening balance

    (164,077)

    (162,550)
Allowance for losses on trade accounts receivable

       (7,439)

      (68,524)
Receivables recovered

        54,114

        66,997

(117,402)

(164,077)


	12/31/2011	12/31/2010
Opening balance	(117,402)	(164,077)
Allowance for losses on trade receivables	(20,005)	(7,439)
Recovery (reversal) of receivables	12,468	54,114
Closing balance	(124,939)	(117,402)

8. 7.INVENTORIES


	12/31/2011	12/31/2010
Finished products	997,128	1,015,534
Work in process	776,918	588,668
Raw materials	847,598	638,857
Storeroom supplies	897,940	800,090
Iron ore	215,400	312,637
	3,734,984	3,355,786

Changes in the allowance for inventory losses are as follows:

2010

2009
Finished products
1,016,594

600,955
Work in process
588,723

510,006
Raw materials
656,286

581,393
Supplies
864,205

711,855
Iron ore
313,716

249,978
Provision for losses
(83,738)

(48,814)

3,355,786

2,605,373

FS-27


	12/31/2011	12/31/2010
Opening balance	(64,115)	(50,306)
Allowance for obsolete or slow-moving inventories	(19,030)	(13,809)
Closing balance	(83,145)	(64,115)

~~Provisions have been recognized~~

Allowances for certain items considered as obsolete or slow-moving ~~inventories.~~were recognized.

As at of December 31, ~~2010,~~2011, the Company has long-term iron ore inventories ~~in the amount of~~amounting to R$ ~~130,341,~~144,483, classified in other non-current ~~assets.~~assets (R$130,341 as of December 31, 2010).

~~FS-35~~

9. 8.OTHER CURRENT ASSETS

The group of other current assets ~~are~~is comprised as follows:


	2010	2009	12/31/2011	12/31/2010
Prepaid taxes	89,596	54,831	104,733	89,596
Guarantee margin on financial instruments (Note 17)	254,485	115,949
Guarantee margin on financial instruments (Note 15 V)			407,467	254,485
Unrealized gains on derivatives (Note 15)			55,115
Prepaid expenses			24,135	12,997
	344,081	170,780	591,450	357,078

~~10.~~ 9.INCOME ~~TAXES~~TAX AND SOCIAL CONTRIBUTION

(a)Income tax and social contribution recognized in profit or loss:

The income tax and social contribution recognized in profit or loss for the year are as follows:

2010

2009
Income tax and social contribution expense (income)

Current
313,371

581,735
Deferred
257,326

117,881

570,697

699,616

~~Reconciliation~~


	12/31/2011	12/31/2010
Income tax and social contribution income (expenses)
Current	(136,427)	(363,429)
Deferred	52,542	(207,268)
	(83,885)	(570,697)

The reconciliation of ~~Consolidated~~ income tax and social contribution expenses and income and the result from applying the effective rate on profit before income tax (IRPJ) and social contribution (CSLL) are as follows:


	12/31/2011	12/31/2010
Profit before income tax and social contribution	3,751,119	3,086,888
Tax rate	34%	34%
Income tax and social contribution at combined statutory rate	(1,275,380)	(1,049,542)
Adjustment to reflect effective rate:
Interest on capital benefit		121,312
Income subject to special tax rates or untaxed	1,279,431	216,529
Tax incentives	73,134	33,824
Adjustments arising from Law 11941 and MP 470 installment plans	(16,060)	106,216
Sale of nondeductible securities	(189,946)
Income tax and social contribution credits	44,434
Other permanent deductions (additions)	502	964
Income tax and social contribution in profit (loss) for the period	(83,885)	(570,697)
Effective rate	2%	18%

FS-28

2010

2009
Profit before income tax and social contribution
       3,086,888

             3,314,797
Tax rate
34%

34%
Income tax and social contribution at combined tax rate
      (1,049,542)

       (1,127,031)
Adjustments to reflect effective rate:

Benefit of interest on shareholders’ equity
          121,312

           108,788
Equity in results of affiliated companies/ Profits (losses) of subsidiaries with different rates or not subject to taxation
          216,529

           169,314
Tax incentives
             33,824

             11,732
Adjustments resulting from installment payments under Law 11941 and MP 470 (Note 20)
          106,216

           252,838
Other permanent exclusions (additions) (*)
                  964

          (115,257)
Income tax and social contribution on profit (loss) for the year
         (570,697)

          (699,616)
Effective rate
18%

21%

~~(*) In 2009 this refers mainly to income tax on tax loss of subsidiary Prada.~~

(b)Deferred income tax and social contribution:

~~Deferred taxes~~

The deferred income tax and social contribution are ~~recorded to reflect~~calculated on tax losses of income tax, the ~~future tax effects attributable to~~negative social contribution basis and related temporary differences between the tax ~~base~~bases of assets and liabilities and ~~their carrying amounts.~~

2010

2009

01/01/09
Deferred income tax and social contribution

Income tax loss carry forwards
4,944

162,123

307,545
Social contribution tax loss carryforwards
1,871

56,661

110,763
Temporary differences
1,586,126

1,708,234

1,176,416
- Provision for contingencies
298,708

279,184

556,725
- Provision for impairment of assets
40,345

46,984

39,519
- Provision for inventory losses
26,011

17,969

6,899
- Provision for gains/losses on financial instruments
183,169

160,239

78,821
- Provision for interest on shareholders’ equity
121,351

20,706

91,276
- Provision for long-term sales
1,221

6,806

2,383
- Provision for consumption and services
43,828

33,929

26,074
- Allowance for losses on trade accounts receivable
146,865

102,482

59,950
- Provision for payments of private pension plans
7,012

4,358

21,336
- IFRS adjustments
57,813

103,532

102,757
- Goodwill on merger
599,730

791,184

61,563
- Other temporary diffeences
60,073

140,861

129,113

1,592,941

1,927,018

1,594,724
Non-Current Assets
1,592,941

1,957,058

1,596,905
Non-Current Liabilities

(30,040)

(2,181)

~~FS-36~~

~~Some companies~~the accounting balances of the ~~Group~~financial statements.


	12/31/2011	12/31/2010
Deferred tax assets
Income tax loss carryforwards	425,406	4,944
Social contribution loss carryforwards	157,858	1,871
Temporary differences	1,257,509	1,586,126
- Provision for contingencies	211,835	240,753
- Allowance for asset impairment losses	60,930	27,915
- Allowance for inventory losses	30,814	26,012
- Allowance for gains/losses on financial instruments	253,985	183,169
- Accrued pension plan payments	144,066	103,033
- Accrued interest on capital	74	121,351
- Allowance for long-term sales	1,221	1,221
- Accrued supplies and services	67,445	43,828
- Allowance for doubtful debts	45,342	145,390
- Goodwill on acquisition	371,153	599,730
- Other	70,644	93,726
Non-current assets	1,840,773	1,592,941

Deferred tax liabilities
- Adjustment to PP&E useful lives (Law 11638/07)	37,776
- Other (*)	75
Non-current liabilities	37,851

(*) Related to a sole jurisdiction, thus presented at net amounts.

Some subsidiaries of CSN recognized tax credits on income tax and social contribution tax loss carryforwards not subject to statute of limitations and based on the history of profitability and expected future taxable profits determined in technical studies approved by Management.

In July 2010, the Company joined the REFIS (tax debt refinancing program) and elected to offset part of the balance ofincome tax and social contribution loss carryforwardsas of December 31, 2009 recognized in part B of the LALUR (taxable income computation book), amounting to R$110,192 and R$39,669, respectively, against the four last installments of the tax refinancing plan, consisting of debts enrolled under Provisional Measure 470/09 and payable in 12 installments, as prescribed by relevantlegislation.

Since they are subject to significant factors that may change the projections for realization, the carrying amounts of deferred tax assets are reviewed ~~monthly~~quarterly and projections are reviewed annually. These studies indicate the realization of these tax assets within the term stipulated by the mentioned instruction and the limit of 30% of the taxable profit.

Certain CSN subsidiaries ~~of CSN~~ have tax assets ~~in the amounts of R$ 265,532~~amounting to R$536.886 and R$ ~~69,910,~~167.504, related to income tax and social contribution ~~tax~~ loss carryforwards, for which no deferred taxes were set ~~up. Out of these totals,~~up, off which R$ ~~14,800 expire in 2011, R$ 50~~54 expires in 2012, R$ ~~8,902~~9,726 in 2013, R$ ~~623~~696 in 2014, R$ ~~25,594~~27,976 in 2015, R$15 in 2016, R$46 in 2017 and R$ ~~42,265~~44.138 in 2025. The remaining tax assets refer to ~~Brazilian~~domestic companies and, therefore, ~~they can be carried forward indefinitely.~~are not subject to statute of limitations.

The tax benefit of goodwill of Nacional Minérios S.A., which arose on the merger of Big Jump in July 2009, amounted to R$~~1,391,858. Up~~1,391,858.Up to December ~~2010~~2011 a total amount of R$672,732 (R$394,360 up to 2010) had been realized, ~~(R$ 115,988 in 2009),~~ leaving ~~a remaining~~aremaining amount of R$ ~~997,498,~~719,126, which will be realized through 2014. ~~From 2011 to~~In 2012 and 2013, ~~the amount realized each year~~this realization will be R$278,372 per year and in the ~~final~~last year, of 2014, the benefit will be R$162,382.

FS-29

The undistributed profits of the Company’s foreign subsidiaries have been invested and will continue to be ~~indefinetly~~indefinitely invested in ~~tin~~ their operations. These undistributed profits of the Company’s foreign subsidiaries amounted to R$8,033,902as ofDecember 31, 2011 (R$2,434,537 as of December 31, 2010. If circumstances change and the tax authorities position on the application of tax treaties prevails in Courts, these undistributed earnings may generate a tax liability in lieu in the amount of R$ 1,083,367.2010).

(c)Income tax and social contribution recognized in ~~equity:~~equity

The income tax and social contribution recognized directly in equity are ~~shown below:~~as follows:

2010

2009
Income tax and social contribution (losses)/gains

Actuarial gains and losses
125,065

76,069
Financial instruments (available-for-sale)
75,522

-
Exchange variation onforeign operations
433,297

425,510


	12/31/2011	12/31/2010
Income tax and social contribution (losses)/gains
Gain/(loss) on defined benefit pension plan	163,931	125,065
Changes in the fair value on available-for-sale financial assets	241,484	75,522
Exchange variation on foreign operations	425,510	433,297

(d)Tax incentives

The ~~company~~Company enjoys Income Tax incentives based on the legislation in effect, such as: Worker Food Program, the Rouanet Law (tax incentives related to cultural activities), Tax Incentives for Audiovisual Activities, and Funds for the Rights of ~~Childrenand Adolescents,~~Children and ~~Incentives for Sporting and Para-sporting Activities.~~Adolescents. As atof December 31, ~~2010,~~2011, these tax incentives ~~involved a~~ total ~~amount~~R$1,914 (R$8,160 as of ~~R$ 8,160 (R$ 11,732 in 2009)~~December 31, 2010).

~~FS-37~~

~~(e) Transition Tax System~~

The Transition Tax System (RTT), which was regulated by Law 11941/09, will remain in effect until a law takes effect to govern the tax effects of the new accounting standards, with a view to tax neutrality.

The system was optional in calendar years 2008 and 2009, respecting: (i) the application for the two-year period of 2008-2009, not one single calendar year; and (ii) the option in the Corporate Income Tax Return (DIPJ), and is now mandatory as from calendar year 2010.

~~CSN elected to adopt the RTT in 2008. Accordingly, for purposes of calculating income tax and social contribution for the years ended 2009 and 2008, the prerogatives defined in the RTT were used.~~

~~11.~~ 10.OTHER NON-CURRENT ASSETS

The group of other non-current assets ~~classified in long-term receivables~~ is comprised as follows:

2010

2009
Judicial deposits (Note 21)
2,774,706

2,706,971
Recoverable taxes (*)
247,910

236,852
Other
283,478

278,814

3,306,094

3,222,637


	12/31/2011	12/31/2010
Judicial deposits (Note 19)	1,760,814	2,774,706
Recoverable taxes (*)	257,977	247,910
Prepaid expenses	115,853	115,755
Unrealized gains on derivatives (Note 15)	376,344	254,231
Iron ore inventories	144,483	130,341
Northeast Investment Fund - FINOR	47,754
Others	163,001	153,137
	2,866,226	3,676,080

(*) ~~Refer~~Refers mainly to ~~PIS/COFINS (taxes~~taxes on ~~revenue)~~revenue (PIS/COFINS) and ~~ICMS (state VAT)~~State VAT (ICMS) on ~~purchases~~the acquisition of ~~property, plant and equipment items that~~fixed assets which will be recovered inover a ~~period of 48 months.~~48-month period.

11.INVESTMENTS

a)Other Investments


	12/31/2011	12/31/2010
Riversdale Mining	-	1.061.961
Panatlântica	12.030	19.800
Usiminas	2.077.277	1.020.350
Other	(1.082)	1.513
Total Investments	2.088.225	2.103.624

~~12. INVESTMENTS~~FS-30

2010

2009
Riversdale Mining
1,061,961

319,727
Panatlântica
19,800

-
Usiminas
1,020,350

-
Other
1,513

2,175
Total Investments
2,103,624

321,902

•·RIVERSDALE MINING LIMITED - Riversdale

~~Founded in 1986,~~

On April 20, 2011, the Company adhered to the tender offer of Riversdale Mining Limited (“Riversdale”) ~~is a mining company listed on~~shares conducted by Rio Tinto. Therefore, the Australian Stock Exchange. Riversdale intends to develop as a diversified mining company, with focus on growth through investments in mining opportunities. The company has anthracite coal mines in South Africa and coking coal mines in Mozambique.

~~In November 2009, the Company’s Board~~Company sold 100% of Directors approved the acquisition by the indirect subsidiary CSN Madeira Ltda. (currently named CSN Europe Ltd.) of a non-controlling interest in the capital of Riversdale Mining Limited. This acquisition at first involved 28,750,598 shares, which at the time represented 14.99% of the capital of Riversdale. Subsequently, on January 8, 2010 CSN Europe obtained approval from the appropriate Australian governmental authorities, which allowed it to

~~FS-38~~

In January 2010, with the conclusion of the two stages of the operation, CSN began indirectly holding 16.20% of Riversdale’s capital. Subsequently, due to the exercise of call options for shares issued by Riversdale, the Company’s indirect interest was diluted to 15.6%.

Between the months of July and August 2010 Riversdale carried out an operation involving the issue of new shares and new fund-raising in which CSN Europe participated by acquiring 5,602,478 new common shares and thus raising its total stake to 36,835,805 shares, keeping its equity interest ~~of 15.6%~~held in Riversdale’s ~~capital.~~share capital, corresponding to 47,291,891 shares at the price of A$16.50 per share, totalingA$780,316.

• ·PANATLÂNTICA

On January 5, 2010, the Company’s Board of Directors approved the acquisition of common shares representing 9.39% of the capital stock of Panatlântica S.A. (“Panatlântica”), a ~~publicly-traded corporation with head offices~~publicly-held company, headquartered in the city of Gravataí, State of Rio Grande do ~~Sul. The purpose of this company is to manufacture, sell,~~Sul, engaged in the manufacturing, trade, import, export and ~~process~~processing of steel and ferrous ~~and~~or non-ferrous metals, ~~both~~ coated ~~and uncoated varieties. At present this~~or not. This investment is carried at fair ~~value.~~value.

• ·USIMINAS

Usinas Siderúrgicas de Minas Gerais S.A. – USIMINAS, ~~with head offices~~headquartered in ~~city of~~ Belo Horizonte, State of Minas Gerais, is engaged in steel and ~~correlated industries. The Company~~related operations. USIMINAS produces flat rolled ~~products~~steel in the ~~steel mills known as~~ Intendente Câmara and José Bonifácio de Andrada e Silva plants, located in ~~Ipatiga –~~Ipatinga, Minas Gerais, and Cubatão, – São Paulo, respectively, ~~aimed at both~~to be sold in the domestic market and ~~exportation. USIMINAS owns~~also for exports, and ~~operates~~it also exploits iron ore mines located in ~~the city of~~ Itaúna, – Minas Gerais, ~~aimed at achieving the strategies of~~to meet its verticalization and production cost optimization ~~of production costs. The Company maintains~~strategies. USIMINAS also has service and distribution centers located in several regions of Brazil, ~~as well as~~and the ~~ports of~~ Cubatão, in São Paulo, and Praia Mole, in Espírito Santo, ports, as well as in locations strategic ~~points~~ for ~~shipping out~~the shipment of its production.

As of December 31, 2011, the Company reached holdings of 11.97% in common shares and 20.14% in preferred shares of Usiminas’ share capital.

USIMINAS is listed on the São Paulo Stock Exchange (“Bovespa”: USIM3 and USIM5). ~~As at December 31, 2010 CSN directly and indirectly holds 4.97% of the capital of Usiminas.~~

~~13. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES~~b)Investments in jointly controlled entities

The balances of the balance sheets and income statements of the companies under shared control are stated below and have been consolidated into the Company’s financial statements according to the percentage equity interests described in item (b) of Note 2.

2010

2009

NAMISA

MRS

ITASA
NAMISA

MRS

ITASA
Current assets

3,937,574

1,034,466

82,817

2,266,333

1,271,294

78,005
Non-current assets

9,519,584

3,769,878

769,422

9,651,083

3,652,432

883,329
Long-term receivables

8,570,421

476,758

48,850

8,773,789

763,116

5,385
Investments, PP&E and intangible assets

949,163

3,293,120

720,572

877,294

2,889,316

877,944
Total Assets

13,457,158

4,804,344

852,239

11,917,416

4,923,726

961,334

Current liabilities

1,273,436

1,015,234

115,454

624,682

1,469,225

118,072
Non-current liabilities

1,455,604

1,769,262

139,870

1,473,765

1,737,801

207,694
Equity

10,728,118

2,019,848

596,915

9,818,969

1,716,700

635,568
Total Equity and Liabilities

13,457,158

4,804,344

852,239

11,917,416

4,923,726

961,334

~~FS-39~~


	12/31/2011			12/31/2010
	Nacional	MRS	Itá	Nacional	MRS	Itá
	Minérios (*)	Logística	Energética	Minérios (*)	Logística	Energética
Current assets	4,155,543	917,291	81,729	3,937,574	1,034,466	82,817
Non-current assets	9,526,804	4,625,495	719,606	9,519,584	3,769,877	769,422
Long-term receivables	8,422,434	336,439	44,239	8,570,421	476,757	48,850
Investments, PP&E and intangible assets	1,104,370	4,289,056	675,367	949,163	3,293,120	720,572
Total assets	13,682,347	5,542,786	801,335	13,457,158	4,804,343	852,239

Current liabilities	1,260,068	1,108,938	100,175	1,273,436	1,015,234	115,454
Non-current liabilities	307,352	2,134,906	62,637	1,455,604	1,769,261	139,870
Total equity	12,114,927	2,298,942	638,523	10,728,118	2,019,848	596,915
Total liabilities and equity	13,682,347	5,542,786	801,335	13,457,158	4,804,343	852,239

	12/31/2011			12/31/2010
	Nacional		Itá	Nacional		Itá
	Minérios (*)	MRS Logística	Energética	Minérios (*)	MRS Logística	Energética
Net operating revenue	3,766,712	2,862,337	242,913	2,937,169	2,247,101	222,594
Cost of sales and services	(1,646,011)	(1,732,552)	(81,692)	(1,109,067)	(1,326,655)	(76,600)
Gross profit	2,120,701	1,129,785	161,221	1,828,102	920,446	145,994
Operating (expenses) income	(634,475)	(199,754)	(66,223)	(476,621)	(306,668)	(52,422)
Finance income (costs), net	1,016,743	(134,272)	(12,327)	1,016,778	38,243	(23,890)
Profit before income tax and social contribution	2,502,969	795,759	82,671	2,368,259	652,021	69,682
Current and deferred income tax and social contribution	(429,226)	(272,714)	(28,103)	(412,989)	(216,451)	(23,724)
Profit for the period	2,073,743	523,045	54,568	1,955,270	435,570	45,958

(*) Refer to the consolidated balances and profit or loss of Nacional Minérios S. A.

2010

2009

NAMISA

MRS
ITASA

NAMISA

MRS

ITASA
Net Operating Revenue

     2,937,169

      2,247,101

     222,594

   1,465,327

    2,275,950

    226,453
Cost of Products sold

   (1,109,067)

(1,326,655)

     (76,600)

   (889,681)

   (1,217,982)

    (73,583)
Gross Profit (Loss)

     1,828,102

         920,446

     145,994

      575,646

    1,057,968

    152,870
Operating (expenses) income

      (476,621)

      (306,668)

     (52,422)

   (339,882)

      (118,866)

    (51,677)
Finance income (expenses), net

     1,016,778

           38,243

     (23,890)

   1,073,547

        (51,995)

    (25,508)
Profit (Loss) before income tax and social contribution
     2,368,259

         652,021

       69,682

   1,309,311

       887,107

      75,685
Current and deferred income tax and social contribution
      (412,989)

     (216,451)

     (23,724)

   (402,475)

      (281,385)

    (25,674)
Net income

     1,955,270

         435,570

       45,958

      906,836

       605,722

      50,011

•·NACIONAL MINÉRIOS – NAMISA

Headquartered in Congonhas, State of Minas Gerais, this company is primarily engaged in the production, purchase and sale of iron ore and is mainly focused on foreign markets for sale of its products. Its major operations are carried out in the cities of Congonhas, Ouro Preto, Itabirito and Rio Acima, in the State of Minas Gerais, and in Itaguaí, in the State of Rio de Janeiro.

In December 2008 CSN sold 2,271,825 shares of the voting capital of Nacional Minérios S.A. to the company Big Jump Energy Participações S.A. ~~(Big~~(Big Jump), the shareholders of which are the companies Posco and Brazil Japan Iron Ore Corp (Itochu Corporation, JFE Steel Corporation, Sumitomo Metal Industries, Ltd., Kobe Steel Ltd., Nisshin Steel Co. Ltd., Nippon Steel). Subsequent to this sale, Big Jump subscribed to new shares, paying up in cash the total amount of US$3,041,473 thousand, corresponding to R$7,286,154, of which R$6,707,886 was recognized as goodwill on the share subscription.

Due to the new corporate structure of the ~~jointly-controlled subsidiary,~~jointly controlled entity, where Big Jump holds 40% and CSN 60%, and in view of the shareholders’ agreement signed by the parties, CSN consolidates it ~~proportionally.~~proportionately.

Such shareholders’ agreement ~~states~~prescribes that certain situations of severe impasse between the shareholders that are not resolved after mediation and negotiation procedures between the executive officers of the parties may give CSN the right to exercise its call option and Big Jump the right to exercise its put option regarding the equity interest held by Big Jump in Namisa.

Other agreements signed, in order to make such association feasible, among them the agreement for purchase of shares and the long-term operating agreements between Namisa and CSN, ~~(see Note 31),~~ provide for certain obligations to do that, if not complied with or remedied within the stipulated deadlines in certain extreme situations may give rise to the right on the part of the aggrieved party to exercise its put or call option, as the case may be, with respect to the equity interest held by Big Jump in Namisa.

Further to the process of restructuring Namisa, on July 30, 2009 this ~~jointly-controlled subsidiary~~jointly controlled entity merged its parent Big Jump Energy Participações S.A., such that Posco and Brazil Japan Iron Corp. began holding a direct interest ~~of 39.99%~~ in Namisa. There was no change in the equity interest held by CSN as a result of this merger ~~operation.~~transaction.

In July and November 2011, respectively, Nippon Steel and Sumitomo Metal Industries, until then members of the BJIOC consortium, sold their interests to the other members and, with the entry of the new shareholder China Steel Corp. (CSC), the new corporate structure of Namisa started to be as follows: CSN 60%, BJIOC 32.52%, Posco 6.48% and CSC 1%.

• ·MRS LOGÍSTICA

This subsidiary is engaged in providing public railroad freight transportation services, on the basis of an onerous concession agreement, on the tracks of the Southeast Network, located between the cities of Rio de Janeiro, São Paulo and Belo Horizonte, previously belonging to Rede Ferroviária Federal ~~S.A. -~~S.A.- RFFSA, which was privatized on September 20, 1996. In 2008 CSN transferred to Namisa in the form of a capital contribution a 10% equity interest of MRS,

~~Besides this~~ decreasing its direct interest ~~the Company further~~from 32.93% to 22.93%. Thus, CSN still holds indirect interests of 6%, through its subsidiary Nacional Minérios S.A.– Namisa, a proportionately consolidated entity.

In 2010 CSN held an indirect interest of ~~6% through Nacional Minérios S.A. – Namisa, a proportionally consolidated subsidiary, and~~ 4.34% through ~~the~~its subsidiary International Investment ~~Fund.~~Fund (IIF). On December 23, 2011 IIF distributed dividends to CSN, paid with the transfer of MRS shares to CSN.

As of December 31, 2011, the Company held a direct interest of 27.27%.

FS-32

MRS ~~may further~~can also engage in modal transportation services related to railroad transportation and also participate in projects aimed at expanding the railroad services granted on a concession basis.

~~FS-40~~

For provision of the services covered by the concession agreement obtained for a period of 30 years starting on December 1, 1996, extendable for an equal period by exclusive decision of the ~~concession-granting authority,~~concession grantor, MRS leased from RFFSA for the same concession period the assets required for operation and maintenance of the railroad freight transportation activities. Upon extinction of the concession, all leased assets will be transferred to the ownership of the railroad transportation operator designated in that same act.

•·ITÁ ENERGÉTICA S.A. - ITASA

CSN holds 48.75% of the subscribed capital and all the common shares issued by Itasa, a special purpose company originally created to carry out the construction of the Itá hydroelectric power plant: contracting for the supply of goods and services necessary to carry out the project and raising funds, including posting the corresponding guarantees.

Itasa has a 60.5% stake in Consórcio Itá, which was created to operate the Itá hydroelectric power plant, pursuant to the concession agreement of December 28, 1995 and its 1st amendment, dated July 31, 2000, signed between the members of the consortium (Itasa and Centrais Geradoras do Sul do Brasil - Gerasul, formerly named Tractebel Energia S.A.), granted by the federal government through the ~~National~~Agência Nacional de Energia Elétrica, or ANEEL (National Electric Power ~~Regulatory Agency – ANEEL,~~Agency), which expires in October 2030.

Under the terms of the concession agreement, ITASA has the right to 60.5% of an average of 668 MW, the quantity corresponding to the project energy prorated among the consortium members, with the other consortium member Tractebel Energia S.A. (“(‘Tractebel”) being entitled to the remaining ~~39.5 %. Of~~39.5%.Of the average of 404.14 MW to which this subsidiary is entitled, an average of 342.95 MW is sold to its shareholders in proportion to their equity interest in the company, and an average of 61.19 MW is sold to consortium member Tractebel.

•·CONSÓRCIO DA USINA ~~ELÉ~~HIDRELÉTRICA DE IGARAPAVA

Igarapava Hydroelectric Power Plant is located in Rio Grande, which is located 400 kilometers from Belo Horizonte and 450 kilometers from São Paulo, with installed capacity of 210 MW. It consists of 5 bulb type generating units and is considered a major mark for power generation in Brazil.

Igarapava stands out for being the first hydroelectric power plant built through a consortium involving five major companies.

CSN holds 17.92% of the subscribed capital of the consortium, whose specific purpose is the distribution of electric power, which is made according to the percentage equity interest of each company.

The balance of property, plant and equipment less depreciation ~~in 2010~~as of December 31, 2011 is R$31,751 (R$32,919 ~~(R$ 38,150 in 2009)~~as of December 31, 2010) and the amount of the expense attributable to CSN is R$6,366 (R$7,333 ~~in 2010 (R$ 6,422 in 2009)~~as of December 31, 2010).

~~14.~~ ·COMPANHIA BRASILEIRA DE SERVIÇOS DE INFRAESTRUTURA

In December 2011, CSN subscribed to 1,876,146 common shares, corresponding to 50% of the capital of CBSI - Companhia Brasileira de Serviços de Infraestrutura (“CBSI”). The investment is the result of a joint venture between CSN and CKLS Serviços Ltda. based in the city of Araucária, PR. CBSI is primarily engaged in providing services to subsidiaries, associates, controlling companies and third-party entities, and can operate activities related to the assembly and installation of industrial machinery, construction, road recovery and paving, construction of plants, electric stations and substations, special engineering services to design structural projects, and other related activities.

12.PROPERTY, PLANT AND EQUIPMENT

Land

Buildings

Machinery, equipment and facilitie
Furniture and fixtures
Construction in progress
Other (**)

Total
Cost of property, plant and equipment

Balance at January 1, 2009
131,918

1,109,598

6,270,174

103,935

2,367,352

1,743,074

11,726,051
Effect of foreign exchange gain (loss)
(4,366)

(20,246)

(125,167)

(3,576)

(950)

(10,568)

(164,873)
Acquisitions

1,996,759

1,996,759
Disposals

(181)

(24,615)

(10,568)

(26,364)

(28,407)

(90,135)
Transfers to other categories of assets
(1,493)

391,101

1,603,859

2,179

(2,242,232)

246,586

Other

(2,507)

589

5,334

(4,830)

27,811

26,397
Balances at December 31, 2009
126,059

1,477,765

7,724,840

97,304

2,089,735

1,978,496

13,494,199
Effect of foreign exchange gain (loss)
(1,659)

(2,914)

(31,235)

(1,230)

(746)

(11,919)

(49,703)
Acquisitions

3,635,911

3,635,911
Disposals

(12,754)

(302)

(15,501)

(5,129)

(33,686)
Transfers to other categories of assets
10,785

131,138

1,633,738

10,645

(1,195,423)

(590,883)

Write-off of supplies for internal consumption

(154,662)

(154,662)
Other (*)
40,607

(194,344)

101,028

23,017

1,830

21,909

(5,953)
Balance at December 31, 2010
175,792

1,411,645

9,415,617

129,434

4,515,806

1,237,812

16,886,106

Accumulated depreciation

Balance at January 1, 2009

(147,187)

(961,984)

(79,135)

(465,911)

(1,654,217)
Effect of foreign exchange gain (loss)

8,111

77,922

2,955

6,644

95,632
Depreciation

(51,619)

(602,726)

(3,912)

(133,088)

(791,345)
Impairment losses

(11,472)

(11,472)
Disposals

1,669

10,544

7,428

19,641
Other

2,441

3,773

(5,341)

(19,964)

(19,091)
Balance at December 31, 2009

(188,254)

(1,481,346)

(74,889)

(616,363)

(2,360,852)
Effect of foreign exchange gain (loss)

2,739

28,473

1,180

1,546

33,938
Depreciation

(74,344)

(677,266)

(4,469)

(36,877)

(792,956)
Disposals

7,689

280

19,889

27,858
Transfers to other categories of assets

28,849

(290,017)

(54)

261,222

Other

32,973

(29,126)

(23,055)

1,681

(17,527)
Balance at December 31, 2010

(198,037)

(2,441,593)

(101,007)

(368,902)

(3,109,539)

Property, plant and equipment, net

At January 1, 2009
131,918

962,411

5,308,190

24,800

2,367,352

1,277,163

10,071,834
At December 31, 2009
126,059

1,289,511

6,243,494

22,415

2,89,735

1,362,133

11,133,347
At December 31, 2010
175,792

1,213,608

6,974,024

28,427

4,515,806

868,910

13,776,567

FS-33



	Land	Buildings	Machinery, equipment and facilities	Furniture and fixtures	Construction in progress	Other (*)	Total
Balance at December 31,2009	126,059	1,289,511	6,243,494	22,415	2,089,735	1,362,133	11,133,347
Effect of foreign exchange differences	(1,659)	(175)	(2,762)	(50)	(746)	(10,373)	(15,765)
Acquisitions					3,481,249		3,481,249
Derecognized projects					(15,501)		(15,501)
Disposals			(5,065)	(22)		14,760	9,673
Transfers to other categories of assets	10,785	159,987	1,343,721	10,591	(1,040,761)	(484,323)
Depreciation		(74,344)	(677,266)	(4,469)		(36,877)	(792,956)
Other	40,607	(161,371)	71,902	(38)	1,830	23,590	(23,480)
Balance at December 31,2010	175,792	1,213,608	6,974,024	28,427	4,515,806	868,910	13,776,567
Effect of foreign exchange differences	1,234	3,640	16,377	135	(157)	2,162	23,391
Acquistion through business combination	3,325	10,805	14,050	562	4,204	90,572	123,518
Acquisitions					4,400,828		4,400,828
Derecognized projects					(3,778)		(3,778)
Disposals		(6,719)	(30,059)	(17)		(13,294)	(50,089)
Depreciation		(39,364)	(821,672)	(4,931)		(65,441)	(931,408)
Reversal of allowance for loss on asset disposal						4,774	4,774
Transfers to other categories of assets	14,233	273,320	1,477,118	9,172	(1,848,785)	74,942
Transfers to intangible assets					(11,104)	(383)	(11,487)
Other		(170)	(4,883)	54	(695)	50,454	44,760
Balance at December 31,2011	194,584	1,455,120	7,624,955	33,402	7,056,319	1,012,696	17,377,076

(*) Refer ~~mainly to the adjustment at ITASA, which elected adoption of deemed cost.~~
~~(**) These refer~~ basically to railway assets, ~~for railroad use,~~ such as ~~shunting~~ yards, tracks and railway sleepers.

The breakdown of the projects comprising construction in progress is as follows:


	Project objective	Start date	Scheduled completion	12/31/2010	12/31/2011
Construction in Progress - Main projects
Logistics				1,889,411	3,795,760
	Expansion of Transnordestina railroad around 1,728 km to boost the transportation of varied products as iron ore, limestone, soybeans, cotton, sugarcane, fertilizers, oil and fuels.	2009	2014	1,774,875	3,489,871
	Expansion of MRS's capacity and current investments for maintenance of current operations			111,763	290,410
	Current investments for maintenance of current operations			2,773	15,479
Mining				1,364,733	1,931,047
	Expansion of Casa de Pedra Mine capacity production to 42 Mtpa	2007	2012/13⁽¹⁾	1,101,234	1,322,433
	Expansion of TECAR to permit an annual exportation of 60 Mtpa	2009	2013	167,163	425,134
	Expansion of Namisa capacity production to 39 Mtpa	2008	2015/16	81,172	137,059
	Current investments for maintenance of current operations			15,164	46,421
Steel				803,798	1,164,239
	Implementation of the long steel mill in the states of Rio de Janeiro, Minas Gerais and São Paulo forproduction of rebar and wire rod.	2008	2013⁽²⁾	618,832	907,521
	Current investments for maintenance of current operations
	Expansion of TECAR to allow annual exports of 45 mtpy			184,966	256,718
	Expansion of Namisa production capacity to 39 mpty
Cement				457,864	165,273
	Construcion of Cement plant in the Northeast and Southern region of Brazil and in the city of Arcos, MinasGerais	2011	2013⁽³⁾	98,258	132,986
	Construcion of clinquer plant in the city of Arcos, Minas Gerais	2007	2011⁽⁴⁾	357,981	27,536
	Current investments for maintenance of current operations			1,625	4,751
	Total construction in progress			4,515,806	7,056,319

(1) Expected date for completion of the 40 Mtpa and 42 Mtpa Stages

~~FS-41~~(2) Expected date for completion of the Rio de Janeiro unity

(3) Expected date for completion of new grinding on Arcos - MG

(4) Manufacturing plant in operation, in “ramp-up”

The costs classified in construction in progress comprise basically the acquisition of services, purchase of parts to be used as investments for improvement of performance, upgrading of technology, enlargement, expansion and acquisition of assets that will be transferred to the relevant line items and depreciated as from the time they are available for use.

Current investments for maintenance are capitalized and depreciated on an accrual basis until the next maintenance event of the relevant asset, totaling R$654,741 as of December 31, 2011 (R$495,430 as of December 31, 2010).

Others repairs and maintenance expenses are charged to operating costs and expenses when incurred.

FS-34

~~The following is~~In view of the ~~weighted average depreciation (years):~~need to review the useful lives at least every financial year, in 2011 management performed the review for all the Company’s units. As a result, the estimated useful lives for the current year are as follows:


Buildings	45	46
Machinery, equipment and facilities	15	13
Furniture and fixtures		10
Other	15	34

a)The Company ~~elected~~capitalized borrowing costs amounting to ~~adopt the historical cost, carrying out a review~~R$353,156 (R$215,624 as of ~~the remaining economic useful life of the property, plant and equipment estimated by external specialists. The effects resulting from this review, recorded as from January 1, 2010, are as follows:~~

~~Consolidated:~~

~~Decrease in depreciation expense - R$ 69,744~~

a)~~Loan costs in the amount of R$ 215,624 (R$ 85,260 in 2009) were capitalized. These~~December 31, 2010) (see note 26).These costs are basically calculated for ~~the~~ mining, cement, long steel and Transnordestina projects, ~~which refer~~ mainly relating to: (i) ~~expansion of~~ Casa de ~~Pedra;~~Pedra Mine expansion; (ii) construction of the cement plant in Volta Redonda, ~~(RJ)~~RJ, and the clinker plant in the city of Arcos, ~~(MG);~~MG; (iii) construction of the long steel ~~plant~~mill in the city of Volta Redonda, ~~(RJ)~~RJ; and (iv) ~~expansion~~extension of Transnordestina railroad, which will connect the countryside of the ~~Transnordestina railroad that will link the interior of the Northeast~~northeast region to the ~~ports of~~ Suape, ~~in the~~ State of Pernambuco, and Pecém, ~~in the~~ State of Ceará), ports.

The rates used to capitalize ~~loan~~borrowing costs are as follows:

~~FS-42~~

~~Rates~~
~~Specific~~FEES ~~projects~~			~~Non-specific~~ ~~projects~~
Specific		Non-specific
projects		projects
TJLP + 1.3% to 3.2%	~~7.44%~~	10.56%
UM006 + 2.7%

b)Additions to depreciation, amortization and depletion for the period were distributed as follows:



	12/31/2011	12/31/2010
Production cost	892,297	770,542
Selling expenses	7,130	6,471
General and administrative expenses	29,941	29,156
Other operating expenses	18,883	7,865
	948,251	814,034

2010

2009
Production cost
770,542

747,164
Selling expenses
6,471

6,250
General and administrative expenses
29,156

26,738

806,169

780,152

c)~~CSN leases information technology equipment under a series of agreements and contracts, in the form of operating leases. Total lease expenses in 2010 were R$ 4,446 (R$ 3,731 in 2009).~~

d)CSN’s subsidiary Itasa elected to adopt the deemed cost, adjusting the opening balance at the transition date of January 1, 2009 according to their fair values, as estimated by external specialists. The need for application of the deemed cost option was mainly due to the economic environment in which it operates and other particular aspects of the subsidiary’s business.

The Casa de Pedra mine is an asset that belongs to CSN, which has the exclusive right to explore such mine.Our mining activities of Casa de Pedra are based on the ~~“Manifesto Mina”~~‘Mine Manifest’, which ~~confers to~~grants CSN full ownership over the mineral deposits existing within our property limits.

As of December 31, ~~2009 and 2010,~~2011 the net ~~fixed assets~~property, plant and equipment of Casa de Pedra ~~were~~was R$~~2,020 and R$2,167, respectively, mainly represented by R$965 and R$911 of construction in progress. As~~2,485,077 (R$2,167,378 as of December 31, ~~2009~~2010), represented mainly by construction in progress amounting to R$1,123,821 (R$911,077 as of December 31, 2010). Up to December 31, 2011, interest capitalized in property, plant and ~~2010, capitalized interest in~~equipment of Casa de Pedra ~~assets amounted~~totaled R$82,607 (R$48,590 as of December 31, 2010).

13.INTANGIBLE ASSETS

FS-35



	Goodwill	Intangible assets with finite useful lives	Software	Other	Total
Balance at December 31,2009	423,698	9,982	23,879		457,559
Acquisitions and expenditures			25,239	1,002	26,241
Amortization		(4,991)	(16,353)		(21,344)
Balance at December 31,2010	423,698	4,991	32,765	1,002	462,456
Effect of foreign exchange differences			6	72	78
Acquisitions through business combination (*)	204,569				204,569
Acquisitions and expenditures			350	353	703
Disposals			(784)	(489)	(1,273)
Impairment losses	(60,861)				(60,861)
Transfer of property, plant and equipment			11,487		11,487
Transfer of long-term receivables				2,977	2,977
Amortization		(4,991)	(9,622)	(2,230)	(16,843)
Other movements			(2,113)	2,194	81
Balance at December 31,2011	567,406		32,089	3,879	603,374

(*) Goodwill based on expected future earnings, arising on the Prada Embalagens and CBL business combination on July 12, 2011.

Recoverable amount of the Packaging cash-generating unit (“CGU”), determined based on the business valuation report prepared by independent appraisers. As a result of this valuation, the company recognized an impairment adjustment amounting to R$~~55 and R$48, respectively.~~60,861

~~15. INTANGIBLE ASSETS~~

Goodwill

Intangible assets with definite useful life
Software

Other

Total
Acquisition cost

Balance at January 1, 2009
743,469

49,909

43,089

836,467
Acquisitions and expenditures

5,628

5,628
Deferred income tax and social contribution on goodwill on downstream merger in subsidiary (*)
(39,462)

(39,462)
Balance at December 31, 2009
704,007

49,909

48,717

802,633
Acquisitions and expenditures

25,239

1,002

26,241
Disposals

(23)

(23)
Balance at December 31, 2010
704,007

49,909

73,933

1,002

828,851

Amortization

Balance at January 1, 2009
(257,172)

(34,936)

(17,563)

(309,671)
Amortization

(4,991)

(7,275)

(12,266)
Impairment
(23,137)

(23,137)
Balance at December 31, 2009
(280,309)

(39,927)

(24,838)

(345,074)
Amortization

(4,991)

(16,353)

(21,344)
Disposals

23

23
Balance at December 31, 2010
(280,309)

(44,918)

(41,168)

(366,395)

Net Intangible Assets

At January 1, 2009
486,297

14,973

25,526

526,796
At December 31, 2009
423,698

9,982

23,879

457,559
At December 31, 2010
423,698

4,991

32,765

1,002

462,456

~~(*) Transfer related to deferred income tax and social contribution.~~

~~FS-43~~

The concession intangible ~~assets~~asset with definite useful ~~lives refer~~life refers to the amount originally paid by ~~the~~ shareholders, ~~the~~whose economic ~~justification for which~~basis was ~~the~~ expected future ~~profit as a result of~~earnings due to the concession ~~rights, incorporated~~right, recorded by the ~~Company.~~Company’s jointly controlled entity. The amortization is calculated ~~under~~on a straight-line basis over the ~~straight-line method at the rate of 10% p.a.~~

concession period.

The useful life of ~~the computer~~ software is 5one to five years. ~~The annual depreciation rate is 20%.~~

Goodwill:~~These~~The economic basis of goodwill is the expected future earnings and, in accordance with the new pronouncements, these amounts ~~have~~are not ~~been~~ amortized since January 1, 2009, when they became subject only to impairment ~~testing, without any need being identified to recognize the impairment of these assets.~~testing.


Goodwill on Investments	~~2010~~Balance at 12/31/2011	Investor
Flat steel	13,091	CSN
~~GalvaSud~~ Subtotal Company	13,091	~~CSN~~
~~Prada~~ Mining	~~63,509~~ 347,098	~~CSN~~ Namisa
~~NAMISA~~ Packaging	207,217	CSN
~~CFM~~ Total consolidated	567,406

·Impairment testing for goodwill

~~339,615~~

~~Namisa~~

~~Cayman do Brasil~~

~~7,483~~

~~Namisa~~

~~Total~~

~~423,698~~

•~~Impairment test of goodwill~~

In order to conduct impairment testing, goodwill is allocated to CSN’s operating divisions ~~which~~that represent the lowest level within the Company at which goodwill is monitored for internal management purpose, never above Operating Segments.


Cash-generating unit	Segment	12/31/2011	12/31/2010
Mining (Namisa)	Mining	347,098	347,098
Packaging (*)	Steel	207,217	63,509
Flat steel	Steel	13,091	13,091
		567,406	423,698

(*) Amount presented net of the impairment adjustment amounting to R$60,861.

FS-36

Cash-Generating Unit (CGU)

Segment

2010

2009

01/01/09
Mining (Namisa)

Mining

              347,098

              347,098

              347,098
Ersa

Mining

                23,137
Packaging

Steel

                63,509

                63,509

                96,227
Flat steel

Steel

                13,091

                13,091

                19,835

              423,698

              423,698

              486,297

The recoverable amount of the Packaging Cash-Generating Unit (“CGU”) was based on its value in use with the aid of independent appraisers and this was the basis for the impairment testing, since the following criteria were met:

•~~There were no significant changes in assets and liabilities;~~

•~~The calculation resulted in~~ a ~~recoverable amount that substantially exceeded the CGU’s carrying amount;~~

•~~There are no evidences or facts and circumstances that indicate any impairment of the assets in use since the last valuation conducted by independent experts.~~

~~FS-44~~

~~The recoverable amount of the Namisa Mining~~ Cash-Generating Unit (“CGU”) is ~~above its carrying amount and was~~ determined based on ~~a discounted~~value-in-use calculations.

These calculations use cash flow ~~using a discount rate~~projections, before income tax and social contribution, of 9.72% p.a. in US$, considering the long-term contracts signed for purchase of iron ore falling due in 2042. The revenue from the sale of ore supplied under these long-term contracts was limited to the contractual volume.

~~The recoverable amount of the Cash-Generating Units ("CGUs") mentioned above (except Packaging and Mining) was determined~~ based on ~~a discounted cash flow and is above the carrying amount. The projections used are based on~~financial budgets approved by ~~CSN Board of Directors and consider~~management for a three-year period. The amounts related to cash flows subsequent to the ~~following items:~~

•~~Average Gross Margin of each Cash-Generating Unit~~three-year period were extrapolated based on the ~~history and on projections approved by~~estimated growth rates shown below. The growth rate does not exceed the ~~Board for the next 3 years;~~
•~~Updating of costs based on~~average long-term ~~inflation projections;~~
•~~Discount rate before income tax and social contribution of 11.92% p.a.;~~
•~~Average~~ growth rate of the industry in which the Cash-Generating Unit (“CGU”) operates.

The main assumptions used in calculating the values in use as of December 31, 2011 are as follows:


	Mining	Packaging	Flat steel
Gross margin (i)	For gross margin were used the expansion plans alreadyapproved in the Company’s business plan, iron ore prices onthe international market, based on projections prepared byofficial institutions of the mining industry and the projectedUS dollar (US$) versus Brazilian reais (R$) rate curve until2020, made available by the Central Bank of Brazil(BACEN). After 2020, no variance was considered.	Average gross margin of eachcash-generating unit based on itshistory and projections approvedby the Board for the next threeyears;	Averagegross margin of eachcash-generating unit based on itshistory and projections approvedby the Board for the next threeyears;
Cost adjustment	Cost adjustment based on long-term inflation projections;	Cost adjustment based on long-term inflation projections;	Cost adjustment based on long-term inflation projections;
Growth rate (ii)	Cash flows were made considering a projection period up to2041, the maturity term of the main contracts and to whichthe Company's Business Plan is tied. Therefore it was notused a grow rate, given that the projection period exceeds 30years.	Average growth rateof 2.1% p.a.used to extrapolate the cash flowsafter the budgeted period;	Average growth rate of 0.5% p.a.used to extrapolate the cash flowsafter the budgeted period;
Discount rate (iii)	Pretax US dollar 11% p.a. discount rate.	Pretax 16.75% p.a. discount rate.	Pretax 11% p.a. discount rate.

(*) Assumptions used by independent experts.

(i) Budgeted gross margin.

(ii) Weighted average growth rate, used to extrapolate the cash flows after the ~~budged~~budget period.

~~Management determined the budgeted gross margin based on past performance and expectations for market growth. The amounts relating~~(iii) Pretax discount rate, applied to ~~the~~ cash ~~flows after 3 years hence have been extrapolated based on the estimated growth rates and are based on projections included in specific industry reports.~~flow projections.

During 2009, due to the reduction in production for strategic reasons, the Ersa Cash-Generating Unit had an impairment loss of R$ 23,137, which was fully allocated to goodwill and recorded under other operating expenses.

~~Based on these assumptions, no impairment has been identified in the cash-generating units described above.~~

~~16. LOANS,~~14.BORROWINGS, FINANCING AND DEBENTURES

Current Liabilities

Non-Current Liabilities

Rates (%)

2010

2009

2010

2009
FOREIGN CURRENCY

Exchange contract advances - ACC
4.35% and 4.98%

       233,837

Prepayment
1.24% to 3.50%

       473,255

       309,437

1,840,269

    2,872,698
Prepayment
3.51% to 7.50%

       138,210

     522,116

Prepayment

Guaranteed perpetual bonds
7.00% and 9.50%

           2,268

         26,191

1,666,200

    1,305,900
Fixed rate notes
6.50% to 9.75%

         76,006

         29,339

3,832,260

    2,263,560
Fixed rate notes
10.50%

         32,074

         33,518

     666,480

       696,480
Financed imports
3.52% to 6.00%

         57,293

         42,107

       59,322

         80,481
Financed imports
6.01% to 8.00%

         16,849

         38,041

       24,396

         41,679
BNDES/Finame
Res. 635/87 int. + 1.70% and 2.70%
         20,085

         19,796

       55,256

         75,241
Other
3.30% and 4.19% and 5.37% and CDI + 1.20%
         85,790

         27,826

     103,587

       126,870

901,830

760,092

8,769,886

7,462,909

LOCAL CURRENCY

BNDES/Finame
TJLP + 1.50% to 3.20%

       308,968

       280,802

1,907,596

    1,634,920
Debentures
103.60 % CDI and 9.40% + IGPM and 1.00% + TJLP
         41,750

         30,659

1,760,846

       624,570
Prepayment
104.80% and 109.50 % CDI
         64,216

         31,217

3,400,000

    1,400,000
CCB
112.50% CDI

           1,354

         19,782

3,000,000

    2,000,000
Intercompany

Other
100% IGPDI and 106% CDI and CDI + 0.29% and 5% and 14%
         26,443

         18,489

       23,303

         93,444

442,731

380,949

10,091,745

5,752,934
Total loans and financing

1,344,561

1,141,041

18,861,631

13,215,843
Transaction costs

       (35,929)

       (27,121)

    (80,816)

        (62,162)
Total loans and financing + transaction costs

1,308,632

1,113,920

18,780,815

13,153,681

~~FS-45~~FS-37


		Current liabilities		Non-current liabilities
	Rates in (%)	12/31/2011	12/31/2010	12/31/2011	12/31/2010
FOREIGN CURRENCY
Prepayment	1% to 3.50%	381,333	473,255	573,388	1,840,269
Prepayment	3.51% to 7.50%	148,597	138,210	1,281,171	522,116
Guaranteed perpetual bonds	7.00%	2,553	2,268	1,875,800	1,666,200
Fixed rate notes	9.75%	4,191	4,546	1,031,690	916,410
Fixed rate notes	6.50%	53,851	47,834	1,875,800	1,666,200
Fixed rate notes	6.875%	26,598	23,626	1,406,850	1,249,650
Fixed rate notes	10.5%	34,390	32,074	750,320	666,480
Financed imports	3.52% to 6.00%	261	57,293		59,322
Financed imports	6.01% to 8.00%	25,248	16,849	27,310	24,396
CCB	1.54%	176,440
BNDES/FINAME	Interest R. Res. 635/87+1.7% and 2.7%	25,903	20,085	36,750	55,256
Other	3.3% to 5.37% and CDI +1.2%	105,181	85,790	145,438	103,587
		984,546	901,830	9,004,517	8,769,886
LOCAL CURRENCY
BNDES/FINAME	TJLP + 1.5% to 3.2%	430,432	308,968	1,744,727	1,907,596
Debentures	103.6 % and 110.8% CDI and9.4% + IGPM and 1% + TJLP	672,073	41,750	2,822,424	1,760,846
Prepayment	104.8% and 109.5 % CDI	537,128	64,216	4,523,224	3,400,000
CCB	112.5% CDI	101,280	1,354	7,200,000	3,000,000
Other		9,509	26,443	37,058	23,303
		1,750,422	442,731	16,327,433	10,091,745
Total borrowings and financing		2,734,968	1,344,561	25,331,950	18,861,631
Transaction costs		(32,885)	(35,929)	(145,445)	(80,816)
Total borrowings and financing +transaction costs		2,702,083	1,308,632	25,186,505	18,780,815

AtThe balances of prepaid intragroup borrowings related to the Company total R$2,244,927 as of December 31, ~~2010~~2011 (R$2,080,721 as of December 31, 2010), see note 4.

·Funding transaction costs ~~for the~~

As of December 31, 2011 funding ~~were~~transaction costs are as follows:



	Short term	Long term
	Short term	2013	2014	2015	2016	2017	After 2017	Total	TJ⁽¹⁾	TIR⁽²⁾
Fixed rate notes	4,067	4,779	3,478	3,100	2,203	2,203	4,852	20,615	6.5% to 10%	6.75% to 10.7%
BNDES	553	491	423	389	389	389	3,491	5,572	1.3% to 1.7%	1.44% to 7.39%
BNDES	1,578	1,578	284					1,862	2.2% to 3.2%	7.59% to 9.75%
Prepayment	8,059	8,020	6,397	2,219	2,219	2,219	1,354	22,428	109.50% and 110.79% CDI	10.08% to 12.44%
Prepayment	509	509	509	509	509	346		2,382	2.37% and 3.24%	2.68% to 4.04%
CCB	17,472	16,220	17,651	13,902	13,902	10,056	18,046	89,777	112.5% CDI	11.33% to 14.82%
Other	647	427	427	427	427	427	674	2,809	110.8% and 103.6% CDI	12.59% and 13.27%
	32,885	32,024	29,169	20,546	19,649	15,640	28,417	145,445

Short-term

Long-term

Total

2012

2013

2014

2015

After 2015

TJ⁽¹⁾

TIR⁽²⁾
Fixed rate notes

3,900

23,155

2,786

2,920

2,219

2,068

13,162

6,5% to 10%

6,75% to 10,7%
BNDES

637

5,602

2,763

403

334

300

1,802

1,3% to 1,7%

1,44% to 7,39%
BNDES

1,578

3,440

1,578

1,578

284

2,2% to 3,2%

7,59% to 9,75%
Prepayment

7,590

27,089

7,591

7,591

5,928

1,750

4,229

109,50% and 110,79% CDI

10,08% to 12,44%
Prepayment

676

3,461

676

676

676

578

855

2,37% and 3,24%

2,68% to 4,04%
CCB

20,765

17,881

16,727

1,154

113,5% to 117,5% CDI

11,33% to 12,82%
Other

783

188

188

103,6% CDI

12.59%

35,929

80,816

32,309

14,322

9,441

4,696

20,048

(1)TJ – Annual interest rate contracted

(2)TIR – Annual internal rate of return

·Maturities of borrowings, financing and debentures presented in non-current liabilities

As of December 31, ~~2010,~~2011, the principal of ~~the~~ long-term ~~loans,~~borrowings, financing and debentures by maturity year is as ~~follows by year of maturity:~~follows:

FS-38


2012	2,165,803	11.5%
2013	2,088,254	11.1%	2,263,889	9%
2014	1,947,418	10.3%	1,933,763	8%
2015	2,187,899	11.6%	2,346,461	9%
2016	2,221,853	11.8%	2,444,259	10%
After 2016	6,584,204	34.9%
Guaranteed Perpetual Bonds	1,666,200	8.8%
2017			3,166,273	12%
After 2017			11,301,505	45%
Perpetual bonds			1,875,800	7%
	18,861,631	100.0%	25,331,950	100%

In September 2009, through its subsidiary CSN Islands XI Corp, the Company issued bonds in the amount of US$ 750 million. These bonds, which fall due in September 2019, have interest rate of 6.875% p.a. payable semi-annually as from March 2010,·Amortizations and ~~the issuer may redeem them in advance through payment of premium to the creditors.~~

The collateral granted for the loans are property, plant and equipment, collateral signatures, sureties and bank guarantees, as shown in the following table, and do not comprise guarantees granted by subsidiaries and jointly-controlled subsidiaries.

2010
2009
Property, plant and equipment

47,985
47,985
Guarantor collateral

74,488
74,612
Imports

21,820
41,964
Bank guarantees

288,338
206,125

432,631
370,686

The ~~following~~ table ~~show~~below shows the amortizations and new funding ~~during~~in the current period:



	12/31/2011	12/31/2010
Opening balance	20,089,447	14,267,601
Funding	7,824,012	8,754,779
Amortization	(3,614,606)	(3,897,405)
Other (*)	3,589,735	964,472
Closing balance	27,888,588	20,089,447

                 2010
                  2009
Opening balance
       14,356,884

            11,983,153
Funding
         8,789,548

              7,671,696
Amortization
       (3,897,405)

            (3,775,593)
Other (*)
            957,165

            (1,522,372)
Closing balance
       20,206,192

            14,356,884

(*) Includes ~~inflation adjustment and~~ foreign exchange ~~gains (losses).~~differences and inflation adjustments.

Loans and financing contracts with certain financial institutions contain some covenants that are usual in financial agreements in general and the Company is compliant with them at December 31, ~~2010.~~2011.

In February 2011, the Company entered into with Caixa Econômica Federal a Corporate Loan Transaction - Large Corporations, by issuing a bank credit certificate of R$2 billion, with final amortization maturity of 94 months. This CCB (bank credit note) bears interest equivalent to 112.5% of the CDI (interbank deposit rate), as released by CETIP (OTC Clearing House), per year, and interest is paid on a quarterly basis, in March, June, September and December.

In April 2011, the Company contracted an Export Credit Note amounting to R$1.5 billion from Banco do Brasil, which will mature in April 2019.

This NCE (export credit note) bears interest equivalent to 110.8% of the CDI (interbank deposit rate), as released by CETIP, per year, and interest is paid on a semiannual basis, in April and October.

In August 2011, the Company entered into with Caixa Econômica Federal a Corporate Loan Transaction - Large Corporations, by issuing a bank credit certificate of R$2.2 billion, with final amortization maturity of 108 months. This CCB (bank credit note) bears interest equivalent to 112.5% of the CDI (interbank deposit rate), as released by CETIP, per year, and interest is paid on a quarterly basis, in February, May, August and November.

In December 2011 the Company settled in advance its export receivables securitization program with the payment of R$313,842 (R$283,857 in principal, R$2,373 in interest and R$27,612 in premium paid to creditors for early settlement).

•·~~DEBENTURES~~Debentures

i. Companhia ~~Siderurgica~~Siderúrgica Nacional

4^th4th issue

As approved at ~~a meeting of~~ the Board of ~~Directors~~Directors’ meeting held on December 20, 2005 and ratified on April 24, 2006, the Company issued on February 1, 2006, ~~a total of~~ 60,000 ~~non-convertible and~~nonconvertible, unsecured debentures, in a single series, ~~at the~~with a unit face value of R$ ~~10. These~~10.These debentures were issued in the total amount of R$600,000 and the proceeds from their trading with financial institutions were received on May 3, 2006.

The face value of these debentures earns interest ~~corresponding~~equivalent to 103.6% of ~~the~~ CDI rate, as released by Cetip, ~~rate,~~per year, and maturity of the face value is scheduled for February 1, 2012, with an early redemption option.

5th issue

As approved at the Board of Directors’ meeting held on July 12, 2011, the Company issued on July 20, 2011, 115 nonconvertible, unsecured debentures, in single series, with a unit face value of R$10 million. These debentures were issued in the total amount of R$1,150,000 and the proceeds from their trading with financial institutions were received on August 23, 2011.

The face value of these debentures earns interest equivalent to 110.8% of CDI, as released by Cetip, per year, and maturity of the face value is scheduled for February 1, 2012, with an early redemption option.

ii. Transnordestina Logística

On March 10, 2010 Transnordestina Logística S.A obtained approval from the Northeast Development Fund –- FDNE for issue of the ~~1st~~1^st Series of its ~~1st~~1^st Private Issue of ~~share-convertible~~convertible debentures, ~~comprising in all 10~~consisting of eight series in the total amount of R$ ~~2,672,400. The~~2,672,400.The first, third, ~~fourth, seventh~~ and ~~ninth~~fourth series refer to funds to be ~~applied~~invested in the Missão Velha – Salgueiro

– Trindade e Salgueiro – Porto de Suape module, which also includes the investments in the Suape Port, ~~of Suape,~~ and the reconstruction of the ~~section of railroad track from~~ Cabo to Porto Real de Colé~~gio.~~gio railroad section. The second, fifth and ~~fifth~~sixth series refer to funds to be invested in the Eliseu Martins – Trindade module. The ~~sixth,~~seventh and eighth ~~and tenth~~ series refer to funds to be invested in the Missão Velha – Pecém module, which also includes the investments in the ~~Port of~~ Pecé~~m. The 2nd~~m Port.

General

Number

Unit

Balance (R$)

Issue

Series

meeting

issued

face value

Issue

Maturity

Charges

12/31/2011

1st

2/8/2010

336,647,184

R$ 1,00

03/09/10

10/3/2027

TJLP + 0.85% p.a.

336,647

1st

2ª

2/8/2010

350,270,386

R$ 1,00

11/25/2010

10/3/2027

TJLP + 0.85% p.a.

350,270

1st

3ª

2/8/2010

338,035,512

R$ 1,00

1/12/2010

10/3/2027

TJLP + 0.85% p.a.

338,036

1st

4ª

2/8/2010

468,293,037

R$ 1,00

10/04/11

10/3/2027

TJLP + 0.85% p.a.

468,293

·Guarantees provided

Guarantees provided for the borrowings comprise property, plant and ~~3rd Series have been fully subscribed~~equipment items and ~~paid up on the following dates and~~sureties, as shown in the ~~following amounts:~~table below, and do not include guarantees provided for subsidiaries and jointly controlled entities.

~~FS-47~~

General

Number

Unit face

Issue

Balance
Issue

Series

Meeting

issued

value

date

Maturity

Charges

in 2010

1st

1st

02/08/10

336,647,184

R$ 1.00

03/10/10

10/03/27

TJLP + 0,85% p.a

336,647
1st

2nd

02/08/10

350,270,386

R$ 1.00

11/25/10

10/03/27

TJLP + 0,85% p.a

350,270
1st

3rd

02/08/10

338,035,512

R$ 1.00

12/01/10

10/03/27

TJLP + 0,85% a.a

338,036

(*) Because of the early settlement of export receivables, the securitization reserve fund amounts were redeemed.

~~17.~~ 15.FINANCIAL INSTRUMENTS

I –- Identification and measurement of financial instruments

The Company enters into transactions involving various financial instruments, mainly cash and cash equivalents, including ~~financial~~short-term investments, marketable securities, trade ~~accounts receivable,~~receivables, trade payables, and ~~loans~~borrowings and financing. ~~In addition,~~Additionally, it also carries out transactions involving derivative financial instruments, especially exchange and interest rate swaps.

Considering the nature of ~~the~~these instruments, ~~the~~their fair value is basically determined by the use of ~~quotations in the Brazilian~~Brazil’s money market and ~~foreign capital markets~~mercantile and ~~Commodities and Futures Exchange.~~futures exchange quotations. The amounts recorded in current assets and current liabilities have immediate liquidity or short-term maturity, mostly less than three months. Considering the ~~terms~~maturities and ~~characteristics~~features of ~~these~~such instruments, ~~the~~their carrying amounts approximate their fair values.

·Classification of financial instruments

2010 2009
Consolidated - R$ thousand Available- for-sale
Fair value
through profit
or loss

Loans
and receivables-Effective interest Other liabilities - Amortized cost method Balances Available
for-sale Fair value
through
profit or loss Loans and
receivables-Effective interest
Other liabilities - Amortized cost
method

Balances
Assets
Current Assets

Cash and cash equivalents
10,239,278 10,239,278 7,970,791 7,970,791
Trade accounts receivable, net
1,259,461 1,259,461 1,186,315 1,186,315
Guarantee margin on financial instruments
254,485 254,485 115,949 115,949
Securitization reserve fund
22,644 22,644 91,703 91,703
Non-current Assets

Other receivables
73,731 73,731 59,952 59,952
Investments
2,102,112 2,102,112 319,727 319,727
Securitization reserve fund
32,031 32,031 34,389 34,389

Liabilities

Current Liabilities

Loans and financing
1,302,811 1,302,811 1,110,382 1,110,382
Debentures
41,750 41,750 30,659 30,659
Derivatives
116,407 116,407 77,147 77,147
Trade accounts payable
521,156 521,156 504,223 504,223
Non-current Liabilities

Loans and financing
17,100,785 17,100,785 12,591,273 12,591,273
Debentures
1,760,844 1,760,844 624,570 624,570
Derivatives
263 263 18,730 18,730


	12/31/2011						12/31/2010
Consolidated	Notes	Available for sale	Fair value through profit or loss	Loans and receivables -effective interest	Other Liabilities - amortized cost method	Balances	Available for sale	Fair value through profit or loss	Loans and receivables - effective interest	Other Liabilities - amortized cost method	Balances
Assets
Current
Cash and cash equivalents	5			15,417,393		15,417,393			10,239,278		10,239,278
Trade receivables, net	6			1,558,997		1,558,997			1,259,461		1,259,461
Guarantee margin on financial instruments	8 and 15			407,467		407,467			254,485		254,485
Derivative financial instruments	8 and 15		55,115			55,115
Securitization reserve fund									22,644		22,644

Non-current
Other trade receivables				57,797		57,797			58,485		58,485
Investments		2,089,309				2,089,309	2,102,112				2,102,112
Derivative financial instruments	10		376,344			376,344		254,231			254,231
Securitization reserve fund									32,031		32,031
Short-term investments				139,679		139,679			112,484		112,484

Liabilities
Current
Borrowings, financing and debentures	14				2,734,968	2,734,968				1,344,561	1,344,561
Derivative financial instruments	15 and 16		2,971			2,971		116,407			116,407
Trade payables					1,232,075	1,232,075				623,233	623,233
Non-current
Borrowings, financing and debentures	14				25,331,950	25,331,950				18,861,631	18,861,631
Derivative financial instruments	15 and 16		373,430			373,430		254,494			254,494

•·Fair value measurement

The financial instruments recognized at fair value require the disclosure of ~~the~~ fair value measurements at three hierarchy levels:

•·Level 1: quoted prices (unadjusted) in active markets for identical assets ~~and liabilities;~~or liabilities.

•·Level 2: ~~Other~~other available ~~information,~~inputs, except those atof Level 1 that are observable for the asset or liability, whether directly ~~(as~~(i.e., prices) or indirectly ~~(derived~~(i.e., derived from prices);

•·Level 3: ~~Information~~inputs unavailable due to slight or no market activity and which is significant for the definition of the fair value of assets.

~~The following table shows the financial instruments recognized at fair value using a valuation method:~~

~~FS-48~~

2010

2009

Level 1

Level 2

Level 3

Balances

Level 1

Level 2

Level 3

Balances
Assets

Non-current Assets

Available-for-sale financial assets

Investments

   2,102,112

2,102,112

319,727

    319,727

Liabilities

Current Liablities

Financial liabilities at fair value through profit or loss

Derivatives

116,407

    116,407

77,147

      77,147

Non-current Liabilities

Derivatives

         263

            263

18,729

      18,729

FS-41


				12/31/2011				12/31/2010
Consolidated	Level 1	Level 2	Level 3	Balances	Level 1	Level 2	Level 3	Balances
Assets
Current
Financial assets at fair value through profit or loss
Derivative financial instruments		55,115		55,115

Non-current
Available-for-sale financial assets
Investments	2,089,309			2,089,309	2,102,112			2,102,112

Financial assets at fair value through profit or loss
Derivative financial instruments		376,344		376,344		254,231		254,231

Liabilities
Current
Financial liabilities at fair value through profit or loss
Derivative financial instruments		2,971		2,971		116,407		116,407

Non-current
Financial liabilities at fair value through profit or loss
Derivative financial instruments		373,430		373,430		254,494		254,494

II ~~- Cash and cash equivalents,~~– investments in financial ~~investments, trade accounts receivable, other current assets, trade payables, and other current liabilities~~

These amounts are recorded in the financial statements at their carrying amounts, which are substantially similar to those that would be obtained if they were traded in the market. The fair values of other long-term assets and liabilities do not differ significantly from their carrying amounts, exceptinstruments classified as available for ~~the amounts shown in the next table.~~

The estimated fair value for the consolidated long-term loans and financing have been calculated at current market rates, considering the nature, term and risks similar to those of the recorded contracts, as compared below:

2010

2009

Carrying amount

Fair value

Carrying amount

Fair value
Guaranteed perpetual bonds
                 1,668,468

           1,663,701

                1,332,091

           1,317,327
Fixed rate notes
                 4,605,997

           4,966,629

                3,022,138

           3,283,359

~~III – Investments in available-for-sale securities~~sale and measured at fair value through ~~profit or loss~~OCI

These consist mainly of investments in shares acquired in Brazil and abroad involving top ranked companies classified by international rating agencies as investment grade, which are recognized in non-current assets, and any gains or losses are recognized in equity, where they will remain until actual realization of the securities or when any loss is considered unrecoverable.

~~The~~

Potential impairment of financial assets classified available for sale

During 2010 and 2011 CSN invested in ordinary (USIM3) and preferred (USIM5) shares of Usiminas, classified as financial instruments available for sale as they do not attend the criteria to be classified within any of the other categories of financial instruments (measured at fair value through profit and loss, held to maturity or loans and receivables). The instruments are classified under non-current financial instruments and measured at their fair value based on their quoted price at 31 December 2011 (BOVESPA). The company is evaluating strategic alternatives with respect to its investment in Usiminas.

Considering the decline in market value of the shares Usiminas during the year, the Company has evaluated whether, at the balance sheet date, there is objective evidence of impairment of its investments in Usiminas. Management evaluated if the decline in market value of the shares Usiminas should be considered either significant or prolonged. Determining whether a decline is significant or prolonged requires judgment and according to CSN’s accounting policy, which is based on national and international application, an instrument by instrument analysis is made based on quantitative and qualitative information from the moment on onwards that the decline either above 20% or more than 12 months.

Despite the Company’s investment strategy and despite the fact that both the ordinary and preferred shares are equity instruments, management separately evaluated the ordinary and preferred shares for impairment considering the different rights attached to them. The policy of the Company requires a detailed analysis of the percentage and period of decline, characteristics of the instrument, the segment in which the entity operates and volatility of the instrument. Additionally, macro-economic factors, qualitative analyses and other relevant factors after the balance sheet date until the date of approval of the financial statements are taken into consideration to the extent that is possible within the context of the standards, their interpretations and application in practice.

To determine the period of decline of the market value of the instruments below their cost, the Company compared their respective weighted average cost of acquisition at balance sheet date with the last trading date on which the quoted maximum price was above this weighted average cost of acquisition. In case of the ordinary shares the period of decline was calculated at 1 month, while in the case of the preferred shares the period of decline was calculated at 7 months. Management is of the opinion that, considering its accounting policy, the decline is not prolonged.

Volatility measures the dispersions between returns of a share or index. Volatility is a measure of risk of a share, but also serves to evaluate to what extent price variations historically are within expectations. Historical volatility of the shares is calculated and considered in order to identify the expected fluctuation of the respective instruments, evaluate the expected future volatility and conclude if a decline in market value of an instrument below its cost should be considered significant.

FS-42

The following table shows these indicators for a period of 12 years,long period sufficient to eliminate volatility spikes caused by economic crises:


Period	Volatility
	USIM3	USIM5
1/3/2000 to 12/31/2011	50.42%	48.57%

In light of this information, Management concluded that the decline in market value relative to their price of acquisition of the shares of USIM3 and USIM5 at 31 December 2011 of 30.8% and 34.5%, respectively, is not significant.At 25 April 2012 the decline of the shares had significantly reduced to26.1% and 27.3% respectively, further supporting the volatility of the securities.

Management considers that during the period under analysis there have not been significant changes with an adverse effect in the technological, market, economic and legal environment in which Usiminas operates. Further, while the market value of Usiminas at 31 December 2011 was below the value of its net assets at that date (R$ 13.5 billion and R$ 19 billion respectively) and the company therefore was required to evaluate impairment of its assets in accordance with IAS38.12(d), the company did not register any such impairment.

Considering the quantitative and qualitative analyses above, Management is of the opinion that there is no objective evidence of impairment of the ordinary and preferred shares of Usiminas and consequently has not reclassified losses thus far recognized in other comprehensive income (R$ 767,924, net of tax).

III – Fair values of assets and liabilities as compared to their carrying amounts

Financial assets and liabilities at fair value through profit or loss are recognized in current and non-current assets and liabilities, and any gains orand possible losses are recognized as finance income ~~and loss,~~or finance costs, respectively.

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

The estimated fair values of consolidated long-term borrowings and financing were calculated at prevailing market rates, taking into consideration the nature, terms and risks similar to those of the recorded contracts, as compared below:


	12/31/2011		12/31/2010
	Carrying amount	Fair value	Carrying amount	Fair value
Guaranteed perpetual bonds	1,878,353	1,819,903	1,668,468	1,663,701
Fixed rate notes	5,183,690	5,832,364	4,606,820	4,966,629

IV ~~- Policy for~~– Financial risk management ~~of financial risks~~policy

The Company has and follows a policy of managing its risks, with guidelines regarding the risks incurred by the company. ~~Under the terms of the~~Pursuant to this policy, the nature and general position of ~~the~~ financial risks isare regularly monitored and managed in order to ~~evaluate~~assess the results and the financial impact on cash ~~flows.~~flow. The credit limits and the quality of counterparties’ hedge ~~of counterparties~~instruments are also periodically reviewed.

The risk management policy was established by the Board of Directors. Under this policy, market risks are hedged when it is considered necessary to support the corporate strategy or when it is necessary to maintain a level of financial flexibility.

Under the terms of the risk management policy, the Company manages some risks by using derivative financial instruments.

The Company’s risk policy prohibits any speculative deals or short sales.

~~FS-49~~

•·Liquidity risk

FS-43

~~This~~It is the risk ~~arises if~~that the Company ~~does~~may not have sufficient ~~liquid~~net funds to ~~cover~~honor its financial commitments as a result of mismatching of terms or volumes between scheduled receipts and payments.

~~In order to~~

To manage cash liquidity in ~~local~~domestic and foreign currency, ~~premises are established for~~assumptions of future disbursements and receipts are established and ~~these are~~daily monitored ~~on a daily basis~~ by the ~~Treasury~~treasury area. The payment schedules for the long-term portions of ~~loans,~~borrowings, financing and debentures are shown in Note ~~16.~~14.

The following table shows the contractual maturities of financial liabilities, including estimated interest payments.

At December 31, 2010
Less than one year

From one to two years
From two to five years
Over five years
Loans, financing and debentures
                 1,344,561

           4,254,057

                6,357,168

           8,250,406
Derivative financial instruments
                    116,407

                     263

Trade accounts payable
                    521,156

At December 31, 2009

Loans, financing and debentures
                 1,141,041

           5,864,415

                4,150,017

           3,201,411
Derivative financial instruments
                      77,147

                18,729

Trade accounts payable
                    504,223


At December 31, 2011	Less than one year	From one to two years	From two to five years	Over five years	Total
Borrowings, financing and debentures	2,734,968	2,263,889	6,724,483	16,343,578	28,066,918
Derivative financial instruments	2,971	373,430			376,401
Trade payables	1,232,075				1,232,075

At December 31, 2010
Borrowings, financing and debentures	1,344,561	4,254,057	6,357,169	8,250,405	20,206,192
Derivative financial instruments	116,407	254,494			370,901
Trade payables	623,232				623,232

•·~~Exchange~~Foreign exchange rate risk

The Company assesses its exchange exposure by subtracting its liabilities from its assets denominated in ~~Dollar, Euro~~dollar, euro and ~~Yen,~~australian dollar, thus arriving at its net exchange exposure, which is the foreign currency ~~risk exposure.~~exposure risk. Therefore, besides the trade ~~accounts receivable~~receivables arising from exports and investments overseas that in economic terms constitute natural hedges, the Company further considers and uses various financial instruments, such as derivative instruments (US$ xto Real and euro to dollar swaps, and forward exchange contracts, etc.) to manage its risks of ~~variations~~fluctuations in currencies other than the ~~value of the local currency (Brazilian real) versus the U.S. Dollar.~~Brazilian real.

•·Policies ~~for~~on the use of hedging derivatives

The Company’s financial policy reflects the parameters of liquidity, credit and market risks approved by the Audit Committee and Board of Directors. The use of derivative instruments in order to prevent fluctuations in interest and exchange rates from having a negative impact on the company’s balance sheet and income ~~statements~~statement should consider the same parameters. As provided for in internal rules, this financial investment policy has been approved and is being managed by the finance officers.

At the meetings of the Executive Officers and Board of Directors, the officers and directors routinely present and discuss the Company’s financial positions. Under the bylaws, transactions involving material amounts require the prior approval of management bodies. The use of other derivative instruments is contingent upon the express prior approval of the Board of Directors.

To finance its activities, the Company resorts to the capital markets, both locally and internationally, and based on the indebtedness profile it is seeking, part of the debt is pegged to foreign currency, basically to the ~~US$,~~US dollar, which causes Management to seek hedging for debt through derivative financial instruments.

To contract derivative financial instruments for hedging within the internal control structure, the following policies are adopted:

~~FS-50~~

•·ongoing calculation of exchange exposure that occurs by analyzing assets and liabilities exposed to foreign currency, under the following terms:(i) trade ~~accounts receivable~~receivables and payables in foreign currency; (ii) cash and cash equivalents and debts in foreign currency considering the maturity of the assets and liabilities exposed to exchange fluctuations;

FS-44

•·presentation of the financial position and exchange exposure on a routine basis at meetings of the Executive Officers and Board of Directors that approve the hedging strategy;

•·carrying out derivative hedging transactions only with leading banks, diluting the credit risk through diversification among these banks;

The consolidated net exposure as atof December 31, ~~2010~~2011 is as follows:

	~~2010~~
	~~(amounts in US$)~~
~~Cash and cash equivalents overseas~~	~~4,239,578~~
~~Derivative guarantee margin~~	~~152,734~~
~~Trade accounts receivable - foreign market~~	~~96,584~~
~~Securitization reserved fund~~	~~32,814~~
~~Other assets~~	~~130,645~~
~~Total assets~~	~~4,652,355~~
~~Loans and financing~~	~~(5,734,873)~~
~~Trade accounts payable~~	~~(7,795)~~
~~Other liabilities~~	~~(59,981)~~
~~Total liabilities~~	~~(5,802,649)~~
~~Gross exposure~~	~~(1,150,294)~~
~~Notional amount of derivatives contracted~~	~~1,249,529~~
~~Net exposure~~	~~99,235~~


Foreign Exchange Rate Exposure	Amounts US$	Amounts EUR	Amounts A$
Foreign Exchange Rate Exposure	thousand)	thousand)	thousand)
Cash and cash equivalents overseas	5,613,908		302,553
Derivative guarantee margin	217,223
Trade receivables - foreign market	287,616	7,844
Other assets	139,219	118
Total assets	6,257,966	7,962	302,553
Borrowings and financing	(5,299,622)
Trade payables	(10,779)	(1,450)
Other liabilities	(56,479)	(16)
Total liabilities	(5,366,880)	(1,466)
Gross exposure	891,086	6,496	302,553
Notional amount of derivatives contracted	267,856	(90,000)
Net exposure	1,158,942	(83,504)	302,553

~~The results obtained~~

Gains and losses on these transactions are consistent with the policies and strategies defined by ~~Management.~~

•~~Forward Contract – Real Exchange Rate for Commercial Dollar Exchange Rate~~management.

The purpose of this contract is to hedge obligations denominated in foreign currency against the fluctuation in the Brazilian Real. The Company can buy or sell forward contracts for commercial dollar rates on the Commodities and Futures Exchange (BM&F) to mitigate the exchange exposure for its US$ denominated liabilities. The specifications of the Real x Dollar forward exchange rate contract, including detailed explanations on the characteristics of the contracts and calculation of the daily adjustments, are published by the BM&F. In 2010, the Company paid R$ 179,564 and received R$ 259,490 in adjustments, thus obtaining a gain of R$ 79,926. The gains and losses on these contracts are directly related to exchange fluctuations. At December 31, 2010 the Company did not have any outstanding transactions.

•·Exchange swap transactions

The Company carries out exchange swap transactions in order to hedge its assets and liabilities against any fluctuations in the ~~US$/R$~~US dollar-real parity.

This hedge through exchange swaps provides the Company, through the ~~asset end~~long position of the contract, with a forward rate agreement (FRA) gain on the exchange coupon, which at the same time improves our investment rates and reduces the cost of our funding in the international market.

As of December 31, ~~2010,~~2011, the Company had a long position in exchange swap of US$ ~~1,178,000~~367,856 thousand (US$ ~~1,519,500~~1,249,529 thousand ~~in 2009)~~as of December 31, 2010) where we received, in the long position, exchange rate change plus 3.4541% per year on ~~the asset end,~~average (in 2010, exchange rate change plus 2.29% per ~~year on average (in 2009 exchange rate change plus 0.88% p.a.)~~year), and paid 100% of CDI, in the ~~CDI rate on the asset end~~short position of the exchange swap contract.

~~FS-51~~

AtAs of December 31, ~~2010,~~2011 the Company held a short position in a foreign exchange swap of US$100,000 thousand, where we paid foreign exchange change plus interest of 2.39% per year on average in the short position and received 100% of CDI in the long position of the foreign exchange swap.

As of December 31, 2011, the consolidated position of these contracts is as follows:

~~i) Open~~a) Outstanding transactions

·US dollar-to-real exchange swap

FS-45

	Reference value (US$ thousand)		2010 appreciation (R$ thousand)		Fair value (market) (R$ thousand)	Amount payable in the year (R$ thousand)
Conterparties	2010	Maturity of transaction	Asset position	Liability position	2010	Amount payable
								12/31/2011
									Appreciation (R$)				Fair value
Counterparties							Transaction maturity	Notional (US$ thousand)	Asset position		Liability position		Amount receivable / (payable)
JP Morgan							2/1/2012 to 3/1/2012	9,981	19,127		(18,556)		571
HSBC	223,000	jan/3/11	372,794	(385,900)	(13,106)	(13,106)	4/22/2012 to 6/15/2012	101,317	192,919		(176,554)		16,365
Deutsche Bank	265,000	jan/3/11 to feb/1/11	443,143	(468,544)	(25,401)	(25,401)
Itau BBA	450,000	jan/3/11	751,835	(778,892)	(27,057)	(27,057)
Société Générale							02/1/2012 to 8/2/2012	16,635	30,554		(29,362)		1,192
Bradesco							8/1/2012	3,327	6,279		(5,743)		536
Banco do Brasil							7/2/2012 to 9/3/2012	6,654	12,605		(12,413)		192
Santander	110,000	jan/3/11 to jan/2/15	183,787	(190,395)	(6,608)	(6,608)	2/1/2012 to 1/2/2015	14,990	28,900		(28,416)		484
Goldman Sachs	130,000	jan/3/11 to feb/1/15	215,302	(224,658)	(9,356)	(9,356)	1/2/2015	190,000	371,174		(352,514)		18,660
Banco de Tokyo							12/15/2016	24,952	46,980		(47,960)		(980)
	1,178,000		1,966,861	(2,048,389)	(81,528)	(81,528)		367,856	708,538		(671,518)		37,020

								12/31/2010
									Appreciation (R$)				Fair value
												(market)
Counterparties							Transaction maturity	Notional (US$ thousand)	Appreciation (R$)	Asset position		Liability position		Amount (payable)

JP Morgan							11/1/2011 to '3/1/2012	6,654	11,078		(11,170)		(92)
HSBC							1/3/2011	223,000	372,794		(385,900)		(13,106)
Société Générale							2/1/2011 to '12/1/2011	23,289	39,687		(50,254)		(10,567)
Pactual							7/1/2011	3,327	5,847		(8,573)		(2,726)
Deutsche Bank							1/3/2011 to 2/1/2011	265,000	443,143		(468,544)		(25,401)
Santander							1/3/2011 to 1/2/2015	131,625	220,951		(239,169)		(18,218)
Goldman Sachs							1/3/2011 to 1/2/2015	130,000	215,302		(224,658)		(9,356)
Itau BBA							1/3/2011 to 12/1/2011	466,634	779,802		(809,381)		(29,579)
								1,249,529	2,088,604		(2,197,649)		(109,045)

·Real-to-US dollar exchange swap


		12/31/2011
			Appreciation (R$)		Fair value
			Appreciation (R$)		(market)
	Transaction	Notional (US$	Asset	Liability	Amount
Counterparties	maturity	thousand)	position	position	(payable)
Santander	2/1/2012	(70,000)	130,266	(130,787)	(521)
Goldman Sachs	2/1/2012	(30,000)	55,704	(56,030)	(326)
		(100,000)	185,970	(186,817)	(847)

·Iene-to-US dollar exchange swap


		12/31/2011
			Appreciation (R$)		Fair value
			Appreciation (R$)		(market)
	Transaction		Asset	Liability	Amount
Counterparties	maturity	Notional (iene)	position	position	receivable
Deutsche Bank	12/12/2013	59,090,000	374,455	(373,430)	1,025
		59,090,000	374,455	(373,430)	1,025


		12/31/2010
			Appreciation (R$)		Fair value
			Appreciation (R$)		(market)
Counterparties	Transaction maturity	Notional (iene)	Asset position	Liability position	Amount receivable/ (payable)
Deutsche Bank	12/12/2013	59,090,000	254,231	(254,231)
		59,090,000	254,231	(254,231)

b) Settled US dollar-real transactions


	Appreciation 2011				Appreciation 2010
Counterparties	Notional(US$thousand)	Asset position (R$)	Liability position(R$)	Amount received / (paid) in 2011	Notional(US$thousand)	Asset position (R$)	Liability position(R$)	Fair value in2010	Impact onP&L in 2011
Deutsche Bank	2,352,000	3,809,284	(3,927,022)	(117,738)	265,000	443,143	(468,544)	(25,401)	(92,337)
Goldman Sachs	100,000	2,978,316	(2,975,695)	2,621	100,000	167,243	(173,031)	(5,788)	8,409
HSBC	1,843,000	3,022,397	(3,092,542)	(70,145)	223,000	372,794	(385,900)	(13,106)	(57,039)
Itau BBA	809,635	1,345,353	(1,380,319)	(34,966)	466,635	779,802	(809,378)	(29,576)	(5,390)
Santander	246,625	412,585	(434,164)	(21,579)	121,625	204,241	(221,856)	(17,615)	(3,964)
BTG Pactual	3,327	5,542	(9,050)	(3,508)	3,327	5,847	(8,573)	(2,726)	(782)
Société Générale	23,289	41,093	(52,363)	(11,270)	23,289	39,687	(50,255)	(10,568)	(702)
JP Morgan	3,327	5,737	(6,075)	(338)	6,654	11,078	(11,170)	(92)	(246)
Bradesco	1,663	3,143	(2,755)	388					388
	5,382,866	11,623,450	(11,879,985)	(256,535)	1,209,530	2,023,835	(2,128,707)	(104,872)	(151,663)

~~ii) Settled transactions~~

Referencia value (Notional amount) US$ thousand
2010 appreciation (R$ thousand)
2009 appreciation (R$ thousand)
Fair value (market) (R$ thousand)
Amount paid/received in the year (R$ thousand)
Maturity
Counterparties
2010

2009

Asset position
Liability position
Asset position
Liability position
2010

2009

Amount received
Amount paid
01/04/2010 a 02/01/2010
Deutsche Bank
983,000

1,740,799

(1,748,563)

(7,764)

6,170

(13,934)
01/04/2010 a 03/05/2010
Goldman Sachs
2,132,000

300,000

3,857,227

(3,845,925)

523,270

(527,928)

11,302

(4,658)

54,579

(38,619)
01/04/2010 a 02/08/2010
HSBC

3,680,500

6,442,985

(6,587,554)

(144,569)

17,266

(161,835)
01/04/2010 a 03/01/2010
Itau BBA

2,890,000

130,000

5,081,102

(5,111,321)

226,753

(228,968)

(30,219)

(2,215)

64,845

(92,849)
02/08/2010

Santander

4,601,220

1,024,500

8,285,964

(8,292,883)

1,788,212

(1,824,172)

(6,919)

(35,960)

131,592

(102,551)

Westlb

265,000

65,000

475,789

(491,788)

113,379

(114,569)

(15,999)

(1,190)

(14,809)

14,551,720

1,519,500

25,883,866

(26,078,034)

2,651,614

(2,695,637)

(194,168)

(44,023)

274,452

(424,597)

The ~~net~~ position of ~~the above contracts is~~outstanding transactions was recorded in ~~a specific account for derivatives~~the Company’s assets and liabilities and totals R$37,020 in assets and R$847 in liabilities as ~~a loss~~of December 31, 2011 (R$109,045 in ~~the amount~~liabilities as of ~~R$ 81,528 in 2010 (loss of R$ 44,023 in 2009)~~December 31, 2010) and its effects are recognized in the Company’s finance income ~~(expenses)~~(costs) as a loss ~~in the amount~~totaling R$115,490 as of December 31, 2011 (loss of R$ ~~231,673.~~231,673 as of December 31, 2010) (see Note 26).

~~i) Open~~a) Outstanding transactions

Reference value (EUR thousand)
Appreciation - 2010 (R$ thousand)
Fair value (market) (R$ thousand)
Amount receivable in the year (R$ thousand)
Counterparties
2010

Maturity of transaction
Asset position
Liability position
2010

Amount receivable
Deutsche Bank
25,000

jan/20/11

56,648

(55,707)

941

941
Goldman Sachs
50,000

jan/20/11

113,295

(111,415)

1,880

1,880
HSBC

15,000

jan/20/11

34,029

(33,424)

605

605

90,000

203,972

(200,546)

3,426

3,426

FS-47


			12/31/2011
			Appreciation (R$)		Fair value (market)
		Notional (EUR	Asset	Liability	Amount
Counterparties	Transaction maturity	thousand)	position	position	receivable
HSBC	1/12/2012	25,000	51,469	(48,556)	2,913
Deutsche Bank	1/12/2012	25,000	51,521	(48,556)	2,965
Goldman Sachs	1/12/2012	40,000	128,761	(121,389)	7,372
		90,000	231,751	(218,501)	13,250


			12/31/2010
			Appreciation (R$)		Fair value (market)
		Notional (EUR	Asset	Liability	Amount
Counterparties	Transaction maturity	thousand)	position	position	receivable
HSBC	1/20/2011	15,000	34,029	(33,424)	605
Deutsche Bank	1/20/2011	25,000	56,648	(55,707)	941
Goldman Sachs	1/20/2011	50,000	113,295	(111,415)	1,880
		90,000	203,972	(200,546)	3,426

~~ii)~~b) Settled transactions


	Appreciation 2011				Appreciation 2010
Counterparties	Notional (EUR thousand)	Asset position (R$)	Liability position (R$)	Received / (paid) in 2011	Notional (EUR thousand)	Asset position (R$)	Liability position (R$)	Fair value in 2010	Impact on P&L in 2011

Deutsche Bank	210,000	475,582	(481,504)	(5,922)	25,000	56,648	(55,707)	941	(6,863)
Goldman Sachs	140,000	321,800	(319,448)	2,352	50,000	113,295	(111,415)	1,880	472
HSBC	15,000	34,029	(33,413)	616	15,000	34,029	(33,424)	605	11
Itau BBA	85,000	199,820	(197,116)	2,704					2,704
	450,000	1,031,231	(1,031,481)	(250)	90,000	203,972	(200,546)	3,426	(3,676)

The position of outstanding transactions was recognized in the Company’s assets and totals R$13,250 as of December 31, 2011 (R$3,426 in assets as of December 31, 2010) and its effects are recognized in the Company’s finance income (costs) as a gain totaling R$9,574 as of December 31, 2011 (loss of R$6,763 as of December 31, 2010) (see Note 26).

·Real-Commercial U.S. Dollar Exchange Rate Futures

It seeks to hedge foreign-denominated liabilities against the real fluctuation. The Company may buy or sell commercial U.S. dollar futures on the Commodities and Futures Exchange (BM&F) to mitigate the foreign exchange exposure of its US dollar-denominated liabilities. The specifications of the Real-U.S. dollar exchange rate futures contract, including detailed explanation on the contract’s features and the calculation of daily adjustments, are published by the BM&F and disclosed on its website (www.bmf.com.br).In 2011, the Company did not contract U.S. dollar futures transactions.Throughout 2010, the Company paid R$179,564 and received R$259,490 in adjustments, thus with a gain of R$79,926.Gains and losses from these contracts are directly related to the foreign exchange fluctuations.

·Other derivatives

The subsidiary Lusosider carries out transactions with derivatives to hedge its exposure against the euro-dollar fluctuation. As of December 31, 2011, the gross position was US$35,352 thousand and the net position was US$144 thousand (including the derivatives below).

FS-48

Reference value
(EUR thousand)
Appreciation - 2010
(R$ thousand)
Amount payable in the year (R$ thousand)
Conterparties
2010

Maturity of transaction
Asset position
Liability position
Amount receivable/received
Amount payable/paid
Itau BBA

25,000

jul/12/10

56,833

(57,010)

(177)
Deutsche Bank

30,000

jul/12/10 to sep/15/10

68,061

(68,266)

(205)
HSBC

75,000

jul/12/10 to nov/18/10

70,998

(175,322)

(4,324)
Goldman Sachs

25,000

sep/15/10 to nov/18/10

283,127

(288,610)

(5,483)

255,000

579,019

(589,208)

(10,189)


		12/31/2011
Counterparties	Transaction maturity	Notional (US$ thousand)	Appreciation (R$)		Fair value (market)
Counterparties	Transaction maturity	Notional (US$ thousand)	Asset position	Liability position	Amount receivable
BES	4/30/2012	20,208	38,017	(34,049)	3,968
BNP	1/31/2012	15,000	28,219	(25,453)	2,766
		35,208	66,236	(59,502)	6,734

The position of outstanding transactions was recognized in the Company’s assets and totals R$6,734 as of December 31, 2011.

On September 26, 2011, the subsidiary Tecon settled its derivative transactions used to hedge its exposure to Real-Yen fluctuation, the notional amount of which was JPY 2,390,398 (outstanding short position of R$8,042 as of December 31, 2010).

Gains or losses on these transactions as of December 31, 2011 are consolidated into the Company’s finance income (costs) as a gain totaling R$16,501 (loss of R$8,388 in 2010) (see Note 26).

•·Sensitivity analysis

~~For consolidated~~ of the US dollar-to-real exchange ~~transactions with dollar fluctuation risk,~~swap

The sensitivity analysis is based onin the ~~exchange rate at~~assumption of maintaining, as a probable scenario, the fair values as of December 31, ~~2010 -R$ 1.6662 = US$ 1.00 – adjustments have been estimated~~2011 recognized in assets, amounting to R$37,020 and in liabilities, amounting to R$847.The Company considered the scenarios below for ~~five different scenarios, as follows:~~the real-dollar parity volatility.

- Scenario 1: ~~Probable Scenario, rate~~(25% real appreciation) R$-US$ parity of ~~1.6736 for future dollar quotation on the BM&F falling due on February 1, 2010 –gathered at December 31, 2010;~~
1.4069;

- Scenario 2: ~~(25% appreciation of the real)~~(50% real appreciation) R$~~/US$~~-US$ parity of ~~1.2497;~~
0.9379;

- Scenario 3: ~~(50% appreciation of the real)~~(25% real depreciation) R$~~/US$~~-US$ parity of ~~0.8331;~~
2.3448;

- Scenario 4: ~~(25% devaluation~~(50% real depreciation) R$-US$ parity of 2.8137.


	12/31/2011
		Reference
		value (US$
	Risk	thousand)	Scenario 1	Scenario 2	Scenario 3	Scenario 4

		1.8758	1.4069	0.9379	2.3448	2.8137

Net currency swap	US dollar fluctuation	267,856	(125,611)	(251,222)	125,611	251,222

Exchange position functional currency BRL	US dollar fluctuation	891,086	(417,875)	(835,749)	417,875	835,749
(not incluing exchange derivatives above)

Consolidated exchange position	US dollar fluctuation	1,158,942	(543,486)	(1,086,971)	543,486	1,086,971
(including exchange derivatives above)

·Sensitivity analysis of the ~~real) R$/US$ parity of 2.0828;~~
~~- Scenario 5: (50% devaluation of the real) R$/US$ parity of 2.4993.~~euro-to-dollar exchange swap

2010

Risk

Reference value US$
Scenario 1

Scenario 2

Scenario 3

Scenario 4

Scenario 5

1.6662

1.6736

1.2497

0.8331

2.0828

2.4993

Exchange swap

Fluctuation of US$

1,178,000

8,720

(490,696)

(981,392)

490,696

981,392

Exchange position - BRL functional cur.

Fluctuation of US$

(1,150,294)

(8,514)

479,155

958,310

(479,155)

(958,310)
(not including exchange derivatives above)

Consolidated exchange position

Fluctuation of US$

99,235

735

(41,336)

(82,673)

41,336

82,673
(including exchange derivatives above)

~~FS-53~~

- Scenario 1: ~~Probable Scenario, rate~~(25% real appreciation) R$-euro parity of ~~R$ 2.2188 for future Euro quotation on the BM&F falling due on February 1, 2010 –gathered at December 31, 2010;~~
1.8257;

- Scenario 2: ~~(25% appreciation of the real)~~(50% real appreciation) R$~~/Euro~~-euro parity of ~~1.6710;~~
1.2171;

- Scenario 3: ~~(50% appreciation of the real)~~(25% real depreciation) R$~~/Euro~~-euro parity of ~~1.1140;~~
3.0428;

- Scenario 4: ~~(25% devaluation of the real)~~(50% real depreciation) R$~~/Euro~~-euro parity of ~~2.7850;~~
3.6513.


	12/31/2011
		Reference
	Risk	value (EUR	Scenario 1	Scenario 2	Scenario 3	Scenario 4
		thousand)

		2.4342	1.8257	1.2171	3.0428	3.6513

Net currency swap	euro fluctuation	(90,000)	54,770	109,539	(54,770)	(109,539)

Exchange position functional currency BRL	euro fluctuation	6,496	(3,954)	(7,907)	3,954	7,907
(not incluing exchange derivatives above)

Consolidated exchange position	euro fluctuation	(83,504)	50,816	101,632	(50,816)	(101,632)
(including exchange derivatives above)

·Sensitivity analysis of exchange exposure to australian dollar

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2011.The Company considered the scenarios below for the real-australian dollar parity volatility.

- Scenario 5:1: (25% real appreciation) R$-A$ of 1.4337;

- Scenario 2: (50% ~~devaluation~~real appreciation) R$-A$ of ~~the real)~~0.9558;

- Scenario 3: (25% real depreciation) R$~~/Euro~~-A$ parity of ~~3.3420.~~2.3895;

2010

Risk

Reference value EUR
Scenario 1

Scenario 2

Scenario 3

Scenario 4

Scenario 5

2.2280

2.2188

1.6710

1.1140

2.7850

3.3420

Exchange swap

Fluctuation of EURO

    90,000

       (831)

(50,130)

(100,260)

    50,130

100,260

Exchange position - BRL functional cur.

Fluctuation of EURO

      5,588

         (52)

    (3,113)

    (6,225)

      3,113

      6,225
(not including exchange derivatives above)

Consolidated exchange position

Fluctuation of EURO

    95,588

       (883)

(53,243)

(106,485)

    53,243

106,485
(including exchange derivatives above)

- Scenario 4: (50% real depreciation) R$-A$ parity of 2.8674.


	12/31/2011
		Reference
	Risk	value (A$	Scenario 1	Scenario 2	Scenario 3	Scenario 4
		thousand)

		1.9116	1.4337	0.9558	2.3895	2.8674

Exchange position functional currency BRL	Australian dollar fluctuation	302,553	(144,590)	(289,180)	144,590	289,180

·Sensitivity analysis of exchange dollar-to-euro swap

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2011 recognized in assets, amounting to R $6,734.The Company considered the following scenarios for the real-euro parity volatility.

- Scenario 1: (25% real appreciation) euro-dollar parity of 0.9856;

- Scenario 2: (50% real appreciation) euro-dollar parity of 0.6571;

- Scenario 3: (25% real depreciation) euro-dollar parity of 1.6426;

- Scenario 4: (50% real depreciation) euro-dollar parity of 1.9712.

FS-50


	12/31/2011
		Reference
	Risk	value (US$	Scenario 1	Scenario 2��	Scenario 3	Scenario 4
		thousand)
		1.3141	0.9856	0.6571	1.6426	1.9712

Net currency swap	US dollar fluctuation	35,208	(11,567)	(23,133)	11,567	23,133

Exchange position functional currency EURO	US dollar fluctuation	(35,352)	11,614	23,228	(11,614)	(23,228)
(not incluing exchange derivatives above)

Consolidated exchange position	US dollar fluctuation	(144)	47	95	(47)	(95)
(including exchange derivatives above)

•·Interest rate risk

Short- and long-term liabilities to indexed to floatinginterest rate and inflation ~~indices.~~indices. Due to this exposure, the Company undertakes derivative transactions to better manage these risks.

•·~~LIBOR x CDI~~Interest rate swap transactions (LIBOR to CDI)

The objective of these transactions is to hedge transactions indexed to US dollar LIBOR ~~in US$~~ against fluctuations in Brazilian interest rates. Basically, the Company carried out swaps of its obligations indexed to the LIBOR, onin which it receives interest of 1.25% p.a. ~~over~~on the notional value of the dollar ~~(asset end)~~(long position) and pays 96% of the CDI ~~rate~~ on the ~~reference value~~notional amount in R$reais at the ~~contracting~~contract date ~~(liability end). The reference value~~(short position).The notional amount of ~~these swaps~~this swap as atof December 31, ~~2010~~2011 is US$ ~~150,000~~107,500 thousand, hedging an export ~~pre-payment~~prepayment transaction in the same amount. The gains and losses on these contracts are directly related to fluctuations in exchange rates (US$) and interest rates (LIBOR and CDI)~~. Generally they involve~~.In general, these are transactions ~~carried out on~~conducted in the Brazilian ~~OTC~~over-the-counter market ~~with the counterparties being leading~~that have as a counterparty a prime financial ~~institutions.~~institution.

As atof December 31, ~~2010,~~2011, the position of these contracts is as follows:

a) ~~Open~~Outstanding transactions

Reference value (Notional amount) US$ thousand
Appreciation - 2010
(R$ thousand)
Fair value (market) (R$ thousand)
Amount payable in the year (R$ thousand)
Maturity date
Counterparties
2010

Asset position
Liability position
2010

Amount payable
feb/12/11

CSFB

150,000

254,575

(257,584)

(3,009)

(3,009)


		12/31/2011
		Notional
		(US$	Appreciation (R$)		Fair value
		thousand)			(market) (R$)
Counterparties	Transaction maturity	2011	Long position	Short position	Amount payable
CSFB	2/13/2012	107,500	182,432	(184,556)	(2,124)


		12/31/2010
		Notional
		(US$	Appreciation (R$)		Fair value
		thousand)			(market) (R$)
Counterparties	Transaction maturity	2010	Long position	Short position	Amount payable
CSFB	2/12/2011	150,000	254,575	(257,584)	(3,009)

b)Settled transactions

FS-51

~~FS-54~~

~~b) Settled transactions~~

Reference value (Notional amount) US$ thousand
Appreciation - 2010          (R$ thousand)
Appreciation - 2009          (R$ thousand)
Fair value (market)           (R$ thousand)

Maturity
Counterparties
2010

2009

Asset position
Liability position
Asset position
Liability position
2010

2009

Amount paid
feb/12/10
CSFB

150,000

150,000

    255,316

    (259,411)

254,787

(256,971)

(4,095)

(2,184)

   (1,911)
may/12/10
CSFB

150,000

    255,228

    (259,066)

(3,838)

   (3,838)
aug/12/10
CSFB

150,000

     255,367

    (260,316)

(4,949)

   (4,949)
nov/12/10
CSFB

150,000

     255,320

    (260,475)

(5,155)

   (5,155)

1,021,231

(1,039,268)

254,787

(256,971)

(18,037)

(2,184)

(15,853)


		Appreciation 2011				Appreciation 2010
Counterparties	Maturity	Notional (US$thousand)	Long position(R$)	Short position(R$)	Paid in 2011	Notional(US$ thousand)	Long position(R$)	Short position(R$)	Fair value in2010	Impact onP&L in 2011
CSFB	14/2/2011	150,000	255,238	(260,757)	(5,519)	150,000	254,575	(257,584)	(3,009)	(2,510)
CSFB	12/5/2011	150,000	255,151	(260,582)	(5,431)					(5,431)
CSFB	12/8/2011	129,000	219,172	(224,641)	(5,469)					(5,469)
CSFB	14/11/2011	129,000	219,547	(224,607)	(5,060)					(5,060)
		558,000	949,108	(970,587)	(21,479)	150,000	254,575	(257,584)	(3,009)	(18,470)

The ~~net~~ position of ~~the above contracts is recorded in a specific derivatives account as a loss~~outstanding transactions was recognized in the ~~amount~~Company’s liabilities and totals R$2,124 in 2011 (R$3,009 in liabilities as of ~~R$ 3,009 as at~~ December 31, ~~2010~~2010) and its effects ~~are~~were recognized in the Company’s finance income ~~(expenses)~~(costs) as a loss ~~in the amount~~totaling R$20,594 (loss of R$ ~~18,862.~~18,864 in 2010).

•·Sensitivity analysis of interest rate swaps (LIBOR to CDI)

2010

Notional US$

Risk

Probable

25%

50%
LIBOR interest rate vs CDI swaps
150,000

(LIBOR) US$
(1,795)

(26,823)

(31,904)

The sensitivity analysis is based on the assumption of maintaining, as a probable scenario, the fair values as of December 31, 2011 recognized in liabilities, amounting to R$2,124.The Company considered the following scenarios for the LIBOR (US$) and CDI interest rates volatility.


	12/31/2011
	Notional (US$ thousand)	Risk	25%	50%	25%	50%
LIBOR-to-CDI interest rate swap	107,500	(Libor) US$	(25,586)	(30,176)	25,586	30,176

•·Sensitivity analysis of changes in interest rates

The Company considers the effects of ana 5% increase or decrease ~~of 5%~~ in interest rates on its outstanding ~~loans,~~borrowings, financing and debentures as atof December 31, ~~2010~~2011 in the ~~consolidated~~ financial statements.

		Impact on Profit or Loss
		2010	2009		Impact on profit or loss
Changes in interest rates	Changes in interest rates			% p.a.	12/31/2011	12/31/2010
TJLP		6,465	5,603	6.00	1,372	6,465
LIBOR		7,102	7,466
Libor				0.81	7,941	7,102
CDI		42,103	17,209	10.87	72,607	42,103

•·~~Share’s~~Share market price risks

The Company is exposed to the risk of changes in ~~the price of shares~~equity prices due to the investments made and classified as available-for-sale. Equity investments refer to blue chips traded on BOVESPA.

The following table summarizes the impact of the changes in ~~the~~ prices of ~~shares~~financial instruments classified as available-for-sale on profit or loss for the year and equity, in ~~equity, under~~ other comprehensive ~~income.~~income:

Other Comprehensive Income
2010

2009
Net change in fair value of financial instruments classified as available-for-sale
515,572

36,885


	Profit (loss) for the year		Other comprehensive income
	12/31/2011	12/31/2010	12/31/2011	12/31/2010
Net change in the fair value of financial instruments classified as available for sale	(621,312)	515,573	(767,015)	552,461

~~In 2010~~

On April 20, 2011, the Company ~~received~~sold 100% of its equity interest held in Riversdale’s share capital, corresponding to 47,291,891 shares at the price of A$16.50 per share, totaling a gain of R$~~11,754 related to interest on shareholders’ equity.~~698,164.

~~Investments in acquired shares~~

The Company considers as probable scenario the amounts recognized at market prices as of ~~leading companies are traded on the BOVESPA and ASX (Australian Securities Exchange).~~

~~The following sensitivity~~December 31, 2011. Sensitivity analysis is based on the ~~premise~~assumption of maintaining as probable scenario the market values as atof December 31, ~~2010. Accordingly,~~2011.Therefore, there is no impact on the financial instruments classified as ~~available-for-sale as~~available for sale already presented above. The Company considered the following scenarios for volatility of the ~~shares.~~

~~FS-55~~shares:

FS-52

- Scenario 1: (25% appreciation of shares);

- Scenario 2: (50% appreciation of shares);

- Scenario 3: (25% devaluation of shares);

- Scenario 4: (50% devaluation of shares);


	Impact on Equity				Impact on profit and equity
Companies	25%	50%	25%	50%	Probable	25%	50%	25%	50%
Usiminas	204,934	409,867	(204,934)	(409,867)	(767,924)	509,296	1,018,593	(509,296)	(1,018,593)
Riversdale Mining Limited	103,103	206,205	(103,103)	(206,205)
Planatlântica	2,551	5,101	(2,551)	(5,101)
Panatlântica					909	2,663	5,326	(2,663)	(5,326)
	310,587	621,174	(310,587)	(621,174)	(767,015)	511,959	1,023,919	(511,959)	(1,023,919)

•·Credit risks

The exposure to credit risks of financial institutions is in line with the parameters established in the financial ~~policy. The Company’s~~policy.The Company adopts the practice ~~is to analyze~~of analyzing in detail the financial position of its customers and suppliers, establishing a credit limit and conducting ongoing monitoring of the outstanding balance.

~~In relation to financial~~

As regards short-term investments, the Company only makes investments in institutions with low credit risk ~~according to~~as rated by credit rating agencies. As part of the funds is invested in repo (repurchase agreements) backed by Brazilian government bonds, there is also exposure to ~~the credit risk of Brazil.~~Brazil’s sovereign risk.

•·Capital management

The Company manages its capital structure ~~in order~~ to ensure ~~the continuity~~that it will be capable of ~~its operations, so as~~providing return to ~~offer return to~~its shareholders and benefits to other ~~interested parties, as well as maintaining~~stakeholders, and maintain an ~~optimum~~optimal capital structure to reduce this cost.

~~Instruments associated with other risks of fluctuations in the prices of financial assets~~

~~Total return equity swap contracts~~V – Margin deposits

~~On August 13, 2009, the Company settled in advance the total return equity transaction contracted on September 5, 2008 as approved by the Board of Directors on July 8, 2009.~~

2009
Issue date

Settlement date

Reference value         (US$ thousand)

Assets

Liabilities
Fair value
sep/05/08

aug/13/09

               1,050,763

1,364,812

(1,934,741)

   (569,929)

~~In spite of the accumulated loss on this transaction since September 5, 2008 through the settlement date, in the amount of R$ 569,929, during 2009 the transaction generated a gain of R$ 1,026,465.~~

The Company ~~also engaged in a cashless swap that involved~~holds margin deposits totaling R$407,467 (R$254,485 as its counterparty the bank Goldman Sachs International and was pegged to 29,684,400 American Depositary Receipts (“ADRs”) issued by Companhia Siderúrgica Nacional (asset end) and the 3-month LIBOR plus a spread of ~~0.75% p.a. (liability end).~~

The gains and losses on this contract were directly related to the fluctuations in the exchange rate and the quotations of the Company’s ADRs and the LIBOR interest rate. This instrument was recognized in other payables in the balance sheet and the gains and losses were recorded on the accrual basis in the Company’s finance income (expenses).

This transaction featured a deposit relating to the guarantee margin with the counterparty in the amount of US$ 593,410 remunerated daily according to the FedFund rate and this deposit was released on the date the transaction was settled. The guarantee margin was recognized in other receivables, in current assets.

~~FS-56~~

~~V – Guarantee margin~~

~~The Company has deposits in guarantee in the amount of R$ 254,485 (R$ 115,964 in 2009)~~December 31, 2010); this amount is invested ~~with Deutschebank to~~at Deutsche Bank as guarantee of the derivative financial instrument contracts, specifically ~~the swap~~swaps between CSN Islands VIII and CSN. ~~In addition, the Company has a securitization reserve fund in the amount of R$ 54,675 (R$ 126,092 in 2009) set forth in the contracts for the securitization program (see Note 16).~~

~~18.~~ 16.OTHER PAYABLES

The group of other payables classified in current and non-current liabilities is comprised as follows:


	Current		Non-current
	Consolidated		Consolidated
	12/31/2011	12/31/2010	12/31/2011	12/31/2010
Amounts due to related parties (*)	178,635	148,364	3,094,453	3,028,924
Unrealized losses on derivatives (Note 15 I)	2,971	116,407	373,430	254,494
Dividends and interest on capital payable	928,924	631,344
Advances from customers	23,868	35,361
Taxes in installments	313,201	656,678	1,910,576	859,898
Profit sharing - employees	131,755	90,243
Other payables	149,091	176,555	215,061	178,350
	1,728,445	1,854,952	5,593,520	4,321,666

FS-53

Current

Non-Current

2010

2009

2010

2009
Amounts due to related parties (Note 5)
148,364

80,062

3,028,924

2,980,772
Unrealized losses on derivatives (Note 17)
116,407

77,146

263

18,729
Dividends and interest on shareholders’ equity payable (Note 24)
631,344

383,079

Advances from customers
35,361

85,464

Taxes payable in installments
656,678

582,190

859,898

437,231
Other payables
266,798

410,633

178,350

229,591

1,854,952

1,618,574

4,067,435

3,666,323

(*) The nature of transactions with related parties are described in note 4.

~~19.~~ 17.GUARANTEES

The Company is liable for guarantees ~~in the amount of R$ 7,484,271 (R$ 4,863,348 in 2009)~~ for its subsidiaries and ~~jointly-controlled subsidiaries,~~jointly controlled entities, as follows:

Millions

Currency
Maturities

Borrowings

Tax collection lawsuits
Other

Total

2010

2009

2010

2009

2010

2009

2010

2009

Transnordestina
R$

jun/01/10 to may//08/28

1,145,397

298,000

    5,186

    2,800

1,150,583

   300,800
CSN Cimentos
R$

Indeterminate

32,745

26,100

26,987

26,987

     59,732

     53,087
Prada
R$

Indeterminate

   9,958

    9,900

       740

    1,900

     10,699

     11,800
Sepetiba Tecon
R$

Indeterminate

       1,465

       1,900

15,000

15,000

61,519

66,500

     77,983

     83,400
Itá Energética
R$

sep/15/13

       9,587

   93,700

       9,587

     93,700
CSN Energia
R$

Indeterminate

    1,029

    1,000

    2,336

    3,300

       3,365

       4,300
Total em R$

1,156,449

   393,600

58,732

52,000

96,767

101,487

1,311,948

   547,087

CSN Islands VIII
US$

dec/16/13

   550,000

   550,000

   550,000

   550,000
CSN Islands IX
US$

1/15/2015

   400,000

   400,000

   400,000

   400,000
CSN Islands X
US$

Perpetual



   750,000



   750,000
CSN Islands XI
US$

sep/21/19

   750,000

   750,000

   750,000

   750,000
CSN Islands XII
US$

Perpetual

1,000,000

1,000,000


Aços Longos
US$

dec/31/11

       4,431

      8,700

       4,431

       8,700
CSN Resources
US$

7/21/2020

1,000,000

1,000,000


CSN Cimentos
US$

7/15/2010

          200



          200
Namisa
US$

dec/31/09

    20,000



     20,000
Total in US$

3,704,431

2,478,900



3,704,431

2,478,900
Total in R$

6,172,323

4,316,261

6,172,323

4,316,261

7,328,772

4,709,861

58,732

52,000

96,767

101,487

7,484,271

4,863,348

~~FS-57~~

a)Tax ~~recovery program (Refis)~~Recovery Program (REFIS)

•·Federal ~~Refis~~REFIS

On November 26, 2009, the Company, ~~and~~ its subsidiaries and jointly controlled entities joined the Tax Recovery Programs established by ~~Federal~~ Law 11941/09 and Provisional Measure 470/~~09,~~2009, aimed at settling tax liabilities through a special payment system and installment ~~payment~~plan for the settlement of ~~their~~ tax and social security obligations. Joining the special tax programs reduced the amount of fines, interest and legal charges previously due.

Management’s decision took into consideration matters already judged by higher courts, as well as the assessment of ~~external~~outside legal counsel regarding the possibility of favorable outcomes in the contingencies in progress.

The tax debts enrolled under Provisional Measure 470/09 were payable in 12 installments, starting November 2009.In July 2010, the Company elected to offset income tax and social contribution carryforwards against the last four installments of the installment plan, as allowed by relevant legislation.

In November 2009 and February 2010, the ~~companies recognized the adjustments required~~debts payable enrolled in the installment plan under Law 11,941/09, already recognized through provisions, ~~as well as~~were reviewed based on the reductions in ~~the debts~~debits set forth in special programs, according to the ~~dates for~~ waiver date of administrative appeals or ~~lawsuits.~~legal proceedings. In ~~2009, a positive effect before income tax and social contribution was recorded in~~ the ~~amount of R$ 507,633, and in the 1st~~first quarter of 2010, athe negative effect before income tax and social contribution ~~was recorded in the amount~~ of R$ ~~42,364. These amounts were recorded~~42,365 was accounted for in other operating income and expenses and in finance income ~~(expenses)~~(costs) (see ~~notes 26~~Notes 25 and ~~27)~~26).

~~The new amount~~

In June, 2011, the Group companies consolidated the debts enrolled in the tax program set forth by Law 11941/09, payable in 180 SELIC-adjusted installments. As a result of ~~debts~~the consolidation, the provision increased R$19,734 in the second quarter of 2011, recognized in line item Finance income (costs) and other expenses, before income tax and social contribution.

With respect to judicial deposits linked to REFIS proceedings, the Company obtained a favorable opinion from the National Treasury Attorney General’s Office (PGFN) and the Federal Revenue Service (RFB) on the treatment given to the excess deposit generated after application of the reductions ~~related to~~obtained for tax payment in cash.

Accordingly, the ~~tax program under Law 11941/09 was~~Company filed a request for offset against deposits in court related to these contingencies and is still subject to validation by the appropriate authorities. The remaining balance will be paid in 180 monthly installments based on the consolidation of the ~~debts by the authorities.~~

~~The debts under the terms of Provisional Measure 470/09 were divided into 12 installments as from November 2009. In July 2010, the Company elected to offset the four last~~deposit surplus against taxes in installments under the ~~tax recovery~~Law 11941 REFIS program ~~against its income tax and social contribution tax loss carry forwards, as permitted by applicable legislation.~~with the PGFN. We are awaiting a reply from the PGFN of the intended offset.

The ~~appropriate authorities are still examining the data submitted~~position of REFIS debts recorded in ~~order to consolidate the debts included~~taxes in ~~the installment payment programs established by Provisional Measure 470/09~~installments in current and ~~Law 11941/09.~~

Atnon-current liabilities as of December 31, ~~2010, the position~~2011 was R$2,094,741 (R$1,444,207 as of ~~the debts under the Refis, recorded under taxes payable in installments, was R$ 1,444,207 (R$ 826,844 in 2009) in the Consolidated.~~December 31, 2010).

•~~State Refis~~

On January 18, 2010 the State of Rio de Janeiro published Law 5647/10, which introduced the Tax Recovery Program. Based on these new regulations, amounts due were reduced in terms of fines and interest and could be settled with “precatórios” (bonds issued to pay court-ordered debts) through May 31, 2010. The Company and its subsidiaries CSN Cimentos and MRS elected to include some of their state tax debts, totaling R$ 52,387, in the Tax Recovery Program (REFIS), without significant impacts on profit or loss.

~~21.~~ 19.PROVISIONS FOR TAX, SOCIAL SECURITY, LABOR AND CIVIL RISKS AND JUDICIAL DEPOSITS

~~Contingencies and claims~~

Claims of different nature are being challenged at the appropriate courts. Details of the accrued amounts and related judicial deposits are as follows:

2010

2009

1/1/2009

Judicial deposits
Provision

Judicial deposits
Provision

Judicial deposits
Provision
Social security and labor
107,237

247,214

86,541

217,777

63,448

159,257
Civil
47,216

80,330

37,251

61,428

24,863

63,542
Tax
878,309

86,841

869,399

40,162

9,552

46,424
Judicial deposits
46,023

44,493

41,667

1,078,785

414,385

1,037,684

319,367

139,530

269,223
Legal obligations challenged in court:

Tax

IPI premium credit
1,227,892

1,227,892

1,227,892

1,227,892

1,196,822

2,227,203
CSLL credit on exports

401,916

1,240,158

1,156,830
SAT

50,880

66,650
Salary premium for education
36,189

33,121

36,189

33,121

36,189

33,121
CIDE
54,211

27,545

29,913

27,674

27,616

27,390
Income tax on ”Plano Verão”
341,551

20,892

339,215

20,892

336,826

20,892
Other provisions
36,078

113,552

36,078

108,203

370,268

107,436

1,695,921

1,824,918

1,669,287

2,708,820

1,967,721

3,639,522

2,774,706

2,239,303

2,706,971

3,028,187

2,107,251

3,908,745

Total current liabilities

222,461

189,517

161,144
Total non-current liabilities
2,774,706

2,016,842

2,706,971

2,838,670

2,107,251

3,747,601

~~FS-58~~

Non-Current

Current
Nature

2009

Additions

Adjustment

Utilization

Transfer to taxes payable in instal.

2010

2010

2009
Civil

17,717

5,500

5,38

(5,393)

23,208

57,622

43,711
Labor

18,778

7,511

(2,940)

23,349

164,839

145,806
Tax

2,696,181

60,707

519,074

(957,809)

(406,893)

1,911,260

Social security

105,994

36,966

16,550

(100,485)

59,025

2,838,670

103,173

548,519

(1,066,627)

(406,893)

2,016,842

222,461

189,517

The provisions for civil, labor, tax, environmental and social security liabilities ~~have been~~were estimated by ~~Management~~management and are mainly based on the ~~assessment made by~~ legal ~~counsel, and only cases~~counsel’s assessment. Only proceedings for which the risk is classified as probable ~~losses~~loss are ~~recorded.~~accrued. Moreover, these provisions include tax liabilities resulting from contingencies filed by the Company, subject to SELIC ~~(Special Settlement and Custody System) rate.~~(Central Bank’s policy rate).

c) Tax ~~contingencies~~lawsuits

§Income tax and social contribution

(i) ~~”Plano~~“Plano Verão”- The Company is claiming the recognition of financial and tax effects on the calculation of income tax and social contribution, related to removal by the government of inflation measured according to the Consumer Price Index (IPC) in January and February 1989, involving a total percentage figure of 51.87% (“Summer Plan”).

In 2004 the lawsuit was terminated with a final and unappealable decision that granted the right to apply the index of 42.72% (January 1989), with the 12.15% already applied to be deducted from this index. The final decision also granted application of the index of 10.14% (February 1989)~~. The~~.The proceeding is currently ~~under accounting investigation.~~at expert discovery stage.

As atof December 31, ~~2010~~2011, there is an amount of R$345,676 (R$341,551 ~~(R$ 339,215 in 2009)~~as of December 31, 2010) deposited in court, classified in a specific account of judicial deposits in long-term receivables, and a provision of R$20,892 (R$20,892 ~~in 2009)~~as of December 31, 2010), which represents the portion not recognized by the courts.

FS-56

(ii) CSLL Export (Social Contribution on Income from Export Revenues)– In February 2004 the Company filed a lawsuit claiming that it should not be subject to payment of CSLL (social contribution) on its export revenues/profits, as well as to obtain court authorization to offset all the amounts of CSLL incorrectly paid on such export revenues/profits since the publication of Constitutional Amendment 33/2001, which provided new wording to article 149, paragraph 2 of the 1988 Federal Constitution (CF/88), by determining that “social contributions shall not be levied on export revenues”.

~~In March 2004 an injunction was granted, and subsequently confirmed in a court decision, authorizing the exclusion (from the CSLL tax base) of just the export profits.~~

Such court decision was overturned by the 4th Panel of the Federal Regional Court (TRF) for the 2nd Region, which denied the injunction requested by the Company. An extraordinary appeal (RE) challenging the constitutionality of the regional court decision was filed, but it was put on hold until such time as the Federal Supreme Federal (STF) decides the matter in the case records of RE 564.413 (leading case), which recognized the existence of general repercussion of this same constitutional issue.

~~In December 2008~~Since then the Company ~~received a Collection Notice for~~was maintaining the amounts relating to exclusion of such revenues from the CSLL tax base. Therefore, the Company’s Board of Directors approved a motion to attach the Collection Notice to the installment payment program introduced by Law 11941/2009 (REFIS), and also to continue discussing the main matter in court relating to non-levy of CSLL on export revenues/profits ~~which was recently judged by~~in a provision; however, after the STF ~~in the case records of RE 564.413~~ruling on Extraordinary Appeal (RE) 564,413 (leading case) in a vote ~~contrary (6X5) to taxpayers. This decision has~~on the non-levy of CSLL on taxpayers’ exports, still not yet ~~been~~ published, ~~and will probably be subject~~the Company decided to ~~appeal.~~

~~Up to December 31, 2010~~include this lawsuit in the installment plan established by Law 11941/09 (REFIS).The adjusted amount of the ~~suspended requirement and~~lawsuit included in the ~~credits offset on the basis of such lawsuit~~installment plan was R$ ~~401,916 (R$ 1,240,158 in 2009), plus the SELIC rate.~~365,466.

§Economic Intervention Contribution ~~for intervention in the economic domain - CIDE~~(CIDE)

The Company ~~questioned~~was challenging the legal validity of Law 10168/00, which introduced the collection of CIDE on amounts paid, credited or remitted to non-resident beneficiaries by way of royalties or compensation for agreements involving supply, technical assistance, assignment and licenses for use of trademarks and patents.

~~FS-60~~

In view of the unfavorable decisions and the benefits involving reduction in fines and interest, the Company’s Board of Directors approved including the amounts covered by the court litigation in the tax recovery program introduced by Law 11941/2009.

After application of the benefits of this program, the Company maintains judicial deposits in the amount of R$ ~~6,141,~~6,200, of which R$2,895 involves excess deposits after application of the REFIS reductions that may be offset ~~against other debts being challenged in court by the taxpayer or~~ converted into income. As atof December 31, ~~2010~~2011 there is a provision recognized in the amount of R$3,246 (R$ ~~3,376 in 2009)~~3,246 as of December 31, 2010), including legal charges.

§Salary premium for education – “Salário Educação”

The Company has filed a lawsuit challenging the constitutionality of the salary premium for education and for discussing the possibility of recovering the amounts paid in the period from January 5, 1989 to October 16, 1996. The lawsuit was unsuccessful, and the TRF upheld the decision unfavorable to CSN, a decision that is final and ~~unappealable.~~unappealable.

In view of the final and unappealable decision, CSN tried to make payment of the amount due, though the FNDE and INSS did not reach an agreement as to which agency should receive it. They also required that the amount should be paid along with a fine, with which the Company did not agree.

Lawsuits were then filed challenging the above events, with judicial deposit of the amounts involved in the lawsuits. In the first lawsuit, the lower court partly accepted the Company’s request, with the judge deducting the fine, but upholding the SELIC rate, with counterarguments against the defendant’s appeal against the SELIC rate.

The accrued amount and judicial deposit as atof December 31, ~~2010~~2011 totals R$33,121 (R$33,121 ~~in 2009)~~as of December 31, 2010).

§On-the-job accident insurance - SAT

The Company is challenging in court the increase in the SAT rate from 1% to 3% (first lawsuit), and is also challenging the increase in SAT for purposes of the Special Retirement Contribution, which was set at 6%, according to legislation applicable to employees exposed to toxic material (second lawsuit).

FS-57

As regards the first lawsuit mentioned above, the lower court decision was unfavorable and the lawsuit is now being judged by the ~~TRF for the~~ 2^nd~~Region.~~ Region TRF. With respect to the second lawsuit, its decision was unfavorable to the Company and the amount due in this lawsuit, R$33,077, was deposited in court, in favor of the INSS (National Institute of Social Security).

The accrued amount as atof December 31, ~~2010~~2011 totals R$ ~~36,966~~61,536 (R$ ~~50,880 in 2009)~~59,024 as of December 31, 2010), which includes legal charges and refers exclusively to the lawsuit related to the increase from 1% to 3% for all the Company’s locations and its subsidiary Cia Metalúrgica Prada’s locations.

In view of the likelihood of loss in this court challenge, the CSN Board of Directors approved including the amount relating to this matter in the installment payment program under Law 11941/~~2009. Due~~2009.Due to joining the REFIS and waiver of the lawsuit challenging the rate increase from 1% to 3%, CSN included the unassessed period in the Ordinary Installment Payment Program, ~~which is presently awaiting ratification.~~in 60 stallments.

§IPI export premium credit ~~over export~~

The tax legislation allowed Brazilian companies to recognize ~~an excise tax~~a federal VAT (IPI) premium credit until 1983, when by executive order from the government these benefits were cancelled and it was no longer permitted to utilize these credits.

~~FS-61~~

In August 2003 the Company obtained a favorable decision at the lower court, authorizing the utilization of such credits. The National Treasury appealed and obtained a favorable decision. The Company then filed a special and extraordinary appeal against the decision to the Superior Court of Justice - STJ and STF, respectively.

Between September 2006 and May 2007, the National Treasury filed 5 tax collection lawsuits and 3 administrative proceedings against the Company relating to collection of the taxes that were offset against the IPI premium credit. The total amount involved approximates R$ 4.5 billion, inflation adjusted through December 31, 2010.

On August 29, 2007 CSN pledged assets backed by treasury shares in the amount of R$ 536 million, with the equivalent of 25% of this amount being replaced by judicial deposits through monthly installments made through December 31, 2007, and as such replacements occur, a request was filed to release the pledges of the equivalent amounts in shares at the closing quotation for the share on the date prior to the deposit, and this request was about to be granted.

On August 13, 2009, the STF rendered a decision, with general repercussion, determining that the IPI premium credit was only in effect through October ~~1990. Accordingly,~~1990.Accordingly, the credits accrued after 1990 were not recognized and, in view of this STF decision, the Company’s Board of Directors approved including this matter in the tax recovery program for tax debts introduced by Provisional Measure 470/09 and Law 11941/09, which entails benefits in terms of reduction of fines, interest and legal charges.

The Company ~~maintened~~maintained a provision for the amount of the credits already offset, plus late payment charges through September 30, ~~2009. The~~2009.The new amount of debt after application of the reductions prescribed in the program under Law 11941/09 was offset against the ~~escrow~~judicial deposits related to these lawsuits, resulting in excess deposits in the amount of R$516 million after ~~applicationof~~application of the REFIS reductions, ~~wich~~which can ~~either~~ be ~~offset against other debits included in the installment payment program or~~ refunded. ~~These debits are still subject to validation by the appropriate authorities, wich will take place during 2011.~~

The debts under Provisional Measure (MP) 470/09 were paid in 12 installments as from November 2009, with the last four installments being replaced by the use of the income tax and social contribution tax loss carryforwards, in the manner provided by ~~applicable~~relevant legislation. The appropriate authorities are still examining the data submitted in order to consolidate the debts included in such installment payment program. So far 5 administrative cases, in the amount of R$ 1.8 billion, are being challenged by the authorities, with the first 2 being included as executable tax debts. The Company promptly challenged the challenges at the administrative level (by means of filing the appropriate appeals), since there are strong arguments in the sense of allowing inclusion of such debts in the installment payment under MP 470/09, and obtained a court order suspending the appeals filed by the government, which suspended the requirement to pay the debt until a final decision is reached at the administrative level. The administrative cases aimed at re-inclusion of the debts under MP 470/09 are still being analyzed.

§Other

The Company has also recognized provisions for lawsuits relating to INSS, FGTS Complementary Law 110, COFINS Law 10833/03, PIS Law 10637/02 and PIS/COFINS -– Manaus Free Trade Zone, totaling R$90,703 as of December 31, 2011 (R$84,367 as atof December 31, ~~2010, (R$ 72,124 in 2009)~~2010), ~~wich~~which includes legal ~~charges~~charges.

~~In relation~~

With respect to the COFINS Law 10833/03 debt, the Board of Directors approved inclusion of the related amounts in the tax recovery program under Law 11941/~~09. The~~09.The Company maintained a provision for the amount of these credits already offset, plus late payment charges through September 30, 2009.

The new amount of debts after application of the reductions allowed under the program of Law 11941/09 was offset against judicial deposits related to these lawsuits, resulting in excess deposits in the amount of R$9,141 after application of the REFIS reductions, which may be ~~offset against other debts included in the installment plan or challenge in court or~~ refunded. ~~These debts are still subject to validation by the appropriate authorities, which is set to occur in 2011.~~

d) Other

FS-58

§Competition

On June 14, 2010, the ~~TRF for~~Regional Federal Court of Brasília ~~turned down a lawsuit for~~rejected the annulment action filed by CSN against ~~the~~CADE (The Anti-Trust ~~Board (CADE)~~Board), which ~~sought to annul~~aimed at annulling its fine for the ~~assessment imposed for allegedly committing the violations prescribed by articles~~alleged infringements laid down in Articles 20 and 21, ~~item~~ I, of Law 8884/~~1984. The~~1984.The Company filed appropriate appeals ~~were filed~~ against this decision, ~~but~~which were ~~turned down, giving rise to an Appeal~~dismissed, resulting in the filing of a Motion for ~~Declaratory Judgment,~~Clarification, which is ~~awaiting~~pending judgment. The collection of ~~fine in~~ the ~~amount of~~ R$65,292 fine is suspended by ~~court~~a Court decision, which ~~granted suspension based on~~stays the collection as from the date CSN issued a guarantee ~~for the debt provided by CSN.~~letter. This ~~lawsuit~~action is classified as risk of possible loss.

~~FS-62~~

§Environmental

a) Environmental ~~Liabilities~~liabilities

As at ofDecember 31, ~~2010,~~ 2011,a provision is recognized in the amount of R$312,612 (R$278,106 ~~(R$ 116,544 in 2009)~~as of December 31, 2010) for expenditures relating to environmental investigation and recovery services for potentially contaminated areas surrounding establishments in the States of Rio de Janeiro, Minas Gerais and Santa Catarina. Estimated expenditures will be reviewed periodically and the amounts already recognized will be adjusted whenever needed. These are ~~Management’s~~management’s best estimates considering recovery studies in areas that have been degraded and are in the process of being used for activities. These provisions are recognized in operating expenses.

The provisions are measured at the present value of the expenditures required to settle the obligation, using a ~~pre-tax~~pretax rate that reflects current market assessments of the time value of money and the specific risks of the obligation. The increase in the obligation due to passage of time is recognized as ~~finance cost.~~other operating expenses.

The long-term interest rate used to discount to present value and update the provision through December 31, ~~2010~~2011 is 11.00%~~. The~~.The liability recognized is periodically updated based on these discount rates plus the general market price index (IGPM) for the period.

b) Decommissioning of Assets

Obligations on decommissioning of assets consist of estimated costs for decommissioning, retirement or restoration of areas upon the termination of activities related to mining resources. The initial measurement is recognized as a liability discounted to present value and subsequently through increase in expenses over time. The ~~cost of~~asset decommissioning ~~of assets~~cost equivalent to the initial liability is capitalized as part of the carrying amount of the asset, being depreciated over the useful life of the asset. The liability recognized atas of December 31, ~~2010~~2011 is R$24,327 (R$17,421 ~~(R$ 15,524 in 2009)~~as of December 31, 2010).

~~23.~~ 21.SHAREHOLDERS´ EQUITY

i. ~~Paid-up~~Issued capital

~~The Company’s fully~~

Fully subscribed and ~~paid-up~~paid-in capital as atof December 31, ~~2010~~2011 is R$1,680,947 (R$1,680,947 as atof December 31, ~~2009), divided into 1,483,033,685 (755,179,610 in 2009)~~2010) represented by 1,457,970,108 (1,483,033,685 as of December 31, 2010) book-entry common shares without par value. Each common share entitles its holder to one vote in ~~resolutions of the General Meeting of Shareholders. At the~~Shareholders’ Meetings. The Extraordinary ~~General~~Shareholders´ Meeting held on March 25, 2010 ~~approval was granted to a~~approved the stock split, ~~in shares representing~~at the ~~capital, a transaction whereby~~ratio of one (1) common share for each ~~share began to be represented by 2 (two) new~~two (2) shares. ~~At the Extraordinary General Meeting held on November 1, 2010 approval was granted to cancel 27,325,535 shares that were held in treasury.~~

~~ii. Authorized~~ii.Authorized capital

The Company’s bylaws in effect as atof December 31, ~~2010~~2011 determine that the capital can be raised to up to 2,400,000,000 shares by decision of the Board of Directors.

~~iii. Legal~~iii.Legal reserve

This reserve is recognized at the rate of 5% of the profit for each period, ~~in the manner~~as provided for by ~~article~~Article 193 of Law 6404/~~76). The limit for this~~76.This reserve ceiling, as prescribed by prevailing legislation, has already been ~~reached, as required by applicable legislation.~~reached.

~~iv. Treasury~~iv.Treasury shares

~~The~~

As of December 31, 2011, the Company ~~holds in~~did not have any treasury shares. On August 2, 2011, the Company approved the cancelation of 25,063,577 ~~shares that it issued, acquired in the market for R$ 570,176 (R$ 1,191,559 in 2009) for future disposal or cancelation. The market value of these~~existing treasury shares ~~as at December 31, 2010 corresponds to R$ 668,446 (R$ 1,466,895 in 2009).~~

~~FS-63~~

v. Ownership structure

As at ofDecember 31, ~~2010,~~2011, the Company’s ownership structure was as ~~follows:~~follows:


			2010		12/31/2011			31/12/2010
	Number of common shares	% of total shares		% w/o treasury shares	Quantity ofordinary shares	% total ofshares	% withouttreasury shares	Quantity of ordinary shares	% total ofshares	% without treasuryshares
Vicunha Siderurgia S.A.	697,719,990	47.05%		47.86%	697,719,990	47.86%	47.86%	697,719,990	47.05%	47.86%
Rio Iaco Participações S.A.	58,193,503	3.92%		3.99%
Rio Iaco Participações S.A. (*)					58,193,503	3.99%	3.99%	58,193,503	3.92%	3.99%
Caixa Beneficente dos Empregados da CSN - CBS	12,788,231	0.86%		0.88%	12,788,231	0.88%	0.88%	12,788,231	0.86%	0.88%
BNDESPAR	31,773,516	2.14%		2.18%	31,773,516	2.18%	2.18%	31,773,516	2.14%	2.18%
Diversos (ADR - NYSE)	358,913,048	24.20%		24.62%
Other shareholders (approximately 10 thousand)	298,581,820	20.13%		20.47%
NYSE - ADRs					373,772,695	25.64%	25.64%	358,913,048	24.20%	24.62%
BOVESPA					283,722,173	19.45%	19.45%	298,581,820	21.83%	20.47%
	1,457,970,108	98.31%		100.00%	1,457,970,108	100.00%	100.00%	1,457,970,108	98.31%	100.00%
Treasury shares	25,063,577	1.69%
Treasury stock								25,063,577	1.69%
Total shares	1,483,033,685	100.00%			1,457,970,108	100.00%		1,483,033,685	100.00%

(*) Rio Iaco Participação S. A. is a company part of the control group.

vi. Changes in outstanding shares



	Number of shares	Treasury shares
Balance at December 31,2009	1,457,970,108	52,389,112
Cancelation of shares		(27,325,535)
Balance at December 31,2010	1,457,970,108	25,063,577
Cancellation of shares		(25,063,577)
Balance at December 31,2011	1,457,970,108

Changes in common shares outstanding

Number of shares
Balance held in treasury
Opening balance in 2009

1,517,338,908

69,468,768
Acquisition of treasury shares

(59,368,800)

59,368,800
Cancelation of shares

(76,448,456)
Balance at December 31, 2009

1,457,970,108

52,389,112
Cancelation of shares

(27,325,535)
Balance at December 31, 2010

1,457,970,108

25,063,577

~~vii. Appropriated retained earnings~~22.PAYMENT TO SHAREHOLDERS

Brazilian laws and CSN’s By-laws require that certain appropriations be made from retained earnings to reserve accounts on an annual basis. The purpose and basis of appropriation to such reserve accounts are described below:FS-60

•~~Investment reserve - this is a general reserve for future expansion of CSN’s activities.~~

•Legal reserve - this reserve is a requirement for all Brazilian corporations and represents the annual appropriation of 5% of net income up to a limit of 20% of capital stock, as determined in the Brazilian Corporate Law. This reserve may be used to increase capital or to absorb losses, but may not be distributed as cash dividends.

~~24. DIVIDENDS AND INTEREST ON SHAREHOLDERS’ EQUITY~~

		~~12/31/2010~~
		12/31/2011
~~Net income~~Profit for the year		~~2,516,376~~ 3,706,033
~~IFRS adjustments - First-time adoption~~Reversion of prior year unrealized earnings reserve		~~(33,416)~~ 3,779,357
Basic profit used to determine dividends		7,485,390

Proposed allocation:
~~Basic net income for determination of dividends~~Statutory reserve (working capital) (*)		~~2,482,960~~

~~Proposed allocation:~~		(5,717,390)
Investment reserve		~~(626,160)~~ (568,000)
Total allocation to reserves		~~(626,160)~~(6,285,390)
~~Interest onshareholders’ equity~~		~~(356,800)~~
Proposed dividends		~~(1,500,000)~~ (1,200,000)
Total proposed dividends ~~and interest on shareholders’ equity~~		(1,200,000)~~(1,856,800)~~

Weighted average number of shares		1,457,970
Dividends and interest on ~~shareholders’ equity~~capital per share		~~1.2736~~ 0,8231

Additional ~~information~~information:
Mandatory minimum dividends for the year (**)		~~629,094~~ 926,508
~~Residual balance~~Dividends from ~~prior~~previous years		~~957~~ 1,373
Dividends payable		~~630,051~~927,881

(*) The Annual General Meeting shall decide on the allocation of excess of the Reserve.

(**) CSN’s bylaws ~~establish~~require the distribution of mandatory minimum dividends of 25% of the net income after ~~exclusions~~the deduction of the legal reserves.

~~a) Interest on shareholders’ equity~~23.NET SALES REVENUE

The Company’s management will propose to the Annual General Meeting the payment of interest on shareholders’ equity in the amount of R$ 356,800, corresponding to R$ 0.244724 per share outstanding at that date.

The calculation of interest on shareholders’ equity is based on the variation in the Long-Term Interest Rate (TJLP) on equity, limited to 50% of the profit for the period before income tax or 50% of the retained earnings and earnings reserves, and the higher of the two limits may be used, as provided for by prevailing legislation.

Pursuant to CVM Resolution 207 of December 31, 1996 and applicable tax rules, the Company elected to record interest on shareholders’ equity proposed against the finance costs account and to reverse it in the same account and, therefore, it is not presented in the income statement and has no effect on profit, except regarding the tax effects recognized in the income tax and social contribution lines. Management will propose that the amount of interest on shareholders’ equity be attributable to the mandatory minimum dividend.

~~25. OPERATING REVENUES~~

Net ~~operating revenues is~~sales revenue are comprised as follows:


		2010	2009	12/31/2011	12/31/2010	12/31/2009
Operating revenues
Gross revenue
Domestic market		13,201,074	10,488,409	13,366,345	13,201,074	10,488,409
Foreign market		4,270,333	3,197,187	6,417,397	4,270,333	3,197,187
		17,471,407	13,685,595	19,783,742	17,471,407	13,685,596
Deductions
Cancelled sales and discounts granted	Cancelled sales and discounts granted	(416,706)	(462,954)	(257,888)	(416,706)	(462,954)
Taxes levied on sales		(2,604,191)	(2,244,278)	(3,006,270)	(2,604,191)	(2,244,278)
		(3,020,897)	(2,707,232)	(3,264,158)	(3,020,897)	(2,707,232)
Net operating revenues		14,450,510	10,978,364

Net revenue				16,519,584	14,450,510	10,978,364

24.EXPENSES BY NATURE

FS-61


	12/31/2011	12/31/2010	12/31/2009
Raw Material	(3,927,105)	(3,245,396)	(1,907,607)
Labor cost	(1,647,545)	(1,226,087)	(1,086,005)
Consumable materials	(1,084,440)	(1,061,012)	(907,844)
Maintenance cost	(969,376)	(856,297)	(691,905)
Outsourcing services	(1,981,025)	(1,542,638)	(1,577,641)
Depreciation, Amortization and Depletion	(925,790)	(808,215)	(770,068)
Others (*)	(445,256)	(161,916)	(1,196,905)
	(10,980,537)	(8,901,561)	(8,137,975)
Rated:
Cost of sales and/or services	(9,800,844)	(7,882,726)	(7,210,774)
Selling expenses	(604,108)	(481,978)	(447,129)
General and administrative expenses	(575,585)	(536,857)	(480,072)��
	(10,980,537)	(8,901,561)	(8,137,975)

(*) Include increase/reduction in finished goods and in work in process.

~~26.~~ 25.OTHER OPERATING ~~EXPENSES AND~~ INCOME (EXPENSES)


	12/31/2011	12/31/2010	12/31/2009
Other operating expenses
Taxes and fees	(37,499)	(81,394)	(109,753)
Effect of REFIS - Law 11941/09 and MP 470/09	(16,119)	(8,444)
Provision for contingencies and net losses on reversals	(75,823)	(182,761)	(297,695)
Contractual and nondeductible fines	(45,537)	(155,445)	(46,882)
Fixed cost of equipment stoppages	(33,674)	(21,213)	(34,198)
Write-off of obsolete assets	(85,120)	(32,098)	(99,457)
Expenses on studies and project engineering	(42,050)	(21,142)	(6,385)
Pension plan (Note 29 c)	(67,276)	(63,110)
Impairment loss adjustment	(60,861)		(23,137)
Healthcare plan (Note 29 d)	(37,343)	(33,817)	(30,257)
	(501,302)	(599,424)	(647,764)
Other operating income
Sale of Riversdale shares (Note 11)	698,198
Gain on acquisition of "precatórios"		15,595
PIS/COFINS/ICMS untimely credits		32,739
Dividends received from third parties	14,199
Other income	6,780	487	863,297
	719,177	48,821	1,368,594
Other operating (expenses) income	217,875	(550,603)	720,830

26.FINANCE INCOME (COSTS)

2010

2009
Other operating expenses

(643,081)

(695,905)
Taxes and fees

(81,394)

(109,753)
Effect of REFIS - Law 11941/09 and MP 470/09 (Note 20)

(8,444)


Provision for contingencies and net losses on reversals

(260,235)

(297,695)
Contractual and non-deductible fines

(155,445)

(46,882)
Fixed cost of equipment stoppages

(21,213)

(34,198)
Write-off of obsolete assets

(32,098)

(112,483)
Expenses on studies and project engineering

(21,142)

(6,385)
Impairment of goodwill ERSA



(23,137)
Other expenses

(63,110)

(65,372)
Other operating income

              92,478

         1,416,735
PIS / COFINS / ICMS credits recovered during the year

             32,739

Gains on investments

               2,534

            835,115
Effect of REFIS - Law 11941/09 and MP 470/09 (Note 20)



           505,297
Gain on acquisition of "precatórios" from the city of Piraí

             15,595

Other income

              41,610

              76,323
Other operating (expenses) income

(550,603)

            720,830

~~FS-65~~FS-62


	12/31/2011	12/31/2010	12/31/2009
Finance costs:
Borrowings and financing - foreign currency	(639,197)	(641,632)	(598,849)
Borrowings and financing - local currency	(1,622,365)	(791,926)	(277,699)
Related parties	(389,059)	(374,929)	(365,150)
Capitalized interest	353,156	215,624	85,260
PIS/COFINS on other revenues	(1,230)	(1,079)	(1,072)
Losses on derivatives (*)	(20,594)	(27,252)	(152,102)
Net effect of REFIS - Law 11941/09 and MP 470/09	(77,335)	(33,921)	2,336
Interest, fines and late payment charges	(264,359)	(283,768)	(281,190)
Other finance costs	(222,938)	(261,570)	(304,049)
	(2,883,921)	(2,200,453)	(1,892,515)
Finance income:
Related parties	29,300	53,491	55,750
Income from short-term investments	538,882	394,183	276,177
Other income	149,268	195,466	254,098
	717,450	643,140	586,025

Inflation adjustments:
- Assets	6,330	271	8,465
- Liabilites	(43,781)	(8,714)	69,266
	(37,451)	(8,443)	77,731
Exchange gains (losses):
- On assets	1,041,200	(585,719)	(295,526)
- On liabilities	(753,666)	398,527	995,064
- Exchange gains (losses) on derivatives (*)	(89,415)	(158,510)	282,786
	198,119	(345,702)	982,324
Inflation adjustment and exchange gains (losses), net	160,668	(354,145)	1,060,055

Finance costs, net	(2,005,803)	(1,911,458)	(246,435)

(*) Statement of gains and losses on derivative transactions
CDI to USD swap	(115,490)	(231,673)	(581,523)
EUR to USD swap	9,574	(6,763)
Future US dollar		79,926	(231,563)
Total return equity swap			1,026,463
Other	16,501	(8,388)	(65,248)
	(89,415)	(166,898)	148,129
Libor to CDI swap	(20,594)	(18,864)	(17,445)
	(20,594)	(18,864)	(17,445)
	(110,009)	(185,762)	130,684

27. ~~FINANCE EXPENSES AND INCOME~~

2010

2009
Finance expenses:

Loans and financing - foreign currency

       (641,632)

       (598,849)
Loans and financing - local currency

       (791,926)

       (277,699)
Related parties

(374,929)

(365,150)
Capitalized interest

         215,624

           85,260
PIS/COFINS on other revenues

           (1,079)

           (1,072)
Losses on derivatives (*)

         (27,252)

       (152,102)
Net effect of REFIS - Law 11941/09 and MP 470/09

         (33,921)

             2,336
Interest, fines and late payment charges

       (283,768)

       (281,190)
Other finance costs

(261,570)

(304,049)

    (2,200,453)

    (1,892,515)
Finance income:

Related parties

           53,491

           55,750
Yields from marketable securities

         394,183

         276,177
Other yields

         195,466

         254,098

         643,140

         586,025
Inflation adjustment:

- Assets

                271

             8,465
- Liabilities

           (8,714)

           69,266

           (8,443)

           77,731
Exchange gains (losses):

- On assets

       (585,719)

       (295,526)
- On liabilities

         398,527

         995,064
- Exchange gains (losses) on derivatives (*)

       (158,510)

         282,786

(345,702)

982,324
Inflation adjustment and exchange gains (losses), net
       (354,145)

      1,060,055

Finance costs, net

    (1,911,458)

       (246,435)

(*) Statement of results of derivative transactions

CDI x US$ swap

       (231,673)

       (581,523)
EUR x US$ swap

           (6,763)

LIBOR x CDI swap

         (18,864)

         (17,445)
Future US$

           79,926

       (231,563)
Total return on equity swap

      1,026,463
Other

           (8,388)

         (65,248)

       (185,762)

         130,684

~~FS-66~~

SEGMENT INFORMATION

~~28. SEGMENT AND GEOGRAPHICAL INFORMATION~~

According to the Company’s structure, its businesses are distributed into 5 (five) operating segments. ~~Thus,~~Accordingly, we analyzed our information by segment as follows:

•·Steel

The Steel Segment consolidates all the operations related to the production, distribution and sale of ~~packaging, metallic packaging~~flat steel, metal containers and galvanized steel, with operations in Brazil, the United States and Portugal. This segment ~~serves~~supplies the following markets: ~~civil~~ construction, steel packaging for the Brazilian chemical and food industries, ~~white line (home appliances),~~home appliances, automobile and OEM (motors and compressors)~~. The~~.The Company’s steel units produce hot and cold rolled steel, galvanized and pre-painted steel ~~with~~of great durability. They also produce tinplate, a raw material used to produce ~~packaging.~~metal containers.

FS-63

Overseas, Lusosider, which is based in Portugal, also produces ~~metallic~~metal sheets, as well as galvanized steel. CSN LLC in the ~~U.S.~~U.S.A. meets local market needs by supplying cold rolled and galvanized steel. For ~~2012,~~2013, it is slated to begin production of long steel products. The initial production slated, ~~to the tune~~ of ~~500 thousand~~500,000 metric tons per year, ~~(mtpy),~~ will consolidate the company as a source of complete construction solutions, ~~for civil construction,~~ complementing its portfolio of products with high added value in the steel chain.

•·Mining

This segment encompasses the activities of iron ore and tin mining. The high-quality iron ore operations are located in the Iron Quadrilateral in MG, the Casa de Pedra mine in Congonhas, – MG, that produces high quality iron ore, as well as the Company’s subsidiary Nacional Minérios S.A. (Namisa), which has its own mines, ~~which are~~ also of excellent quality, and ~~further~~also sells third party iron ore. Furthermore, CSN also owns Estanho de Rondônia S.A. (ERSA), a company that has both tin mining and casting units.

CSN holds the concession to operate ~~the~~TECAR, a solid bulk terminal, ~~TECAR,~~ one of the four terminals that comprise the Itaguaí Port, ~~of Itaguaí (RJ). Importations of coal~~in Rio de Janeiro. Coal and coke imports are carried out through this terminal.

•~~Logística~~

·Logistics

i. Railroad

CSN has equity interests in two railroad companies: MRS Logística ~~S. A.~~S.A., which manages the former Southeast Network of Rede Ferroviária Federal S.A. (RFFSA), and Transnordestina Logística ~~S. A.~~S.A., which operates the ~~old~~former Northeast Network of RFFSA in the States of Maranhão, Piauí, Ceará, Rio Grande do Norte, Paraíba, Pernambuco and Alagoas.

a) MRS

The railroad transportation services provided by MRS are based on the supply of raw materials and the shipment of final products. The total amount of iron ore, coal and coke consumed by the Presidente Vargas Mill is carried by MRS, as is part of the steel produced by CSN for the domestic market and for export.

The Southeast Brazilian railroad system, encompassing 1,674 kilometers of tracks, serves the tri-state industrial area of São ~~Paulo - Rio~~Paulo-Rio de ~~Janeiro - Minas~~Janeiro-Minas Gerais, linking the mines located in Minas Gerais to the ports located in São Paulo and Rio de Janeiro, and the steel mills of CSN, Companhia Siderúrgica Paulista (or Cosipa) and Gerdau Açominas. Besides serving other customers, the railroad system carries iron ore from the Company’s mines in Casa de Pedra, Minas Gerais, and coke and coal from the Itaguaí Port, ~~of Itaguaí,~~ in Rio de Janeiro, to Volta Redonda, and carries CSN’s exports to the ports of Itaguaí and Rio de Janeiro. Its volumes of cargo carried account for approximately 28% of the total volume carried by the Southeast railroad system.

~~FS-67~~

b) Transnordestina Logística

Together, CSN and the federal government will be making investments for implementation of the Transnordestina Project for construction of around 1,728 km of new lines. The work on this project, slated for conclusion in 2013, further includes complementing and renewing part of the infrastructure (or lines) of the concession held by Transnordestina Logística, which will be expanded from the nearly 2,600 kilometers of track presently operating to around 4,300 kilometers.

Transnordestina Logística S.A. has a 30-year concession granted in 1998 to operate the Northeastern Brazil railroad system. This railway system ~~which~~ covers 4,238 kilometers of railroads in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte. Moreover, it links up the main ports in the region, thus providing an important competitive advantage by means of opportunities for combined transportation solutions and logistics projects tailored to customer needs.

The project underway will increase the transportation capacity of Transnordestina Logística 20-fold, bringing it up the level of the most modern railroads in the entire world.

FS-64

With its new configuration, Transnordestina will become the best logistics option for export of grains through the ~~ports of~~ Pecém and Suape ports, as well as other solid bulk cargos such as iron ore from the Northeast Region, playing an important role in the region’s development.

ii. ~~Port~~Ports

The Port logistics segment consolidates the operation of the terminal built during the post-privatization period of the ports, Sepetiba Tecon. The Sepetiba terminal features complete infrastructure to meet all the needs of exporters, importers and ship-owners. Its installed capacity exceeds that of most other Brazilian terminals. It has excellent depths of 14.5 meters in the mooring berths and a huge storage area, as well as the most modern and appropriate equipment, systems and ~~inter-modal~~intermodal connections.

The Company’s constant investment in projects in the terminals consolidates the Itaguaí Port Complex as one of the most modern in ~~the country. At~~Brazil, at present ~~it has~~with capacity for ~~annually~~ handling 480 thousand containers and 30 million metric tons per year of bulk cargo.

•·Energy

CSN is one of the largest industrial consumers of electric power in Brazil. As energy is fundamental to its production process, the Company invests in assets for generation of electric power to guarantee its self-sufficiency. These assets are as follows: Itá hydroelectric power plant, in the State of Santa Catarina, with rated capacity of 1,450 MW, where CSN has a share of 29.5%; Igarapava hydroelectric power plant, Minas Gerais, with rated capacity of 210 MW, in which CSN holds of 17.9% of the capital; and a thermoelectric co-generation Central Unit with rated capacity of 238 MW, which has been operating at the UPV since ~~1999. For~~1999.For fuel the Central Unit uses the residual gases produced by the steel mill itself. Through these three power generation assets, CSN obtains total rated capacity of 430 MW.

•·Cement

The cement division consolidates the Company’s cement production, distribution and sales operations, which use the slag produced by the Volta Redonda plant’s blast furnaces. ~~Currently,~~In 2011, the clinker used in cement production is leased from third ~~parties~~parties; however, ~~it will be produced by CSN itself in~~at the end of 2011, ~~when~~with the completion of the first stage of the Arcos ~~factory~~Clinker plant, MG, this plant already supplied the milling needs of CSN Cimentos in ~~Minas Gerais will be completed. CSN also has a limestone mine on that site, which is already part of its cement division.~~Volta Redonda.

The information presented to Management regarding the performance of each business segment is generally derived directly from the accounting records, combined with some intercompany allocations.

·Sales by geographic area

Sales by geographic area are determined based on the ~~location of customers. On a consolidated basis, domestic~~customers’ location. Domestic sales are represented by revenues from customers located in Brazil ~~while~~and export ~~revenues represent~~sales are represented by revenues from customers located abroad.

~~FS-68~~

FS-65


	12/31/2011
	Steel	Mining	Logistics		Energy	Cement	Corporate expenses/elimination	Consolidated
	Steel	Mining	Ports	Railroad	Energy	Cement	Corporate expenses/elimination	Consolidated
Revenues and expenses
Metric tons (thou.) - (unaudited) (*)	4,895,581	23,849,514				1,754,596
Revenues
Domestic market	8,190,463	834,144	142,778	1,022,885	183,492	332,950	(564,796)	10,141,916
Foreign market	1,287,274	5,107,707					(17,313)	6,377,668
Cost of sales and services	(7,038,168)	(2,185,149)	(85,474)	(667,186)	(105,497)	(268,432)	549,062	(9,800,844)
Gross profit	2,439,569	3,756,702	57,304	355,699	77,995	64,518	(33,047)	6,718,740
Selling and administrative expenses	(471,003)	(149,862)	(18,303)	(90,020)	(25,408)	(67,712)	(357,385)	(1,179,693)
Depreciation	606,810	161,655	5,674	105,454	22,495	23,222	4,058	929,368
Adjusted EBITDA	2,575,376	3,768,495	44,675	371,133	75,082	20,028	(386,374)	6,468,415

	12/31/2011
	Steel	Mining	Logistics		Energy	Cement	Corporate expenses/elimination	Consolidated
	Steel	Mining	Ports	Railroad	Energy	Cement	Corporate expenses/elimination	Consolidated
Sales by geographical area
Asia	31,255	4,250,002						4,281,257
North America	502,486							502,486
Latin America	147,363							147,363
Europe	560,880	857,705						1,418,585
Other	45,290						(17,313)	27,977
Foreign market	1,287,274	5,107,707					(17,313)	6,377,668
Domestic market	8,190,463	834,144	142,778	1,022,885	183,492	332,950	(564,796)	10,141,916
TOTAL	9,477,737	5,941,851	142,778	1,022,885	183,492	332,950	(582,109)	16,519,584

2010

Steel

Mining

Logistics

Energy

Cement

Corporate Expenses / Elimination
Consolidated

Port

Railroad

Results


Metric tons (Th.) - (unaudited) (*)
    4,795,851

18,554,984

    991,789

       24,342,624
Revenues


Domestic market
     8,763,470

     573,976

       119,315

    838,436

113,517

    201,841

(363,750)

       10,246,805
Foreign market
     1,162,539

3,041,166

         4,203,705
Cost of sales and services
   (6,095,348)

(1,186,962)

       (70,046)

(521,747)

(41,579)

(163,631)

    392,571

      (7,686,742)
Gross Profit
     3,830,661

2,428,180

         49,269

    316,689

   71,938

      38,210

      28,821

         6,763,768
Selling and administrative expenses
     (573,572)

   (134,580)

       (16,590)

    (70,644)

(25,555)

    (43,119)

(350,759)

      (1,214,819)
Depreciation
        519,411

     145,817

           5,577

    102,629

   22,501

      13,648

      (3,414)

            806,169
Adjusted EBITDA
     3,776,500

2,439,417

         38,256

    348,674

   68,884

        8,739

(325,352)

         6,355,118

2010

Steel

Mining

Logistics

Energy

Cement

Corporate Expenses / Elimination
Consolidated

Port

Railroad

Sales by geographic area


Asia

                 40,752

         2,513,499

         2,554,251
North America

               432,229

            432,229
Latin America

               193,692

            193,692
Europe

               454,997

            527,667

            982,664
Other

                 40,869

              40,869
Foreign market

            1,162,539

3,041,166











         4,203,705
Domestic market

            8,763,470

573,976

119,315

        838,436

113,517

    201,841

(363,750)

       10,246,805
TOTAL

            9,926,009

3,615,142

119,315

        838,436

113,517

    201,841

(363,750)

       14,450,510

(*) The ~~volumes of~~ ore sales volumes presented in this note ~~consider the Company’s~~take into consideration Company sales and ~~investments~~the interest in its subsidiaries and jointly controlled entities (Namisa 60%).


	12/31/2010
	Steel	Mining	Logistics		Energy	Cement	Corporate expenses/elimination	Consolidated
	Steel	Mining	Ports	Railroad	Energy	Cement	Corporate expenses/elimination	Consolidated
Revenues and expenses
Metric tons (thou.) - (unaudited) (*)	4,795,851	18,554,984				991,789
Revenues
Domestic market	8,763,470	573,976	119,315	838,436	113,517	201,841	(363,750)	10,246,805
Foreign market	1,162,539	3,041,166						4,203,705
Cost of sales and services	(6,225,820)	(1,252,474)	(70,046)	(521,747)	(41,579)	(163,631)	392,571	(7,882,726)
Gross profit	3,700,189	2,362,668	49,269	316,689	71,938	38,210	28,821	6,567,784
Selling and administrative expenses	(443,100)	(69,068)	(16,590)	(70,644)	(25,555)	(43,119)	(350,759)	(1,018,835)
Depreciation	519,411	145,817	5,577	102,629	22,501	13,648	(3,414)	806,169
Adjusted EBITDA	3,776,500	2,439,417	38,256	348,674	68,884	8,739	(325,352)	6,355,118

	12/31/2010
	Steel	Mining	Logistics		Energy	Cement	Corporate expenses/elimination	Consolidated
	Steel	Mining	Ports	Railroad	Energy	Cement	Corporate expenses/elimination	Consolidated
Sales by geographical area
Asia	40,752	2,513,499						2,554,251
North America	432,229							432,229
Latin America	193,692							193,692
Europe	454,997	527,667						982,664
Other	40,869							40,869
Foreign market	1,162,539	3,041,166						4,203,705
Domestic market	8,763,470	573,976	119,315	838,436	113,517	201,841	(363,750)	10,246,805
TOTAL	9,926,009	3,615,142	119,315	838,436	113,517	201,841	(363,750)	14,450,510

(*) The ore sales volumes presented in this note take into consideration Company´s sales and the interest in its subsidiaries and jointly controlled entities (Namisa 60%).

FS-66


	12/31/2009
	Steel	Mining	Logistical		Energy	Cement	Corporate expenses/elimination	Consolidated
	Steel	Mining	Ports	Railroad	Energy	Cement	Corporate expenses/elimination	Consolidated
Revenue and expenses
Tonnes (thou.) - (unaudited) (*)	4,110,266	17,478,837				338,272
Revenue
Domestic market	7,045,510	247,490	144,363	822,503	116,641	60,380	(330,353)	8,106,534
Foreign market	1,155,780	1,716,050						2,871,830
Cost of sales and services	(5,692,531)	(1,247,696)	(75,563)	(464,104)	(43,363)	(60,893)	373,376	(7,210,774)
Gross profit	2,508,759	715,844	68,800	358,399	73,278	(513)	43,023	3,767,590
Selling and administrative expenses	(370,445)	(39,745)	(14,290)	(58,283)	(24,978)	(16,135)	(403,325)	(927,201)
Depreciation	484,351	134,665	10,776	109,514	25,234	8,714	6,898	780,152
Adjusted EBITDA	2,622,665	810,764	65,286	409,630	73,534	(7,934)	(353,404)	3,620,541

	12/31/2009
	Steel	Mining	Logistical		Energy	Cement	Corporate expenses/elimination	Consolidated
	Steel	Mining	Ports	Railroad	Energy	Cement	Corporate expenses/elimination	Consolidated
Sales by geography
Asia	248,663	1,368,608						1,617,271
North America	322,798	79,426						402,224
Latin America	117,982							117,982
Europe	424,314	268,016						692,330
Other	42,023							42,023
Foreign market	1,155,780	1,716,050						2,871,830
Domestic market	7,045,510	247,490	144,363	822,503	116,641	60,380	(330,353)	8,106,534
TOTAL	8,201,290	1,963,540	144,363	822,503	116,641	60,380	(330,353)	10,978,364

(*) The ore sales volumes presented in this note take into consideration Company´s sales and the interest in its subsidiaries and jointly controlled entities (Namisa 60%).

2009

Steel

Mining

Logistics

Energy

Cement

Corporate Expenses / Elimination
Consolidated

Port

Railroad

Results

Metric tons (Th.) - (unaudited) (*)

     4,110,266

   17,478,837

338,272

       21,927,375
Revenues


Domestic market

     7,045,510

        247,490

    144,363

    822,503

116,641

   60,380

(330,353)

         8,106,534
Foreign market

     1,155,780

     1,716,050

         2,871,830
Cost of sales and services

   (5,572,268)

   (1,179,304)

    (75,563)

(464,104)

(43,363)

(60,893)

    373,376

      (7,022,119)
Gross Profit

     2,629,022

        784,236

      68,800

    358,399

   73,278

     (513)

      43,023

         3,956,245
Selling and administrative expenses

      (490,708)

      (108,137)

    (14,290)

    (58,283)

(24,978)

(16,135)

(403,325)

     (1,115,856)
Depreciation

        484,351

        134,665

      10,776

    109,514

   25,234

     8,714

        6,898

            780,152
Adjusted EBITDA

     2,622,665

        810,764

      65,286

    409,630

   73,534

(7,934)

(353,404)

         3,620,541

2009

Steel

Mining

Logistics

Energy

Cement

Corporate Expenses / Elimination

Consolidated

Port

Railroad

Sales by geographic area

Asia

    248,663

1,368,608

         1,617,271
North America

    322,798

      79,426

            402,224
Latin America

    117,982

            117,982
Europe

    424,314

    268,016

            692,330
Other

      42,023

              42,023
Foreign market

1,155,780

1,716,050

         2,871,830
Domestic market

7,045,510

    247,490

    144,363

    822,503

116,641

      60,380

     (330,353)

         8,106,534
TOTAL

8,201,290

1,963,540

    144,363

   822,503

116,641

      60,380

     (330,353)

       10,978,364

~~(*)~~ The ~~volumes of ore sales presented in this note consider the Company’s sales and investments in subsidiaries (Namisa 60%).~~

~~FS-69~~

~~The Adjusted~~adjusted EBITDA consists of profit for the year plus net finance income ~~(expenses)~~(costs), income tax and social contribution, depreciation and amortization, and other operating income (expenses), which are ~~excluded as~~deducted because they mainly refer ~~mainly~~ to non-recurring items of the operation.

The Company’s ~~Executive Officers~~executive officers use ~~the~~ Adjusted EBITDA as a tool to measure the recurring operating cash generation capacity, as well as a means for allowing it to make comparisons with other companies.

2010 2009
Adjusted EBITDA 6,355,118 3,620,541
Depreciation (806,169) (780,152)
Other operating (Note 26) (550,603) 720,843
Finance income (expenses) (Note 27) (1,911,458) (246,435)
Profit before taxes 3,086,888 3,314,797
Income tax and social contribution (Note 10) (570,697) (699,616)
Net income 2,516,191 2,615,181


	12/31/2011	12/31/2010	12/31/2009
Adjusted EBITDA	6,468,415	6,355,118	3,620,541
Depreciation	(929,368)	(806,169)	(780,152)
Other operating income (expenses) (Note 25)	217,875	(550,603)	720,843
Finance income (expenses) (Note 26)	(2,005,803)	(1,911,458)	(246,435)
Pretax income	3,751,119	3,086,888	3,314,797
Income tax and social contribution (Note 9)	(83,885)	(570,697)	(699,616)
Profit for the year	3,667,234	2,516,191	2,615,181

~~29.~~ 28.EARNINGS PER SHARE (EPS)

Basic earnings per share:

Basic earnings per share have been calculated based on the profit attributable to the owners of CSN ~~and non-controlling interests, which amounted to R$ 2,516,376 (R$ 2,618,934 in 2009),~~ divided by the weighted average number of common shares outstanding during the year (after the ~~share~~stock split), excluding the common shares purchased and held as treasury shares, as follows:

2010

2009

Common shares
Profit attributable to owners of CSN
               2,516,376

              2,618,934
Weighted average number of shares
               1,457,970

              1,492,453
Basic and Diluted EPS
                   1.72594

                 1.75478

FS-67


	12/31/2011	12/31/2010	12/31/2009
	Common shares
Profit for the year
Attributed to Company owners	3,706,033	2,516,376	2,618,934
Attributed to non-controlling interests	(38,799)	(185)	(3,753)
Weighted average number of shares	1,457,970	1,457,970	1,492,453
Basic and diluted EPS	2,54191	1,72594	1,75478

~~30.~~ 29.EMPLOYEE BENEFITS

The pension plans granted by the Company cover substantially all employees. The plans are administered by Caixa Beneficente dos Empregados da CSN (“(‘CBS”), which is a private non-profit pension fund established in July 1960. The members of CBS are ~~employees~~ employees—and former ~~employees~~ employees—of the Company and some subsidiaries that ~~join~~joined the fund through an agreement, and the employees of CBS itself. The Executive Officers of CBS is comprised of a CEO and two other executive officers, all appointed by CSN, which is the main sponsor of CBS. The Decision-Making ~~Council~~Board is the higher decision-making and guideline-setting body of CBS, presided over by the president of the pension fund and made up of 10 members, six chosen by CSN in its capacity as main sponsor of CBS and four elected by the fund’s participants.

~~FS-70~~

Until December 1995, CBS Previdência administered two defined benefit plans based on years of service, salary and Social Security benefits. On December 27, 1995 the then Private Pension Secretariat (“SPC”) approved the implementation of a new benefit ~~plan. This new~~ plan, ~~took effect as from~~effective beginning that date, and ~~was~~ called Mixed Supplementary Benefit Plan (“(‘Mixed Plan”), structured in the form of a variable contribution plan. Employees hired after that date were only entitled to join the new Mixed Plan. In addition, all active employees who were participants of the old defined benefits plans had the opportunity to switch to the new Mixed Plan.

As atof December 31, ~~2010~~2011 CBS had ~~30,540~~31,482 participants ~~(28,419 in 2009)~~(30,540 as of December 31, 2010), of whom ~~15,433~~16,603 were active contributors ~~(12,884 in 2009)~~(15,433 as of December 31, 2010), ~~9,888~~9,705 were retired employees ~~(10,117 in 2009)~~(9,888 as of December 31, 2010), and ~~5,219~~5,174 were related beneficiaries ~~(5,418 in 2009). Out~~(5,219 as of December 31, 2010).Out of the total participants as at December 31, ~~2010, 14,108~~2011, 13,726 belonged to the defined benefit plan and ~~16,432~~17,756 to the mixed plan.

The plan assets of CBS are primarilyi~~nvested~~ invested in repurchase agreements (backed by federal government bonds), federal securities indexed to inflation, shares, loans and real estate. As atof December 31, ~~2010~~2011 CBS held 12,788,231 common shares of CSN ~~(70,981,734~~(12,788,231 common shares as atof December 31, ~~2009)~~2010). ~~In 2010 CBS received R$ 73 million in dividends on the equity interest represented by such shares.~~ The total plan assets of the entity amounted to R$ ~~3.4~~3.8 billion and R$3.6 billion as at December 31, ~~2009~~2011 and 2010, respectively. The administrators of the CBS funds seek to match plan assets with benefit obligations payable on a long-term basis. Pension funds in Brazil are subject to certain restrictions regarding their capacity for investment in foreign assets and, therefore, these funds invest mainly in Brazilian securities.

Plan Assets are all available assets and the benefit plans’ investments, not including the amounts of debts to sponsors.

a.Description of the pension plans

Plan covering 35% of average salary

This plan began on February 1, 1966 and is a defined benefit plan aimed at paying pensions (for length of service, special situations, disability or ~~old-age)~~old age) on a lifetime basis, equivalent to 35% of the adjusted average of the participant’s salary for the last 12 months. The plan also guarantees sick pay to participants on Official Social Security leaves of absence and further ensures payments of savings fund, funeral allowance and pecuniary aid. This plan was discontinued on October 31, 1977 when the new supplementary plan based on average salary took effect.

Supplementary average salary plan

This plan began on November 1, 1977 and is a defined benefit plan, aimed at complementing the difference between the adjusted average of the participant’s salary for the last 12 months and the Official Social Security benefit for retirement, alsoon a lifetime basis. As in the 35% plan, there is coverage for the benefits of sick pay, death and pension. This plan was discontinued on December 26, 1995 with the creation of the mixed supplementary benefit plan.

FS-68

Mixed supplementary benefit plan

This plan began on December 27, 1995 and is a variable contribution plan. Besides the scheduled retirement benefit, it also covers the payment of risk benefits (pension paid while the participant is still working, disability compensation and sick/accident pay)~~. Under~~.Under this plan, the retirement benefit is calculated based on the amount accumulated by the monthly contributions of the participants and sponsors, as well as on each participant’s option for the manner in which they receive them, which can be lifetime (with or without continuity of pension for death) or through a percentage applied to the balance of the fund generating the benefit (loss for indefinite period)~~. After~~.After retirement is granted, the plan takes on the characteristics of a defined benefit plan.

b.Investment policy

The investment ~~policies establish~~policy establishes the principles and guidelines that will govern the investments of funds entrusted to the entity, in order to foster the security, liquidity and profitability required to ensure equilibrium between the plan’s assets and liabilities, based on an ALM (Asset Liability Management) study that takes into consideration the benefits of participants and beneficiaries for each plan.

~~FS-71~~

The investment plan is reviewed annually and approved by the Decision-Making ~~Council~~Board considering a 5-year horizon, as established by resolution CGPC 7 of December 4, 2003. The investment limits and criteria established in the policy are based on Resolution 3792/09 published by the National Monetary Council (“CMN”).

c.Employee benefits

2010

2009

1/1/2009
Obligations recorded in the Balance Sheet

Pension plan benefits

            67,532
Post-employment health benefits
          367,839

          317,145

          296,608

          367,839

          317,145

          364,140

The actuarial calculations are updated at the end of each annual reporting period by outside actuaries and presented in the financial statements pursuant to IAS 19Employee Benefits.


	12/31/2011	12/31/2010
Obligations recognized in the balance sheet
Pension plan benefits	11,673
Post-employment healthcare benefits	457,377	367,839
	469,050	367,839

The reconciliation of employee benefits’ assets and liabilities is as follows:


	12/31/2011	12/31/2010
Present value of defined benefit obligations	(2,153,649)	(1,982,556)
Fair value of plan assets	2,384,450	2,316,018
(Deficit)/surplus	230,801	333,462
Restriction to actuarial assets due to recovery limitation	(174,926)	(280,582)
(Liabilities)/assets, net	55,875	52,880
Liabilities	(11,673)
Assets (*)	67,548	52,880
Net (liabilities)/assets recognized in the balance sheet	(11,673)

Changes in the present value of ~~employee benefits is~~defined benefit obligation during the year are as follows:

2010

2009

1/1/2009
Present value of defined benefit obligations
      1,982,556

       1,731,767

       1,415,029
Fair value of plan assets
    (2,316,018)

     (2,160,158)

      (1,396,350)
Deficit/(surplus)
        (333,462)

         (428,391)

             18,679
Restriction due to limitation of recovery
          280,582

           380,092

             18,737
Net Liabilities/(Assets)
          (52,879)

          (48,299)

            37,416
Liabillities

             67,534
Assets (*)
          (52,879)

          (48,299)

           (30,118)
Net Liabilities(Assets)
          (52,879)

          (48,299)

            37,416

FS-69


	12/31/2011	12/31/2010	31/12/2009
Present value of obligations at the beginning of the year	1,982,556	1,731,767	1,415,029
Cost of services	5,579	1,313	1,249
Interest cost	202,242	185,285	174,122
Benefits paid	(178,403)	(166,147)	(148,561)
Actuarial loss/(gain)	141,675	225,341	287,146
Other		4,997	2,782
Present value of obligations at the end of the year	2,153,649	1,982,556	1,731,767

Changes in the fair values of plan assets in the current year are as follows:


	12/31/2011	12/31/2010	12/31/2009
Fair value of assets at the beginning of the year	2,316,018	2,160,158	1,396,350
Expected return on plan assets	260,163	218,229	176,356
Sponsors' contributions	67,709	63,109	68,890
Participants' contributions			2,782
Benefits paid	(178,402)	(166,147)	(148,561)
Actuarial (gains) losses	(81,038)	40,669	664,341
Fair value of plan assets at the end of the year	2,384,450	2,316,018	2,160,158

The amounts recognized in the income statement are comprised as follows:


	12/31/2011	12/31/2010	12/31/2009
Cost of current services	(5,579)	(1,313)	(1,249)
Interest cost	(202,242)	(185,285)	(174,122)
Expected return on plan assets	260,163	218,229	176,356
Sponsors' contributions transferred in prior year	67,710	63,109	68,890
	120,052	94,740	69,875
Total unrecognized revenue (*)	103,678	94,740	73,357
Total (costs)/revenue recognized in the income statement	16,374		(3,482)
Total (costs)/revenue, net	120,052	94,740	69,875

(*) The ~~Asset~~Company did not recognize in its balance sheet the asset and the balancing items thereto resulting from the actuarial valuation ~~was not recorded by the Company since~~of surplus plans because there is no clear evidence of its realization, in accordance with IAS 19 – Employee benefits.

~~Changes in the present value of the defined benefit obligation during the year are as follows:~~

2010

2009
Present value of obligations at beginning of year
      1,731,767

       1,415,029
Cost of service
              1,313

               1,249
Cost of interest
          185,285

           174,122
Benefits paid
        (166,147)

        (148,561)
Actuarial loss/(gain)
          225,341

          287,146
Other
              4,999

              2,782
Present value of obligations at end of year
      1,982,556

��      1,731,767

~~The changes in the fair value of the plan assets during the year are as follows:~~

2010

2009
Fair value of assets at beginning of year
    (2,160,158)

     (1,396,350)
Expected return on plan assets
        (218,229)

      (176,356)
Contributions of sponsors
          (63,109)

          (68,890)
Contributions of participants

            (2,782)
Benefits paid
          166,147

          148,561
Actuarial gains/(losses)
          (40,669)

        (664,341)
Fair value of plan assets at December 31
    (2,316,018)

     (2,160,158)

~~FS-72~~

The ~~amounts to be recognized in the~~ (cost)/income ~~statement are presented below:~~

2010

2009
Cost of current service
              1,313

              1,249
Cost of interest
          185,285

           174,122
Expected return on plan assets
      (218,229)

         (176,356)
Total unrecognized revenue (*)
        (31,631)

             (4,467)
Total costs recognized in the income statement

               3,482
Total costs (revenues), net (*)
          (31,631)

                (985)

~~(*) The revenue resulting from the actuarial valuation was not recorded by the Company since there is no clear evidence of its realization, in accordance with IAS 19 – Employee benefits~~.

~~The cost~~ is recognized in the income statement in other operating expenses.

Changes in actuarial gains and losses are as follows:

2010

2009
Actuarial (gains) and losses
          184,671

        (377,195)
Restriction due to limitation of recovery
         (99,509)

          361,355
Total cost of actuarial (gains) and losses
           85,162

          (15,840)


	12/31/2011	12/31/2010	12/31/2009
Actuarial gains and (losses)	(222,712)	(184,671)	377,195
Restriction due to recovery limitation	105,655	99,509	(361,355)
	(117,057)	(85,162)	15,840
Actuarial gains and (losses) recognized in other comprehensive income	(28,048)
Unrecognized actuarial gains/(losses) (*)	(89,009)	(85,162)	15,840
Total cost of actuarial (gains) and losses	(117,057)	(85,162)	15,840

~~There were no changes in actuarial liabilities (assets) from 2009 to 2010, with the~~(*) The actuarial loss ~~being~~results from the ~~result of the fluctuations~~fluctuation in the investments ~~comprising the portfolio of assets held by CBS.~~that form CBS’s asset portfolio.

The history of actuarial gains and losses is as follows:

FS-70


	2010	2009	1/1/2009	12/31/2011	12/31/2010	12/31/2009	01/01/2009 (**)
Present value of defined benefit obligations	1,982,556	1,731,767	1,415,029	(2,153,649)	(1,982,556)	(1,731,767)	(1,415,029)
Fair value of plan assets	(2,316,018)	(2,160,158)	(1,396,350)	2,384,450	2,316,018	2,160,158	1,396,350
Surplus	333,462	428,391	(18,679)	230,801	333,462	428,391	(18,679)
Experience adjustments in plan obligations	225,341	287,146
Experience adjustments in plan assets	40,669	664,341
Experience adjustments to plan obligations				141,675	225,341	287,146
Experience adjustments to plan assets				(81,038)	40,669	664,341

The main actuarial assumptions used ~~were:~~were as follows:


	12/31/2011	12/31/2010	12/31/2009
Actuarial funding method	Projected unit credit	Projected unit credit	Projected unit credit
Functional currency	Real (R$)	Real (R$)	Real (R$)
Recognition of plan assets	Fair value	Fair value	Fair value
Amount used as estimate of equity at the end of the year	Best estimate for equity at the end of the fiscal year, obtained based on a projection of October amountsrecorded	Best estimate for equity at the end of the fiscal year, obtained based on a projection of October amountsrecorded	Best estimate for equity at the end of the fiscal year, obtained based on a projection of October amountsrecorded
Discount rate	10.46%	10.66%	11.18%
Inflation rate	4.6%	4.4%	4.20%
Nominal salary increase rate	5.65%	5.44%	5.24%
Nominal benefit increase rate	4.6%	4.4%	4.20%
Rate of return from investments	11,52% - 12,24%	11,31% - 12,21%	10,21% - 10,78%
General mortality table	AT 2000 segregated by gender	AT 2000 segregated by gender	AT 2000 segregated by gender
Disability table	Mercer Disability with probabilities multiplied by 2	Mercer Disability with probabilities multiplied by 2	Mercer Disability with probabilities multiplied by 2
Disability mortality table	Winklevoss - 1%	Winklevoss - 1%	Winklevoss - 1%
Turnover table	2% p.a. millennium plan, nil for defined benefit plans	2% p.a. millennium plan, nil for defined benefit plans	2% p.a. millennium plan, nil for defined benefit plans
Retirement age	100% on first date he/shed becomes eligible for programmed retirement benefit under plan	100% on first date he/shed becomes eligible for programmed retirement benefit under plan	100% on first date he/shed becomes eligible for programmed retirement benefit under plan

Household of active participants	95% will be married at the time of retirement, with the wife being 4 years younger than the husband	95% will be married at the time of retirement, with the wife being 4 years younger than the husband	95% will be married at the time of retirement, with the wife being 4 years younger than the husband

2010

2009

1/1/2009
Actuarial method for Financing
Projected Unit Credit

Projected Unit Credit

Projected Unit Credit
Functional currency
Real (R$)

Real (R$)

Real (R$)
Recording of plan assets
Marke value

Market value

Market value
Amount used as estimate of equity at year end
Best estimate of CBS for
position at 12/31/2010

Best estimate of CBS for position at 12/31/2009

Best estimate of CBS for position at 1/1/2009
Discount rate
10.66%

11.18%

12.76% - 13.07%
Inflation rate
4.40%

4.20%

4.50%
Nominal salary increase rate
5.44%

5.24%

5.55%
Nominal benefit increase rate
4.40%

4.20%

4.50%
Rate of return from investments
11.31% - 12.21%

10.21% - 10.78%

12.93% - 13.21%
General mortality chart
AT 2000 segregated by gender

AT 2000 segregated by gender

AT 83 segregated by gender
Disability table
Mercer Disability with probabilities multiplied by 2

Mercer Disability with probabilities multiplied by 2

Mercer Disability with probabilities multiplied by 2
Mortality table for disabled persons
Winklevoss - 1%

Winklevoss - 1%

Winklevoss
Turnover table
Millennium plan at 2% p.a., nil for DB plans

Millennium plan at 2% p.a., nil for DB plans

Milennium plan at 2% p.a., nil for DB plans
Retirement age
100% on first date for becoming eligible for programmed retirement beneft under plan

100% on first date for becoming eligible for programmed retirement benefit under plan

100% on first date for becoming eligible for programmed retirement benefit under plan
Family composition of active participants
95% will be married at the time of retirement, with the wife being 4 years younger than the husband

95% will be married at the time of retirement, with the wife being 4 years younger than the husband

95% will be married at the time of retirement, with the wife being 4 years younger than the husband

~~FS-73~~

The assumptions related to the mortality table are based on published statistics and mortality tables. These tables represent an average life expectancy in years of employees retiring at the age of 65, as shown below:


	2010	2009	1/1/2009	12/31/2011	12/31/2010	12/31/2009
Longevity at age of 65 for current participants
Male	19.55	19.55	18.63	19.55	19.55	19.55
Female	22.17	22.17	21.98	22.17	22.17	22.17

Allocation of plan assets:


	12/31/2011		12/31/2010
Variable income	360,958	15.14%	234,303	10.12%
Fixed income	1,756,831	73.68%	1,961,306	84.68%
Real estate	190,756	8.00%	52,352	2.26%
Other	75,905	3.18%	68,057	2.94%
Total	2,384,450	100.00%	2,316,018	100.00%

Expected long-term return on plan assets:


	12/31/2011	12/31/2010
Variable income	18.05%	15.58%
Fixed income	10.53%	10.44%
Real estate	10.34%	9.62%
Other	10.34%	9.62%
Total	11.78%	11.62%

The actual return on ~~the~~ plan assets was R$179,126 (R$258,898 ~~(R$ 840,697~~ as atof December 31, ~~2009)~~2010).

~~Allocation of plan assets:~~FS-71

2010

2009
Variable income
          234,303

10.12%

       1,308,232

60.56%
Fixed income
       1,961,306

84.68%

          756,424

35.01%
Real estate
            52,352

2.26%

            41,190

1.92%
Other
            68,057

2.94%

            54,312

2.51%
Total
       2,316,018

100.00%

       2,160,158

100.00%

~~Expected long-term returns on plan assets:~~

2010

2009
Variable income
15.58%

12.30%
Fixed income
10.44%

9.48%
Real estate
9.62%

9.71%
Other
9.62%

16.05%
Total
10.31%

11.50%

Variable-income assets comprise mainly CSN shares.

Fixed-income assets comprise mostly debentures, Certificates of Interbank Deposit ~~("CDI"~~(“CDI”) and National Treasury Notes (“NTN-B”).

Real estate refers to buildings appraised by a specialized asset appraisal firm. There are no assets in use by CSN and its subsidiaries.

~~Expenses for~~

For the ~~year 2010 on~~defined benefit plans, the expense as of December 31, 2011 was R$67,276 (R$63,110 as of December 31, 2010).

For the mixed plan, which ~~includes~~has defined contribution components, ~~amounted to~~the expense in 2011 was R$29,487 (R$22,514 ~~(R$ 19,560 for 2009)~~as of December 31, 2010).

d.Expected contributions

Expected contributions of R$ ~~64,747~~69,244 will be paid to defined benefits plans in ~~2011.~~2012.

For the mixed supplementary benefit plan, which includes defined contribution components, expected contributions of R$ ~~25,000~~27,500 will be paid in ~~2011.~~2012.

~~FS-74~~

~~e. Post-employment health care plan~~POST-EMPLOYMENT HEALTH CARE PLAN

~~This is~~

Refer to a ~~health care~~healthcare plan created on December 1, 1996 exclusively for retired former employees, pensioners, those who received an amnesty, war veterans, widows of employees who died as a result of on-the-job accidents and former employees who retired on or before March 20, 1997 and their related dependents. Since then, the health care plan has not permitted the inclusion of new beneficiaries. The plan is sponsored by CSN and administered by Caixa Beneficente dos ~~Emprados~~Empregados da Cia. Siderúrgica Nacional - CBS.

The amounts recognized in the balance sheet were determined as follows:


	2010	2009	12/31/2011	12/31/2010
Present value of obligations	367,839	317,145	457,377	367,839
Liabilities	367,839	317,145	457,377	367,839

~~The interest on the actuarial obligation amounted to R$ 35,457 in 2010 (R$ 38,440 in 2009).~~

The reconciliation of liabilities for ~~health~~healthcare benefits is as follows:

2010

2009
Actuarial liabilities at beginning of year
         317,145

          296,608
Cost of current service
             35,457

             38,440
Contributions of sponsor transferred in prior year
        (33,064)

           (35,136)
Recognition of (gain)/loss for the year
             48,301

             17,232
Actuarial liabilities at end of year
        367,839

           317,145


	12/31/2011	12/31/2010
Actuarial liabilities at the beginning of the year	367,839	317,145
Interest on actuarial obligation	39,616	35,457
Sponsor's contributions transferred in prior year	(34,653)	(33,064)
Recognition of (gain)/loss for the year	84,575	48,301
Actuarial liabilities at the end of the year	457,377	367,839

For the post-employment healthcare benefit plan, the expense in 2011 was R$37,343 (R$33,817 as of December 31, 2010).

The actuarial gains and losses recognized in equity are as follows:

2010

2009
Actuarial loss on obligation
            48,301

            17,232
Loss recognized in equity
            48,301

            17,232


	12/31/2011	12/31/2010	12/31/2009
Actuarial loss on obligation	84,575	48,301	17,232
Loss recognized in equity	84,575	48,301	17,232

The history of actuarial gains and losses is as follows:

FS-72

2010

2009

01/01/2009 (*)
Present value of defined benefit obligation
         367,839

          317,145

          296,608
Deficit/(surplus)
         367,839

         317,145

           296,608
Experience adjustments in plan obligations
             48,301

             17,232

               9,023


	12/31/2011	12/31/2010	31/12/2009	01/01/2009 (**)
Present value of defined benefit obligation	(457,377)	(367,839)	(317,145)	(296,608)
(Deficit)/surplus	(457,377)	(367,839)	(317,145)	(296,608)
Experience adjustments to plan obligations	84,575	48,301	17,232	9,023

(**) IAS 19 requires disclosure of the history for 5 (five) years, although this does not have to be retrospectively applied for a first-time adopter of IFRS.

The ~~effect of~~impact on a ~~1% (one per cent)~~one-percent change in the ~~presumed tendency~~assumed trend rate ~~for health costs~~of the healthcare cost is as follows:

2010

2009

Total effect of cost of current service and finance cost
         3,603

        (3,128)

          3,274

        (2,847)
Effect on defined benefit obligation
       34,122

      (29,617)

        29,287

      (25,461)


	12/31/2011		12/31/2010		12/31/2009
	Increase	Reduction	Increase	Reduction	Increase	Reduction
Effect on total cost of current service and finance cost			3,603	(3,128)	3,274	(2,847)
Effect on defined benefit obligation	42,032	(35,916)	34,122	(29,617)	29,287	(25,461)

~~FS-75~~

The actuarial assumptions used for calculating post-employment ~~health~~healthcare benefits were:

2010

2009
Biometric assumptions

General mortality table
AT 2000 segregated by gender

AT 2000 segregated by gender
Turnover
N/A

N/A
Family composition
Actual composition

Actual composition

Financial assumptions
2010

2009
Nominal actuarial discount rate
10.77%

11.18%
Inflation
4.40%

4.20%
Increase in medical cost based on age
1.50%

1.50%
Nominal growth rate in Medical Service Costs
2.31%

2.31%
Average Medical Cost
316.22

274.16


	12/31/2011	12/31/2010	12/31/2009
Biometric
General mortality table	AT 2000 segregated by gender	AT 2000 segregated by gender	AT 2000 segregated by gender
Turnover	N.A.	N.A.	N.A.
Household	Actual household	Actual household	Actual household


Financial	12/31/2011	12/31/2010	12/31/2009
Actuarial nominal discount rate	10.46%	10.77%	11.18%
Inflation	4.6%	4.4%	4.2%
Increase in medical cost based on age	4.6%	1.5%	1.5%
Nominal medical costs growth rate	2.31%	2.31%	2.31%
Average medical costs	299.69	316.22	274.16

~~31.~~ 30.COMMITMENTS

a.Take-or-pay contracts

As atof December 31, ~~2010~~2011 and ~~2009,~~2010, the Company was a party to take-or-pay contracts as shown in the following table:

FS-73

Payments Minimum future commitments
Company
contracted Nature of service Contract terms 2009 2010 2011 2012 2013 2014 2015 After 2016 Total
MRS Logística Transportation of iron ore Transportation of at least 80% of the metric tons agreed to be carried by MRS. 157,685 92,504 136,607 136,607 136,607 136,607 136,607 68,303 751,338
MRS Logística Transportation of iron ore, coal and coke Transportation of 8,280,000 mtpy for coal, coke and other reduction products - 3,600,000 Mpta. 259,979 7,151 133,412 100,060 233,472
FCA Transportation of mining
products Transportation of at least 1,900,000 Mpta. 58,473 419 63,085 63,085 63,085 189,255
FCA Railroad transportation of clinker by FCA for CSN Cimentos Transportation of at least 675,000 Mpta of clinker in 2011 and 738,000 Mpta of clinker as from 2012. 24,638 26,937 26,937 26,937 26,937 116,727 249,113
ALL Railroad transportation of steel products Railroad transportation of at least 20,000 metric tons of stell products per month from the Água Branca Terminal in São Paulo to CSN PR in Araucária - PR. 10,214 14,760 3,690 18,450
White Martins Supply of gas (oxygen, nitrogen and argon) CSN undertakes to acquire at least 90% of the annual volume of gas contracted w ith White Martins. 103,008 103,098 88,698 88,698 88,698 88,698 88,698 88,698 532,188
CEG Rio Supply of natural gas CSN undertakes to acquire at least 70% of natural gas. 359,780 431,093 264,646 264,646 529,292
Vale S.A Supply of ore pellets CSN undertakes to acquire at least 90% of the volume of lead pellets guaranteed in the contract. 22,268 195,221 141,765 141,765 141,765 94,510 519,805
Compagás Supply of natural gas CSN undertakes to acquire at least 80% of the annual volume of natural gas contracted w ith Compagás. 11,984 15,318 11,754 11,754 11,754 11,754 11,754 105,786 164,556

COPEL Supply of energy CSN undertakes to acquire at least 80% of the annual volume of electric pow er contracted w ith COPEL. 9,583 13,178 8,809 8,809 8,809 8,809 8,809 52,852 96,897
K&K Tecnologia Supply of blast furnace mud generated in the pig iron production process CSN undertakes to acquire at least 3,000 metric tons of blast furnace mud for porcessing in the mud concentration plant of CSN. 6,480 6,480 6,480 6,480 6,480 46,980 79,380
Harsco Metals Supply of slag resulting from the pig iron and steel production process The Harsco Metals Ltda. undertakes to perform the Scrap recovery Services resulting from the process of production of pig iron and steel from CSN / UPV, receiving by this process the equivalent in value the result of multiplying the unit price (U.S. $ / t) by the total Liquid Steel CSN’s Mill production, w ith a guarantee of a minimum production of liquid steel corresponding to 400,000 tons. 32,819 37,279 28,416 28,416 28,416 14,208 99,456
1,015,579 905,475 923,070 880,947 512,551 388,003 279,285 479,346 3,463,202


			Payments		Minimum future payments
Concessionaire	Type of service	Agreement terms and conditions	2010	2011	2012	2013	2014	2015	After 2015	Total
MRS Logística	Iron ore transportation.	Contractual clause providing for guaranteed revenue on railway freight. In the case ofCSN, this means a minimum payment of 80% of freight estimate.	92,504	153,870	176,058	176,058	176,058	176,058	88,029	792,261
MRS Logística	Steel products transportation	Transportation of at least 80% of annual volume agreed with MRS.		17,606	58,762	58,762	58,762	58,762	24,484	259,532
MRS Logística	Iron ore, coke and coal transportation.	Transportation of 8,280,000 metric tons per year of iron ore and 3,600,000 metric tonsper year of coal, coke and other reducing agents.	7,151	41,463	100,060					100,060
FCA	Mining products transportation.	Transportation of at least 1,900,000 metric tons per year.	419	1,324	63,085	63,085				126,170
FCA	FCA railway transportation ofclinker to CSN Cimentos.	Transportation of at least 675,000 metric tons per year of clinker in 2011 and 738,000metric tons per year of clinker starting 2012.		1,648	26,937	26,937	26,937	26,937	116,727	224,475
ALL	Railway transportation of steelproducts.	Rail transportation of at least, 20,000 metric tons of steel products monthly, which can vary 10% up or down, originated at the Água Branca Terminal in São Paulo for CSN PR in Araucária, State of Paraná.	10,214	14,774	3,540					3,540
White Martins	Supply of gas (oxygen, nitrogenand argon).	CSN undertakers to buy at least 90% of the annual volume of gas contracted withWhite Martins.	103,098	102,274	93,606	93,606	93,606	93,606	93,606	468,030
CEG Rio	Supply of natural gas.	CSN undertakes to buy at least 70% of the monthly natural gas volume	431,093	432,449	280,322					280,322
Vale S.A	Supply of iron ore pellets.	CSN undertakes to buy at least 90% of the volume of iron ore pellets secured bycontract. The take-or-pay volume is determined every 18 months.	195,221	349,797	176,305	176,305	117,537			470,147
Compagás	Supply of natural gas.	CSN undertakes to buy at least 80% of the monthly natural gas volume contracted withCompagás.	15,318	16,884	13,281	13,281	13,281	13,281	119,531	172,655
COPEL	Power supply.	CSN undertakers to buy at least 80% of the annual energy volume contracted withCOPEL.	13,178	13,378	7,487	7,487	7,487	7,487	39,934	69,882
K&K Tecnologia	Processing of blast furnace sludge generated during pig ironproduction.	CSN undertakes to supply at least 3,000 metric tons per month of blast furnace sludge for processing at K&K sludge concentration plant.	1,082	6,186	7,074	7,074	7,074	7,074	51,283	79,579
Harsco Metals	Processing of slag generated during pig iron and steel production.	Harsco Metals undertakes to process metal products and slag crushing byproducts resulting from CSN’s pig iron and steel manufacturing process, receiving for this processing the amount corresponding to the product of the multiplication of unit price (R$/t) by total production of liquid steel from CSN steel mill, ensuring a minimumproduction of liquid steel of 400,000 metric tons.	37,279	39,739	30,000	30,000	15,000			75,000
Siemens	Manufacturing, repair, recoveryand production of ingot castingmachine units.	Siemens undertakes to manufacture, repair, recover and produce, in whole or in part, ingot casting machine units to provide the necessary off-line and on-line maintenance of continuous ingot casting machine assemblies of the Presidente Vargas plant (UPV). Payment is set at R$/t of produce steel plates.	38,569	38,817	32,324	18,856				51,180

			945,126	1,230,209	1,068,841	671,451	515,742	383,205	533,594	3,172,833

b.Concession agreements

Minimum future payments related to government concessions as atof December 31, ~~2010~~2011 fall due according to the schedule set out in the following table:

Minimum future commitments

Concession

Nature of service
2011

2012

2013

2014

2015

After 2016

Total
MRS

Concession for a period of 30 years, renewable for another 30 years, for transporting iron ore from the mines of Casa de Pedra in MG and coke and coal from the Port of Itaguaí (RJ) to Volta Redonda and transportation of exports back to the Ports of Itaguaí and Rio de Janeiro.
225,944

225,958

225,958

225,958

225,958

2,372,42

3,502,202

Transnordestina

Concession for a period of 30 years granted on December 31, 1997, renewable for another 30 years, for development of public railroad transportation services in the Northeast of Brazil. The Northeast System covers 4,238 km of railroad track and operates in the states of Maranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte.
5,809

5,809

5,809

5,809

5,809

69,705

98,750

Tecar

Concession to operate the solid bulk terminal TECAR, one of the four terminals that comprise the Port Itaguaí, in Rio de Janeiro, for a period expiring in 2022 and renewable for another 25 years.
86,530

108,895

131,856

131,856

131,856

922,992

1,513,985

Tecon

Concession for a period of 25 years granted on September 3, 1998 , renewable for another 25 years, to operate the container terminal at the Port de Itaguaí (RJ).
20,490

20,490

20,490

20,490

20,490

215,142

317,592

338,773

361,152

384,113

384,113

384,113

3,580,265

5,432,529


		Minimum future payments
Company Concession	Type of service	2012	2013	2014	2015	After 2015	Total
MRS	30-year concession, renewable for another 30 years, to provide iron ore railway transportation services from the Casa de Pedra mines, in Minas Gerais, coke and coal from the Itaguaí Port, in Rio de Janeiro, to Volta Redonda, transportation of export goods to the Itaguaí and Rio de Janeiro Ports, and shipping of finishedgoods to the domestic market.	80,315	80,315	80,315	80,315	823,230	1,144,490

Transnordestina	30-year concession granted on December 31, 1997, renewable for another 30years for the development of public utility to operate the Northeastern railwaysystem. The railway system covers 4,238 kilometers of railroads in the states ofMaranhão, Piauí, Ceará, Paraíba, Pernambuco, Alagoas and Rio Grande do Norte.	6,494	6,494	6,494	6,494	74,135	100,111

Tecar	Concession to operate TECAR, a solid bulk terminal, one of the four terminals that comprise the Itaguaí Port, in Rio de Janeiro, for a period ending 2022 and renewable for another 25 years.	111,225	117,913	125,922	125,922	881,455	1,362,437

Tecon	25-year concession granted in July 2001, renewable for another 25 years, tooperate the container terminal at the Itaguaí Port.	22,129	22,129	22,129	22,129	221,293	309,809

		220,163	226,851	234,860	234,860	2,000,113	2,916,847

~~FS-76~~

c.Projects and other commitments

•·Steel – Flat and long steel

~~The Company is implementing a long-steel unit in Volta Redonda, in Rio de Janeiro, within its main facility. In this new unit,~~

CSN intends to produce 500,000 metric tons per year ~~(mtpy)~~ of ~~log~~long steel products, with an estimate of ~~which~~ 400,000 ~~mtpy~~t/year of ~~beams~~rebar and 100,000 ~~mtpy~~t/year of ~~machine wire. Total investment in production of long-steel products will amount to approximately R$ 974 million.~~wirerod. The ~~new~~ facilities will use scrap and pig iron as ~~the~~their main raw materials. ~~Besides~~In addition to this ~~mill,~~plant, CSN is ~~also developing two entirely new long-steel~~assessing the option of implementing in Brazil other similar projects, ~~each~~ also with 500,000 t/year capacity of 500,000 mtpy. The Company’s forecast is that these two new units will start up production by the end of 2013. CSN is also developing a long steel project, with slated installed capacity of 1.5 million mtpy, in a site to be confirmed.each.

•·Iron ore project

FS-74

~~The iron ore business lines~~CSN projects producing 89 mtpy of ~~CSN encompass expansion of its mining activities and its maritime port facilities. The Company is forecasting that by 2014 it will be producing~~ iron ore products, ~~to the tune of 89 million mtpy,~~including 50 ~~million~~ mtpy at Casa de Pedra and 39 ~~million~~ mtpy at Namisa. ~~We expect to finance these investments through the Brazilian Development Bank (BNDES), export credit agencies, placement of securities and free cash flows from our current operations.~~

~~Moreover,~~In addition, a CSN is ~~investing~~inventing in ~~expanding~~ the expansion of the Itaguaí seaport, or TECAR, for a capacity of ~~its maritime port in Itaguaí, or TECAR, up to the point where it can handle~~ 84 ~~million~~ mtpy. The ~~present~~current annual export capacity is equivalent to 30 million ~~mtpy.~~metric tons.

~~In addition to these projects, the Company is evaluating other opportunities for greenfield and brownfield projects, as well as some acquisition options.~~

~~CSN holds the concession to operate the solid bulk terminal TECAR, one of the four terminals that comprise the Port of Itaguaí, in Rio de Janeiro, through which coal~~Coal and coke imports are ~~carried out. The term of~~made using the TECAR terminal, whose concession agreement is 25 years, ~~renewable~~extendable for another 25 years.

Upon ~~extinction of this~~ concession termination, all ~~the~~ rights and privileges transferred to ~~CSN,~~Tecon will be handed back to CDRJ (Companhia Docas do Rio de Janeiro), together with the assets owned by CSN and those resulting from investments it made by CSN in leased assets, declared ~~reversible~~as returnable assets by CDRJ as they are necessary to the ~~government~~continuity of the related services. Any assets declared as returnable assets will be ~~returned to CDRJ (Companhia Docas do Rio de Janeiro) since they are need for the continued provision of services granted under the concession. The assets declared to be reversible will be indemnified~~compensated by CDRJ ~~for the~~at their residual value, ~~of their cost, after deduction of~~less related depreciation/amortization.

~~FS-77~~

•·Cement project

~~The~~

Up to December 2011 the Company ~~has~~had invested R$ ~~814~~770 million in the construction of an entirely new grinding unit in Volta Redonda ~~which is already in operation,~~ and a new clinker blast furnace in ~~Arcos/~~Arcos, MG, with production capacity of 2.4 ~~million~~ mtpy and 830,000 ~~mtpy,~~t/year, respectively. This project represents CSN’s entry into the cement market, taking advantage of the slag generated by its blast furnaces and its limestone reserves in Arcos.

In the 4^thfourth quarter of ~~2010,~~2011, CSN cement sales ~~reached 342,799~~totaled 484,346 metric tons ~~(338,000 in 2009),~~(342,799 as of December 31, 2010) and ~~is expected to reach~~we expect reaching full production capacity by ~~2012. These~~2012.These investments are ~~partly~~partially financed by ~~BNDES. In addition to this plant,~~ the Company is undertaking other projects as well, such as the installation of an integrated cement plant in Arcos, with capacity of up to 1 million mtpy, and is further considering setting up three additional integrated plants (cement and clinker) in Brazil by 2014, also with capacity of 1 million mtpy. Combined, these cement operations and projects will involve total capacity of 6.4 million mtpy by 2014.BNDES.

•·Nova Transnordestina project~~Project~~

In August 2006, in order to permit implementation of a major infrastructure project led by the Brazilian federal government, CSN Executive Officers approved a transaction for the merger of Transnordestina Logística S.A., a company that was linked to the

The Nova Transnordestinaproject by Companhia Ferroviária do Nordeste - CFN, a CSN subsidiary currently named Transnordestina Logística S. A. that holds a 30-year concession granted in 1998 to operate the Northeast Railroad of RFFSA, with 4,238 kilometers of railroad tracks. The~~Nova Transnordestina~~project includes building 1,728 ~~additional kilometers of the latest generation~~km in new, next-generation, wide-gauge ~~track.~~tracks. The Company expects that the investments will permit Transnordestina Logística S.A. to boost the transportation of ~~varied~~several products, such as iron ore, limestone, ~~soybeans,~~soy, cotton, sugarcane, fertilizers, oil, and ~~fuels.~~fuel. The investments will be financed by means of several agencies, such as the Northeast Investment Fund (FINOR), the Northeast Development ~~Superintendency~~Authority (SUDENE) and the BNDES. The ~~company~~Company has already obtained the required environmental ~~authorizations,~~permits, purchased part of the equipment, contracted some of the services, and ~~implementation of~~in certain regions the project is ~~already~~at an advanced ~~in certain regions.~~implementation stage.

The Company ~~guarantees~~is the guarantor of BNDES loans for theTransnordestinaproject, ~~from BNDES, in the total amount~~which as of ~~R$ 373.5 million as at~~ December 31, ~~2010.~~2011 total R$392,874 (R$373,484 as of December 31, 2010). These loans are ~~for the purpose of financing~~being used to finance the investments in ~~infrastructure to be made in the~~~~Transnordestina~~~~project.~~Transnordestina’s infrastructure. The maximum amount of future payments that can be required offrom the guarantor under the guarantee ~~for the project~~ is R$ ~~373.5 million.~~392,874.

•·CSN’s Logistic Platform Project in Itaguaí

Under the terms of the concession agreement, CSN is responsible for unloading at least ~~3.4~~3.0 million per year of coal and coke from ~~the Company’s~~CSN’s suppliers through the terminal, as well as ~~third party~~handling ore shipments. Among the approved investments announced by CSN, we highlight the development and expansion of the solid bulk terminal at Itaguaí so that it can also handle up to ~~130~~84 million ~~mtpy~~metric tons per year of iron ore.

•·Long-term agreements with Namisa

The Company has signed long-term agreements with Namisa for the provision of port operation services and supplies of ~~raw~~run-of-mine (ROM) iron ore ~~(ROM)~~ from the Casa de Pedra mine, as described below:

i. Port ~~operation service~~operating services agreement

FS-75

On ~~December 30,~~October 21, 2008, CSN ~~signed~~entered into an agreement for the provision of port services ~~for~~to Namisa for a 35-year period, ~~of 34 years,~~ consisting of receiving, handling, storing and shipping Namisa’s iron ore ~~from Namisa~~ in annual volumes that ~~vary~~range from 18.0 million to 39.0 million .tonnes. On December 30, 2008, CSN has received the amount of approximately R$5.3 billion as an advance for part of the payments due for the services to be provided under this agreement. The amounts charged for these port services are reviewed on a quarterly basis and adjusted considering the changes in the market price ~~for~~of iron ore.
~~FS-78~~

ii. High ~~silicon~~Silica ROM
On ~~December 30,~~October 21, 2008, CSN ~~signed~~also entered into an agreement for the supply of high ~~silicon~~silica crude iron ore ROM ~~ore~~ to Namisa for a period of 3035 years in volumes ~~varying~~that range from ~~42.0~~25.7 million tons to ~~54.0 million.~~46.5 million tons per year. On December 30, 2008, CSN has ~~already~~ received approximately R$1.6 billion as an advance for part of the payments due for the supplies to be made under this agreement. The ~~amounts supplied are~~supply price is reviewed ~~every quarter~~on a quarterly basis and adjusted considering the changes in the market price ~~for~~of iron ore.
iii. Low ~~silicon~~Silica ROM
On ~~December 30,~~October 21, 2008, CSN ~~also signed~~entered into an agreement for the supply of low ~~silicon~~silica crude iron ore ROM ore to Namisa for a period of 359 years in volumes that ~~vary~~range from ~~2.8~~8 million tons to ~~5.04 million.~~30.6 million tons per year. On December 30 2008, CSN has ~~already~~ received ~~about~~approximately R$424 ~~million~~billion as an advance for part of the payments due for the supplies to be made under this agreement. The ~~amounts supplied are~~supply price is reviewed ~~every quarter~~on a quarterly basis and adjusted considering the changes in the market price ~~for~~of iron ore.
~~32.~~ 31.INSURANCE ~~COVERAGE~~
Aiming to properly mitigate risk and in view of the nature of its operations, the Company and its subsidiaries have taken out several different types of insurance policies. Such policies are contracted in line with the CSN Risk Management policy and are similar to the insurance taken out by other companies operating in the same lines of business as CSN and its subsidiaries. The risks covered under such policies include the following: Domestic Transportation, International Transportation, Carrier’s Civil Liability, Importation, Exportation, Life and Casualty, Health Coverage, Fleet Vehicles, D&O (Civil Liability Insurance for ~~Administrators)~~Directors and Officers), General Civil Liability, Engineering Risks, Sundry Risks, Export Credit, Performance Bond and Port Operator’s Civil Liability.
~~As mentioned~~
In 2011, after negotiation with insurers and reinsurers in ~~note 33, on May 4, 2011 the Company contracted an insurance~~Brazil and abroad, was issued Insurance Issued Certificate to hiring policy of Operational Risk of Property Damage and ~~Business Interruption~~Loss of Profits, with effect from March 23, 2011 to March 22, 2012, which had its term extended by the period of March 23, 2012 to June 30, 2012. Under the insurance policy, the LMI ~~– Maximum~~(Maximum Limit of ~~Indemnity of~~Indemnity) is R$~~850 million to its entities,~~850,000 and covers the following units and subsidiaries of the Company: Usina Presidente Vargas, ~~Mining~~ Casa de Pedra Mine, CSN Paraná, Arcos Mining, CSN ~~Parana, CSN~~ Porto Real, TECON Terminal, TECAR Coal Terminal, ~~Terminal TECON,~~ NAMISA and CSN ~~Cement, which was negotiated with the insurers and reinsurers in Brazil and abroad for placement of insurance.~~Cement. The ~~company~~Company decided to take responsibility for a range of retention of R$170 million excess of the deductibles for property damage and ~~business interruption~~loss of profits and co-participate with 64%53.55% of the risks. The Company plans to reduce the co-participation.
~~Due to~~
In view of their nature, the risk assumptions adopted are not part of the scope of an audit of the financial statements and, accordingly, were not examined by our independent auditors.
~~33.~~ 32.SUBSEQUENT EVENTS
•·Bond issuance
On January ~~26, 2011~~30, 2012, the Company ~~disclosed to the market,~~priced, through a Significant Event Notice, that it has increased its equity interest in Usinas Siderúrgicas de Minas Gerais S.A. – USIMINAS, through purchases of common and preferred shares. The Company now holds 5.03% of the common shares and 4.99% of the preferred shares, as already disclosed to the market on January 13, 2011. Between January 26 and March 21, 2011, the Company purchased new common shares of Usiminas, so that it became the owner of 8.62% of the common shares. Further, on April 20, 2011, the Company increased its participation in Usiminas’ capital through acquisitions of common shares and preferred shares, such that the Company holds 10.01% of common shares and 5.25% of preferred shares. The Company is assessing strategic alternatives in relation to its investment in Usiminas, including potential additional acquisitions of shares in percentage amounts higher than those mentioned above. Any additional acquisitions might lead to changes in the ownership structure or administrative structure of Usiminas.
•~~On January 28, 2011 CSN merged~~ its subsidiary CSN ~~Aços Longos~~Resources S.A., ~~which resulted~~an additional bond issuance amounting to US$200 million, by reopening the US$1 billion bonds, bearing interest of 6.5% per year and maturing in ~~optimization~~July 2020.
·Merger of ~~processes~~the clinker plant
FS-76
On January 31, 2012, the Company and ~~reduction~~its subsidiary CSN Cimentos entered into a purchase and ~~simplification~~sale agreement to acquire CSN Cimentos’ unit in Arcos, MG. As a result,the clinker plant is now a branch of ~~administrative costs, notably with respect~~CSN.
·Purchase of Alfonso Gallardo Group assets
On January 31, 2012, Companhia Siderúrgica Nacional, through its wholly-owned subsidiary CSN Steel, completed the acquisition of all shares held by the Alfonso Gallardo Group in the Companies Stahlwerk Thüringen (SWT) and Gallardo Sections. Total transaction price was €482.5 million.
The Company shall make allocations of the purchase price to ~~matters~~assets acquired and liabilities assumed and the determination of ~~a managerial nature, due~~any goodwill resulting from that transaction. At this moment, the Company does not have enough information to meet the disclosures related to the ~~concentration~~acquisition, required by IFRS 3 – Business Combination.
·Settlement of debentures
On February 1, 2012, the Company settled the fourth issue debentures amounting to R$635,285 (R$600,000 in ~~a single organizational structure of all commercial, operational~~principal and ~~administrative activities~~R$35,285 in interest), which had been issued on February 1, 2006 and paid interest equivalent to 103.6% of the ~~two companies.~~CDI Cetip.
~~FS-79~~
•·~~The~~Issuance of promissory notes (“Promissory Notes”)
In March 2012, the Company ~~took out a R$ 2 billion loan from Caixa Econômica Federal on February 3, 2011. This transaction was carried out through a Special Credit Line for Major Corporations, with issue~~has approved the first (1st) issuance of ~~a bank credit note in the total amount~~promissory notes (“Promissory Notes”) of the ~~loan, which falls due in 94 months.~~Company for public distribution with restricted placement efforts, pursuant to CVM Rules (“Issuance”).
•~~Between February 1~~
The Issuance comprised 40 Promissory Notes with unit value of R$20 million, totaling R$800 million, fully subscribed and ~~10, 2011~~paid up on this date. The net amount raised by the Company ~~purchased 10,456,086~~through this Issuance will be fully allocated to extend the Company’s debt profile, after the deduction of applicable commissions and expenses.
·CADE
On April 11, 2012, Conselho Administrativo de Defesa Econômica (CADE) issued an injunctive order barring us from, among others, acquiring more Usiminas shares or exercising our voting rights on the shares we already own. We are analyzing alternatives to preserve our rights.
·Annual General Meeting
At the Annual Shareholders’ Meeting held on April 27, 2012, the shareholders approved the Company’s distribution of the ~~capital~~profit for the year ended December 31, 2011 and allocation of the ~~mining company Riversdale Mining Limited,~~unrealized earnings reserve, as follows:
-Declaration of dividends in the amount of R$ ~~281,438, thus achieving total indirect interest of 19.98% of the~~1,200,000, corresponding to R$0.82306 per share;
-Paid in capital ~~of this company.~~
•On April 20, 2011 the Company adhered to a takeover bid for shares of Riversdale Mining Limited (“Riversdale”) promoted by Rio Tinto. The Company will sell the total participation currently held in the share capital of Riversdale, equivalent to 47,291,891 shares at A$ 16.50 per share, total A$ of 780,316.
•~~On April 20, 2011 the Company entered into a new financing contract through a export credit note~~increase in the amount of R$ ~~1.5 billion issued by Banco do Brasil S.A.~~2,859,053.
•-~~On May 4, 2011~~Allocation to the Company contracted insurance policy of Operational Risk of Property Damage and Business Interruption to its entities, units and subsidiaries Usina Presidente Vargas, Mining Casa de Pedra, Arcos Mining, CSNParana, CSN Porto Real, TECAR Coal Terminal, Terminal TECON, NAMISA and CSN Cement.
•On May 19, 2011, the Company entered into, through our Spanish subsidiary CSN Steel SL, a share purchase agreement with the Spanish group Alfonso Gallardo (“AG Group”) to establish the acquisition of all the shares held by the AG Group in (i) Cementos Balboa S.A., a cement and clinker producer locatedstatutory reserves in the Extremadura region in Spain; (ii) Corrugados Azpeitia, S.L. and Corrugados Lasao, S.L.U., long steel manufacturers with plants in the Basque Country; (iii) Stahlwerk Thüringen GmbH, a long steel manufacturer located in Unterwellenborn, Germany, specialized in the productionamount of ~~steel profiles, and; (iv) Gallardo Sections S.L.U., a AG Group steel distributor.~~R$ 3,426,336.
Subject to adjustments, pursuant to the share purchase agreement, CSN Steel SL will pay €543 million for the acquisition of the abovementioned shares, and will assume approximately €403 million in indebtedness and further adjustments. The transaction will be submitted to necessary regulatory and/or antitrust approvals, and its closing is still subject to other conditions which are inherent to transactions of this nature.
~~* * * * *~~
~~FS-80~~
FS-77

Net Operating Revenues
	R$ (Reais)			% of Net Operating Revenues
			In Market		Total
	2010	2009	2010	2009	2010	2009
	(in millions of R$)		(in percentages)
Domestic Sales
Slabs	41	20	0%	0%	0%	0%
Hot-Rolled	3,011	1,982	35%	29%	31%	25%
Cold-Rolled	1,387	1,172	16%	18%	14%	15%
Galvanized	2,559	2,099	30%	31%	26%	27%
Tin Mill	1,576	1,511	18%	22%	16%	19%
Subtotal	8,575	6,784	99%	100%	87%	86%
Export Sales
Slabs	0	123	0%	11%	0%	2%
Hot-Rolled	2	182	0%	16%	0%	2%
Cold-Rolled	27	8	2%	1%	0%	0%
Galvanized	778	553	70%	49%	8%	7%
Tin Mill	300	259	27%	23%	3%	3%
Subtotal	1,107	1,125	99%	100%	11%	14%
Total	9,682	7,909			98%	100%
Total Sales
Slabs	41	143	0%	2%	0%	2%
Hot-Rolled	3,013	2,163	31%	27%	30%	26%
Cold-Rolled	1,414	1,180	15%	15%	14%	14%
Galvanized	3,337	2,637	34%	33%	34%	32%
Tin Mill	1,876	1,770	19%	22%	19%	22%
Subtotal	9,682	7,894	99%	100%	98%	98%
By-Product	244	307			2%	2%
Total	9,926	8,219			100%	100%

	Year Ended December 31,		Increase (Decrease)
	2010	2009

Net operating revenues	14,451	10,978	32%
Cost of products sold	(7,687)	(7,022)	9%

Gross profit	6,764	3,956	71%
Operating expenses
Selling	(678)	(636)	7%
General and administrative	(537)	(480)	12%
Other income	92	1,417	(93%)
Other expenses	(643)	(696)	(8%)


Operating income	4,998	3,561	40%

Finance income (expenses), net	(1,911)	(246)	677%

Income before income taxes	3,087	3,315	(7%)
Income Tax	(571)	(700)	(18%)
Current	(314)	(582)	(46%)
Deferred	(257)	(118)	118%

Net income	2,516	2,615	(4%)

Non-controlling interests	(0)	(4)	(95%)

Owners of the Company	2,516	2,619	(4%)

	Aggregate Amount	Maturity
	(In million of R$)
Guarantees of Debt:
Transnordestina	1,152	2011-2028

Contingent Liability for Concession Payments⁽¹⁾:
Sepetiba Tecon	318	2026
Transnordestina	99	2027
Solid Bulks Terminal - TECAR	1,514	2022
MRS Logística S.A	3,502	2026
Total	5,433
”Take-or-Pay” Contractual Obligations
MRS Logística S.A.	986	2016
White Martins Gases Industriais Ltda.	532	2016
Companhia Estadual de Gás do Rio de Janeiro – CEG Rio	529	2012
Ferrovia Centro Atlântica – FCA	438	2013
Vale S/A	519	2014
Companhia Paranaense de Gás - COMPAGÁS	165	2024
Companhia Paranaense de Energia - COPEL	98	2024
ALL	18	2012
K&K Tecnologia	79	2023
Harsco Metals Ltda	99	2014
Total	3,463

Total Contingent Liability with Respect to Consolidated and Non-consolidated Entities:	10,048

	Common Shares⁽¹⁾				American Depositary Shares⁽¹⁾
	US$ per Share⁽²⁾		Volume		US$ per ADS		Volume
	High	Low	*(Inthousands)***		High	Low	*(Inthousands)***
2006:
Year end	6.19	3.49	4,216	6.23		3.57	5,596
2007:
Year end	14.90	4.67	5,330	15.28		4.71	6,977
2008:
Year end	25.63	4.12	5,761	25.51		3.94	9,222
2009:
Year end	18.45	6.03	4,936	18.61		6.00	7,218
2010:
First quarter	20.03	14.25	4,739	20.00		14.01	6,577
Second quarter	20.81	13.37	4,035	20.76		13.16	6,386
Third quarter	17.37	14.53	3,143	17.67		14.34	4,353
Fourth quarter	17.78	15.21	2,666	18.21		15.54	4,202
Year end	20.81	13.37	3,637	20.76		13.16	5,360
2011
First quarter	17.98	15.24	3,036	18.33		15.41	4,377
Second quarter	16.81	11.60	3,169	17.22		11.81	4,453
Third quarter	12.55	7.89	3,780	12.62		7.94	5,932
Fourth quarter	9.66	7.23	3,683	9.89		7.31	4,573
Year End	17.98	7.23	3,422	18.33		7.31	4,840
2012
First quarter	10.83	8.09	3,958	10.88		8.53	5,486

October 31, 2011	9.66	7.23	4,623	9.89	7.46	5,858
November 30, 2011	9.51	7.54	3,650	9.70	7.55	4,319
December 31, 2011	8.84	7.35	2,819	8.76	7.31	3,542
January 31, 2012	10.54	8.09	3,626	10.54	8.53	5,393
February 29, 2012	10.83	10.05	4,290	10.88	10.10	5,595
March 31, 2012	10.78	9.45	3.989	10.73	9.46	5,470

	Common Shares⁽¹⁾			American Depositary Shares⁽¹⁾

	US$ per Share⁽²⁾		Volume	US$ per ADS		Volume

	High	Low	*(In* *thousands)*	High	Low	*(In* *thousands)*

2005:
Year end	4.49	2.45	5,771	4.47	2.47	5,095
2006:
Year end	6.27	3.46	4,216	6.29	3.49	5,605
2007:
Year end	15.00	4.58	5,330	15.35	4.58	6,980
2008:
First quarter	20.93	11.88	5,171	20.99	12.16	8,521
Second quarter	26.21	17.76	4,617	26.23	17.75	6,895
Third quarter	21.87	8.24	6,323	21.78	9.21	11,038
Fourth quarter	10.51	4.07	6,887	10.41	3.93	10,390
Year end	26.21	4.07	5,761	26.23	3.93	9,219
2009:
First quarter	9.27	6.03	5,967	9.30	5.92	9,217
Second quarter	13.29	7.31	5,039	13.25	7.27	7,088
Third quarter	15.45	9.83	4,573	15.53	9.73	6,226
Fourth quarter	19.20	14.57	4,145	19.07	14.47	6,417
Year end	19.20	6.03	4,930	19.07	5.92	7,214
2010:
First quarter	18.38	13.08	4,800	19.17	13.86	6,742
Second quarter	19.09	12.67	4,114	19.90	13.24	6,524
Third quarter	16.46	13.77	3,253	17.49	14.44	4,555
Fourth quarter	16.85	14.42	2,687	18.02	15.49	4,533
Year end	19.09	12.67	3,713	19.90	13.24	5,589
2011
January 31	17.03	15.66	1,119	18.14	16.45	1,729
February 28	15.20	16.15	919	17.11	16.08	1,396
March 31	15.52	14.44	1,018	16.55	15.25	1,432
First quarter	17.03	14.44	3,055	18.14	15.25	4,556
April 30	15.93	14.35	995	17.04	15.21	1,126

*Exposure as of December 2011 (amortization)**	Notional	2012	2013	2014	2015	2016	Thereafter

US dollar LIBOR	2,444	547	178	308	400	547	464

US dollar fixed rate	7,362	298	1,071	14	756	52	5,171


CDI	14,008	1,045	546	1,446	1,041	1,707	8,223


TJLP	3,231	382	335	101	90	95	2,228

Other	495	26	43	65	60	43	258


*Exposure as of December 2010 (amortization)**	Notional	2011	2012	2013	2014	2015	Thereafter

US dollar LIBOR	2,694	522	611	158	274	342	787

US dollar fixed rate	6,374	72	33	951	12	671	4,635


CDI	7,102	1	1,045	546	1,446	1,012	3,052


TJLP	2,939	306	338	338	115	95	1,747

Other	809	191	118	101	112	83	204


	December 31, 2010	December 31, 2009	Exposure

Cash inreais:	2,635	2,131	CDI
Cash in U.S. dollars:	4,556	1,850	LIBOR

	December 31, 2011	December 31, 2010	Exposure
Cash inreais:	2,690	2,635	CDI
Cash in U.S. dollars:	6,784	4,556	LIBOR

	December 2010		December 2009
	Average rate %	Average life	Average rate %	Average life

U.S. dollar LIBOR*	2.23	3.15	2.52	2.36
U.S. dollar fixed rate	7.41	14.91 (with perpetual bond)	8.27	15.81 (with perpetual bond)
Euro fixed rate	N/A	N/A	N/A	N/A
UMBNDES*	N/A	N/A	N/A	N/A
CDI	110.58 of CDI	4.61	112.53 of CDI	2.46
IGPM*	N/A	N/A	N/A	N/A
TJLP*	2.21	5.58	3.00	5.57

	December 2011		December 2010
	Average rate %	Average life	Average rate %	Average life
U.S. dollar LIBOR	3.14	3.20	2.23	3.15
U.S. dollar fixed rate	6.37	14.37 (with perpetual bond)	7.41	14.91 (with perpetual bond)
Euro fixed rate	N/A	N/A	N/A	N/A
UMBNDES	N/A	N/A	N/A	N/A
CDI	111.21 of CDI	5.19	110.58 of CDI	4.61
TJLP	1.70	5.58	2.21	5.58


	Notional	Average interest rate	Average maturity
As of December 31, 2010	(in U.S. dollar million,	(U.S. dollar)	(days)
	unless otherwise indicated)

Swaps (U.S. dollar fixed - rate versus CDI)	1,178	2.29%	54


	Notional	Average interest rate	Average maturity
As of December 31, 2009	(in U.S. dollar million,	(U.S. dollar)	(days)
	unless otherwise indicated)

Swaps (U.S. dollar fixed - rate versus CDI )	1,520	0.8823%	40


* daily reset

	Notional	Average interest rate	Average maturity
As of December 31, 2011	(in U.S. dollar million,	(U.S. dollar)	(days)
	unless otherwise indicated)
Swaps (U.S. dollar fixed - rate versus CDI)	293	3.45%	782
Swaps (U.S. dollar fixed - rate versus CDI)	75	3.23%	691
Swaps (U.S. dollar fixed - rate versus CDI)	(100)	2.39%	32

	Notional	Average interest rate	Average maturity
As of December 31, 2010	(in U.S. dollar million,	(U.S. dollar)	(days)
	unless otherwise indicated)
Swaps (U.S. dollar fixed - rate versus CDI )	1,178	2.29%	54


	December 31, 2010	December 31, 2009

U.S. dollar Liabilities	5,803	4,660
loans and financing	5,735	4,597
trade accounts payable	8	32
other	60	31

U.S. dollar Assets	5,903	4,530
offshore cash and cash equivalents	4,240	1,908
derivatives (swaps and NDFs)	1,402	2,170
trade accounts receivable	33	107
offshore investments (net of cash)	97	184
other	131	161
Total U.S. dollar Exposure	100	131

	December 31, 2011	December 31, 2010
U.S. dollar Liabilities	5,367	5,803
loans and financing	5,300	5,735
trade accounts payable	11	8
other	56	60

U.S. dollar Assets	6,525	5,903
offshore cash and cash equivalents	5,613	4,240
derivatives (swaps and NDFs)	485	1,402
trade accounts receivable	-	33
offshore investments (net of cash)	288	97
other	139	131
Total U.S. dollar Exposure	1,158	100

	December 31, 2011	December 31, 2010
Euro Liabilities	1	-
trade accounts payable	1	-

Euro Assets	98	-
derivatives (swaps and NDFs)	(90)	-
offshore investments (net of cash)	8	-
Total Euro Exposure	(82)	-

	December 31, 2011	December 31, 2010
AUD Liabilities	-	-

AUD Assets	303	-
offshore cash and cash equivalents	303	-
Total AUD Exposure	303	-

December 31, 2010	Risk	Scenario	Reference	Exchange	Additional
			Value	Rates	Results
			(In million of US$)		(In million of R$)

			1,178	1.6662
Foreign Exchange swaps	Fluctuation of US$	1		1.6736	9
		2		1.2497	(491)
		3		0.8331	(981)
		4		2.0828	491
		5		2.4993	981

			(1,151)	1.6662
Exchange position - BRL Functional currency	Fluctuation of US$	1		1.6736	(9)
(not including exchange derivatives above)		2		1.2497	479
		3		0.8331	958
		4		2.0828	(479)
		5		2.4993	(958)

			99	1.6662
Consolidated exchange position	Fluctuation of US$	1		1.6736	-
(including exchange derivatives above)		2		1.2497	(41)
		3		0.8331	(83)
		4		2.0828	41
		5		2.4993	83


	Nocional
					2010
	US$ million	Risk	Probable	25%	50%
Swapsof interest rate libor vs CDI	150	(Libor) US$	(2)	(27)	(32)


	Nocional		31.12.2011
	Million US$	Risk	25%	50%	25%	50%
Swap of interest rate libor vs CDI	108	(Libor) US$	(26)	(31)	26	30

February 28

Depositary service

4th4th issue

5th issue

4^th4th issue


		Impact on profit or loss
	% p.a	2011	2010
Changes in interest rates
TJLP	6.00	1,372	6,465
Libor	0.81	7,941	7,102
CDI	10.87	72,607	42,103


		Impact on Equity
Companies	25%	50%	25%	50%
Usiminas	205	410	(205)	(410)
Riversdale Mining Limited	103	206	(103)	(206)
Planatlântica	3	5	(3)	(5)
	311	621	(311)	(621)


	2010	2009
- Net income for the year	2,516,191	2,615,181
- Provision for charges on loans and financing	1,489,191	1,130,089
- Depreciation and amortization	806,169	780,152
- Gain (loss) on disposal of assets	5,827	70,494
- Deferred income tax expense (benefit)	257,326	117,881
- Provision for swap/forward transactions	126,492	(88,986)
- Gain/loss on change in percentage equity interest	-	(835,115)
- Allowance for doubtful accounts	(46,675)	1,527
- Provision for actuarial liabilities	2,393	(47,622)
- Accrual for contingencies	199,558	99,157
- Inflation adjustment and foreign exchange gains (losses), net	57,119	(2,024,573)
- Other	(72,705)	416,265
Cash flows from operating activities	5,340,886	2,234,450

- Trade accounts receivables	143,250	(51,082)
- Inventories	(794,331)	926,260
- Taxes for offset	247,366	(313,697)
- Trade accounts payables	11,964	(1,137,203)
- Payroll and related charges	(36,757)	15,257
- Taxes payable	(101,723)	263,734
- Taxes payable in installments - Refis	(414,473)	(103,775)
- Judicial deposits	(33,822)	(737,041)
- Contingent liabilities	16,868	(422,375)
- Interest paid	(1,190,423)	(992,280)
- Interest paid on swap transactions	(676,163)	(742,700)
- Other	(30,107)	287,433
Changes in assets and liabilities	(2,858,351)	(3,007,469)

Net cash provided by (used in) operating activities	2,482,535	(773,019)

- Receipts/payments on derivative transactions	395,346	248,966
- Net effects of equity swap	-	1,420,322
- Investments	(1,370,016)	(284,232)
- Property, plant and equipment	(3,635,911)	(1,996,759)
- Intangible assets	(25,216)	(5,628)
Net cash used in investing activities	(4,635,797)	(617,331)

- Loans and financing	8,789,548	7,671,696
- Financial institutions - principal	(2,706,982)	(2,783,313)
- Dividends and interest on shareholders' equity	(1,560,795)	(2,027,600)
- Capital contribution in subsidiaries by non-controlling shareholders	128,811	-
- Treasury shares	-	(1,350,307)
Net cash provided by financing activities	4,650,582	1,510,476

Effects of changes in exchange rates on cash and cash equivalents	(228,833)	(1,300,744)

Increase (decrease) in cash and cash equivalents	2,268,487	(1,180,618)
Cash and cash equivalents, beginning of year	7,970,791	9,151,409
Cash and cash equivalents, end of year	10,239,278	7,970,791


					Profit reserves						Comprehensive Income

												Unrealized gain
										Cumulative	Gain (loss) on	(loss) on		Companhia
	Common	Capital	Legal	Retained				Treasury	Retained	translation	defined benefit	available-for-sale		Siderúrgica	Non-controlling
	Stock	reserve	reserve	earnings	Dividends	Reserve	Total	stock	earnings	adjustment	pension plan	securities	Total	Nacional	interests	Total equity
*At December 31, 2008 - as reported*	*1.680.947*	30	*336.190*	*2.493.493*	-	*1.658.115*	*4.487.798*	*(719.042)*	*1.012.732*	*200.124*			*200.124*	6.662.589		6.662.589

Impact of restatement of prior years									(176.185)					(176.185)		(176.185)
*Balances at December 31, 2008*	*1.680.947*	30	*336.190*	*2.493.493*	-	*1.658.115*	*4.487.798*	*(719.042)*	*836.547*	*200.124*	-	-	*200.124*	*6.486.404*	-	*6.486.404*

Unrealized gain/loss- Investment										(602)			(602)	(602)		(602)
IFRS adjustments					485.816		485.816		175.257	(200.124)			(200.124)	460.949		460.949

*Opening balance at January 1, 2009*	*1.680.947*	30	*336.190*	*2.493.493*	*485.816*	*1.658.115*	*4.973.614*	*(719.042)*	*1.011.804*	*(602)*	-	-	*(602)*	*6.946.751*	-	*6.946.751*
														-
Approval of proposed dividends					(485.816)		(485.816)						-	(485.816)		(485.816)
Profit for the year									2.618.934				-	2.618.934	(3.753)	2.615.181
Allocation of profit for the year													-	-		-
- Declared dividends (R$1,028.82 per thousand shares)									(321.365)				-	(321.365)		(321.365)
- Interest on capital (R$219.46 per thousand shares)									(319.965)				-	(319.965)		(319.965)
- Reserves				1.285.864		561.658	1.847.522		(1.847.522)				-	-		-
- Proposal to the General Meeting					1.178.635		1.178.635		(1.178.635)				-	-		-
Comprehensive income										(618.723)	(3.275)	36.885	(585.113)	(585.113)		(585.113)
Repurchase of treasury shares as per EGM 8/13/2009								(1.350.308)					-	(1.350.308)		(1.350.308)
Cancelation of treasury shares as per EGM 8/21 and 9/14/2009						(877.791)	(877.791)	877.791					-	-		-
Non-controlling interests													-	-	86.813	86.813
Other									3.332				-	3.332		3.332
*Balances at December 31, 2009*	*1.680.947*	30	*336.190*	*3.779.357*	*1.178.635*	*1.341.982*	*6.636.164*	*(1.191.559)*	*(33.417)*	*(619.325)*	*(3.275)*	*36.885*	*(585.715)*	*6.506.450*	*83.060*	*6.589.510*
														-		-
Approval of proposed dividends					(1.178.635)		(1.178.635)						-	(1.178.635)		(1.178.635)
Profit for the year									2.516.376				-	2.516.376	(185)	2.516.191
Allocation of profit for the year													-	-		-
- Declared dividends (R$186.76 per thousand shares)									(272.297)				-	(272.297)		(272.297)
- Interest on capital (R$244.72 per thousand shares)									(356.800)				-	(356.800)		(356.800)
- Dividends proposed to the General Meeting (R$842.06 per thousand shares)					1.227.703		1.227.703		(1.227.703)				-	-		-
Investment reserve						626.159	626.159		(626.159)				-	-		-
Cancelation of treasury shares						(621.417)	(621.417)	621.383					-	(34)		(34)
Comprehensive income										(69.270)	(28.603)	515.573	417.700	417.700		417.700
Non-controlling interests							-						-	-	107.053	107.053
*Balances at December 31, 2010*	*1.680.947*	30	*336.190*	*3.779.357*	*1.227.703*	*1.346.724*	*6.689.974*	*(570.176)*	-	*(688.595)*	*(31.878)*	*552.458*	*(168.015)*	*7.632.760*	*189.928*	*7.822.688*

	Equity interest (%)
Companies	2010	2009	Main activities

Direct interest: full consolidation
CSN Islands VII	100.00	100.00	Financial transactions
CSN Islands VIII	100.00	100.00	Financial transactions
CSN Islands IX	100.00	100.00	Financial transactions
CSN Islands X	100.00	100.00	Financial transactions
CSN Islands XI	100.00	100.00	Financial transactions
CSN Islands XII	100.00	100.00	Financial transactions
Tangua	100.00	100.00	Financial transactions
International Investment Fund	100.00	100.00	Equity interests and financial transactions
CSN Minerals (1)	100.00	100.00	Equity interests
CSN Export	100.00	100.00	Financial transactions, sale of products and equity interests
CSN Metals (2)	100.00	100.00	Equity interests and financial transactions
CSN Americas (3)	100.00	100.00	Equity interests and financial transactions
CSN Steel	100.00	100.00	Equity interests and financial transactions
TdBB S.A	100.00	100.00	Dormant company
Galvasud - Merged on 1/29/2010		99.99	Steel-making
Sepetiba Tecon	99.99	99.99	Port services
Mineração Nacional	99.99	99.99	Mining and equity interests
CSN Aços Longos - Merged on 1/28/2011	99.99	99.99	Manufacture and sale of steel and/or metallurgical products
Florestal Nacional (4)	99.99	99.99	Reforestation
Estanho de Rondônia - ERSA	99.99	99.99	Tin mining
Cia Metalic Nordeste	99.99	99.99	Manufacture of packaging and distribution of steel products
Companhia Metalúrgica Prada	99.99	99.99	Manufacture of packaging and distribution of steel products
CSN Cimentos	99.99	99.99	Manufacture of cement
Inal Nordeste - Merged on 05/30/2011	99.99	99.99	Service center for steel products
CSN Gestão de Recursos Financeiros	99.99	99.99	Dormant company
Congonhas Minérios	99.99	99.99	Mining and equity interests
CSN Energia	99.99	99.90	Sale of electric power
Transnordestina Logística	76.45	84.34	Railroad logistics
Special partnership - Extinguished on 11/30/2010		39.47	Equity interests

Indirect interest: full consolidation
CSN Aceros	100.00	100.00	Equity interests
CSN Cayman - Liquidated on 8/31/2010		100.00	Financial transactions, sale of products and equity interests
CSN IRON - Extinguished on 1/31/2010		100.00	Financial transactions and equity interests
Companhia Siderurgica Nacional LLC	100.00	100.00	Steel-making
CSN Europe (5)	100.00	100.00	Financial transactions, sale of products and equity interests
CSN Ibéria	100.00	100.00	Financial transactions and equity interests
CSN Portugal (6)	100.00	100.00	Financial transactions and sale of products
Lusosider Projectos Siderúrgicos	100.00	100.00	Equity interests
Lusosider Aços Planos	99.94	99.94	Steel-making and equity interests
CSN Acquisitions	100.00	100.00	Financial transactions and equity interests
CSN Resources (7)	100.00	100.00	Financial transactions and equity interests
CSN Finance UK Ltd	100.00	100.00	Financial transactions and equity interests
CSN Holdings UK Ltd	100.00	100.00	Financial transactions and equity interests
Energy I - Liquidated on 8/31/2010		99.99	Equity interests
Itamambuca Participações - Merged on 05/30/2011	99.99	99.99	Mining and equity interests
Special partnership - extinguished on 11/30/2010		60.53	Equity interests

Direct interest: proportional consolidation
Nacional Minérios (NAMISA)	59.99	59.99	Mining and equity interests
Itá Energética	48.75	48.75	Genaration of electric power
MRS Logística	22.93	22.93	Railroad transportation
Consórcio da Usina Hidrelétrica de Igarapava	17.92	17.92	Electric power consortium
Aceros Del Orinoco	22.73	22.73	Dormant company

Indirect interest: proportional consolidation
Namisa International Minerios SLU	60.00	60.00	Equity interests and sale of products and ores
Namisa Europe	60.00	60.00	Equity interests and sale of products and ores
Pelotização Nacional - Merged on 12/30/2010		59.99	Mining and equity interests
MG Minérios - Merged on 12/30/2010		59.99	Mining and equity interests
MRS Logística	10.34	10.34	Railroad transportation
Aceros Del Orinoco	9.08	9.08	Dormant company


(1)		New corporate name of CSN Energy S.à.r.l., changed on December 15, 2010.
(2)		New corporate name of CSN Export S.à.r.l., changed on August 9, 2011.
(3)		New corporate name of CSN Overseas S.à.r.l., changed on December 15, 2010.
(4)		New corporate name of CSN Panamá S.à.r.l., changed on December 15, 2010.
(5)		New corporate name of CSN Steel S.à.r.l., changed on December 17, 2010.
(6)		New corporate name of Itaguaí Logística S.A., changed on December 27, 2010.
(7)		New corporate name of CSN Madeira Lda., changed on January 8, 2010.
(8)		New corporate name of Hickory-Comércio Internacional e Serviços Lda., changed on January 8, 2010.
(9)		New corporate name of CSN Cement S.à.r.l., changed on June 18, 2010.
(10)		Companies that became subsidiaries on November 3, 2011.

	Equity interest in capital social (%)
Special purpose entities	2010	2009	Principal activities
Direct equity interest: full consolidation
DIPLIC - Fundo de investimento multimercado	100.00	100.00	Multimarket Investment fund
Mugen - Fundo de investimento multimercado	100.00	100.00	Multimarket investment fund


	Published (US$ thousand)	Exchange rate	Published (R$ thousand)	Adjustments (R$ thousand)	Adjusted (R$ thousand)	Adjusted (US$ thousand)
Non-Current Assets
Deferred income tax and social contribution	335,919	2.3370	785,043	100,847	885,889	379,071
Non-Current Liabilities
Provision for pension fund - Post-employment benefits	60,343	2.3370	141,022	296,608	437,630	187,261
Equity	3,315,687	2.3370	7,748,761	(195,762)	7,552,999	3,231,921

					1/1/2009
	BRGAAP Published	BRGAAP Republished	IFRS		IFRS
			Reclassifications	Adjustments
ASSETS
Current assets	18,352,070	18,352,070	(432,746)	25,181	17,944,505
Cash and cash equivalents	9,151,409	9,151,409			9,151,409
Trade accounts receivable	1,086,557	1,086,557			1,086,557
Inventories	3,622,775	3,622,775		(1,526)	3,621,249
Income tax and social contribution for offset	128,055	128,055			128,055
Deferred income tax and social contribution	739,227	739,227	(739,227)
Proposed dividends receivable	42,890	42,890		26,707	69,597
Guarantee margin for financial instruments	2,570,050	2,570,050			2,570,050
Other current assets	1,011,107	1,011,107	306,481		1,317,588
Non-current Assets	13,145,369	13,236,131	2,113,702	(41,942)	15,307,891
Long-term receivables	2,490,802	2,581,564	2,113,702	12,483	4,707,749
Deferred income tax and social contribution	753,831	844,593	739,227	13,085	1,596,905
Recoverable taxes	302,831	302,831			302,831
Judicial deposits	740,341	740,341	1,366,910		2,107,251
Trade accounts receivable	376,374	376,374		(602)	375,772
Prepaid expenses	125,011	125,011			125,011
Other	192,414	192,414	7,565		199,979
Investments in affiliated companies and other investments	1,512	1,512			1,512
Property, plant and equipment	10,083,777	10,083,777	21,708	(33,651)	10,071,834
Intangible assets	526,796	526,796			526,796
Deferred charges	42,482	42,482	(21,708)	(20,774)
TOTAL ASSETS	31,497,439	31,588,201	1,680,956	(16,761)	3,252,396

SHAREHOLDERS EQUITY AND LIABILITIES
Current Liabilities	9,633,228	9,633,228	320,243	(459,108)	9,494,363
Trade accounts payable	1,939,205	1,939,205			1,939,205
Loans and financing	2,916,759	2,916,759	340,868		3,257,627
Debentures	44,428	44,428			44,428
Payroll and related charges	117,994	117,994			117,994
Taxes payable	333,811	333,811			333,811
Taxes payable in installments	249,930	249,930			249,930
Provision for pension fund	54,818	54,818	(54,818)
Dividends payable	1,790,642	1,790,642		(459,108)	1,331,534
Provisions for tax, social security, labor and civil risks	91,710	91,710	69,434		161,144
Equity swap financial instruments	1,596,394	1,596,394			1,596,394
Other	497,537	497,537	(35,241)		462,296
Non-current Liabilities	15,201,622	15,468,569	1,360,713	(18,000)	16,811,282
Loans and financing	8,040,773	8,040,773	7,565		8,048,338
Debentures	632,760	632,760			632,760
Provisions for tax, social security, labor and civil risks	2,450,126	2,450,126	1,297,475		3,747,601
Provision for environmental risks	71,425	71,425	14,224		85,649
Deferred income tax and social contribution			855	1,326	2,181
Taxes payable in installments	795,052	795,052			795,052
Amounts due to related parties	2,878,200	2,878,200			2,878,200
Employee benefits	62,750	329,697	54,818	(20,375)	364,140
Other	270,536	270,536	(14,224)	1,049	257,361
Shareholders Equity	6,662,589	6,486,404		460,347	6,946,751
Common stock	1,680,947	1,680,947			1,680,947
Capital reserve	30	30			30
Earnings reserve	3,682,865	3,682,865	85,891	485,816	4,254,572
Additional dividends proposed				485,816	485,816
Other	3,682,865	3,682,865	85,891		3,197,049
Retained earnings		(176,185)	1,212,855	(24,866)	1,011,804
Carrying value adjustment	1,298,747	1,298,747	(1,298,746)	(603)	(602)
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES	31,497,439	31,588,201	1,680,956	(16,761)	33,252,396

					12/31/2009
	BRGAAP Published	BRGAAP Republished	IFRS		IFRS
			Reclassifications	Adjustments
ASSETS
Current Assets	13,568,594	13,568,594	(749,273)	16,152	12,835,473
Cash and cash equivalents	7,970,791	7,970,791			7,970,791
Trade accounts receivable	1,186,315	1,186,315			1,186,315
Inventories	2,588,946	2,588,946	(35)	16,462	2,605,373
Income tax and social contribution for offset	398,172	398,172			398,172
Deferred income tax and social contribution	749,272	749,272	(749,272)
Other current assets	675,098	675,098	34	(310)	674,822
Non-current Assets	15,598,630	15,695,676	2,241,576	(47,222)	17,890,030
Long-term receivables	3,640,162	3,737,208	2,241,573	(1,559)	5,977,222
Deferred income tax and social contribution	1,112,299	1,209,345	749,272	(1,559)	1,957,058
Recoverable taxes	236,852	236,852			236,852
Judicial deposits	1,214,670	1,214,670	1,492,301		2,706,971
Trade accounts receivable	212,486	212,486			212,486
Receivables from subsidiaries	479,120	479,120			479,120
Prepaid expenses	105,921	105,921			105,921
Other	278,814	278,814			278,814
Investments in affiliated companies and other investments	321,889	321,889		13	321,902
Property, plant and equipment	11,145,530	11,145,530	17,846	(30,029)	11,133,347
Intangible assets	457,580	457,580		(21)	457,559
Deferred charges	33,469	33,469	(17,843)	(15,626)
TOTAL ASSETS	29,167,224	29,264,270	1,492,303	(31,070)	30,725,503

SHAREHOLDERS EQUITY AND LIABILITIES
Current Liabilities	5,128,196	5,128,196	48,897	(1,179,027)	3,998,066
Trade accounts payable	504,223	504,223			504,223
Loans and financing	1,160,407	1,160,407	(77,146)		1,083,261
Debentures	30,659	30,659			30,659
Amounts due to related parties	80,062	80,062			80,062
Payroll and related charges	134,190	134,190			134,190
Taxes payable	336,804	336,804			336,804
Taxes payable in installments	582,190	582,190			582,190
Provision for pension fund	57,158	57,158	(57,158)
Dividends payable	1,562,085	1,562,085		(1,179,006)	383,079
Provisions for tax, social security, labor and civil risks	83,462	83,462	106,055		189,517
Other	596,956	596,956	77,146	(21)	674,081
Non-current Liabilities	18,445,535	18,730,965	1,443,406	(36,444)	20,137,927
Loans and financing	12,547,840	12,547,840	(18,729)		12,529,111
Debentures	624,570	624,570			624,570
Provisions for tax, social security, labor and civil risks	1,452,422	1,452,422	1,386,248		2,838,670
Provision for environmental risks	116,544	116,544	15,524		132,068
Deferred income tax and social contribution	28,325	28,325		1,715	30,040
Taxes payable in installments	437,231	437,231			437,231
Amounts due to related parties	2,980,772	2,980,772			2,980,772
Employee benfits	12,788	298,218	57,158	(38,231)	317,145
Other	245,043	245,043	3,205	72	248,320
Shareholders Equity attributed to CSN	5,510,433	5,322,049		1,184,401	6,506,450
Share capital	1,680,947	1,680,947			1,680,947
Capital reserve	30	30			30
Earnings reserve	4,211,770	4,211,770	54,200	1,178,635	5,444,605
Additional dividends proposed	-	-		1,178,635	1,178,635
Other	4,211,770	4,211,770	54,200		4,265,970
Retained earnings		(188,384)	150,604	4,363	(33,417)
Carrying value adjustment	(382,314)	(382,314)	(204,804)	1,403	(585,715)
Non-controlling interests	83,060	83,060			83,060
Shareholders equity	5,593,493	5,405,109		1,184,401	6,589,510

TOTALSHAREHOLDERS EQUITY AND LIABILITIES	29,167,224	29,264,270	1,492,303	(31,070)	30,725,503