Companhia Siderúrgica Nacional (NYSE:SID) Q1 2024 Earnings Conference Call May 10, 2024 10:30 AM ET

Company Participants

Antonio Marco Campos Rabello - CFO and IRO
Helena Guerra - ESG and Sustainability Director
Benjamin Steinbruch - President, Executive Board, Chairman and CEO
Luis Martinez - Executive Director, Commercial and Logistics Area & Member of Executive Board
Edvaldo Rabelo - Director, Cement Business

Conference Call Participants

Daniel Sasson - Itau BBA
Rafael Barcellos - Banco Bradesco BBI
Ricardo Monegaglia - Safra
Marcio Farid - Goldman Sachs

Operator

Good morning, ladies and gentlemen. At this time, we would like to welcome everyone to CSN Conference Call to present Results for the First Quarter 2024. We have with, the company’s Executive officers.

We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company presentation. Ensuing this, we will go on to the question-and-answer section at which time further instructions will be provided.

Today's event can be accessed at ri.csn.com.br, where the presentation is also available. The replay service will be available after the call.

Before proceeding, please that the forward-looking statements herein are mere expectations or trends and are based on the current assumptions and opinions of the company management and that future results, performance, and events may differ materially from those expressed herein, which do not constitute projections.

Actual results, performances, or event may differ materially from those expressed or implied by forward-looking statements as a result of several factors overall, and economic conditions in Brazil and other countries, interest rate and exchange rate levels, future rescheduling or prepayment of debt denominated in foreign currencies, protectionist measurements in the U.S., Brazil and other countries, changes in laws and regulations and general competitive factors at a global, regional or national basis.

I will now turn the conference over to Mr. Antonio Marco Campos Rabello, CFO and Investor Relations Executive Officer, who will begin the presentation. You may proceed, Mr. Rabello.

Antonio Marco Campos Rabello

Good morning, everybody. My name is Marco Rabello. It is a pleasure to share with you the results of CSN. We -- I joined CSN in the second fortnight of March. I would like to thank the team and Marcelo Ribeiro for all of the support that I received in the transition period and for the deliveries that he gave us, while he was at CSN. Thank you, Marcelo.

On Slide number two, we see the main slides attained this quarter. Despite the fact that we faced several challenges regarding the price of our products at beginning of the year was important to reinforce operating enhancements beginning with mining, where we had record sales for the first quarter.

The company benefited from this period, prior period, and we sold more than 9 million tonnes. In terms of steel, this is the fifth quarter -- consecutive quarter of sales, showing the normalization of the operation and the asserted commercial strategy by managing to compensate for a seasonally weaker quarter in the domestic market with increased sales abroad. We captured synergies, delivering a 26% EBITDA margin, something unheard of since we carried out the last acquisition.

Lastly, and not least important, we have an ESG highlight with the publication of the 2023 integrated report with advances in emissions control. ESG is a strategic fundamental topic for CSN.

We go on to Slide number 4. We see the EBITDA evolution. You see an impact of the price of iron ore and the impact on our results this quarter besides seasonality of the period, the drop in the flat price had an impact on the mining EBITDA and on the consolidated results. There was a difference between the first quarter 2022 and the fourth quarter 2023, leading us to an EBITDA margin of 19% for the period.

In the next slide, we can see the CapEx and the working capital. On the part of investments, the drop of 50% vis-à-vis the previous quarter is due to a seasonality of CSN that wants to concentrate investments for the end of the year.

When we compare this with the same period year-on-year, we made significant advances in investment in steel and coke batteries, centering and the streamlining of UPV operations. We also had advances and capacity expansion projects in mining, mainly related to new P15 equipment purchases.

In terms of working capital, a reduction in accounts receivable directly related to the weaker sales performed in the period, especially in mining because of a drop in the international prices.

We go on to Slide number 6, where we present the adjusted cash flow evolution with a negative result of BRL636 million, impacted by lower operating results but also because of the negative impact of interest rates and the hedging with iron or this should be reverted in the coming quarter with the change of prices we have observed in the last weeks.

In Slide number 7, we show you the leverage evolution and net debt buildup after two consecutive quarters of drop of leverage, we had an increase in the level of indebtedness of BRL1.2 billion when compared with the first quarter last year. This performance was expected because of the drop in prices of commodities.

We're making the most of this moment to reinforce our commitment to continue to reduce leverage in the coming quarters and comply with the goals of the company. We will have more robust results in the coming quarters with seasonality acting in our figure in terms of volume and with an increase in price.

In iron ore and steel, we also have strategic projects remarked upon in previous calls. We have a partner in energy and work with strategic investors for a minority stake in mining. These are topics that are extremely important because we need to have a diversified company with relevant action in different areas, and they will enable us to recycle our internal capital and of course, we will have a variation of leverage in less stable periods.

In Slide number 8, you see our debt amortization schedule. We show you the sound cash position CSN has had with several million reals at our disposal. Additionally, the company is very active in terms of rolling its debt with a focus on long-term operations and the local capital market.

This quarter, we had the reissuance of bonds of last year with a raising of $700 million maturing in 2030. Yesterday, we concluded our 15th simple debenture with a total value of BRL800 million, divided in two series with the objective of investing in infrastructure for long-term and efficient structures.

With this, we conclude the consolidated analysis of our performance. And we now go on to the highlights of the segment. On Slide number 10, we see the steel performance. For the third consecutive quarter, we had a growth in sales. Because of the strong dynamism of the foreign market, especially SWT, offset by the drop in the domestic market, there was a price readjustment that was significant because of competition with imported material and because of the diversified mix with a higher concentration of lower added value products. This offset the increase in price and enabled us to have a good EBITDA at the beginning of the year.

In Slide number 11, you see a growth of 5.7% in steel production, referring to the enhancement of the production process that we have observed over the last few quarters compared with the same period in 2023, where we had some bottlenecks in production. Now, we have a higher dilution of fixed costs, leading to a drop in slab in the first quarter 2024.

As mentioned in the previous slide, this decrease was not sufficient to offset the drop of price. On the other hand, the expectation is that the costs will fall even further, but we will resume our performance in the coming quarter where seasonality will play in our favor. There is also a drop in raw material and a more comfortable position once we have quotas for imported products.

On Slide 13, we see the mining performance despite seasonality. The company maintained operational excellence in recent quarters to deliver yet another production record for the year, overcoming the critical period of rainfall.

Now, the readjustment in the price of iron ore was intense, a change of $30 per ton in the price practice this quarter vis-à-vis the last quarter, offsetting all of the problems we saw and leading to a drop in EBITDA, reaching a margin of 40% this quarter.

On Slide number 14, in greater detail, you will see the impact of this adjustment on our results, especially in price provisions. This effect added to the effect of seasonality per volume where we're responsible for a difference of BRL1 billion between the last two quarters.

We look at the result of cements on Slide number 16, and we can see that despite the seasonality with increased rainfall, the company maintained an assertive commercial activity with minor impact on the volume between the two quarters differently from what we observed last year when we had more aggressive price strategies.

This quarter, we see an enhancement in the competitive environment, allowing for a price adjustment in this quarter, which means we have a stable behavior of revenue despite the lower volume.

The message of this slide is a sound capture of synergy and operational efficiency gains surpassing for the first time, the mark of 25%, mark of adjusted EBITDA margin since the integration of assets. So, we're on the right path to capture benefits with a sound and efficient financial performance.

With this, I would like to end the presentation on the segments, and I invite Helena Guerra to speak about the highlights in ESG.

Helena Guerra

Good morning, everybody. Thank you for the opportunity of presenting our results for the quarter. I couldn't begin the call without first referring to our for solidarity to the disaster in Rio Grande do Sul. It is an economic and humanitarian tragedy due to climate change, and it reinforces the need to focus on climate change and the need for the society to adapt to avoid the impacts of this new reality, our deep solidarity and help to our associates in the region.

Even in extremely difficult working conditions, our employees have worked consistently in a very competent way to maintain our dam stable despite this new volume of rainfall and to ensure that our company could be properly mobilized through different actions to help the people in Rio Grande do Sul to face this disaster.

Although the call is for the first quarter of 2024, we highlight the publication of the fourth edition of CS10 report was published yesterday. Both have been reviewed by outside auditors and we're complying with our obligations until 2026.

We refer to this double matter reality. It considers the impacts caused by the company environmental frameworks, but risks and impact to the business, especially financial risk with double materiality as part of the European system that was approved in 2023 and will become a mandatory practice. And this has been incorporated into the 2023 report.

In the quarter, we have some actions referring to advance in health and safety. We have a decrease in the margins of [Indiscernible]. We have a dam that was improved in December. It had reached level one-off stability. This was stated through an external audit. So, all of the dams in the company have the highest level of safety.

We also highlight the evolution in our safety and operations. In the first quarter of 2024, we surpassed the goal set forth regarding our accident frequency rate vehicle for 2030, we have reached in 2024. This is the best historical day, 1.62 accidents and we also have an expressive reduction in the seriousness of accidents, thanks to the program implemented in December called [Indiscernible] to act. And this has reduced the potential number of accidents in environmental management.

More than 500 tons of cement produced according to the best rules in the world. In terms of emissions, very good results in Minas Gerais, almost 2,000 cubic meters an hour allowing for good availability of water at Casa de Pedra, something fundamental for the project.

In terms of diversity, we have increased women participation. We have reached 62% in the CSN group, 10% of women in leadership position compared to the same period last year. And of course, we participate with the evolution of CDP grade that has the largest data bank in the world, and we have become global leaders in environmental management, especially in terms of water, safety, and climate change.

Thank you very much.

Antonio Marco Campos Rabello

Thank you, Helena. Before we go to the question-and-answer session, I would like to give the floor to our President, Benjamin Steinbruch for his remarks.

Benjamin Steinbruch

Well, good morning, everybody. Thank you for your participation in the CSN earnings call. I would like to simply review some points, and we will then open for questions and answers.

I highlight what was said in the [Indiscernible] call and CSN. In mining, we had a record production. However, we had a timely negative impact on prices with a reduction of almost 20% and with a direct impact on EBITDA. This impact that we had in the first quarter will be eliminated as prices have increased 20% once again.

We believe that the negative impact that we had in EBITDA in the first quarter will end up being positive in the second quarter. If we consider that the mine is doing well in terms of production, it is working with control costs, this is the effect of direct price on EBITDA. And if we take into account the movement at the port enabling us to ship more ton through our ports.

Regarding steel, we had an increase in the amount of steel, but we focus a great deal on mix and price. We had an impact of the imported products, and this issue has begun to be addressed by the government. Eventually, there will be a better projection of the domestic market, and we believe it will lead to better results in the second quarter.

In cement, conditions are normal. We have been growing in terms of amount and margin. We have been able to raise the price and cement has shown the potential that it truly has. And gradually with the synergies that we have captured, we have a consolidated position with the integration of Lafarge Holcim and the production of our prior plan. The EBITDA, despite the negative effect, as I mentioned, basically due to the drop of flat.

Now, regarding our investments, we continue our normal pace. We have investment policy that is higher now for 2024. We're advancing at a normal pace. And the main investment that we have for P15, has been fully contracted. All of the equipment has been contracted.

The engineering side under a rapid development, and we believe that very briefly, we will have the P15 becoming operational. This is the main investment from the quantitative and qualities viewpoint for the entire group and for mining. And still, we have coking centering and high furnace also underway.

The leverage, of course, which is an issue of great concern. We have made commitments to remain below 3 times. We continue on with this commitment despite that slide into 1.3% due to the drop of EBITDA and also due to that drop of 20% in prices for iron ore, for plots that seems to have recovered that price loss. We believe that very speedily we will be able to once again have that commitment complied with the market.

As we have been saying for almost two years, our goal is to always work between 2.5 and 3 times leverage and to attempt to be as close as possible as 2.5. We do have a significant investment program, notwithstanding that we believe in our operations, and we will quickly return to that level that we have set forth to comply with.

I can say that mining very broadly is doing very well. It is under control. We have growing volumes. The price has returned. The cost is dropping and the port is doing very well. So, all of the variables seem to be in place and working in harmony quarter-after-quarter as we were able to show this last quarter.

Regarding mining, what we have to do is more of the same. We truly don't need to make corrections or adopt major actions. With this resumption of price, we will once again go back to having the results that were forecast in our budget and we're quite calm when it comes to mining.

With cement, the same holds true. We're doing well, capturing synergy. We are working very close to our nominal volumes. When we lose something because of gold silos, for example, we do lose a bit of the nominal capacity because of this, but the productivity and the yield that we have set forth for ourselves are quite strong, and we have had good receptivity on the part of the market. Our costs are under control, allowing us to have growing margins as was a concrete fact in the first quarter of going beyond 25%.

Now, when it comes to the steel plant, this is where we have our major problems there's nothing different, nothing unknown. It's simply an issue of management and ability to forecast.

We had a serious problem with converters with coke and centering. Well, all of these problems are known at large, but as in any capital-intensive company, when you detect the problem, even though you know how to resolve it, even though you know how to return to normalcy, you do depend on spare parts that should be immediately available, and they're not and the delay because of the articulated order for each type of equipment can be impactful despite knowing what we need, despite having a defined strategy to regress these variables.

Unfortunately, this will take some time and we are presently in that phase where we are losing production. Even though we know what needs to be done, we have to continue to live with that for an additional period.

We are attempting to reduce that problem that we have with third-parties in the market. We have been successful. The purchases are lower than our cost of operation, but we're getting ready to recover for our loss of the time of difficulty in production have gone beyond what we expected in the steel mills.

Now, commercially, we have a highly competitive market because of the imported products. It is a pity that the Brazilian government proceeds so slowly with that reaction that we're expecting regarding imported products. It's not only in the steel segment, we have to be attentive to this and quickly react quickly in all segments that impact our economy.

This is not a timely issue with the general problem. China attack very strongly and fully impacts competition. Nobody can say let China come, we're ready. We are not, not in the automotive sector, not in chemistry, not in the consumption sector, or in the spare part sector and the damage takes some time to recover from the Brazilian government is under the obligation of reacting rapidly to protect the industry as a whole.

We have seen this in the past. There is a drop in the share of industry in Brazilian GDP and for each point that we dropped, it takes threefold the effort to go back to our original position.

Although the Brazilian government is somewhat attentive, it has been slow in terms of its reduction and not very aware in terms of what should be done with imported products.

To give you an idea, the Brazilian government used the averages of the year's 2022, 2023 to set up the average imported added 30% in amount. And based on that has come up with a new import levy.

Now, if the government would have wanted to inhibit imports, they should have based themselves on the averages of the United States with a reduction of 30% to show that they're truly combating imports.

Unfortunately, we have done the contrary. What will happen in May and June is that imports will be extremely strong and to set up this higher quota. And only after that, there will be a new taxation levy. It continues to stimulate imports, which truly doesn't make very much sense and which is effectively hampering the entire Brazilian economy.

I repeat here, nobody can face up China. Nobody. When China is ready to export any type of product, it simply goes over everybody in any country. We have to be attentive to that. And the faster and the stronger this action is, the better the production for industry as a whole and for Brazilian economy. And this will have a huge repercussion as it is already happening in the consumption area. It's an issue that is pending, and we have to wake up to this and act quickly.

Very well. We're now going to open the floor for questions and answers, and we are at your entire disposal to answer your questions. Thank you very much for your attention and let us continue on.

Question-and-Answer Session

Operator

Thank you. We will now go on to the question-and-answer session for investors and analysts. [Operator Instructions]

Your first question is from Daniel Sasson from Itau BBA. Your microphone has been unmuted.

Daniel Sasson

Good afternoon. Thank you all for the -- for taking my questions. My first question refers to that final testimony made by Benjamin on China competition, the competition of imports that the sector has been facing for a year and a half.

For Martinez, if you could comment on this new scheme for recent quarter recently announced by the government. If this is something that could move the needle in terms of this competition due to imports because of aspects that are not exactly fair? Or is this just an initial step where they all should be done? If this could stabilize the margins in the sector or if it was still a very small step?

My second question is to Benjamin. Benjamin, thank you for this opportunity. If you could comment on your mindset in terms of opportunities for growth, especially in organic opportunities, acquisitions appear and you have to be ready for them. It's not something that you can predict beforehand.

So, how can you balance all of this out with that commitment with your capital structure and the leverage below 3 times? Simply so that we can understand at which moment you will be taking this additional step to deleverage in the future and generate value that way that would help us to understand some transactions that could take place in the short-term? Thank you.

Answer

Luis Martinez

Hello Daniel. Thank you for the question. Now, to speak about the commercial defense. I'm going to try to complement what Benjamin has said so that you fully understand not only what is happening globally with this situation regarding other players in the sector, but specifically, what happens with CSN. CSN presently has a portfolio where 50%, 51% comes from reverted material-linked pre-painted and tin foil.

Now, we have this as a matter and the issue of commercial defense throughout the world is dealt with as a matter of survival in the United States that deals with this more friendly. They implemented 323 as a matter of national security. So, this became a very important issue in the worldwide scenario. It has to be dealt with, with a great deal of seriousness.

To add to what Benjamin said about China, nowadays to give you an idea what we have in terms of flat steel coming into Brazil, what arrives every month. I'm referring to 70%, 80% that comes in directly here. This is a unique, very peculiar situation and very typical for CSN.

Besides everything that is happening is that we have become the trash can of the world. We're receiving material outside of specific -- coating that the market has to put up with, with generalized corrosion, compromising everything we have built in Brazil. This is an additional issue of extreme emergency, we cannot compete technically. Commercially, there is no competition. But technically, we have not been able to act correctly so as to block the entry of these products into the country.

Another important point, if we look at the worldwide scenario, Brazil is the only country in the world with this its mouth open to China. And this is what is happening in Brazil at present, the most serious countries nowadays, what do they do? They privilege their industry, maintain employment, competitiveness. And beyond that, in real time, they see what is happening with competition.

CSN has never needed protectionism. It is an obsolete concept. I have been at CSN for 23 years. We have always been in the first quartile of prices. We never needed protection to compete. We have operational excellence and commercial strategy in place.

Another problem is our myopic vision. We're confusing a strictly technical topic with a political issue. We represent to China, something negligent in terms of the imports. Brazil would not have any retaliation if we had applied the rules that other countries have applied. Nobody would stop buying corn, grains from Brazil because of a steel import that is destroying the Brazilian market.

From the political viewpoint, we have been greatly weakened. That's the truth, as Benjamin mentioned, everything that the United States did. They base themselves on an average and took away 70%. We leveraged this at 1.3%.

When I speak about technical measures. And in the last call, I praised the government. I imagine that this issue would be dealt with in a stringently technical way according to the World Trade Organization. Now, the three cases of CSN have been postponed. We have a case of pre-painted and two cases of tinfoil. They have been postponed.

Well, this is a political issue. People are simply looking upon this two weeks ago, we had two people from the government carrying out an in local verification, which is part of the regulations of the World Trade Organization to see about prices and costs.

What should the government have done to enforce temporary measures while this investigation process was being carried out. This was not done and it could have been done in three or four months. It's very possible that we will have to wait another year for this antidumping to be resolved.

Now, as other plants, we focused on the technical part. And the three products of CSN were postponed. Now, the entire world has set up safeguards sanctions of 25%. And I don't think that we are better than the world. Something wrong is going on here.

To give you an idea of what was done, let's look at the idea of zinc to material, the average that the government considered was 162,000 tons a year. The average imports for 2023 were 483,000 tons.

If you look at 362,000 and multiply this by 1.3, you have 470,000. So the government is legitimizing the import of the zinc products an [Indiscernible] and efficient measure, an offensive measure completely to combat unloyal competition as we have in Brazil. So, this shows us very clearly an event that extends to all other products.

The only thing that is somewhat different is the hot rolled coil. Perhaps they can help us somewhat, but the amount is very small compared to what is imported into Brazil. So in this situation, as Benjamin mentioned, we see several industrial change in Brazil that are suffering due to this problem.

Steel is just beginning. Very soon, we will wake up with the Chinese manufacturing finished products in Brazil. They are now coming in through indirect imports. I do apologize for extending myself on this issue, but this should be looked upon in the correct fashion.

Now, regarding the CSN portfolio, it's very specific. It's very different. It's important to understand how relevant this is for CSN to such a point that the Brazilian steel market in the first quarter, this was not only CSN. We had a loss in mix. There was so much imported zinc that what was left to sell was BQ.

And the entire market is dropping and we suffer more than other local competitors. Daniel, do forgive me for extending my comment, but I attempted to give you more color on this issue. It's really not been thoroughly explained for those who do not understand what is happening. Thank you Daniel for the question.

Daniel Sasson

Thank you, Martinez. Very clear.

Benjamin Steinbruch

Now, regarding what Martinez said about import, I am in the United States. I came yesterday from Europe, I went to visit our units in Portugal and Germany and was able to speak to some people in the automotive sector, for example.

What I can say is that they're terrified with what is happening when it comes to electrical cable from China. It was something that is about to happen. It is happening. China is flooding the European ports with products that have no order. There is no sale, but they're anticipating everything, selling products to the ports in Europe and the United States, literally inundating these markets with vehicles.

I was able to ride in a Chinese car in the car of the year and I have to say the quality and the performance of the cars are impressive. It's going to be a worldwide challenge this issue with China and the European clearly have shown their concern with the future of the European automotive industry as a whole.

It's something that is already happening. And from the viewpoint of quality that I said to prove, I saw it, it's an insane situation that have electric cars that go from zero to 100 in 2.1 seconds. The SUVs do this even faster. The comfort and the technical performance are fantastic. They leave nothing to be desired when it comes to European and American cars with a massive presence at the large European ports.

It's not only steel. It's something that Brazil has to awaken to the rest of the world already has. It's something much broader. We need to have a firm industrial policy that will enable our survival. Different things are going to happen very quickly.

When it comes to Daniel's question about the leverage for new investments, whether they are organic or acquisition, are great concern, Daniel. My concern is about leverage specifically. We have been growing, we're putting in new assets into the group. It's the case of Lafarge causing triple in last year. Now we always have that in-house and external commitment towards leverage and minor falls as we had this quarter because of a sudden drop in prices of commodity of 20% impacted our results. But I can say that with the measures adopted, it is very difficult to go beyond the three times in leverage.

As I mentioned, I believe that based on what we have been doing, we will quickly resume our normal margins of leverage. And as part of this concern what makes sense for us. Our only acquisition that will enable us to reduce that level of leverage and net debt, any type of acquisition that we will have to do or any type of investment that we want to carry out organically will be calculated very cautiously to ensure they do not represent an increase in leverage. This is our prime priority. And we can only justify an acquisition going forward if something has enormous synergy with our present day business to such a point that it will become a feasible way to enhance our EBITDA because of that enormous synergy that may exist.

So, you can remain comp that we will not carry out any type of investment, whether it is for organic growth or an acquisition that will break this rule. We are fully committed with de-leveraging, and we are going to do this quickly at whichever cost is necessary. No investment will be made if it will compromise this standard that prevails within CSN.

Daniel Sasson

Well, thank you, Benjamin.

Operator

Our next question comes from Rafael Barcellos from Banco Bradesco BBI. Your microphone has been unmuted, sir.

Rafael Barcellos

Good morning, everybody. Thank you for taking my questions. I wish Marco Rabello a great deal of luck in his new position and thank Marcelo for his work delivered to CSN. The first question is to Marco. If you could speak about your initial perception that CSN, which will be the projects you will devote more time to in the company.

My second question about the steel market is a question for Martinez. If you could give us an overview of the market. We heard your opinion on the new quota system caused by the flow of imports. But if we could hear more about the internal dynamic demand and the price environment, we saw a drop of prices this quarter environment. Now, what will happen with this dynamic in the second quarter, and which is your price strategy vis-à-vis market share at CSN with the main products in the domestic market? Thank you.

Antonio Marco Campos Rabello

Well, this is Marco. Thank you for your wishes. Of course, this is my personal opinion, but CSN does have a great advantage centered on very important pillars for the national and worldwide economy, with a great deal of potential for growth, for unleashing value. And growth can be gained, of course, organically or through acquisitions. We have a very specific year in terms of CapEx. We have significant CapEx for this year, as mentioned.

First of all, we're going to seek funding with the best terms, with the best structures to bring a maximum return to the CapEx that we want for the year, especially in mining and in steel. There is a higher concentration of CapEx initially in both of these areas, always looking at leverage as Benjamin has underscored. But our average cost of debt, our debt schedule, there will be a large concentration and we're going to see how to best support each segment to bring about the best profitability.

All segments are showing an enhancement in their profitability, including the steel segment. Last year, of course, it faced some production bottlenecks. And obviously, we're going to support the acquisitions that will be carried out by the company with the best financial structure and bringing in the companies that will eventually be acquired in the different segments. Now, these are the main points of concentration for 2024.

Luis Martinez

Hello, Rafael. This is Martinez once again. I will allow myself to speak about the international market. It has been very helpful in terms of our volumes. We had the best quarter in terms of volumes. In the last five quarters, we got to 1,086,000. This was not perceived, but it is an enormous challenge for us at CSN to reach that figure as a group. As part of Benjamin's strategy of not putting all the eggs in the same basket. That is why we have operations with operational excellence outside of Brazil. And this has enabled us to hit these volume records in the last five quarters.

Now, this has just come out in Bloomberg. Biden is planning to increase fourfold the rates for china this is in Bloomberg please read this and see what is happening this corroborates what we have mentioned here. Now, still speaking about china, if we imagine what happened in China some quarters ago, a year ago, nowadays, if you look at the industrial PMI of China, all of the indices in industry are growing.

We have a recovery of industry in China. They're privileging the automotive and industrial sectors. When it comes to civil construction, which is fundamental, the Politburo is working with a policy that shows which are the restrictions for housing, for new developments. Prices in China and this is good news, in this earthquake that we're living in Brazil, prices in China have been recovered by $20, $30. BQ is $535, $545. It was lower than that, almost at the level of $400.

Another interesting point. Well, the emphasis of China has never changed its employability, and they'll do everything for it. We base ourselves on the average of the first quarter of exports from China. It stands at 650 -- 711,000 tons of flat steel in the first quarter. What does this mean? The imports in Brazil of 711,000 tons, mostly coming from China. If you annualize this, it's nothing. We're at a level of 3 million and an import penetration of '22, '23. Nothing has happened. We have to be more rigorous in terms of what we're doing in the United States.

Well, things are somewhat hyperbolic. They're at a different moment from us as a country. The demand did have problems in some sectors, theoretically impacted by high interest rates. They slowed down in construction. But we do have sectors that seem to be the exception. The automotive sector is doing very well. Another important thing that is happening in the USA, purchases are contained. Investors want to know what is the bottom of the well in terms of price. We're coming to a situation of stabilization. In January, it was $1,200 per ton. We're now down to $895, $910.

We shouldn't have significant problems in price in the United States. At the U.S.A. plants, and this is interesting, I looked at the EBITDA. If you look at the operational difference, margins are doing very well. Thank you at 20%. The sector is profitable. It is being privileged by the government. There is national safety. The goal is full employability. There's Biden, the storing and everything to work out. As a pillar, the goal is the growth of the country.

Now in Europe, it has been stable for some time. There was a discrete drop. The commercial defense measures were quite positive now to send Q2, Portugal iPay and tieing of €53 and a sanction of €25, how to compete by employing people in Europe. You begin to question if this is correct, the world is closing down, and we are completely different from other countries.

In the case of Brazil, what is happening? In the first quarter, the demand was practically stable vis-a-vis the fourth quarter. We saw an official figure of €3.50 billion annualized, it would be €14 million, BRL 14.5 million, which was what we had last year. Now there has been a drop, I believe, in some exports. Unfortunately, this doesn't happen with the prod that CSN has where they have enormous capacity in China, they are coded products.

Now in the Brazilian domestic market, the assembly plants are facing a very positive moment. The second quarter, they forecast a growth that will be quite aggressive of 13%, sales somewhat higher as they have good inventory in sectors of distribution, 3%. These sectors linked to consumption, the white line and packaging still very timid because consumers are holding back, and we're holding back in the market, but I do not believe that the Brazilian market will close with figures lower than 2023. The CSN projection is to have a growth, highly leveraged by civil construction.

In the case of civil construction, we still have a carryover of launches of developments. We have launches in infrastructure by private initiative. We also have public works, of course, but they're not very significant. They're more sporadic. And the confidence, interest of civil construction is the highest compared to other chains with this scenario to see what we can do.

The cast iron ore of 115, 120 coal to 47, the real dollar since the last call, 4.8 to 5 and the BQ premium that I mentioned of €535, €545 million compared to the nationalized import is 12% to 15%. So this premium is a limit basically to work with price corrections. But at some point in time, in the second quarter, perhaps in the third quarter because of these changes, we will have to make price corrections to make our margins somewhat more positive.

The EBITDA margin and what we deliver in a per tonne that have had a great drop vis-a-vis the last two years. This is a scenario that we face in the Brazilian market. The great challenge for CSN. And I have a limitation. I have to fight against the imported products. We have to fight with the weapons we have in-house in the products that CSN are losing market 400,000, 350,000 a year, tin-plates have dropped to half because of imports. Besides everything I said about galvanized material.

We do have problems with thin plates and this was a process calculated anti-dumping with the local verification and nothing has been done. There is no protection whatsoever and CSN's request has been postponed. So this is a scenario we face. We're going to continue producing volumes, working as Benjamin says at full steam, selling less for more, acting in different segments of industry, and we're ready to fight. We have no other way out but defend what we are producing. This is a scenario for Brazil.

Rafael Barcellos

Thank you very much. Very clear. Thank you very much.

Operator

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

Ricardo Monegaglia

Well, good afternoon. I have two questions. The first, if you could share with us more details about which are the most obvious points to consolidate the cement industry in Brazil. And as part of these questions, if you could describe, which is the process of analysis for investment at CSN, return on the cost of capital of prior analysis, the minimum spread and how that changes when we think about international company? That is the first question.

The second question refers to the steel mill. The next two months will have a pressure of imports. But if we could risk things and think of a more future outcome. If we can think about a margin recovery in your operation in Brazil and which are the next main deliveries in the equipment refurbishment. Thank you for taking my questions.

Edvaldo Rabelo

Hello, Ricardo. This is Edvaldo, good afternoon. I will answer the first question recording how to unleash value in cement. We have shown, as Benjamin said, the evolution of cement that explains how the industry operates. There is a forecast of an increase of 2% in the market this year. We had a first quarter with the seasonality normal for the period, but April already shows a reaction towards a more positive volume. We're implementing all of the synergies that we can.

And of course, they came about with the acquisition of Lafarge Holcim. We're integralizing all of the synergies in our results. We're going to continue to reduce costs. We had a reduction of almost 20%. This quarter vis-a-vis the same quarter last year, which is very positive. We will continue to invest in this reduction. We're working towards it through management and operational efficiency. It's very important to remark, and Martinez can add something. There is a fundamental point to unleash the value of the cement industry.

This is price. The cement prices of around $70 per ton. While in South American countries, the price is not less than $120 in Europe, $140, $150. And in the U.S., prices of the same magnitude in some regions, reaching $180 per ton.

So clearly, we have opportunities to reduce cost and enhance prices. This will be a fundamental issue to have more sound results. Martinez?

Luis Martinez

Well, Ricardo, that was very good, Edvaldo. Well, in these businesses, like the businesses we work in, of course, operational excellence is the main pillar. As Benjamin says, we always have to be ready for a war. When you have a low cost, you may be the last to die. And this is what I think every day here, and every moment, myself and Edvaldo when thinking about cement. I personally had a very favorable experience. Since we acquired Lafarge Holcim, CSN has become a very important player in the market.

We're a player that well, we had a very strong point. We worked in the retail market and the package market, 80% was our business. Now CSN works with bulk and inventories that are very favorable. And we're serving a very beautiful wave, especially with concrete, concrete are growing in Brazil. Why? Because we have a great deal of work.

What happened were also making the most of the growth of concrete and putting more bolt material into the market? In the first quarter, as Marcelo and likes to say, we had price over volume. We had a drop in volume, but not more than the market, of course, and it was smart to do this and leverage the price. So that EBITDA reached 26%.

We clearly perceived that one of the levers is fundamental, as Edvaldo said, cement is very sensitive. The price-volume ratio in cement is exponential. It's difficult not to work with that variable. So CSN in the last few years has always been doing the same. We have good product, bulk product, packaged product. We're in the concrete chain. We're not going to buy a concrete company. Our business is cement. We want to work with the end user. We have 20,000 clients registered. We sell regularly to 12,000 clients every month.

Now this leaves us in a more comfortable position in terms of fragmentation, operational excellence mentioned by Edvaldo fundamental. Our plans have costs that are somewhat lower than the market. I'm saying something risky perhaps. And in so far as possible, we're being more aggressive commercially also in terms of market share and price. So this is our strategy. This is how we harness value in cement. This has been an emblematic phase that we have had in the last year because of the acquisition of Lafarge Holcim. Thank you.

Ricardo Monegaglia

Very good. Thank you very much. I don't know if I could repeat the second question for the steel mill very quickly.

Luis Martinez

I did keep your question here, Ricardo. I haven't forgotten it. Now how do we increase profitability and the margin in the steel are two simple things, lowering the cost and increasing the price. An important thing and Benjamin also mentioned this, we were using more plates produced, we insist on operational excellence. Unfortunately, and by the Benjamin raises is always very high. Sometimes we're very critical day after day. But the truth is that we're looking at higher numbers, very ambitious numbers. This is not what happened in other quarters.

I have participated in other processes with greater volumes in the company. So our bar is very high. I believe that in the second half of the year, we will harvest results from the cost of fleet. The cost of plate is still prohibitive. We're speaking of BRL 3,400 nowadays the play market to give you an idea. And I'm looking at what is happening. We can buy labor plate at 610, 625. We can buy from China. Well, not to think about China, but from Vietnam 580, 590. These are very attractive prices, and we're going to have to use more our excellence has not been concluded.

Alexandre Lyra has worked on this to ensure that we can charge BRL 3,000 per ton. It's what we desire for the year. And in the near future, we should go on to higher competitiveness quartiles as we had in the past.

Regarding price, it's inevitable in the second half of the year to think of a price re-composition. If we continue with the situation of iron ore, which has a pressure coal 250, 240 in the premium at 12%. Regardless of the premium, we are going to have to make a price correction. And what we have done day after day is to work in the mix, as the mix of Brazil became in coverage because of the invasion of coated and galvanized product. We're buying more BQ material of low added value as part of this earthquake. We're trying to recompose volume, recompose the use of tin plates. I believe that in the second half of the year, you will be able to see more positive margins vis-à-vis the first and second quarters.

As Benjamin mentioned, our measures are on the right path. They have the right intensity. It's simply a matter of time, and this will happen in the second half of the year. That would be the solution for margin.

Ricardo Monegaglia

Thank you. That was very clear. Thank you.

Operator

Our next question from Marcio Farid from Goldman Sachs. Your microphone has been unmuted.

Marcio Farid

Well, good afternoon. Thank you for taking the question. Two follow-ups here. Benjamin and Martinez both spoke about how the U.S. have dealt with the industry better than what has been done in Brazil. My question is, which is your appetite to carry out those investments that you mentioned previously, to gain greater exposure in the U.S.A. via steel mills? And how do the recent events change the perception?

The second question about your CapEx execution was somewhat weak this quarter. The trend is to increase throughout the year. As you do historically, what is happening with P15? What we saw this quarter, does this suggest a reduction in the pace? And Benjamin said you are disappointed with a delay in the ramp-up of steel plant. If you could speak about the timing, are you more delayed than what was expected? And if you have any visibility on this? Thank you very much.

Luis Martinez

Hello, Marcio. This is Martinez and then I will give the floor to Benjamin. Speaking about the U.S., we have no intention of putting the company in greater deleverage. Leverage is in order, and we comply with orders here we don't question them that issue of delevering as goal number one for the company.

On the other hand, in the U.S., luckily, we have complied with the quotas that we have there. They are not minor quotas. We would like to have others. We're fighting for higher quotas in tin plates. The quote is 10,000 tons per year. The American market today lacks the supply of tin plate because of the closure of some plants.

Now in terms of galvanizing pre-painted products, we're working towards making our portfolio more attractive for the client work spot. We want to be a true local player. So today, we're looking at investments that are relatively of low cost, high return service centers were instead of selling the coil. We can sell the materials and sell lower portions galvanized steel. Something that a payer would do in the American market.

In the U.S., the initial appetite now would be to consolidate the quotas we have and have a better walking into this quota to get more value from the portfolio. That is for the United States. Benjamin. I don't know if you would like to add something.

Benjamin Steinbruch

I would like to say regarding the U.S.A. that perhaps is different from what it is from investments in Brazil, where mandatorily, we have to respect the leverage and not surpass our commitment in the United States and Europe. Something different is happening. They are more advance than we are in terms of decarbonizing and clean energy as part of the plan of 1,050 [ph] trillion of the Biden government.

Well, we went after this and perceive. They have just in BRL 150 billion for investments that contemplate decarbonizing and clean energy, which is something completely atypical to speak about investments with subsidized interest rates in Brazil. This doesn't exist.

Now to speak about these investments, this is difficult to explain for Brazil, these lots on the what's happening in the U.S.A. and Europe in capital-intensive industries with the potential of enhancing their performance environmentally. So in the U.S., we are structuring investments. We want to make the most of this opportunity that the government is offering industries that want to invest in decarbonizing and clean energy. We knew that it existed in Europe. We saw decent proof receiving €2.5 million to go on to an electric furnace instead of a high furnace. SAB received BRL 3 billion, while the government gave 30 billion as a loss fund to the industry. In the U.S., it is BRL 150 billion. We're trying to fit into that and do something impactful because there is the financing lines at lower interest rates.

We're incredibly interested in investments, especially in the U.S.A., contemplating these funding lines, we do not have in Brazil. We had a long steel project for the U.S.A. We're going to eventually move this to flat steel and do something here as far as long as it is part of that program that exists in the U.S.A. So we're devoting a great deal of time seeking alternatives for investments in the U.S.A., because of the effect of capital, they are self-justified. Now this is a priority that we have when it comes to investments in activities that are similar to those we have in Brazil.

Marcio Farid

Well, thank you. If you could speak about CapEx, P15, and the moment of the steel plant. Thank you.

Benjamin Steinbruch

Who is going to speak Marco?

Antonio Marco Campos Rabello

I can do that Benjamin.

Benjamin Steinbruch

Very well, you can do so. Thank you.

Antonio Marco Campos Rabello

Marcio, thank you for the question. The CapEx, as we mentioned during the presentation, we do have a challenge of values that are above those of last year to invest in 2024. There is seasonality in CapEx connected to the way that CSN approved and is versus CapEx, half was invested in the fourth quarter last year, and it is higher than the same quarter of the previous year, showing that quarter-on-quarter, we will invest more.

Regarding the CapEx for the year, we can see that this is feasible to reach the goal until the end of the year. Another way to disemburse CapEx is to work on the company's cash management to accompany the company's results during the year, cash generation or make adjustments in CapEx. But what was announced for the company as a trend for the year will be maintained. If a novelty should arise, we will, of course, announce it in a timely fashion. Well, thank you.

And about the steel mill, a question you asked, looking at 2024 in the longer-term, the investments in UPV last year represented the highest in the last eight years. This year, we're going to make the same investment, a record investment in UPV somewhat higher than the previous year. And of course, getting the positive results of all of the investments made so far. Now these investments, along with the discussion of raw material shows the effect will be more concentrated in the second half of the year. But month after month, we look at the results of these investments already made.

Operator

Our next question is in writing from [indiscernible]. Any comment on the acquisition of InterCement?

Antonio Marco Campos Rabello

Very well. We had a material fact a few days ago. We are celebrating discussions with the seller of course, and with the main stakeholders of InterCement. We have until July to conclude these negotiations. At this point in time, we have no concrete fact that we can present to investors. But of course, they will all be communicated appropriately at the right time. We continue to evolve in our interaction. And this is an acquisition of great interest for the group, yes.

Operator

[Operator Instructions]

The question-and-answer session has ended. We would like to return the floor to Mr. Marco Rabello, CFO, for his closing remarks. You can proceed, sir.

Antonio Marco Campos Rabello

Well, thank you all for your attendance at our results call for the first quarter 2024. We do end the presentation for the first quarter. I wish you all a very good weekend.

Operator

The CSN earnings result has just ended. We wish you a very good day.