REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 20072008 OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Comission file number: 1-14732

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 theperiod covered by the annual report:

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

Yes                         No          

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

Yes                         No          

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period thatthe registrant was required to file such reports), and (2) has been subject to such filing requirements for thepast 90 days.

Yes                         No          

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

Yes                         No          

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

Large Accelerated Filer                          Accelerated Filer                        Non-accelerated Filer           

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

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

Item 17               Item 18  

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

Yes                         No          

TABLE OF CONTENTS

i

Table of Contents

ii

Table of Contents

INTRODUCTION

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

• “we”, “us”,we,” “us,” “our” or “CSN” in this annual report are to Companhia Siderúrgica Nacional and its consolidated subsidiaries;
  
  
• “parent company” is to Companhia Siderúrgica Nacional.
  
  
• “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”dollars,” “$, “$” “US$” or “US$”“USD” are to United States dollars;
  
  
• “billions” means thousands of millions, “km” means kilometers, “m” means meters, “tons” means metric tons, and “MW” means megawatts;
  
  
• “TEUs” means twenty-foot equivalent units;
  
  
• “consolidated financial statements” are to the consolidated financial statements of Companhia Siderúrgica Nacional and its consolidated subsidiaries as of December 31, 20062007 and 20072008 and, for the years ended December 31, 2005, 2006, 2007 and 2007,2008, together with the corresponding Report of Independent Registered Public Accounting Firms;
  
  
• amounts inreaisstated at a particular date and followed by U.S. dollar equivalents have been converted using thereaisto U.S. dollars exchange rate in effect on such date; and
  
  
• “ADSs” are to CSN’s American Depositary Shares and “ADRs” are to CSN’s American Depositary Receipts.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,abroad;
  
  
• the effects of the 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;trade or international trade regulations;
  
  
• protectionist measures imposed by Brazil and other countries;
  
  
• anticipated trends in our industry;
  
  
• 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;
  
  
• 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 guaranteesan indication of future performance. As a result of various factors, such as those risks described in “Item 3D. Risk Factors”,Factors,” undue reliance should not be placed on these forward-looking statements.

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

     Our consolidated financial statements as of December 31, 20062007 and 20072008 and for each of the years ended December 31, 2005, 2006, 2007 and 20072008 contained in “Item 18. Financial Statements” have been presented in U.S. dollars and prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. 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), the Brazilian securities commission, or CVM, and determining dividend payments and other distributions and tax liabilities in

2

Table of Contents

Brazil, we have prepared and will continue to be required to prepare financial statements in accordance with the accounting principles required by the Brazilian Corporate Law, specifically, Lawlaws 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, which differ in certain significant respects from U.S. GAAP.

2

Table of Contents

     Because we operate in an industry that uses the U.S. dollar as its currency of reference, our management believes that it is appropriate to present our U.S. GAAP financial statements in U.S. dollars in our filings with the U.S. Securities and Exchange Commission, or SEC. Accordingly, as permitted by the rules of the SEC, we have adopted the U.S. dollar as our reporting currency for our U.S. GAAP financial statements contained in our annual reports that we file with the SEC.

     As described more fully in Note 2(a) to our consolidated financial statements, the U.S. dollar amounts as of the dates and for the periods presented in our consolidated financial statements have been translated from thereal amounts in accordance with the criteria set forth in the U.S. Financial Accounting Standards Board’s Statement of Financial Accounting Standards no.No. 52, “Foreign Currency Translation”,Translation,” at the period-end exchange rate (for balance sheet items) or the average exchange rate prevailing during the period (for income statement items). In this annual report, we refer to a Statement of Financial Accounting Standards issued by the U.S. Financial Accounting Standards Board as an “SFAS.”

Unless the context otherwise indicates:

• historical data contained in this annual report that were not derived from our consolidated financial statements have been translated fromreaison a basis similar to that used in our consolidated financial statements for the same periods or as of the same dates, except investment amounts that have been translated at the exchange rate in effect on the date the investment was made.
  
  
• forward-looking statements have been translated fromreaisat the exchange rate in effect at the time of the most recently budgeted amounts. We may not have adjusted all of the budgeted amounts to reflect all factors that could affect them. In addition, exceptionally we may have translated budgeted amount based on the exchange rate in effect on the date of the action, operation or document.

     Some figures included in this annual report have been subject to rounding adjustments; accordingly,adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them.

Changes on Disclosure of Financial Statements

     Our consolidated financial statements have been prepared in accordance with U.S. GAAP. For certain purposes, such as providing reports to our Brazilian shareholders, filing financial statements with the CVM and determining dividend payments and other distributions and tax liabilities in Brazil, we have prepared and will continue to be required to prepare financial statements in accordance with Brazilian GAAP. Our financial statements prepared in accordance with Brazilian GAAP are not adjusted to account for the effects of inflation.

On July 13, 2007, the CVM issued CVM Rule No. 457 to require listed companies to publish their consolidated financial statements according toin accordance with International Financial Reporting Standards, or IFRS, starting with the year ending December 31, 2010.

     On December 28, 2007, Law No. 11,638 was enacted and amended numerous provisions of the Brazilian corporate lawCorporate Law relating to accounting principles and authority to issue accounting standards. Law No. 11,638 sought to enable greater convergence between Brazilian GAAP and IFRS. To promote convergence, Law No. 11,638 modified certain accounting principles of the Brazilian corporate lawCorporate Law and mandated the CVM to issue accounting rules conforming to the accounting standards adopted in international markets. Additionally, the statute acknowledged a role in the setting of accounting standards for the Committee for Accounting PronouncementsRules (Comitê de Pronunciamentos Contábeis), or CPC, which is a committee of officials from the São Paulo Stock Exchange (BM&FBovespa S.A.– Bolsa de Valores, Mercadorias e Futuros), or the BOVESPA, industry representatives and academic bodies that has issued accounting guidance and pursued the improvement of accounting standards in Brazil. Law No. 11,638 permits the CVM and the Brazilian Central Bank (Banco Central do Brasil), or the Central Bank,to rely on the accounting standards issued by the CPC in establishing accounting principles for regulated entities.

3

Table of Contents

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

     Our consolidated financial statements have been prepared in accordance with U.S. GAAP. For certain purposes, such as providing reports to our Brazilian shareholders, filing financial statements with the CVM and determining dividend payments and other distributions and tax liabilities in Brazil, we have prepared and will continue to be required to prepare financial statements in accordance with Brazilian GAAP. Our financial statements prepared in accordance with Brazilian GAAP are not adjusted to account for the effects of inflation.

     The following table presents our selected financial data as of the dates and for each of the years indicated, prepared in accordance with U.S. GAAP. Our U.S. GAAP consolidated financial statements as of December 31, 20062007 and 20072008 and for each of the years in the three-year period ended December 31, 20072008 appear elsewhere herein, together with the reports of our Independent Registered Public Accounting Firms, Deloitte Touche Tohmatsu Auditores Independentes, and KPMG Auditores Independentes, for the periods noted in their reports. The selected financial information as of December 31, 2003, 2004, 2005 and 20052006 and for each of the years in the two-year period ended December 31, 20042005 have been derived from our U.S. GAAP consolidated financial statements in U.S. dollars, not included in this annual report. The selected financial data below should be read in conjunction with “Item 5. Operating and Financial Review and Prospects.”

4

Table of Contents

Exchange Rates

     The Brazilian foreign exchange system allows the purchase and sale of foreign currency and the international transfer of reais by any person or legal entity, regardless of the amount, subject to certain regulatory procedures. The Brazilian currency has during the last decades experienced frequent and substantial variations in relation to the U.S. dollar and other foreign currencies.

5

Table of Contents

Exchange Rates

     Prior     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 March 4, 2005, there were two principal legalthe stabilization of the macroeconomic environment and a strong increase in foreign investment in Brazil, with the exchange marketsrate reaching R$1.56 per US$1.00 in Brazil:

• August 2008. In the commercial rate exchange market, and
  
  
• context of the floating rate exchange market.

     Most trade and financial foreign exchange transactions were carried out on the commercial rate exchange market. These included the purchase or sale of shares or payment of dividends or interest with respect to shares. Foreign currencies could only be purchasedcrisis in the commercial exchange market through a Brazilian bank authorized to buy and sell currency in these markets. In bothglobal financial markets rates were freely negotiated.

     Resolution No. 3,265 by the National Monetary Council, dated March 4, 2005, consolidated the foreign exchange markets into one single foreign exchange market, effective as of March 14, 2005. All foreign exchange transactions are now carried out through institutions authorized to operate in the consolidated market and are subject to registration with the electronic registration system of the Central Bank of Brazil, or Central Bank. Foreign exchange rates continue to be freely negotiated, but may be influenced by Central Bank intervention.

     Since 1999, the Central Bank has allowedsince mid-2008, thereal/depreciated 31.9% against the U.S. dollar over the year 2008, reaching R$2.34 per US$1.00 on December 31, 2008. On April 30, 2009, the exchange rate to float freely, and during that period, thereal/U.S. dollar exchange rate has fluctuated considerably. In the past, thewas R$2.18 per US$1.00. The Central Bank has intervened occasionally to control unstable movementsinstability in foreign exchange rates. We cannot predict whether the Central Bank or the Brazilian government will continue to letallow 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 in the future. See “Item 3D. Risk Factors—Risks Relating to Brazil.”substantially.

     The following table sets forthtables present the commercial selling rate, expressed inreais per U.S. dollar (R$/US$), for the periods indicated.

Source: Central Bank.

		Low		High		Average (1)		Period-end
Year ended
December 31, 2004		2.654		3.205		2.917		2.654
December 31, 2005		2.163		2.762		2.413		2.341
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
		Low		High		Average		Period-end
Month ended
December 31, 2008		2.337		2.500		2.394		2.337
January 31, 2009		2.189		2.380		2.307		2.136
February 28, 2009		2.245		2.392		2.313		2.378
March 31, 2009		2.238		2.422		2.314		2.315
April 30, 2009		2.170		2.290		2.206		2.178
May 31, 2009		1.973		2.148		2.061		1.973

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

     As of June 27, 2008, the commercial selling rate for U.S. dollars was R$ 1.6077 per US$1.00.

     We will pay any cash dividends and make any other cash distributions with respect to theour common shares in Brazilian currency. Accordingly, exchange rate fluctuations may affect the U.S. dollar amounts received by the holders of ADSs on conversion by the depositary of such distributions into U.S. dollars for payment to holders of ADSs. Fluctuations in the exchange rate between thereal and the U.S. dollar may also affect the U.S. dollar

6

Table of Contents

equivalent of thereal price of theour common shares on the São Paulo Stock Exchange (Bolsa de Valores do Estado de São Paulo), or BOVESPA.

3B. Capitalization and Indebtedness

     Not applicable.

3C. Reasons for the Offer and Use of Proceeds

     Not applicable.

3D. Risk Factors

     An investment in theour ADSs or our 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 theour 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.

6

Table of Contents

Risks Relating to Brazil

     The Brazilian government has exercised, and continues to exercise, significant influence over the Brazilian economy. This involvement, as well as, Brazilian political and economic conditions, could adversely affect our business and the trading prices of our ADSs and our common shares.

     The Brazilian government frequently intervenes in the Brazilian economy and occasionally makes significant changes in policy and regulations. The Brazilian government’s actions to control inflation and other policies and regulations 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 changes in policy or regulations involving or affecting factors, such as:

• interest rates;
  
  
• exchange controls and restrictions on remittances abroad;
  
  
• currency fluctuations;
  
  
• inflation;
  
  
• price instability;
  
  
• energy shortages and rationing programs;
  
  
• liquidity of domestic capital and lending markets;
  
  
• tax policies and rules; and
  
  
• other political, social and economic developments in or affecting Brazil.

     Uncertainty over whether the Brazilian government will implement changes in policies or regulations affecting these or other factors in the future may contribute to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and in the securities issued abroad by Brazilian issuers.

     Historically, the political scenario in Brazil has influenced the performance of the Brazilian economy in the past; in particular, political crises have affected the confidence of investors and the public in general, which adversely affected the economic development in Brazil.

7

Table of Contents

     These and other future developments in the Brazilian economy and governmental policies may adversely affect us.

     Inflation and government efforts to combat inflation may contribute significantly to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets and, consequently, may adversely affect the market value of our common shares and ADSs.

     Brazil has experienced extremely high rates of inflation in the past. More recently, Brazil’s annual rate of inflation was 1.2% in 2005, 3.8% in 2006 and 7.8% in 2007, as measured by the General Market Price Index (Índice Geral de Preços – Mercado), or the IGP-M. Inflation, and certain government actions taken to combat inflation, have in the past had significant negative effects on the Brazilian economy. Actions taken to combat inflation, coupled with public speculation about possible future governmental actions, have contributed to economic uncertainty in Brazil and heightened volatility in the Brazilian securities markets.

     Future Brazilian government actions, including interest rate decreases, intervention in the foreign exchange market and actions to adjust or fix the value of thereal may trigger increases in inflation. If Brazil again experiences high inflation, we may be adversely affected.

Exchange rate instability may adversely affect our financial condition and results of operations and the market price of theour common shares and ADSs.

     As a result of inflationary pressures, among other factors, theThe Brazilian currency has devalued periodically during the last four decades. Throughout this period, the Brazilian government has implemented various economic plansdecades experienced frequent and utilized a number of exchange rate policies, including sudden devaluations, periodic mini-devaluations during which the frequency of adjustments has ranged from dailysubstantial variations in relation to monthly, floating exchange rate systems, exchange controls and dual exchange rate markets. Although over long periods depreciation of the Brazilian currency generally has correlated with the rate of inflation in Brazil, devaluation over shorter periods has resulted in significant fluctuations in the exchange rate between the Brazilianreal and the U.S. dollar and other foreign currencies.

     The Between 2000 and 2002, thereal depreciated significantly against the U.S. dollar, by 9.3% in 2000reaching an exchange rate of R$3.53 per US$1.00 at the end of 2002. Between 2003 and 18.7% in 2001. In 2002,mid-2008, thereal depreciated 52.3% appreciated significantly against the U.S. dollar due to the stabilization of the macroeconomic environment and a strong increase in part to political uncertainty surroundingforeign investment in Brazil, with the Brazilian political elections andexchange rate reaching R$1.56 per US$1.00 in August 2008. In the context of the crisis in the global economic slowdown. Althoughfinancial markets since mid-2008, thereal appreciated 11.8%, 8.7% and 17.2%depreciated 31.9% against the U.S. dollar in 2005, 2006over the year 2008 and 2007, respectively, no assurance can be given thatreached R$2.337 per US$1.00 at year end. On June 26, 2009, thereal will not depreciate or be devalued against the U.S. dollar. exchange rate was R$1.940 per US$1.00.

     Historically, depreciations of thereal relative to the U.S. dollar has also created additional inflationary pressures in Brazil by generally increasing the price of imported products and requiring recessionary government policies to curb aggregate demand. On the other hand, appreciationDepreciation of thereal against the U.S. dollar may lead to a deteriorationcould create inflationary pressures in Brazil and cause increases in interest rates, which could negatively affect the growth of the current accountBrazilian economy as a whole and the balanceharm our financial condition and results of payments, as well as dampen export-driven growth. Depreciation generally curtailsoperations, may curtail access to foreign financial markets and may prompt government intervention, including recessionary governmental policies. Depreciation of thereal against the U.S. dollar can also, as in the context of the current economic slowdown, lead to decreased consumer spending, deflationary pressures and reduced growth of the economy as a whole. On the other hand, appreciation of therealrelative to the U.S. dollar would also reduceand other foreign currencies could lead to a deterioration of the U.S. dollar valueBrazilian foreign exchange current accounts, as well as dampen export-driven growth. Depending on the circumstances, either depreciation or appreciation of distributionsthereal could materially and dividends onadversely affect the growth of the Brazilian economy and our ADSsbusiness, financial condition and may also reduce the market valueresults of our common shares and ADSs.operations.

     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 the appreciation trend ofrealappreciates in relation to the past few years continues,U.S. dollar, it will causereal-denominated production costs to increase as a percentage of total production costs.

7

Table of Contents

     Depreciation of thereal 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 preferred shares and, as a result, the ADSs.

Government efforts to combat inflation may hinder the growth of the Brazilian economy and could harm our business.

     Brazil has in the past experienced extremely high rates of inflation and has therefore followed monetary policies that have resulted in one of the highest real interest rates in the world. Between 2004 and 2008, the base interest rate, or SELIC rate, in Brazil varied between 19.25% and 11.25% per year. Inflation and the Brazilian government’s measures to fight it, principally through the Central Bank, 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 the need for sudden and significant interest rate increases, which could negatively affect our business. In addition, we may not be able to adjust the price of our products to offset the effects of inflation on our cost structure.

     Developments and perceptionsperception 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 issuerscompanies is affected to varying degrees by economic and market conditions in other countries, including the United States, China, other Latin American and emerging market countries.

8

Table of Contents

Although economic conditions in suchthese countries may differ significantly from economic conditions in Brazil, the reaction of investorsinvestors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers. CrisesCrisis 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 andand/or ADSs, and could also make it more difficult or impossible for us to gain access to the capital markets and finance our operations in the future, on acceptable terms.

     The global financial crisis has had significant consequences, including in Brazil, such as stock and credit market volatility, unavailability of credit, higher interest rates, a general slowdown of the world economy, volatile exchange rates, and inflationary pressure, among others, which have and may continue to, directly or indirectly, materially and adversely affect our operating results, financial position and the price of our common shares and/or ADSs.

Risks Relating to the Steel Industry and CSN

     We are exposed to substantial swings in the demand for steel, which has a substantial impact in the prices for our steel.steel products.

     The steel industry is highly cyclical, both in Brazil and abroad. During the past years,Until 2007, the Brazilian steel industry has produced more steel than the domestic economy was able to consume, being heavilyand was therefore dependent on export markets. In 2007 and until the third quarter of 2008, there was a significant increase in the demand for steel in the domestic market, which reduced our dependency on export markets.markets and increased domestic prices. The demand for steel products and, thus, the financial condition and results of operations of companies in the steel industry, including us, are generally affected by macroeconomic fluctuations in the world economy and domesticthe economies of steel-producing countries, including trends in the automotive, construction, home appliances, packaging and distribution sectors.industries. In recent years, the price of steel in world markets has been at historically high levels, but in 2009 these price levels may not continue. Since 2003,prices have been decreasing as a result of lower domestic demand for steel products from developing countries (particularly China),and the strengtheffects of the Euro and overall2008 worldwide economic growth have contributed to historically high prices for our steel products, but these relatively high prices may not continue.financial crisis. Any material decrease in the demand for steel in domestic or export markets served by us could have a material adverse effect on us.

8

Table of Contents

The availability and the price of raw materials that we need to produce steel, particularly coal and coke, may adversely affect our results of operations.

     In 2008, raw material costs accounted for approximately 56.9% of total production costs. Our principal 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 all of the coal required to produce coke and approximately 21.7% of our coke requirements.

     In 2008, there was a steep rise in the cost of a number of commodities essential for steelmaking, specifically coking coal and metallurgical coke. Global developments, particularly the dramatic increase 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, any prolonged interruption in the supply of raw materials or energy, or substantial increases in their costs, could also materially and adversely affect us. These interruptions in the supply of raw materials or energy 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.

     We face significant competition, including price competition and competition from other producers, which may adversely affect our profitability and market share.

     The steel industry is highly competitive with respect to price. OverIn the last decade,1990s, the world steel industry was adversely affected by excess worldwide production capacity, reflecting the decreasing demand for steel in Westernwestern industrial countries and significant increases in steel production capacity in countries outside the Organization for Economic Development, or OECD. 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 the 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 to product quality and customer service, as well as technological advances that would allow a steel manufacturer to lower its costs of production. In addition, most markets are served by several suppliers, often from different countries. Competition from foreign steel producers is strong and may increase due to increases in foreign steel installed capacity, appreciation of thereal against the U.S. dollar and the reduction of domestic steel demand in other markets.

     In addition, many factors influence our competitive position, including efficiency and operating rates, and the availability, quality and cost of raw materials and labor. Over the last two years, China has recently become a net exporter of steel and may become one of the main international exporters of steel in the future.exporters. If we are unable to remain competitive with China or other producers in the future, we may be materially and adversely affected.

Protectionist and other measures adopted by foreign governmentsgovernment 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 which

9

Table of Contents

represent some ofrepresenting the main markets for our exports. Some of these measures were eliminated, resulting inForeign countries continue to impose restrictions on the reopening of some of the markets for certain products. However, foreign legislation continues to imposes restrictions in the volume of exports to certain countries, such as the restrictions on exports of hot-rolled products from Brazil to the United States, Canada and Argentina and the restrictions on exports of certain chemical substances contained in the steel products exported to the European Union, effective as of January 2009. The imposition of these and other protectionist measures by otherforeign countries may materially and adversely affect our export sales.

     On the other hand, in response to steel imports to Brazil at subsidized prices, the Brazilian government has recently imposed certain import tariffs in order to protect the domestic steel industry. If the Brazilian government were to remove these protection measures, or fail to act against cheap or subsidized steel imports, we could be adversely affected.

9

Table of Contents

Malfunctioning equipment or accidents on our premises, railways or ports may decrease or interrupt production, internal logistics or distribution of our products. We do not have insurance policies to cover losses and liabilities in connection with operational risks, and may not have sufficient insurance coverage for certain other events.

The availabilitysteel production process depends on certain critical equipment, such as blast furnaces, steel converters, and continuous casting machines, internal logistics and distribution channels, such as railways and seaports. This equipment and infrastructure may be affected in the pricecase of raw materialsmalfunction or damage. In 2006, there was an accident involving the gas cleaning system adjacent to Blast Furnace No. 3 at the Presidente Vargas 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. Similar or any other significant interruptions in our production process, internal logistics or distribution channels could materially and adversely affect us.

     Our insurance policies for losses in connection with operational risks, covering damage to our facilities (including damage to equipment and blockage of port facilities) and profit losses, have expired on February 22, 2009 and we are currently renegotiating new insurance policies. Lack of insurance coverage for operational risks exposes us to potential significant liability in the event of an accident or business interruption, which may materially and adversely affect us.

Our projects are subject to risks that we needmay result in increased costs or delay or prevent their successful implementation.

     We are investing to producefurther increase our steel particularly coal and coke,mining production capacity, as well as our logistics capabilities. Our expansion and projects are subject to a number of risks that may adversely affect our resultsgrowth prospects and profitability, including the following:

• We may encounter delays or higher than expected costs in obtaining the necessary equipment or services to build and operate a project.
  
  
• Our efforts to develop projects according to schedule may be hampered by a lack of operations.infrastructure, including a reliable power supply.
  
  
• We may fail to obtain, or experience delays or higher than expected costs in obtaining, the required permits to build a project.
  
  
• Changes in market conditions or regulations may make a project less profitable than expected at the time we initiated work on it.

          Any one or a combination of factors described above may materially and adversely affect us.

     The global recession could lead to a significant reduction in our revenues, cash flow and profitability.

     In 2007, our costsThe global economy, in particular global industrial production, is the primary driver of raw materials accounteddemand for approximately 44.5%minerals and metals. Global industrial production has shown a downward trend since the second half of our total production costs. Our principal raw materials include iron ore, coal, coke (a portion of which we make from coal), limestone, dolomite, manganese, zinc, tin2008, resulting in a significant and aluminum. We are dependent on third partieswidespread contraction in demand for some of our raw materials requirements. In addition, allminerals and metals.

     There is uncertainty about the depth and duration of the coal that we use to produce cokecurrent global economic downturn and approximately 15.6% of our coke requirements are imported. Currently there is a worldwide shortage of coke and coal, mainly as a result ofits continuing impact on the rapid growth in the global demand for steel. In 2007, there wasminerals and metals, which could have a sharp rise in the cost of a number of commodities essential for steelmaking. Any prolonged interruption in the supply of raw materials or energy, or substantial increases in their costs, could adversely affect usnegative impact on our cash generation and other steel companies. The availability and prices of raw materials may also be negatively affected by, among other factors, new laws or regulations, suppliers’ allocations to other purchasers, interruptions in production by suppliers, accidents or similar events at suppliers’ premises or along the supply chain and the availability and cost of transportation.

     Global developments, particularly the dramatic increase in Chinese and Indian demand for materials and inputs used in steel manufacturing, may cause severe shortages and/or substantial price increases in key raw materials and ocean transportation capacity. Inability to pass those cost increases on to our customers or to cater to our customers’ demands because of non-availability of key raw materials or other inputs, may harm our business, financial condition or results of operations.profitability.

     New or more stringent environmental and health regulations imposed on us may result in increased liabilities and increased capital expenditures.

     Our steel making, mining and logistics facilities are subject to a broad range of laws, regulations and permit requirements in Brazil relating mainly to the protection of health and the environment. Brazilian pollution standards are expected to continue to change, including new effluent and air emission standards and solid waste-handling regulations. New or more stringent environmental and health standards imposed on us can require us to make increased capital expenditures. We could be exposed to civil penalties, criminal sanctions and closure orders for non-compliance with these regulations. Waste disposal and emissionsemission practices may result in the need for us to clean up or retrofit our facilities at substantial costs andand/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.sales and us.

10

Table of Contents

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. Although our governance and compliance processes include the review of internal control over financial reporting, and other standard control procedures such as internal and external auditing, it may not prevent future breaches of law, accounting 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.

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 with other companies. We have established a joint-venture with an Asian consortium at our subsidiary 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 project with the Brazilian government at Transnordestina Logística S.A., or Transnordestina, to explore railway transportation in the Northeastern region of Brazil; and a joint-venture with Tractebel at Itá Energética S.A., or ITASA, to produce electricity.

     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.

     Particularly with respect to our joint-venture at Namisa, we may be required to reacquire all ownership interest of our Asian partners in Namisa in the event of a dead-lock with respect to a material issue under our shareholders’ agreement.

     Interruptions in the supply of natural gas and power transmission over the government power grid may adversely affect our business, financial condition and results of operations.

     We require significant amounts of energy, both in the form of natural gas and electricity, to power our plant and equipment. We purchase our natural gas needs through distributors which purchase natural gas from Petróleo Brasileiro S.A. -– Petrobras, or Petrobras, (the sole producer and supplier of natural gas in Brazil). Petrobras, in turn, is significantly dependent upon the supply of natural gas from Bolivia. On May 1, 2006, the president of Bolivia announced the nationalization of the country’s gas reserves. The long-term effects of this measure on the supply of natural gas in Brazil are still uncertain. The events in Bolivia could result in the disruption of the natural gas supply to Petrobras or an additional increase in the prices of natural gas. Any resulting interruption or reduction in the levels of supply of natural gas by Petrobras or a significant price increase, may negativellynegatively affect our production and production costs and consequently have ana material adverse effect on us.

Accidents or malfunctions in our critical equipment may decrease or interrupt production. Our insurance policies may not cover all losses and liabilities arising from these decreases or interruptions.

1011

Table of Contents

     The steel production process depends on certain critical equipment, such as blast furnaces, steel converters, and continuous casting machines. This equipmentOur mineral reserve estimates may materially differ from mineral quantities that we may be affected by serious malfunctions or damages. Significant interruptionsable to actually recover; our estimates of mine life may prove inaccurate; and market price fluctuations and changes in our production process would adversely affect us.operating and capital costs may render certain ore reserves uneconomical to mine.

     Our insurance policies for lossesreported 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 connection with operational risks, covering damagesestimating 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 our facilities (including damagethe date of an estimate may lead to equipmentrevision of estimates. Reserve estimates and blockageestimates of port facilities)mine life may require revision based on actual production experience and business interruption, may not be sufficient to cover all losses and liabilities arising from a decrease or interruptionother factors. For example, fluctuations in the steel, including those relatedmarket prices of minerals and metals, reduced recovery rates or increased operating and capital costs due to the failureinflation, exchange rates or other factors may render proven and probable reserves uneconomic to deliver orders to clientsexploit and may ultimately result in a timely manner.

     In addition, we are not able to contract insurance policies on comparable terms to those currently in effect, our resultsrestatement of operation and financial condition may be adversely affected if we incur liabilities which are not completely covered by our insurance policies.reserves.

     We are subject to risks related to legal and administrative proceedings.

     We are involved in numerous legal and administrative proceedings, including proceedings related to tax, liabilities, labor and civil disputes. AsWhile, as of December 31, 2007,2008, we had recorded provisions for some of these proceedings in thea total amount of R$3,578US$1,687 million (US$2,020 million) and judicially deposited a total amount of R$1,765US$893 million (US$996 million) in escrow.

     Itcourt escrow accounts, it is not possible to predict either the outcome of these proceedings.proceedings or the potential liability we may face due to unfavorable rulings in them. In the event that a substantial portion of these proceedings or one or more of the proceedings involving a substantial amount are decided against us, and in the event that no provision has been recorded, our results of operations may be materially adversely affected. In addition, even if sufficient provisions have been recorded, our liquidity may be materially and adversely affected.

     Our activities depend on authorizations from regulatory agencies, and changes in regulations could materially and adversely affect us.

     Our activities depend on authorizations from and concessions by governmental regulatory agencies of the countries in which we operate. If these laws and regulations change, modifications to our technologies and operations could be required, and we could be required to make unexpected capital expenditures. For more information, see “Item 4B—Government RegulationThe loss of any such authorization or changes in the regulatory framework we operate in may materially and Other Legal Matters.”adversely affect us.

     We have experienced labor disputes in the past that have disrupted our operations, and such disputes couldmay 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, couldhave in the past and may in the future materially and adversely affect the operation of facilities, or the timing of completion and the cost of our capital projects.

We are exposed to devaluation of our shares as result of certain equity swap agreements and our pension plan assets.agreements.

     In 2003, we entered into certain equity swap agreements referenced to our common shares. These agreements were originally entered into with POBT Bank and Trust Limited (an affiliate of Banco Pactual), which later assigned the agreements to UBS Symmetry Fund, UBS Strategy Fund and Fruhling Fund. In 2008, these agreements were assigned to Goldman Sachs International. Our current equity swap agreement with Goldman Sachs International will expire on September 10, 2009, unless it is renewed by us. The agreements state that the counterparty must pay us the cash dividends and final price return, if positive, on 29,684,400 CSN ADRs and we must pay the counterparty a fixed rate of 6.2569%USD three-month London Interbank Offered Rate, or Libor, plus 0.75% per annum on the initial price of this number of ADRs and the final price return, if negative, on this number of ADRs. The rationale for these transactions is that equities historically yieldhave yielded higher long-term returns than fixed-incomefixed- income securities, hence tending to offset CSN’s long-term debt servicing costs. SinceFrom September 5 to December 31, 2008, we entered intorecorded a loss in connection with these equity swap agreements our shares have appreciated more than 2,000% overin the initial priceamount of the ADRsUS$685 million, which was partially offset by a gain of US$155 million recorded in connection with an equity swap that expired on the New York Stock Exchange. AsSeptember 5, 2008, for a total loss of December 31, 2007, the accrued value of these swap agreements to us, based on the market value of our ADRs was US$813.3530 million. However, in the event of a sharp depreciationdecrease in the trading price of our shares and ADRs, the amount payable by us under these swap agreements may be significantly highsignificant and materially adverseand adversely affect us. See “Item 5A—Operating Results”, “Item 11—Quantitative and

1112

Table of Contents

Qualitative Disclosures About Market Risk—Equity Risk,” and Note 22A significant devaluation of our common shares may cause our pension funds to our consolidated financial statements contained in “Item 18. Financial Statements.”have an increased deficit of plan assets over pension benefit obligations.

     In addition, weWe are the principal sponsor of Caixa Beneficente dos Empregados da CSN, or CBS, our employee pension plan. As of December 31, 2007,2008, CBS had an excessinvested a portion of its portfolio in our common shares and held 4.47% of our capital stock. As a result, the ability of CBS to honor its pension obligations is subject to fluctuations in the fair value of CBS’s assets, including fluctuations in the trading price of our common shares.

     As of December 31, 2008, CBS had a deficit of plan assets over pension benefit obligations of US$13883.8 million. The fundedunfunded status of CBS is affected by, among other things, fluctuations in the fair value of CBS’s assets, which totaled US$1,025524.7 million as of December 31, 2007,2008, while CBS’ accumulated obligations and projected benefit obligations as of December 31, 20072008 were US$887608.5 million. As of December 31, 2007, CBS held 4.35% of our shares.

     In the event of a sharp depreciation of our common shares, CBS may becomeworsen its unfunded andsituation, which could have ana material and adverse impact on its actuarialability to fulfill its obligations. In this event, we may have to make substantial contributions to the fund to meet its pension benefit obligations.obligations, which may have a material adverse effect on us. See “Item 6D—Employees” and Note 1615 to our consolidated financial statements contained in “Item 18. Financial Statements.”

Risks Relating to a Routine SEC Review

     An ongoing SEC review of our registration statement on Form F-4, filed in connection with a proposed public debt exchange offer, may require us to further amend this annual report.

     We are in the process of responding to comments made by the staff of the SEC regarding our registration statement on Form F-4, filed on September 19, 2005. That registration statement was filed in connection with a proposed public exchange offer of notes originally issued in a non-public transaction. Until our responses to the SEC’s comments are finalized, our capital-raising activities will be limited to the U.S. non-public markets and the markets outside the United States. See “Item 4A. Unresolved Staff Comments” for further information.

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.

     The Brazilian custodian for theour common shares has obtained an electronic certificate of registration from the Central Bank permitting it to remit foreign currency abroad for payments of dividends and other distributions relating to theour common shares or upon the disposition of theour common shares. If holders of ADSs decide to exchange their ADSs for the underlying common shares, they will be entitled to continue to rely on the custodian’s electronic certificate of registration for five business days from the date of exchange. Thereafter, such holders of ADSs may not be able to obtain and remit foreign currency abroad upon the disposition of, or distributions relating to, theour common shares unless they obtain their own electronic certificate of registration or register their investment in theour common shares pursuant to Resolution No. 2,689, which entitles certain foreign investors to buy and sell securities on the São Paulo Stock Exchange.BOVESPA. Holders who do not qualify under Resolution No. 2,689 will generally be subject to less favorable tax treatment on gains with respect to theour common shares. If holders of ADSs attempt to obtain their own electronic certificate of registration, they may incur expenses or suffer delays in the application process, which could delay their ability to receive dividends or distributions relating to theour common shares or delay the return of their capital in a timely manner. In addition, we cannot assure you that the custodian’s electronic certificate of registration or any certificate of foreign capital registration obtained by a holder of ADSs will not be affected by future legislative or other regulatory changes, or that additional restrictions applicable to such holder, to the disposition of the underlying common shares or to the repatriation of the proceeds from such disposition will not be imposed in the future.

13

Table of Contents

     Holders of ADSs may not be able to exercise their voting rights.

     Holder 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 theour 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

12

Table of Contents

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. In addition, the depositary and its agents are not responsibleliable for failing to carry out voting instructions or for the manner of carrying out voting instructions. As a result, holders of ADSs may not be able to exercise their voting rights.

     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 price and time they desire.

     Investing in securities, such as the common shares or the ADSs, of issuers from emerging market countries, including Brazil, involves a higher degree of risk than investing in securities of issuers from more developed countries. Investments in emerging markets are generally considered to be more speculative in nature, and are subject to certain economic and political risks, such as changes in the regulatory, tax, economic and political environment that may affect your ability to receive the total or a partial return on your investment.

     The Brazilian securities markets are substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States and other jurisdictions, and are not as highly regulated or supervised as some of these other markets. The relatively small market capitalization and illiquidity of the Brazilian equity markets may substantially limit the ability of holders of our common shares or ADSs to sell theour common shares or the ADSs at the price and time desired. There is also significantly greater concentration in the Brazilian securities markets than in major securities markets in the United States. See “Item 9C. Markets—Trading on the São Paulo Stock Exchange.BOVESPA.”

     The sale of a substantial number of common shares, or the belief that this may occur, could decrease the trading price of theour common shares and the ADSs; holdersour 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.

     Holders of ADSs might be unable to exercise preemptive rights with respect to theour common shares.

     Holders of ADSs may not be able to exercise the preemptive rights relating to the common shares underlying their ADSs unless a registration statement under the Securities Act is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available. We are not required to file a registration statement with respect to the shares or other securities relating to these preemptive rights and we cannot assure holders of our ADSs that we will file any such registration statement. Unless we file a registration statement or an exemption from registration applies, holders of our ADSs may receive only the net proceeds from the sale of their preemptive rights by the depositary or, if the preemptive rights cannot be sold, the rights will be allowed to lapse.

     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.

14

Table of Contents

     We entered into certain equity swap agreements with Goldman Sachs International, which are referenced to 29,684,400 of our ADRs and set to expire on September 10, 2009. As a result, if we do not renew these equity swap agreements and are required to unwind them in a non-organized manner, a substantial amount of our ADSs may be sold in the market simultaneously, which could cause the trading price of our ADSs to decrease significantly.

     Similarly, our pension fund CBS invests heavily in our common shares, holding as of December 31, 2008 4.47% of our capital stock. Brazilian governmental authorities are discussing with CBS and other pension funds regulatory limits on investments by pension funds in the shares of related parties. As a result, CBS may be required to diversify its portfolio, which, if not done in an organized manner, may cause a substantial amount of our common shares to be sold in the market, negatively affecting the trading price of our common shares.

     We may be prevented from paying dividends to our shareholders and the holders of ADSs.

     At our Annual Shareholders’ Meeting of April 30, 2007, our shareholders approved the payment of dividends and interest on shareholders’ equity related to the fiscal year 2006 in the total amount of US$682.1 million, of which US$191.7 million and US$153.5 million were paid on June 30, 2006 and August 8, 2006, respectively, as intermediary dividends, in accordance with the resolutions of our Board of Directors. The outstanding balance of US$336.9 million was payable on May 9, 2007, but the payment was temporarily suspended as a result of a federal court order relating to one of our tax contingencies. On September 2007, we obtained a favorable decision from a federal court, allowing us to pay such outstanding dividends, and payment was made on September 4, 2007.

     At our Annual Shareholders’ Meeting of April 30, 2009, our shareholders approved the payment of dividends and interest on shareholders’ equity relating to 2008, in the total amount of US$868.6 million (US$738.2 million as dividends and US$130.4 million as interest on shareholders’ equity).

     The total amount of approved dividends include dividends paid in advance on November 27, 2008, in the amount of US$70.6 million, that had already been approved by our Board of Directors on August 12, 2008, and dividends that had already been approved by our Board of Directors on March 24, 2009 in the amount of US$667.6 million.

     Soon after the announcement of the payment of such dividends in the amount of US$667.6 million, a court order was issued by a trial state tax court in the State of Rio de Janeiro in connection with tax claims related to IPI premium credits on exports that we have recorded, in order to block approximately US$354.2 million of our funds. For this reason, the Company paid its shareholders on April 2, 2009 the amount of funds that had not been blocked of approximately US$313.4 million. We are taking all measures to unblock our funds. Nevertheless, aiming at the preservation of our shareholders’ rights, we decided to pay on June 26, 2009, the remaining dividends of approximately US$354.2 million.

     The US$130.4 million as interest on shareholders’ equity were paid on May 11, 2009.

     We cannot assure you that new court orders will not be issued against us to block our funds or to prevent us from paying dividends to our shareholders and holders of ADRs in the future.

Item 4. Information on the Company

4A. History and Development of the Company

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 of crude steel and finished steel products increased in 2007 by 51% to 5.3 million tons and finished steel production increased in 2007 by 21% to 5.0 million tons, as compared to 2006.

     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 2007, we accounted for approximately 45% of the galvanized steel products sold in Brazil. We are also one of the world’s leading producers of tin mill products for packaging containers. In 2007, we accounted for approximately 98% of the tin mill products sold in Brazil.

     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:

13

Table of Contents

• iron ore produced from our own mines is processed in continuous sintering machines to produce sinter;
  
  
• sinter and lump ore direct charges are smelted with lump coke and injected powdered coal in blast furnaces to produce pig iron;
  
  
• pig iron is then refined into steel by means of basic oxygen converters;
  
  
• steel is continuously cast in slabs;
  
  
• slabs are then hot rolled, producing hot bands that are coiled and sent to finishing facilities.

     In addition to owning our own source of iron ore, we also currently produce from our own mines all of our requirements of limestone and dolomite and a portion of our tin requirements. Using imported coal, we produce approximately 75-80% 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 also require water, industrial gases, electricity, rail and road transportation, and port facilities.

History

     Companhia Siderúrgica Nacional is a Brazilian corporation (sociedade por ações) incorporated in 1941 pursuant to a decree of Brazilian President, Mr. Getúlio Vargas. The Presidente Vargas steelworks, located in the city of Volta Redonda, in the stateState of Rio de Janeiro, started production of coke, pig iron castings and long products in 1946.

     Three major expansions were undertaken at the Presidente Vargas steelworks during the 1970s and 1980s. The first, completed in 1974, 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 4.5 million tons of crude steel.

15

Table of Contents

     We were privatized through a series of auctions held in 1993 and early 1994, through which the Brazilian government sold its 91% shareholdingownership interest in our company.us.

     From 1993 through 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, an alternative method that results in higher energy use and metal loss. From 1996 through 2002, we spent the equivalent of US$2.4 billion under 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. 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.

Accident in Blast Furnace No. 3

     In January 2006, there was an accident involving the gas cleaning system adjacent to Blast Furnace No. 3 at the President Vargas steelworks. The accident prevented us from operating the equipment for approximately six months, affecting our operating revenues, as a result of reduced sales volumes, cost of goods sold, as a result of having to purchase slabs from third-party sources, gross profit and operating income, as further explained in “Item 5A. Operating Results—Results of Operations—2006 Compared to 2005”. In order to meet our customers’ purchasing orders during the period in which Blast Furnace No. 3 was under repair, we purchased slabs and coils from third-party sources, therefore increasing our costs of goods sold in 2006. In the second half of 2007, our Blast Furnace No. 3 was completely repaired and resumed operating normally.

Capital ExpendituresGeneral

     We invested US$290 million, US$706are 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 US$9805.1 million tons, respectively. Production of crude steel and rolled steel products decreased in 2005, 20062008 by 6.0% to 5.0 million tons and 2007, respectively,finished steel production decreased in 2008 by 9.0% to further improve productivity levels and4.5 million tons, as compared to maintain our operational capacity. Expenditures of US$632 million

14

Table of Contents

were for, among other things, equipment revamping, spare parts purchases, building repairs, equipment automation and information technology at our facilities, while US$348 million were used for the acquisition of CFM. For further information, see “Item 5B. Liquidity and Capital Resources—Short-Term Debt and Short—Term Investments”2007.

     In 2007, we continued to implement our strategyOur fully integrated manufacturing facilities produce a broad line of developing downstream opportunities, newsteel products, including slabs, hot- and market niches by creating or expanding capacity ofcold-rolled, galvanized and tin mill products for the distribution, packaging, automotive, sector and by investing in a galvanizing and pre-painting plant for supply to the construction and home appliance industry sectors, as describedand construction industries. In 2008, we accounted for approximately 49.0% of the galvanized steel products sold in “Item 4B. Business Overview—Facilities”Brazil. We are also one of the world’s leading producers of tin mill products for packaging containers. In 2008, we accounted for approximately 99.0% of the tin mill products sold in Brazil.

     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:

• iron ore produced from our own mines is processed in continuous sintering machines to produce sinter;
  
  
• sinter and lump ore direct charges are smelted with lump coke and injected powdered coal in blast furnaces to produce pig iron;
  
  
• pig iron is then refined into steel by means of basic oxygen converters;
  
  
• steel is continuously cast in slabs;
  
  
• slabs are then hot rolled, producing hot bands that are coiled and sent to finishing facilities .

     We also intend to control production costs and secure reliable sources of raw materials, energy and transportation in supportcurrently produce from our own mines all of our steelmaking operations throughrequirements of iron ore, limestone and dolomite, and a programportion of strategic investments. The principal strategic investments already madeour tin requirements. Using imported coal, we produce approximately 70-75% 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 set forthpurchased in “Item 4B. Business Overview—Facilities”.local markets. Our steel production and distribution also require water, industrial gases, electricity, rail and road transportation, and port facilities.

Acquisitions and Dispositions

     On June 5, 2006, we acquired 100.0% of the shares ofissued by Companhia Metalúrgica Prada, or Prada, from Kiskidee Investments Limited LLC, for a total amount of US$1.00. Prada is the largest steel can manufacturer in Brazil and produces more than one billion steel cans in its four production units located in the states of São Paulo, Santa Catarina and Minas Gerais, in the southeastern and southern regions of Brazil and, accordingly, is one of our major customers of tin mill products.

16

Table of Contents

     On July 20, 2007, Nacional Minérios S.A. or Namisa, our then wholly-owned mining subsidiary, acquired 100.0% of the shares of issued byCompanhia de Fomento Mineral e Participações, or CFM. The final acquisition price amounted to US$440400 million, of which US$100 million waswere fully paid upon the execution of the purchase agreement, and US$250 million was paid on August 1, 2007. The remaining US$90 million is to be paid in four installments within two years upon the fulfillment of certain conditions set forth in the purchase agreement.by us. CFM explores various iron ore mines and owns ore processing facilities in the stateState of Minas Gerais. CFM is located in the Statestate of Minas Gerais and has facilities close to Casa de Pedra, our most important mining asset.

     Namisa’s business plan providesOn December 30, 2008, our ownership interest was reduced to 40% of the voting and total capital stock of Namisa upon its issuance of newly issued shares for the utilizationaggregate amount of availableapproximately US$3.08 million to Big Jump Energy Participações S.A., an Asian consortium whose shareholders are Itochu Corporation, JFE Steel Corporation, Nippon Steel Corporation, Sumitomo Metal Industries, Ltd., Kobe Steel, Ltd, Nisshin Steel Co, Ltd., and Posco. The remaining 59.99% of the voting stock of Namisa is currently held by us. In connection with this sale, Namisa paid us approximately US$3.0 billion on December 30, 2008 as pre-payment for a portion of the purchase price agreed between the parties for future sales of crude iron ore mining(run-of- mine, or ROM) and logistics resources, includingthe rendering of port services by us to Namisa. The ROM will be extracted by us from the Casa de Pedra mine and will be sold to Namisa, which will be required to beneficiate the product at its own iron ore minesindustrial facilities. All pre-payment agreements were negotiated at arms-length basis. For further information on the effect of these pre-payments in our long-term obligations, see “Item 5E. Off-Balance Sheet Arrangements.”

     We and contracts with third parties, access to railway transport and portBig Jump Energy Participações S.A. have entered into a shareholders’ agreement in order to exportgovern our joint-control of Namisa. Under certain extreme situations provided for in the shareholders’ agreement, a dead-lock resolution process may be established. This procedure 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 call and put options, which entitles Big Jump Energy Participações S.A. to elect to sell all its production. On April 22,ownership interest in Namisa to CSN and CSN to elect to buy all ownership interest of Big Jump Energy Participações S.A. in Namisa, in each case for the fair market value of the respective shares.

Accident in Blast Furnace No. 3

     In January 2006, there was an accident involving the gas cleaning system adjacent to Blast Furnace No. 3 at the Presidente Vargas steelworks. The accident prevented us from operating the equipment for approximately six months, affecting our operating revenues, gross profit and operating income due to reduced sales volumes and the need to purchase slabs and coils from third-parties in order to meet our customers’ purchasing orders during the period in which Blast Furnace No. 3 was under repair, as further explained in “Item 5A. Operating Results—Results of Operations—2007 Compared to 2006.” In the second half of 2007, our Blast Furnace No. 3 was completely repaired and resumed operating normally, and, in December 2008, the reinsurance companies paid us the remaining balance of US$160 million of our US$520 million claim against them. For further information, see “Item 4B. Business Overview—Insurance” and Note 4 to our consolidated financial statements included in “Item 18. Financial Statements.”

Capital Expenditures

     We invested US$706 million, US$980 million and US$886 million in 2006, 2007 and 2008, respectively. Expenditures in 2008 were used for the acquisitions of equipment, of which US$247 million was used in the Casa de Pedra mine expansion, US$34 million in projects relating to the Itaguaí port expansion and US$65 million in major overall projects that extend our fixed assets useful life. For further information, see “Item 5B. Liquidity and Capital Resources—Short-Term Debt and Short-Term Investments.”

     In 2008, we publicly announced that we have retained Goldman Sachscontinued 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 financial advisorsteelmaking operations through a program of strategic investments. The principal strategic investments already made are set forth in connection with the potential sale“Item 4B. Business Overview—Facilities.”

17

Table of a portion or all shares of Namisa.Contents

Planned Investments

     Our planned investments in iron ore, steelmaking, cement and logistic projects are described below.

     Projects which were previously announced, such as the greenfield slab mills in the city 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 and the Logistics Platform Project, in the city of Itaguaí, in the State of Rio de Janeiro (except for the ongoing improvements on its Container Terminal and for the expansion of its Solid Bulks Terminal) were put on hold by the Board of Directors due to the uncertainty about the duration of the current global economic scenario.

Iron Ore Project

     The investments in ourOur iron ore project comprisebusiness comprises the expansion of our mining activities and our seaport facilities, the construction of pellet plants and, to a lesser extent, the trading of iron ore produced by other companies through our own logistics corridor.network. We expect to invest a total of US$3.44.5 billion to produce and/or sell approximately 10090 million tons of iron ore products, by April 2012, of which US$700839 million have already been invested. We willexpect to finance these investments with the National Economic and Social Development Bank (Banco Nacional deDesenvolvimento Econômico Social)-BNDES), or BNDES, other export credit agencies, from the proceeds we intend to obtain from offerings of securities in general and ofwith the free cash flow from our current operations. Our iron ore project schedule and expected investments are divided as follows:the following:

• In January 2004, we announced the approval of investments of approximately US$1.0 billion to expand the annual production capacity of the Casa de Pedra iron ore mine to 53 million tons. We subsequentlyIn connection with the Namisa joint-venture, we reviewed these figures and increased our initial investment to US$1.71.5 billion, and the expansion of the annual production of Casa de Pedra from 53 million to 70 million tons, which is currently being implemented. As of December, 2007,2008, approximately US$400540 million had already been invested in the increase in production capacity of the Casa de Pedra mine and its current annual production capacity is 1721 million tons.
  
  

15

Table

Additional Investments

     In addition to the currently planned investments and maintenance capital expenditures, we continue to consider possible acquisitions, joint ventures and brownfield or greenfield projects to increase or complement our steel producing capabilities.

17

Table of Contents

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 Avenida Brigadeiro Faria Lima, 3,400, 20thRua São José, 20, 16^th floor, 04538-132, São Paulo, SP,20010-020, Rio de Janeiro, RJ, Brazil and our telephone number is +55-11-3049-7100.+55-21-2141-1800. 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 advantages:strengths:

19

Table of Contents

Fully integrated business modelmodel.. We believe we are one of the mostly fully integrated steelmakers in the world. We have captive iron ore reserves, which differentiate us from our main competitors in Brazil that purchase their iron ore requirements from mining companies such as Companhia Vale do Rio Doce, or CVRD. WeIn 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 in excess of 8.3 billion tons, out of which 1.6 billion tons of proven and probable reserves with a grade of approximately 48%48.0% . In addition to our iron ore reserves, we have captive dolomite and limestone mines that supply our Presidente Vargas steelworks. Our steelworks are close to the main steel consumer centers in Brazil, with easy access to port facilities and railroads. Our operations are strongly integrated as a result of our captive sources of raw materials, such as iron ore, and our access to owned infrastructure, such as railroads and deep-sea water port facilities.

Thoroughly developed transport infrastructureinfrastructure.. We have a thoroughly developed transport infrastructure, from our iron ore mine to our steel mill to finally, our ports. The location of our steelworks facility is next to railroad systems and port facilities, facilitating the supply of raw material, 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 ofin which we hold, 32.9% of the voting capital.directly and indirectly, a 33.27% ownership interest. The railway connects the Presidente Vargas steelworks to the container terminal at Itaguaí Port, which handles most of our steel exports. Since we obtained the concession to operate 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-party sources.third-parties.

Self-sufficiency in energy generationgeneration.. 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. We also sell excess energy we generate into the energy market. Our 238 MW thermoelectric co-generation plant provides the Presidente Vargas steelworks with approximately 60% of its energy needs for its steel mills, using as its primary fuel the waste gases generated by our coke ovens, blast furnaces and steel processing facilities. We indirectly hold 29.3%29.5% of the Itá hydroelectric plant that has installed capacity of 1,450 MW, with a guaranteed output of 668 MW to us and to the other shareholders of Itá Energética S.A., or ITASA, proportionally 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 17.9% of the Igarapava hydroelectric, with 210 MW fully installed capacity, corresponding to 130 MW of firm guaranteed output in December 31, 2007.capacity. We have been using part of our 22 MW take from Igarapava to supply energy to the Casa de Pedra and Arcos mines.

Low cost structurestructure.. As a result of our fully integrated business model, our thoroughly developed transportation infrastructure and our self sufficiencyself-sufficiency in energy generation, we have been constantly and consistently presenting substantially high margins. Other factors that lead to our highthese margins are the strategic location of our steelworks facility, the use of state of the art technology and our qualified work force.

Diverse product portfolio and product mixmix.. We have a diversified product mix that includes: hot rolled, cold rolled,hot-rolled, cold-rolled, galvanized and our 98% share of steel tin mill products in Brazil.products. We offer many kinds of steel packaging produced in Brazil, at ouraccounting for 99.0% of the steel tin plate steel mill products and account for more than 50%50.0% of the galvanized flat steel produced in Brazil. We also produce a diversified portfolio of products to meet a wide range of customer needs

18

Table of Contents

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 GalvaSud product provides material for exposed auto parts, using hot-dip galvanized steel and laser-welded blanks. This, together with our hot-dip galvanizing process know-how, should allowallows us to increase our sales to the automotive segment. In 2008, our market share in the automotive industry accounted for 21.0% of total domestic sales, and we expect to further increase our sales to the automotive industry in 2009. Our subsidiary CSN Paraná, provides us additional capacity to produce high-quality galvanized, galvalume and pre-painted steel products for the construction and home appliance industries. In addition, our subsidiary, INAL, the largest flat steel distributor in Brazil, is a strong sales channel in the domestic market, enabling us to meet demands from smaller customer, and therefore to have a strong presence in this market. We believe we are well positioned strategically to develop new products such as long steel and cement that are very important for the civil construction industries.

Strong presence in domestic market and strategic international exposureexposure.. We have a strong presence in the domestic market for steel products, with a 98%99.0% market share of the steel tin mill product industry in Brazil and a large market share for galvanized flat steel. In addition, our subsidiaries CSN LLC and Lusosider constitute significant sales channels for our products, selling in the United States 10% of our total sales and in Europe 7%5.0% and 5.0%, respectively, of our total sales in 2007, respectively.2008.

Strategy20

Table of Contents

Strategies

     Our goal is to increase value for our shareholders, by further benefiting from the competitive cost advantages we offer our customers from the industry segments in which we operate, maintaining our position as one of the world’s lowest-cost steel producers, becoming an important iron ore global player and by optimizing our infrastructure assets (our ports, railways and interest in power generating plants).

     To achieve this goal, we have adopted strategies in each of our four business segments (where we already have assets, current operations or inherited competitive advantages) as described below.

Steel

Our strategy related to our steel business involves:

• supplying domestic markets, where we have historically recorded higher profit margins, with a wide range of finished flat and long steel products;
  
  
• implementing a carefully crafted globalization strategy that may include associations with or the acquisition and/or construction of steel operations, steel-related businesses or distribution or service centers outside Brazil, which could further process low cost semi-finished products (slabs) from Brazil and improve our distribution channels abroad;
  
  
• emphasizing a wide range of value-added products, mostly galvanized, pre-painted and tin-coated;
  
  
• introducing new technologies and systems to enhance our understanding of customers, competitors and industry trends; and
  
  
• providing customer solutions supported by quality products and services.

     For further information on our planned investments relating to our steel activities, see “Item 4A. History and Development of the Company—PlannedCompany —Planned Investments—Steel Making (Slab Mills)Steelmaking.” and “Item 4A. History and Development of the Company—Planned Investments—Long Steel Production”.

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 iron ore mine and CFM –Namisa, and search for investment opportunities, primarily in mining operations related to the steel business. For further information on our planned investments relating to our mining activities, see “Item 4A. History and Development of the Company—PlannedCompany —Planned Investments—Iron Ore Project”

19

Table     In 2008, after the first two years trading in the international iron ore market, we exported 14.7 million tons of Contents

     In 2007, we madeiron ore, which represents a 187% increase as compared to 2007. This first step to our first entry into the international iron ore market. This first stepmarket 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 the terminal to also handle and export iron ore and to load from its facilities the first shipment of our iron ore products.

Logistics

     We expect to take advantage of and expand our logistics capabilities, including our integrated infrastructure operations (our railways and ports).

     We have substantially improved the infrastructure needed to support the PresidentPresidente Vargas steelworks, and our export and international strategies by investing in projects such as power generation through hydroelectric power plants, railways and port facilities in order to increase our ability to control production costs and secure reliable sources of energy, raw materials and transportation.

21

Table of Contents

Cement

     Our strategy for our cement business includes the achievement of greater utilization of by-products by constructing a clinker furnacecement grinding and a grinding millclinker facility to produce 32.3 million tons of cement, using the slag generated by our blast furnaces, which we expect will become operational by the end of 2008 and by the first half of 2009 and the second half of 2010, respectively. For further information on our planned investments relating to our cement activities, see “Item 4A. History and Development of the Company—PlannedCompany —Planned Investments—Cement Project.”

MajorOur Steel Products

     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.

The following chart reflects our production cycle in general terms.

20

Table of Contents

     Our Presidente Vargas steelworks produces flat steel products — slabs, hot-rolled, cold-rolled, galvanized and tin mill products. For further information on our production process, see “—Process”.Product Process.”

22

Table of Contents

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-rolledHot-Rolled Products

     Hot-rolled products comprise heavy-gauge hot-rolled coils and sheets, 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 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-rolledCold-Rolled Products

     Cold-rolled products comprise 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 0.30 millimeters to 2.99 millimeters.

21

Table of Contents

Galvanized Products

     Galvanized products comprise 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.

23

Table of Contents

     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 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 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 flat-rolled low-carbon steel coils or sheets with, as defined by Brazilian standards, a maximum thickness of 0.490.45 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:

22

Table of Contents

• tin plate - coated on one or both faces with a thin metallic tin layer plus a chromium oxide layer, covered with a protective oil film;
  
  
• tin free steel - coated on both faces with a very thin metallic chromium layer plus a chromium oxide layer, covered with a protective oil film;
  
  
• low tin coated steel - coated on both faces with a thin metallic tin layer plus a thicker chromium oxide layer, covered with a protective oil film; and
  
  
• 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 is extracted, crushed, screened and transported by railway from our Casa de Pedra mine located in the city of Congonhas, do Campo, in the State of Minas Gerais, 328 km from the Presidente Vargas 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 import all the coal required for coke production. 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”.Requirements.” This coal distillation process also produces coke oven gas as a by-product,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 2006,2008, we produced about 75-80%70-75% of our coke needs and imported the balance. 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.

24

Table of Contents

     The iron ore is reduced to pig iron through successive chemical reactions with carbon monoxide (from the coke and PCI) in two blast furnaces that 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 sold to neighboring cement companies. Upon completion of our planned cement plant expected to occur by 2008,July 2009, slag also will be 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 into 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, 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 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. After pickling, the hot-rolled coils selected to produce thinner materials are sent to be rolled in cold strip mills. The better surface characteristics of cold-rolled products enhance their value to customers as compared to hot-rolled products. Additional processing

23

Table of Contents

related to cold-rolling may further improve surface quality. Following cold-rolling, coils may be annealed, 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.

     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 operations unit is responsible for steel production operations, repair shops, in-plant railroad, and process development at Volta Redonda;
• 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.

     The production sector is also responsible for environment and quality consultancy, new products development, capital investment implementation for steel production and processing, as well as the supervision of GalvaSud’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 transnational companies.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, we were awarded the ISO 9000: 2000 certificate for the design and manufacture of hot-rolled, pickled and oiled products, cold-rolled, galvanized and tin mill products, which replaced the ISO 9001 Certificate that we were awarded in December 1994. In October 2003, we were also awarded the automotive industry’s Technical

25

Table of Contents

Specification - 16949: 2002, for the design and manufacture of hot-rolled, pickled and oiled, cold-rolled and galvanized products, which replaced the QS 9000 standards that we were awarded in 1997. Some important automotive companies, like Volkswagen, General Motors and Ford, require their suppliers to satisfy the QS 9000 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.

26

Table of Contents

Source: Brazilian Steel Institute (Instituto Brasileiro de Siderurgia), orIBS.
* Lower production due to accident at Blast Furnace No. 3 on January 22, 2006.

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

24

Table of Contents

(1) Lower production due to the accident at Blast Furnace No. 3 on January 22, 2006.

Raw Materials and Suppliers

     The principal 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.

     Given the low interest rate environment in the developed economies, worldwide coordinated economic growth over the last few years – mainly emerging countries as China, India, Russia and Brazil and tighter supply andincreasing demand conditions onfor various commodity type industrial segments enabled coal and iron ore miners, and coke producers were able to charge customers extremely high prices increases. Theseprices. As a result of the effects of the 2008 financial crisis, worlwide coordinated economic growth was deeply impaired and demand for commodity type industrial segments decreased significantly, reversing this trend.

     Nevertheless, these commodity type industrial segments are highly concentrated in the hands of a few global players and there can be no assurance that other 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 stateState of Minas Gerais which has the following installed mining capacity:Gerais.

     Casa de Pedra has an installed mining capacity of 21.5 million tons annually (run-of-mine)(ROM) with a processing ratio of 74.4%79.1%, resulting in a mining capacity of 1617.0 million tons of processed iron ore per year, which exceeds our needs for the Presidente Vargas steelworks. In 2007,2008, the run-of-mine, or ROM, was 21.619.9 million tons (with a total crusher feed of 19.319.5 million tons and a total classification and concentration feed of 18.921.0 million tons). The resulting product tonnage was 15.017.0 million tons of processed iron ore per year (mass recovery on wet basis of 79.6%80.8%) . Of this total amount, 7.17.7 million tons were delivered to the Presidente Vargas steelworks and 5.95.5 million tons were sold to third parties, consisting of 2.53.1 million tons of sinter-feed material, 1.60.9 million tons of pellet feed materials, 0.40.9 million tons of lump ore and 1.40.7 million tons of small lump ore. In addition, approximately 14 million tons of processed iron ore were kept in inventory in 2007.

We own other iron ore assets through Namisa, a wholly-ownedjointly-owned subsidiary of oursour Company, which acquired CFM in July, 2007. CFM was incorporated 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. In 2007, 7.72008, 6.6 million tons of ROM were extracted from the Engenho mine with a waste/ore ratio of 0.27.0.35. The supply of the Pires beneficiation plant reached 7.95.9 million tons with product generation in the order of 4.44.2 million tons composed of Lump Ore (LO), Small Lump Ore,lump ore, small lump ore, or Hematitinha, Sinter Feed (SF)hematitinha, sinter feed and concentrates. Also in 2007, 0.652008, 1.1 million tons were extracted from the Fernandinho mine with a waste/ore ratio of 0.16.0.24. The beneficiation plant at the Fernandinho unit also processed crude ore acquired from third parties, which along with its own ROM, totaled 1.51.2 million tons of feed. This processing was responsible for the generation of 0.60.8 million tons of Lumplump ore and Sinter Feedsinter feed products, in which the Sinter Feedsinter feed practically corresponded to the total production.

27

Table of Contents

     In 2007, CFM2008, Namisa sold 4.72.6 million tons through these two complexes, as well as from Itaminas (from the Sarzedo Mine), of which 1.72.2 million tons were exported. On March 30, 2008 CFM was merged with Namisa.

     Namisa complements our strategy to be a world leading producer of high quality iron ore. Namisa is and will remain fully integrated with our railway and port logistics corridor, providing 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 stateState of Minas Gerais. Trading iron ore is obtained from small mining companies in the neighborhood and other trading companies.

     In order to free up capital For information on a small portionthe sale of 40% of our iron ore projectownership interest in Namisa, see “Item 4A. History and with a view to speed up other projects on various segments (such as cement, steel, logistics), on April 22, 2008, we publicly announced that we have retained Goldman Sachs as our financial advisor in connection withDevelopment of the potential sale of a portion or all of our shares of Namisa.Company—Acquisitions and Dispositions.”

     Our steelmaking operations consumed 8.06.7 million tons of iron ore during 2007,2008, consisting of 5.75.0 million tons of sinter-feed material 0.7 million tons of iron ore pellets and 1.61.7 million tons of lump ore. As we don’tdo not have pelletizing plants, the total amount of pellets has been acquired in the Brazilian market.

25

Table of Contents

     We process the iron ore at the mine site prior to shipment by railway to the Presidente Vargas steelworks. See the map under “Item 4D. Property, Plant and Equipment” for the location of the Casa de Pedra mine in relation to the Presidente Vargas steelworks.

Coal.

     In 2007,2008, our coal consumption totaled 3.33.0 million tons and accounted for approximately 17%21% of our production cost. The 32% increase compared to the 2006 consumption is due to the stoppage of Blast Furnace No. 3 in the first half of 2006, from January to June. Because of the cyclical nature of the coal industry, price and quantity terms contained in our coal supply contracts, which are denominated in U.S. dollars, are usually renegotiated annually. Thus, our coal costs can vary from year to year.

Coke.

     In 2007,2008, in addition to the approximately 1.7 million metric tons of coke we produced, we also consumed 208,193456,254 tons of coke bought from third parties in China, India and Colombia. This figure represents an increase of 119% as compared to our consumption in 2007 and expresses CSN’s historical level of consumption. The reduction of our consumption in 2007 was a direct effect from the the stoppage of Blast Furnace No. 3 in 2006, which increased our stock levels of own produced coke in 2006 and reduced our need to purchase coke from third parties in 2007. The market for coke has been very tightcompetitive 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 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. DespiteDuring the instability shownfourth quarter of 2008, the financial crisis hit the steel industry and coke consumption worldwide was drastically reduced, what tends to result in lower prices of this market in 2007, we were not much affected by the steep price raises as we have maintained good level of stocks that resulted from the stoppage of Blast Furnace No. 3 in the first half of 2006.raw material.

     We use a PCI system that allows us to use less coke in our blast furnaces, substituting a portion of the coke with lower grade coal. The PCI system has reduced our need for imported coal and imported coke, thereby reducing our production costs. In 2007,2008, we used approximately 914,716767,656 tons of imported PCI coal.

Limestone and Dolomite.

     We obtain limestone and dolomite from our Bocaina mine at Arcos in the State of Minas Gerais, State, which produces 1.61.7 million tons of limestone and 0.90.8 million tons of dolomite on an annual basis, more than 90%89% of which is used in theour steelmaking process. See the map under “Item 4D. Property, Plants and Equipment” for the location of the Bocaina mine in relation to the Presidente Vargas steelworks.

Aluminum, Zinc and Tin.

28

Table of Contents

     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 purchase aluminum, zinc and tin typically from third-party domestic suppliers under one-one or two-year contracts. We maintain approximately a one-month reserve of such materials at the Presidente Vargas steelworks.

     In April 2005, we acquired Estanho de Rondônia S.A., or ERSA, a tin mine and smelter facility. This smelter was one of our main tin suppliers in 2004. We intend to increase production from 1,800 tons in 2005 to 3,800 tons in 2009, in order to achieve self- sufficiencyself-sufficiency of this raw material.

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. These gases are supplied by a third partythird-party under long-term contracts from its gas production facilities located on the Presidente Vargas steelworks site. In 20072008 we used 949,000858,876 tons of oxygen to produce 5.35.1 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% 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$1.21.1 million.

Electricity.

     Steelmaking also requires significant amounts of electricity to power rolling mills, production lines, hot metal processing, coking plants and auxiliary units. In 2007,2008, the Presidente Vargas steelworks consumed approximately 3.22.9 million MWh of electric energy or 610590 kilowatt hours per ton of crude steel. This consumption made us one of the largest consumers of electricity in Brazil, accounting for approximately 11% of the overall consumption of electricity in the State of Rio de Janeiro.

26

Table of Contents

     Our main current source of electricity is our 238-MW238 MW thermoelectric co-generation power plant at the Presidente Vargas steelworks, besides the Itá and Igarapava hydroelectric facilities held by us, from which we have a take capacity available of 167 MW and 22 MW, respectively. In addition, we have approved the construction of a new turbine generator at the Presidente Vargas steelworks, which will increase 20 MW to our existing installed capacity. This turbine will be allocated near to our Blast Furnace No. 3, using the outlet gases from the ironmaking 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, S.A., 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 Petrobrás, the Brazilian national oil company.Petrobras. See “Item 3D. Risk Factors —RisksFactors—Risks Relating to the Steel Industry and CSN—Interruptions in the supply of natural gas and power transmission over the government power grid may adversely affect our business, financial condition and results of operations.”

Diesel Oil

     In mid-October 2006, we entered into an agreement to receive diesel oil from the Companhia Brasileira de Petróleo Ipiranga, or Ipiranga, in order to supply our equipment in Casa de Pedra and Arcos in Minas Gerais, which are the plants responsible for our mining activity. In 2007 and 2008, we had a consumption of 38,187 kiloliters and 49,565 kiloliters of oil diesel, respectively. This increase was mainly due to the growth of our mining activity to support our growing iron ore production, which required us to enlarge our mining equipment fleet. In 2007 and 2008, we have paid R$61.3 million and R$82.6 million, respectively, for the diesel oil we consumed.  

29

Table of Contents

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 and coalBrazil. Coal and coke beingare the only inputs acquired abroad.

Our main raw materials suppliers are set forth below:

Logistics

     Transportation costs are a significant component of our steel production costs and are a factor in our price-competitiveness in the export market. Railway transportation is the principal means by which we transport raw materials from our mines to the Presidente Vargas steelworks and steel 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 for processing into steel. The distances from suchour mines to the Presidente Vargas steelworks are 328 km and 455 km. Imported coal and coke bought from foreign suppliers are unloaded at the port of Itaguaí, 90 km west of the Citycity of Rio de Janeiro, and shipped 109 km by train to the Presidente Vargas steelworks. Our finished steel products are transported by train, truck and ships to our customers throughout Brazil and abroad. Our principal Brazilian markets are the cities of São Paulo (335 km from the Presidente Vargas steelworks), Rio de Janeiro (120 km) and Belo Horizonte (429 km).

     Until recently, Brazil’s railway system (including railcars and tracks) was principally government-owned and in need of repair, but has now been largely privatized. In an attempt to increase the reliability of our rail transportation, we indirectly 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, 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.

27

Table of ContentsMarketing Organization and Strategy

Sales and MarketingSteel Products

     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.

Marketing Organization and Strategy

     Our sales approach is to establish a brand loyalty image and achieve a reputation for quality products by developing relationships with our clients and focusing on their specific needs. Our business encompasses operations and commercial activities.

     Our operations activities are undertaken by our production sector, which is composed30

Table of the following two units:

• the operations unit is responsible for steel production operations, repair shops, in-plant railroad, and process development at Volta Redonda;
  
  
• 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.

     The production sector is also responsible for environment and quality consulting, new products development, capital investment implementation for steel production and processing, as well as the supervision of GalvaSud’s and CSN Paraná’s operations.Contents

     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 five market segments: packaging, distribution, automotive, home appliances and original equipment manufacturer, or OEM, and construction. Each one of these segments has a specific strategic goal to provide tailor-made steel solutions that meet the specific needs of each client they serve.

     The distribution unit is responsible for supplying large steel processors and distributors, as well as some industries that produce small diameter pipe and light profiles. The 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 unit is supplied by a specialized mill, GalvaSud, and also by a portion of the galvanized material produced at Presidente Vargas steelworks, benefiting from a combined sales strategy.

     In 2007, approximately2008, over two thirds of our domestic sales were made through our own sales force directly to customers. The remainder was soldremaining 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 to more profitable markets in order to maximize revenues and shareholder returns. Our strategy is to maintain Europe and North America as our main export markets, taking advantage of the commercial channels provided by our subsidiaries CSN LLC, in the United States, and Lusosider, in Portugal.

     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 overfrom the prior two-year periodlast 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 us the flexibility to shift between domestic and export markets, thereby allowing us to maximize our profitability.

     Unlike classic commodity products, there is no exchange trading of steel, or uniform pricing, as wide differences exist in terms of size, chemical composition, quality and specifications. In general, exports are priced

28

Table of Contents

based on international spot prices of steel at the time of sale in U.S. dollars or Euros, depending on the destination. To establish the domestic price, the corresponding international quotations are converted intoreais and an additional amount is added to reflect, among other things, local demand, transportation and tariff costs to import similar products. Sales are normally paid at sight, or within 15 or 30 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.

Iron Ore

     Iron ore products are commercialized by our own commercial team located in Brazil and also overseas, in Portugal and Hong Kong. In addition to our international sales staff, our overseas office also hosts our technical assistance management. Our overseas offices allow us to stay in close contact with our customers, monitor their requirements and our contract performance. Domestic sales, market intelligence analysis, and planning and administration of sales are handled from Brazil by the staff in our Nova Lima office, which is located approximately 70km from the Casa de Pedra mine.

The chart below illustrates the coverage of our sales team both domestically and abroad:

31

Table of Contents

     We supply all of our iron ore to the steel industry and our main targets are the Brazilian, European and Asian markets. Prevailing and expected levels of demand for steel products directly affect demand for iron ore. Demand for steel products is influenced by many factors, such as GDP, global manufacturing production, 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 place specialized personnel in direct contact with our clients to help determine the mix that best suits each particular customer. We also constantly search for the optimal balance between the use of our mining assets and customization needed by each of our customers. In order to compete with competitors more conveniently located geographically or that may offer larger sales volume of iron ore, we rely on our market analysis and forecasts of the market chain.

Steel Sales

     We recorded annual steel sales volume of 4.89 million tons, which represents a decrease of 9.0% as compared to 2007.

     Domestic sales and exports accounted for 85% and 15%, respectively, of our consolidated total steel sales volume. The parent company only accounted for 92% of our consolidated total steel sales volume.

Domestic Sales

     Domestic sales reached 4.16 million tons in 2008, which represents an increase of 15% as compared to 2007.

     The flat steel market in 2008 experienced two very different periods. The first, which lasted from January through October, was marked by strong demand from all sectors, especially the automotive, construction and home appliance and OEM industries, which recorded successive production and sales records.

     From November through December, however, the effects of the 2008 financial crisis affected the industries of our main clients, which caused a significant reduction in production and demand for steel products.

32

Table of Contents

Exports

     Annual exports totaled 733,000 tons, which represents a decrease of 58% as compared to 2007. This reduction is a direct result of our strategy to prioritize domestic sales until October and the overall reduction in international steel demand during the last quarter of 2008.

     Of our total exports, 87% consisted of coated steel items, underlining our policy of concentrating on sales of higher added-value products.

Steel Sales by Geographic Region

     In 2007,2008, we sold steel products to customers in Brazil and 6049 other countries. The fluctuations in the portion of total sales attributableassigned to domestic sales,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, domestically and abroad.

     The three main export markets for our products are Europe, North America Europe and Latin America, representing 55%45%, 31%37% and 7%13%, respectively, of our export sales volume in 2007.2008.

     In North America, we take advantage of our subsidiary CSN LLC, presence, 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 to CSN LLC which are processed at third parties into hot-rolled coil and then transformed into more added value products at CSN LLC’s plant, such as cold-rolled coil and galvanized. Moreover, CSN iswe are able to export cold-rolled coils which can be directly sold or processed by CSN LLC in order to manufacture galvanized products.

In Europe, CSN sellswe sell hot-rolled coil as raw material forto Lusosider, our subsidiary located in Portugal.

The following table contains information relating to our sales of steel products by destination:

Steel Sales by Steel 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 the past three years according to the IBS.Brazilian Steel Institute (Instituto Brasileiro de Siderurgia), orIBS.

2933

Table of Contents

Steel Sales by Industrial SegmentIndustry

     We sell our steel products to manufacturers in several industries. Following is a breakdown of our domestic shipments by volume for the last three years among our market segments:

CSN Sales by Industrial Segment in Brazil

     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 GalvaSud and CSN Paraná. No single customer accounts for more than 5% of our net operating revenues.

Seasonality

     Our sales of steel products are subject to seasonality. It is well known in both the international and domestic steel marketmarkets that demand is lower in the first six months of the year, which directly affects sales. On the other hand, demand normally increases in the third quarter. Our sales force considers this seasonality in its planning while, at the same time, seeks to keep production stable by offsetting domestic market fluctuations with exports to other markets.

Iron Ore Sales

     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 2008, after the first two years trading in the international iron ore market, we exported 14.7 million tons of iron ore, which represents a 186.9% increase, as compared to 2007. Export sales increased 350% from US$218 million in 2007 to US$980 million in 2008.

     Although the world economy has been since the last quarter of 2008 affected by the side-effects from the economy meltdown, we were able to maintain and increase our iron ore sales.

     In 2008, China accounted for mostly of our iron ore sales, followed by Europe. In 2008, the Asian market (primarily China and Japan) and Europe were the primary markets for our sinter feed while Middle East was the primary market for our pellet feed.

     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. The iron ore market worldwide is mainly affected by price, quality, range of products offered, reliability, operating costs and shipping costs. Facing this environment we constantly seek better offer options not just for us but also for our customers.

34

Table of Contents

Facilities

Steel Mill

     The Presidente Vargas steelworks, located in the city of Volta Redonda, in the stateState of Rio de Janeiro, began operating in 1946. It is an integrated facility covering approximately 3.84.0 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, which is also referred to as aor 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 2006,2008, including CSN LLC and Lusosider, are set forth in the following chart:

Effective Capacity

30

Table of Contents

Downstream Facilities

GalvaSud.

     We own 100% ofhave a 99.99% ownership interest in GalvaSud, which produces and sells galvanized steelGalvanew® Galvanew®, laser-welded and pre-stamped parts for the automotive industry. GalvaSud has an annual capacity of 350,000 tons. For further information on the acquisition of GalvaSud, see “Item 4A. History and Development of the Company—Acquisitions”.

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.

Cia. Metalic Nordeste.

     We hold 100% of the shares ofhave a 99.99% ownership interest in Cia. Metalic Nordeste, or Metalic. Metalic is the only two-piece steel can producer in all Americas. It has approximately 45%48% of the packaging market for carbonated drinks in the Northeastern regions of Brazil. Currently, we are the 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 addition to the production of the 350ml steel cans, in 2009 Metalic will also produce 250ml steel cans, increasing its portfolio of products and servicing the market demand for cans of different sizes.

Cia Metalúrgica Prada

35

Table of Contents

     Prada. We own 100% ofhave a 99.99% ownership interest in Companhia Metalúrgica Prada, or Prada. Established in 1936, Prada is the largest Brazilian steel can manufacturer in Brazil and produces more thanhas an annual production capacity of over one billion steel cans in its three production unitsindustrial facilities located in the Statesstates of São Paulo, Rio Grande do Sul and Minas Gerais, in the southeastern and southern regions of Brazil and, accordingly, is one of our major customers of tin mill products.Gerais. Currently, we are the only Brazilian producer of tin-coated products,tin plate, Prada’s principalmain raw material.material, which makes Prada one of our major customers of tin plate products. Prada has important customersclients in the food and chemical industries, including processes and packages of vegetables, fishes, dairy products, lubricants,meat, aerosols, paints and varnishes, and other business activities. On December 30, 2008, Indústria Nacional de Aços Laminados S.A., or INAL, merged into Prada, the surviving entity. For further information on the acquisition of Prada, see “Item 4A. History and Development of the Company—Acquisitions.Acquisitions and Dispositions.”

CSNCompanhia 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 us 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.

Lusosider, Aços Planos, S.A..

     We own 100%99.94% of Lusosider, a producer of hot-dip galvanized products cold-rolled and tin platecold-rolled located in Seixal, near Lisbon, Portugal. Lusosider produces approximately 240,000 tons of galvanized products and 50,000 tons of cold rolled and 60,000 tons of tin platecold-rolled annually. Its main customers include service centers and tube making can making and steel packaging industries. For further information on the acquisition of the remaining 50% of the capital stock of Lusosider, see “Item 4A. History and Development of the Company—Acquisitions.”

INAL. Indústria Nacional de Aços Laminados S/A, orS.A.

     INAL is our subsidiary and a distributor of laminated steel founded in 1957. Currently, INAL is the number one in the Brazilian distribution market, with 600,000 tons/tons per year of installed processing capacity installed.capacity. INAL has three steel service centers and five distribution centers strategically located in the Brazilian territory. Its main and biggest service center is located in Mogi das Cruzes between São Paulo and Rio de Janeiro. INAL has a service center located in Camaçari, in the State of Bahia, to support sales in the Northeastern and North regions of Brazil. Its product mix also includes sheets, slit coils, sections, tubes, and tubes, roofing in standard or customized format, according to client’s specifications. INAL processes all range of products produced by us and services 4,000 customers annually from the civil construction, automotive and home appliances sectors, among others.

31

Table of Contents On December 30, 2008, INAL merged into our subsidiary Prada.

Mines and Mineral Reserves

     We hold concessions to mine iron ore, limestone and dolomite. We purchase manganese on the local market.

     WeExcept for Namisa’s mines, in which we have a 59.99% ownership interest, we own 100% of each of our mines. In addition, each mine is an “open pit” mine. See the map under “Item 4D. Property, Plant and Equipment” for the location of the mines in relation to the Presidente Vargas steelworks and for information on the reserves at our Casa de Pedra mine and resources at Engenho and Fernandinho mines.

     Iron ore extraction, crushing, screening and concentration are done in three different sites: Casa de Pedra (CSN’s property), Pires Beneficiation Plant and Fernandinho Mine (both Namisa’s property).

     The Casa de Pedra facilities are located in the city of Congonhas, do Campo, in the stateState of Minas Gerais. The Casa de Pedra mine is located 350 km from the Presidente Vargas steelworks and supplies iron ore products to our steel mill, as well as for export through the Itaguai Port. Casa de Pedra’s equipment fleet and treatment facilities have an installed annual run-of-mineROM capacity of approximately 6060.0 million tons and 21.5 million tons, respectively.

     Most of the run-of-mineROM of the Pires Beneficiation Plant comes from our 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 8.2810.3 million tons per year. From this total, 56 million tons are currently provided by the Engenho mine and the balance is purchased from third parties.

36

Table of Contents

     The Fernandinho mine is located in the city of Itabirito, in the stateState of Minas Gerais. This unit processes crude ore purchased from third parties, which along with its own run-of-mine,ROM, totaled 1.51.2 million tons of feed in 2007.2008.

     Until 2001, we held an interest in CVRD, Latin America’s largest mining companyFor additional information on our mines and the largest producermineral reserves, see “Item 4D. Property, Plant and exporter of iron ore in the world, through Valepar. Pursuant to an agreement entered into on December 31, 2000, we sold our interest in Valepar to certain companies and pension funds, including Bradespar S.A. and Litel Participações S.A. In connection with the sale of our then controlling stake at Valepar to Bradespar S.A. and Litel Participações S.A. and the subsequent sale of Valia’s (CVRD’s pension fund) 10.3% interest in our company in 2003, CVRD obtained a 30-year right of first refusal to match all the conditions, including price, quality and tenor, obtained by us in contracts with third parties to purchase iron ore producedEquipment—Reserves at Casa de Pedra in excess of ourMine” and our affiliates’ needs.“Item 4D. Property, Plant and Equipment—Resources at Fernandinho and Engenho Mines.”

     In view of certain acquisitions made by CVRD in 1995, theConselho Administrativo de Defesa Econômica, the Brazilian anti-trust agency, or CADE, issued a decision in August 2005 pursuant to which CVRD would have to choose between its share participation in Ferteco Mineração S.A. (Ferteco) or its rights of first refusal mentioned above. Such decision is being challenged by CVRD before the Brazilian courts. In view of certain additional decisions of the relevant authorities involved in such disputes, we filed with CADE a statement of compliance with the administrative order that imposed that the parties should refrain from performing the rights or first refusal of CVRD related to Casa de Pedra mine. This statement of compliance was publicly announced through a notice to the market (fato relevante) on January 17, 2008.

Limestone and Dolomite Mine.

     Our extraction and preparation of limestone and dolomite is done at our Bocaina mining facility located at Arcos, in the stateState 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 45 years. The mining facility is located 455 km from the Presidente Vargas steelworks.

Tin.

     We own a tin mine and a smelter located in the stateState of Rondônia. The inventory of the geological reserves has been prepared from a review of the major reports from the Santa Barbara Mine Document Center. The majority of the deposits and/or target areas are within Mining Leases that have been consolidated into Mining Group (Grupamento Mineiro n”No. 131/92). The reserves provided were recognized by the Brazilian Department of Mineral Production (Departamento Nacional de Produção Mineral), or DNPM, Brazil’s competent authority for the reporting of ore reserves. The reserves and resources presented are “in situ.” For further information on this acquisition, see “Item 4A. History and Development of the Company—Acquisitions.”

32

Table of Contents

Electricity Distribution and Generation

Thermoelectric Co-Generation Power Plant.

     We completed the construction of a 238 MW thermoelectric co-generation power plant at the Presidente Vargas steelworks in December 1999. Since October 2000, the plant has provided the Presidente Vargas steelworks with approximately 60% of itsthe electric energy needs for its steel mills. Aside from operational improvements, the power plant supplies our strip mills with electric energy, processed steam and blown air forfrom the blast furnaces, benefiting the surrounding environment through the elimination of flares that burn steel-processing gases into the atmosphere.

Itá Hydroelectric Facility. We

     Each of Tractebel and Tractebel Energia S.A., or Tractebel, eachus own 48.75%, and Companhia de Cimento Itambé, or Itambé, owns the remaining 2.5%, of Itá Energética S.A., or ITASA, a special-purpose company formed for the purpose of owning and operating, under a 30-year concession, 60.5% of the Itá hydroelectric facility on the Uruguay river in Southern Brazil. Tractebel owns directly the remaining 39.5% of the Itá hydroelectric facility.

     The power facility was built under 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 of 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.

     We and the other shareholders of ITASA have the right to take our pro rata share (proportionally to our interestsownership 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.

37

Table of Contents

Igarapava Hydroelectric Facility.

     We own 17.9% of a consortium that built and will operate for 30 years the Igarapava hydroelectric facility. Other consortium members are CVRD, Companhia Mineira de Metais, Votorantim Metais Zinco, AngloGold Ashanti Mineração Ltda., and Companhia Energética de Minas Gerais, or CEMIG. The plant attained itsbecame full operational on December 30, 1999 with an installed capacity of 210 MW, corresponding to 130136 MW of firm guaranteed output as of December 31, 2007.2008. We have been using part of our 2222.8 MW take from Igarapava to supply energy to the Casa de Pedra and Arcos mines. The remainder is consumed bymines, and to the Presidente Vargas steelworks or sold intosteelworks. From time to time, we also sell the excess energy to the energy market.

Railways

Southeastern Railway System. We own 32.9% (20% of the voting capital) of

     MRS Logística S.A., or MRS, which has a concession to operate, through the year 2026, the assets of Brazil’s Southeastern railway system. As of December 31, 2008, we held directly and indirectly 33.27% of MRS’ total capital. The Brazilian Southeastern railway system, covering 1,674 km of track, serves the São Paulo – Rio de Janeiro – Belo Horizonte industrial triangle in Southeast Brazil, and links theour mines located in the State of Minas Gerais to the ports located in the Statesstates 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 and transports our exports to the ports of Itaguaí and Rio de Janeiro. The railway system connects the Presidente Vargas steelworks to the container terminal at Itaguaí Port, which handles most of our steel exports. Our transport volumes represent approximately 26%22% of the Brazilian Southeastern railway system’s total volume. As of December 31, 2007,2008, US$1,9741,578 million were outstanding and payable by MRS to the Brazilian government federal agencies within the next 1918 years, of which US$1,9021,527 million are treated as an off-balance sheet item (See “Item 5E. Off-Balance Sheet Arrangements”). While we are jointly and severally liable with the other principal MRS shareholders for the full payment of the outstanding amount, we expect that MRS will make the lease payments through internally generated funds and proceeds from borrowings.financing.

Northeastern Railway System. We and the Steinbruch family each

     As of December 31, 2008, we hold 46.9%84.5% of the capital stock of Companhia Ferroviária do Nordeste, or CFN,Transnordestina Logística S.A., a company which is jointly-controlled by us and Taquari Participações S.A. (a company controlled by the Steinbruch family) pursuant to a shareholders' agreement dated November 27, 1997, as amended on May 6, 1999 and on November 7, 2003. Transnordestina Logística S.A. has a 30-year concession granted in 1998 to operate the assets of Brazil’s Northeastern railway system. The Northeastern railway system covers 4,238 km of track and operates in the States

33

Table of Contents

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. In 2006, CFN was authorized by the Brazilian transport agency – ANTT and by our Board of Directors to merge Transnordestina, a large-gauge world-class railway track, into it. As of December 31, 2007, US$20.02008, R$38.7 million was outstanding over the remaining 19-year18-year term of the concession,concessi on, of which US$19.6R$37.7 million are treated as an Off-Balanceoff-balance sheet item (See “Item 5E. Off-Balance Sheet Arrangements”). We and the Steinbruch family are jointly and severally liable for the full payment of the outstanding amount. For more information on the merger and financings for Transnordestina, see “Item 4E.4A. History and Development of the Company—PlannedCompany —Planned Investments—Transnordestina.”

Port Facilities

Solid Bulks Terminal.

     We hold the concession to operate a solid bulks terminal, one of four terminals that form the Itaguaí Port, located in the State of Rio de Janeiro, State, for a term expiring in 2022 and renewable for another 25 years. Itaguaí Port, in turn, is connected to the Presidente Vargas steelworks, Casa de Pedra and CFM 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 unload at least 3.4 million metric tons of coal and coke from our suppliers through the terminal annually, as well as shipments from third parties. Among the approved investments that we announced is the development and expansion of the solid bulks terminal at Itaguaí to also handle up to 160 million tons of iron ore per year. For further information, see “Item 4A. History and Development of the Company—PlannedCompany —Planned Investments—Iron Ore Project (Casa de Pedra).Project.”

38

Table of Contents

Container Terminal.

     We own 100%99.99% of Sepetiba Tecon S.A., or Tecon, which has a concession to operate, for a 25-year term that is renewable for another 25 years, the container terminal at Itaguaí Port. As of December 31, 2007,2008, US$182139 million (R$ 322.4 million) of the cost of the concession remained payable over the next 1918 years of the lease. 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. The Brazilian Federal Port Agency has allocatedspent US$3870 million toin port infrastructure projects such as expanding the maritime access channel and increasing the depth from 18.5 meters to 20 meters. In addition, significant investments are also being made by the Brazilian federal government in adding two extra lanes to the Rio Santos road, in constructing the Rio de Janeiro Metropolitan Bypass, a beltway whichthat will cross the Rio de Janeiro metropolitan area. Also, MRS railway is investing in an extra rail track along the way to the Itaguaí port.Port. These factors, combined with favorable natural conditions, like natural deep waters and low urbanization rate around port area, allow the operation of large vessels as well as highly competitive prices for all the services rendered, result in the terminal being a major hub port in Brazil. For further information on our planned investments relating to our Itaguaí CSN Logistics Platform Project, see “Item 4A. History and Development of the Company—PlannedCompany —Planned Investments—Itaguaí CSN Logistics Platform Project.”