Fitch Assigns 'BBB-' Ratings to Usiminas.

CHICAGO -- Fitch Ratings has assigned foreign and local currency Issuer Default Ratings (IDRs) of 'BBB-' to Usinas Siderurgicas de Minas Gerais S.A. - Usiminas (Usiminas) and a 'AA+(bra)' national scale rating. The Rating Outlook is Stable.

Also, Fitch has assigned a 'BBB-' rating to Usiminas' US$500 million Global Medium Term Note Program. The issuances under the program are unconditionally and irrevocably, jointly and severally guaranteed by Usiminas and Companhia Siderurgica Paulista - Cosipa (Cosipa), its wholly owned operating subsidiary.

Usiminas' ratings are supported by the company's competitive industry position and conservative financial profile. Usiminas ranks as one of Latin America's largest low-cost integrated steel producers and enjoys dominant market shares in subsectors of the Brazilian market. The ratings consider the concentrated nature of the Brazilian steel industry, which limits competition based solely upon price. Barriers to entry include the logistical challenges of transporting steel to Brazil and within Brazil, as foreign steel producers have limited access to efficient distribution networks. As competition from foreign steel imports into Brazil is minimal, Usiminas maintains a 50%-53% share of the flat steel market in Brazil and a 61% share of the automobile and autoparts sub-sectors. The company benefits from its modern production facilities, diverse product mix and access to low-cost labor. These factors allow Usiminas to generate positive cash flows during troughs in the global steel cycle and economic downturns in Brazil. Although Usiminas has focused primarily on the domestic market, the company has also maintained a presence outside of Brazil by exporting about 30% of its sales volumes. Despite on-going consolidation, the global steel industry remains relatively fragmented and intensely competitive. In addition, steel producers face pressure from rising raw material and energy costs.

Usiminas' leverage is low for the rating category and appropriate for the current high steel price environment. As of Sep. 30, 2006 and on a consolidated basis, Usiminas had total debt of BRL3.2 billion (US$1.5 billion) and cash and marketable securities of BRL2.0 billion (US$922 million), resulting in a total debt-to-operating EBITDA ratio of 0.8 times (x) and a net debt-to-operating EBITDA ratio of 0.3x, based on EBITDA for the last 12 months of approximately BRL4.1 billion (US$1.9 billion). Over the past several years, Usiminas has made significant investments to modernize and increase its steel production facilities. Efforts to continue expanding and to grow internationally are likely to result in moderate increases in leverage. At the peak of the investment cycle, Fitch expects Usiminas to maintain a total debt-to-operating EBITDA ratio of less than 2.0x.

Usiminas' competitive business position, export revenues of approximately BRL3.0 billion annually and strong liquidity allow the company to be rated one notch higher on a foreign currency basis than the 'BB+' country ceiling of Brazil. Usiminas' investment grade credit profile is supported by the company's healthy liquidity in the form of cash in Brazil and outside of the country, strong free cash flow generation capability and ownership of investments such as Ternium S.A. with a market value of approximately US$840 million as of year-end 2006. These sources of liquidity could provide cash to make foreign currency denominated debt service payments of approximately US$300 million and thereby mitigate the transfer and convertibility risk associated with a sovereign crisis in Brazil.

Usiminas owns 100% of Cosipa, which together comprise the Usiminas System. With of crude steel production of 8.8 million tons in 2006, the Usiminas System ranks as the largest steel producer in Brazil. The system's two primary integrated steelworks produces slabs, heavy plates and hot- and cold-rolled products, as well as galvanized steel for the automobile, construction and household appliance industries, among others. In 2006, the Usiminas System sold 7.9 million tons of finished steel products, 33% of which were directed to export markets. Usiminas is controlled by a shareholder group, comprised mainly of Brazilian and Japanese industrial and financial entities, that owns 63.86% of its total ordinary shares.

A full copy of Fitch's Credit Analysis report about Usiminas can be found within the coming weeks at FitchResearch, Fitch's subscription-based web site, located at www.fitchratings.com or by contacting Products & Services at [phone].

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