2001 Annual Report - OneSteel

Notes to the Financial StatementsNOTE 35. FINANCIAL INSTRUMENTS (CONTINUED):(c) Foreign exchange (continued)The following table summarises by currency the Australian dollar value of forward foreign exchange agreements and foreign currencyoptions. Foreign currency amounts are translated at rates current at the reporting date. The ‘buy’ amounts represent the Australian dollarequivalent of commitments to purchase foreign currencies, and the ‘sell’ amount represents the Australian dollar equivalent of commitmentsto sell foreign currencies. Contracts to buy and sell foreign currency are entered into from time to time to offset purchase and saleobligations so as to maintain a desired hedge position.2001 2000Average exchange rate Buy Sell Buy SellCurrency 2001 2000 $m $m $m $mUnited States dollars:3 months or less 0.522 0.544 19.2 29.9 2.3 –Over 3 to 12 months 0.524 – 30.5 23.4 – –49.7 53.3 2.3 –Japanese Yen3 months or less 61.89 – 2.4 0.3 – –Over 3 to 12 months 60.83 – 0.9 – – –3.3 0.3 – –New Zealand dollar3 months or less 1.2465 – 1.9 2.2 – –1.9 2.2 – –(d) Credit risk exposuresCredit exposure represents the extent of credit related losses that the OneSteel Group may be subject to on amounts to be exchangedunder derivatives or to be received from financial assets. The notional amounts of derivatives are not a measure of this exposure. TheOneSteel Group, while exposed to credit related losses in the event of non-performance by counterparties to financial instruments, does notexpect any counterparties to fail to meet their obligations given their high credit ratings. Where appropriate, collateral is obtained in theform of rights to securities and master netting agreements. The credit exposure is represented by the net fair value of contracts with apositive fair value at balance date, reduced by the effects of master netting agreements.The OneSteel Group’s exposures to on balance sheet credit risk are as indicated by the carrying amounts of its financial assets. Concentrationsof credit risk (whether on balance sheet or off-balance sheet) that arise from derivative instruments exist for groups of counterparties when theyhave similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes ineconomic or other conditions. The consolidated entity does not have a significant exposure to any individual counterparty.The following table summarises the OneSteel Group’s credit exposure on derivative financial instruments with a positive net fairvalue and has been reduced by unfavourable contracts with the same counterparty pursuant to master netting agreements, whichwill not be settled before the favourable contracts:Consolidated2001 2000$m $mDerivativesInterest rate swaps (2.7) –Foreign exchange contracts 0.8 (2.5)(1.9) (2.5)The OneSteel Group minimises concentration of credit risk by undertaking transactions with a large number of debtors in various countriesand industries.The major geographic concentrations of credit risk arise for the location of the counterparties to the OneSteel Group’s financial assets asshown in the following table:Consolidated2001 2000$m $mLocation of credit riskAustralia 497.6 566.8New Zealand 48.7 38.5North America 13.1 18.2Other 11.3 –570.7 623.530