Algoma is exposed to certain risks related to its ongoing business operations, including financial, market, political, and economic risks. The following discussion provides information regarding Algoma’s exposure to the risks of changing foreign currency exchange rates, commodity prices and interest rates. Algoma may enter into derivative financial instrument transactions in order to manage or reduce input commodity pricing risks, and/or market pricing risk for our products. The use of derivative instruments is subject to our corporate governance policies. These instruments are used solely to mitigate market exposure and are not used for trading or speculative purposes. Algoma may elect to use hedge accounting for certain commodity transactions and designates certain derivatives as hedging instruments in respect of commodity price risk, which are accounting for as cash flow hedges. For those transactions, the cumulative amount of gains and losses on cash flow hedging instruments assessed as effective will be recognized in other comprehensive income and will be recognized in profit or loss only when the hedged transaction affects profit or loss, or is included directly in the initial cost or other carrying amount of the hedged non-financial items. For further information regarding derivative instruments see Notes 3 and 21 to the Consolidated Financial Statements. The fair value of our derivatives is determined using Level 2 inputs, which are defined as “significant other observable” inputs. The inputs used include quotes from counterparties that are corroborated with market sources. Foreign Currency Exchange Rate Risk Algoma is subject to the risk of price fluctuations due to the effects of exchange rates on purchases, labour costs and pension and other post-retirement employment benefits liabilities that are denominated in Canadian dollars. The prices for steel products sold in Canada are derived mainly from price levels in the US market in US dollars converted into Canadian dollars at the prevailing exchange rates. As a result, a stronger US dollar relative to the Canadian dollar increases the Algoma’s Canadian dollar selling prices for sales within Canada. Algoma does not currently hedge foreign currency exchange risk, in view of the balance between input prices in US dollars and sales of finished products in US dollars. Commodity Price Risk and Related Risks In the normal course of our business, Algoma is exposed to market risk or price fluctuations related to the purchase, production or sale of steel products. Algoma is also exposed to price risk related to the purchase of commodities, including natural gas, iron ore and coal used as raw materials. See Note 21 to the Consolidated Financial Statements for further details on Algoma’s derivatives. Algoma’s market risk strategy has generally been to obtain competitive prices for our products and services and allow operating results to reflect market price movements dictated by supply and demand; however, from time to time Algoma has made forward physical purchases to manage exposure to price risk related to the purchases of natural gas. As of March 31, 2022 Algoma had $71.0 million forward buy contracts for hot rolled coil. There were no forward buy contracts for natural gas or any of the other significant raw materials used in the domestic production process. Interest Rate Risk Algoma is currently not exposed to interest rate risk as there is no long-term debt outstanding at March 31, 2022.