Available online at www.sciencedirect.

com

ScienceDirect
Procedia Earth and Planetary Science00 (2015) 000–000
www.elsevier.com/locate/procedia

Global Challenges, Policy Framework & Sustainable Development for Mining of Mineral and Fossil Energy Resources
(GCPF2015)
Demand Forecasting Techniques vis-à-vis Demand Forecast for Lead
S K Sharmaa, G K Sharmab
a
Assistant Mineral Economist (Int.), Indian Bureau of Mines, Nagpur, 440001, India
b
Assistant Mineral Economist (Int.), Indian Bureau of Mines, Nagpur, 440001, India

Abstract
In India, Rajasthan is endowed with the largest resources of high grade lead ore contributing 89% of the
total resources of lead. Lead metal is used in various applications, especially in the manufacture of lead acid battery
which consumes about 74% of lead in the country. The balance 26% demand is in cable sheathing, alloys, pigments
& compounds and other products such as sheets, etc. More than 50% domestic demand of lead is met through
imports and recycles lead.
Limited reserve base of lead coupled with constrained domestic production and ever increasing demand,
compounded on account of diverse industrial applications, have aggrandized the strategic value of lead metal.
The endeavour of this paper has been to relook in to the future domestic scenario of lead in respect of
demand forecasting with coverage on both short-term and long-term perspective.
Keywords:Domestic demand forecast, Lead Metal

1. Introduction to mineral demand &demand forecasting

The theory of mineral demand often is slighted in the study of mineral economics. Demand is defined as the
quantity of goods or services that will be purchased per unit of time at a given price. Demand forecasting is the activity
of estimating the quantity of a product or service or raw material that consumers will purchase or consume in a specific
time & price. Demand forecasting involves techniques including both informal methods (educated guesses) and
quantitative methods (use of historical data or current data on consumption & production of minerals).

2. Necessity for demand forecasting in mineral sector

The stainless steel which is found in kitchen in the form of utensils comprises of chromite and iron, a Lead acid
battery which is found in almost every vehicle & inverters comprises of lead metal. Likewise there are so many products
which we are using in our day to day life contains minerals which have been mined and processed.
Demand forecasting may be used to sustain the end use industry, in assessing future capacity requirements, or in
making decisions on whether to enter a new market. Mineral market research is characterized by what are often long
forecast periods, a lack of reliable consumption data, complex supply-demand-price interrelationships, regional
economic uncertainties and corporate actions. Demand forecast is as much an art as a science.
Long term forecasts of mineral demand attempt to project market conditions under a variety of economic and
technological scenarios for periods of 10, 15 and even 20 or more years forward. There are several reasons that such
long-term forecasts are necessary such as once a discovery of mineral deposits is made, considerable time and money
must often be spent conducting geological, engineering, environmental and project feasibility studies, as well as
obtaining required permits and project financing.
Many minerals are required in a variety of forms by often thousands of primary consumers and even more
secondary users. To forecast demand for a mineral, an analyst must understand what forms of the mineral are required
in various uses. Some minerals are consumed fully in their principal end use, for example, petroleum when used in the
manufacture of gasoline, or potash in fertilizer. However, many other minerals are typically recycled such as glass, lead,

1878-5220© 2015 The Authors. Published by Elsevier B.V.

Peer-review under responsibility of organizing committee of the Global Challenges, Policy Framework & Sustainable Development for Mining of Mineral and
Fossil Energy Resources.
2 SKS & GKS / Procedia Earth and Planetary Science00 (2015) 000–000

copper, silver and aluminum. The amount of a mineral recoverable for reuse during or after the manufacture of a
product can be a significant factor impacting global availability of that mineral.

3. Methods for demand forecasting

As already indicated, conducting mineral demand forecasting studies is a challenging endeavor. Critical to the
preparation of such studies is obtaining and developing reliable production and consumption data, understanding the
dynamics of the marketplace and selecting a model which reflects market behavior. Numerous types of models and
modeling techniques have been developed to forecast mineral demand, and to test market sensitivities. The choice of
which model to use, depends on the nature of the mineral commodity, purpose of the study, length of the forecast
period, availability of reliable data and the analyst's understanding of market dynamics.
Unfortunately, given the often unique characteristics inherent in the market(s) for many minerals, no single all-
purpose model exists to develop forecasts of mineral demand. A model may be very simple, comparing only projected
demand, or may be extremely complex, employing an econometric approach. The various methods which are used to
forecast the mineral demand are as below.

a) Based on time series data - Statistical Method

Four statistical methods have been adopted, namely, (i) Arithmetic Averaging (ii) Moving Average (iii) Trend Analysis
and (iv) Compounded Annual Growth Rate (CAGR), to estimate the future demand
(i) Arithmetic mean of Growth Rate
In this method, the year on year growth in apparent consumption or reported consumption of commodity are first
calculated from base year to current year and subsequently, the simple arithmetic average of these are calculated to
determine the overall growth rate.

Arithmetic mean = 1/n x (x1 +x2 +……..+xn)

Where n= final year – base year
xi = annual consumption changes (Growth/ Fall %) compared with the previous year

(ii) Moving Average

Calculating the average growth rate by this method is slightly more sophisticated as the variations in year on year
consumption of commodity due to unforeseen circumstances are nullified. The moving average is calculated by series
of averages of different subsets of the full data set or simply by forming overlapping blocks of two or more consecutive
years and then, the average annual growth rate of moving average is computed. It is also called a moving mean
(MM) or rolling mean (RM).

(iii) Trend Analysis

The basic tendency of the consumption is to grow or decline by the year, which is usually referred to as “secular
movement” or trend in the series. The concept of trend, logically requires a smooth line because the secular movement
is determined by forces which work out gradually with the passage of time. Influences, such as improvements in
technology, increase/decrease in demand and change in consumption patterns produce gradual changes in the outlook
for a particular Industry. The primary purpose in statistical analysis of economic time series is to discover and measure
such factors which characterize the movement of data through time. The basic principal of trend analysis is to establish
the mathematical model that is optimally fit, for straight line or exponential or logarithmic for the data set on
consumption.

(iv) Compounded Annual Growth Rate (CAGR)

Compound annual growth rate (CAGR) is a specific term for the geometric progression ratio that provides a
constant growth rate over the time period. CAGR dampens the effect of volatility of periodic changes that can render
arithmetic means irrelevant. It is particularly useful to compare growth rates from different data sets such as
consumption growth of commodity.

CAGR = [{CF/ CI} ^ {1/ (n-1)}]-1

Where, CF = Consumption of final year
CI = Consumption of base year
n = Current year – base year
 SKS & GKS/ Procedia Earth and Planetary Science00 (2015) 000–000 3

b) Based on End-Use Industry

In this approach, the consumption of mineral is assumed to be a measure of the indigenous demand. While
consumption takes care of both production and import, the export has to be considered separately for estimating the
overall demand. In this methodology, the future demand is not projected directly out of the past demand data. Instead,
the production of the end product, in the manufacture of which the mineral is consumed, is considered. For the
estimated future target of the end product and the corresponding consumption norm of the input mineral is used to
assess the future demand. Most minerals have multiple use such as chromite use in making of stainless steel, ferroalloys,
refractory, chemicals, etc. The target of end product are based on availability of capital, growth of population,
government policies, R & D activities, Infrastructure requirements, etc.
This method has got some merit as the influence of the relevant economic parameters gets incorporated in the demand
projections.

c) Based on econometric model

In this approach the models of the variables prepared for other purposes are made use of, indirectly relating them
to mineral consumption. In case of the relationship of the consumption with a macroeconomic variable, the equation is a
linear regression taking one variable at a time and it contains a disturbance term “ET” which accounts for influence of all
other variable. In case of econometric modeling, the idea is to use a multiple regression equation involving as many
economic variables as possible so that the disturbance term tends to be extremely insignificant.
Now let as suppose there are five variables which concurrently influence the demand of the mineral (DT) at a
particular point of time “T” and these variables are as follows.

DT = A + A1 UT + A2 VT + A3 WT + A4 XT + ET
Where, UT = Income of consumers
VT = Price of the mineral
WT = Price of the related commodity
XT= Gross national product.

d) Contingency Forecast
This is also known as judgmental method of analysis. All the methods of demand forecasting are essentially based
on the past trends. The contingency forecast become useful for providing room for some unexpected developments,
which are totally unrelated to the past trends, and which may cause the future demand to deviate from an otherwise
expected trends. Such a contingency may be engendered by factors like sudden technological breakthroughs,
substitutions, change in government policies, etc.
In this methodology, the future demand as projected on the basis of above mentioned methods are taken as the
starting points; and then experts opinion born out of there intuitive judgment is pooled to make an assessment of the
extend, to which the future demand are likely to deviate from that of starting point.

e) Intensity of Used methods

The ratio of consumption to a major of national income such as Gross National Product (GNP) or Gross
Domestic Product (GDP) is defined as “Intensity of Use (I.U)”. The term was popularized by W. Malenbaum in 1978.

4. Demand forecast for Lead - A case study

A. Lead
Lead acid battery is the biggest consumer of lead with a share of 74% in total consumption of lead and the growth
of battery industry is closely linked with the growth of automobile industry as well as power back up industry.
Therefore, the rise in automobile industry will have a positive effect on the battery industry. To forecast the demand of
lead in the battery industry, the major consumers, have been studied in detail as given in the following paragraphs. The
demand based on the overall growth in GDP has also been dealt with as given under.

1. Demand Forecast Based on CAGR of Apparent Consumption and GDP Growth

The apparent consumption of lead is growing at 8.18% CAGR (based on growth from 2004-05 to 2013-14) and is
utilised for projecting future demand beyond 2014-15 to 2029-30. The apparent consumption of lead during 2013-14
has been estimated at 276.1 thousand tonnes which is considered as base year for the projection of the demand.
The Planning Commission has announced an average GDP growth target of 8% for the Twelfth Five Year Plan
period (2012-13 to 2016-17). With the 8% target, the Commission seems to strike a balance between the current and the
aspirational. In view of this, the demand forecast has been calculated on the basis of GDP 8% from 2014-15 onwards
4 SKS & GKS / Procedia Earth and Planetary Science00 (2015) 000–000

and as per the CAGR of 8.18% as estimated. The same is given in Table 1.
Table: 1 - Estimated Demand Forecast of Lead from 2014-15 to 2029-30
(Base Year 2013-14 demand of 276 thousand tonnes)
(In tonnes)
Year At CAGR 8.18% GDP Growth @ 8%
2016-17 349,534 347,793
2019-20 442,517 438,119
2024-25 655,640 643,740
2029-30 971,404 945,865

2. Based on time series data on demand/apparent consumption- Statistical Method

(i) Arithmetic Averaging of Growth Rate
In this method the growth rate worked out to be 10.15%. Accordingly, the future demand of lead worked out to be
369 thousand tonnes, 493 thousand tonnes and 1,296 thousand tonnes for the years 2016-17, 2019-20 and 2029-30,
respectively.
(ii) Moving Average
The average annual growth rate, calculated by this method, works out to be 12% and the future demand of lead
works out to be 388 thousand tonnes, 545 thousand tonnes and 1,692 thousand tonnes by 2016-17, 2019-20 and 2029-
30, respectively.
(iii) Trend Analysis
The mathematical model that is optimally fit for the apparent consumption is straight line, is depicted from the
equation as follows:
Y=14935X+118214
Where, Y = the ordinate or computed annual consumption of trend
X = time in year
Based on trend analysis of consumption or regression analysis, the future demand of lead is estimated at 312
thousand tonnes, 357 thousand tonnes and 506 thousand tonnes for the years 2016-17, 2019-20 and 2029-30,
respectively.

3. Demand Forecast on the Basis of Ratio of Production of Storage Batteries and Production of Vehicles
i) Present Demand
It has already been explained that each vehicle running on petrol or diesel or battery requires batteries for
ignition and lighting. The number of batteries produced during the years 2004-05 to 2012-13 is more than three times
the vehicles produced during the same period. This is because of the fact that the life of batteries used in vehicles last
for 1-3 years. Therefore, the battery production has to be such that it can provide batteries throughout the life of the
vehicle say 15 years. It is also known that the different types of vehicles require different types of batteries consuming
different quantities of lead.
The production of total number of vehicles was 206 lakh units in 2012-13. It was observed that the production
of different types of vehicles is increasing with a non uniform rate. Hence, to overcome this problem, the percentage
share of each segment of vehicle was calculated for last ten years. The total number of batteries along with the lead
consumed for batteries used in the vehicles in the respective segment in the particular year was divided according to
their percentage share. In this way, the present demand of lead in the manufacture of battery was calculated.
The present demand of lead, for the production of batteries required for all types of vehicles by this method
worked out to be 240 thousand tonnes for the year 2012-13 and by considering that the share of battery industry to be
74%, the total demand of lead for all industries comes out to be 325 thousand tonnes.

ii) Future Demand

The estimation of consumption of lead in the batteries in segmented vehicles is made by considering growth of
concerned class of vehicles and the same is given in Table 2.
 SKS & GKS/ Procedia Earth and Planetary Science00 (2015) 000–000 5

Table: 2 - Projected Lead Consumption in various Classes of Vehicles

(In tonnes)
HEMM @ 44 kg Commercial Vehicle Passenger Three Wheelers Two Wheelers @
@ 25 kg Vehicles @ 10 kg @ 0.5 kg 0.5 kg
Year
Qty of Lead Qty of Lead Qty of Lead Qty of Lead Qty of Lead

2016-17 1015 115740 190403 2280 44281

2019-20 1321 150969 259179 2919 58297
2024-25 2049 235089 433322 4408 92192
2029-30 3177 366080 724472 6657 145793

The total demand of lead for battery industry is calculated by adding the demand for each segment of vehicles
for particular year. The future demand of lead by 2019-20 is forecasted at about 639 thousand tonnes which will climb
to a level of 1,037 thousand tonnes in 2024-25 and 1,684 thousand tonnes in 2029-30 respectively, including other
industries also.

Comparison of future demand forecasts for lead

It is seen from the preceding paragraphs that there is a difference in the demand forecast made on the basis of
CAGR of apparent consumption, GDP growth rate of 8%, the ratio of production of batteries & production of vehicles
and statistical methods namely, Arithmetic Average, Moving Average and Trend Line Analysis. The demand forecast
made by all the above methods is given below in Table 3.
Table: 3 – Comparative Statement of Total Future Demand of Lead
(In thousand tonnes)
S. No. Methods 2016-17 2019-20 2024-25 2029-30
1. Demand Based on CAGR of Apparent Consumption @
350 442 656 971
8.18%
Demand estimated as per apparent consumption
2. Demand based on GDP Growth Rate @ 8% 348 438 644 946
3. Demand based on GDP growth rate @ 6.4 %, as per the
332 400 546 745
International Monetary Fund.
Time series data of demand/apparent consumption – Statistical method
4. Demand based on Arithmetic Average Method 369 493 800 1,297
5. Demand based on Moving Average Method 388 545 960 1,693
6. Demand based on Trend Line Method 312 357 432 507
Demand Based on Production of LABs
7. Demand Based on the Basis of Ratio of Lead Acid Battery
477 639 1,036 1,684
Production and Production of Vehicles

It is known that the battery used in a vehicle has a life span, ranging from one year to three years and during
the life time of vehicle say 15 years; it requires 5 to 6 batteries. It is also understood that the two wheeler vehicles have
a less life span of 10-12 years. Therefore, each year the production of batteries is to be increased to commensurate the
battery required for changing in the older vehicle, hence, the total battery produced in a particular year gives a fair idea
of lead consumption in the battery industry. It may also be noted that, the batteries consumed for new as well as older
vehicles in each segment is covered in Method-7. Hence, the demand of lead estimated by this method, i.e. based on
ratio of LAB production and production of vehicles seems to be more near to the factual demand. Therefore, the future
demand of lead estimated by this method is accepted. The total future demand of lead in 2016-17, 2019-20, 2024-25 and
2029-30 works out to be 450-500 thousand tonnes, 600-650 thousand tonnes, 1,000-1050 thousand tonnes and 1,650-
1700 thousand tonnes, respectively. Further, it is revealed that this increased demand will be fulfilled by primary
production coupled with secondary production by battery scrap route. Further, the secondary production of lead through
battery scrap route will be more than primary production of lead which will attain a ratio of 2:1 by the year 2029-30.
6 SKS & GKS / Procedia Earth and Planetary Science00 (2015) 000–000

Acknowledgement
The authors are thankful to Controller General and In-charge Mineral Economics division, IBM for providing
an opportunity and motivating to prepare and present this paper. Also we acknowledge all the Authors of website with
utmost sincerity.

References

Seeley W. Mudd, Economics of the mineral industry, American Institute of Mining, Metallurgical & Petroleum
Engineers, Inc., Newyork, 1985.

K. K. Chatterjee, An Introduction to Mineral Economics, Willey Eastern Ltd., 1993.

Market Survey on Lead & Zinc, June 2011, Indian Bureau of Mines.

JPC (Joint Plant Committee) Bulletin.

HZL, Annual Report, 2011-12 to 2013-14.

Indian Mineral Year Book 2003 to 2013, Indian Bureau of Mines

Monthly Statistics of Mineral Production – 2004 to 2014, Indian Bureau of Mines

Department of Industrial Policy & Promotion, Annual Report 2010-11 to 2012-13.

Websites

http://118.67.250.203//scripts/production-trend.aspx; Society of Indian Automobile manufacturers.

http://www.hzlindia.com/ Hindustan Zinc Limited

http://www.ilzsg.org/ International Lead & Zinc Study Group

http://batterycouncil.org/?page=lead_acid_batteries

http://www.ilzda.com India Lead & Zinc Development Association

http://steel.gov.in/

Note: The analytical views/ comments expressed in the paper are solely of the Authors and not related to Indian
Bureau of Mines