Forecasting the demand of indian coal

Coal is a genuinely globalized trade good which is traded around the universe and the kineticss of the monetary value are persuaded by a really convoluted assortment of the elements runing from rains in Indonesia, and to the demand of steel.

Markets for coal

The two most of import regional markets: The Atlantic and the Pacific. Main providers of the first market are: SA ( South Africa ) , Colombia, Poland, Russia, Australia, Indonesia, and the United provinces, while on the Pacific side we find that the chief providers are: Australia, China, Indonesia and Russia. Import demand normally comes from EU on the one manus and from Japan, Chinese Chipei and South Korea on the other manus, and with these states wholly inquiring about 70 % of internationally traded volume of coal. The exchange between the two large markets is dependent of cargo difference and the volumes can lift or decrease depending upon the degree of the cargo monetary values.

By and large, Steam coal monetary values are a based on a assortment of different factors like the supply demand basicss, the cargo charges and other external factors.

India Steam Coal ingestion in India

The bulk of steam coal in India is imported, because we do n’t hold really good quality coal in the state which is peculiarly used for the power coevals. Today bulk of the power workss in India are province authorities owned, and its they who make the determination of purchasing the coal through MMTC. NTPC is a authorities owned company which is in charge of managing these power workss in the state.

Company Profile

Minerals and Metallic elements Trading Corporation of India Ltd.A ( MMTC ) is at the instant 1 of the two topmost earners of FE ( foreign exchange ) for the state and it is besides the largest trading organic structure in the state. It does n’t merely manage the export of the primary merchandises like coal, Fe ore, and production of agro and industrial merchandises. MMTC is besides responsible for the import of few really of import trade goods like ferric and the non-ferrous metals for the Indian industry, and agricultural fertilisers.

MMTC is known for its diverse nature of trade that cover the 3rd state trade, joint ventures and the nexus trades and all the modern signifiers of the international trading.

MMTC has a huge international web crossing about in all the states in Asia, Europe, Oceania, Africa, US and besides has a entirely owned, an international subordinate, MTPL. MMTC is one of the Miniratnas companies of the state.

Presently, MMTC is one of the two topmost FE ( foreign exchange ) earner for India ( of class after the Petroleum refinement companies in India ) . MMTC is besides the first Public Sector Enterprise to be accorded the position of “ FIVE STAR EXPORT HOUSE ” by Government of India for long standing engagement to exports. MMTC is besides the major non-oil importer in India. Few things about MMTC:

India ‘s largest foreign trade Enterprise

Largest exporter of minerals from India

One of India ‘s biggest importers of non-ferrous metals

India ‘s largest importer of steam coal

One of India ‘s largest bargainers of agro merchandises

India ‘s largest bullion bargainer

One of India ‘s taking Importers of fertilisers

Business Areas

MMTC is fundamentally in four countries:

Minerals

Cherished metals

Metallic elements

Coal & A ; Hydro Cs

Fertilizers

Agro merchandises

Global energy scenario

Today the planetary coal industry is confronting the challenges that are unlike its long history. In both India and China the rush in the coal-burning power works building is driving the demand that is stretching supply possible of the both international and local manufacturers.

In North America the merger of endangering clime alteration statute law & A ; swelling natural gas production is threaten the conventional cost advantage of coal-burning power workss. These long-run tendencies are get downing to play out in planetary steam coal trade, driving unusual trading forms and monetary value displacements with which coal purchasers and providers must now get by. The interrelatednesss between seemingly disconnected markets from clip to clip take industry participants by daze. A full apprehension of the new drivers of planetary coal markets requires awareness of wide-ranging tendencies.

The proven planetary coal modesty was estimated to be 9, 84,453 million metric tons by terminal of 2003. The SA had the largest portion of the planetary modesty ( 25.4 % ) followed by Russia ( 15.9 % ) , China ( 11.6 % ) . India was 4th in the list with 8.6 % .

Indian Energy scenario

Coal is the biggest factor in the energy mix in India. It contributes to about 55 % of the entire primary energy demand of the state ‘s production. Over the old ages, we find that there has been a really seeable addition in the size of the portion of gas in the primary energy pie. It has increased from approximately 10 % in 1994 to 13 % in 1999. There has been a fringy diminution in the portion of the oil in the primary energy production from one time 20 % tp 17 % during the same period.

Energy Supply

Coal Supply

India has tremendous coal militias. There are at least 84, 396 million tones of proven recoverable militias ( at the terminal of 2003 ) . This sum to abot 8.6 % of the entire universe militias, and it may last for about 230 old ages of ingestion at the current modesty to production ratio.

Reserves/Production ( R/P ) proportion-

In this ration the militias staying at the terminal of the twelvemonth are divided by the production in that twelvemonth so that we get the length of clip that the staying militias would last if the ingestion and therefore the rate of production were to go on.

India presently is the 4th biggest manufacturer of coal and ignite in the universe. Normally the coal production is concentrated in the undermentioned provinces:

Andhra Pradesh,

Uttar Pradesh, Bihar,

Madhya Pradesh,

Maharashtra,

Orissa,

Jharkhand, and

West Bengal

Oil Supply

Oil presently accounts for approximately 36 % of the entire energy use in India. We are today one of the top 10 oil-guzzling states in the universe. We are confidant of going 3rd largest oil consumer, by catching Korea in Asia after China and Japan.

Natural Gas Supply

Today, natural gas records for approximately 8.9 % of the energy use in the state. The present demand for the natural gas is said to be around 350 million three-dimensional metres per twenty-four hours, as against the handiness of 80 mcmd. By 2011, the demand is projected to be about 450 mcmd. Natural gas militias are anticipated at 660 billion three-dimensional metres.

Nuclear Power Supply

Today, Nuclear Power contributes to about 5.2 % of electricity produced in India. Today, IndiaA has about 19A nuclearA powerA plantsA in operation with the bring forthing capacity of 4560 MW. And there are more atomic reactors that have been approved for building.

Hydro Power Supply

India is gifted with an tremendous hydro potency for power coevals of which merely 15 % has been harnessed so far. It is acknowledged that exploitable potency at 60 % burden factor is 84,000 MW.

Thermal Engergy Generation

Share of different constituents in the thermic energy ( 63.3 % of entire energy coevals in the state ) coevals:

Thermal

Coal

Gas

Diesel

Entire

MW

77648.88

14876.61

1199.75

93725.24

%

52.5

10.1

0.8

63.3

The power burden factors over the old ages are shown below, with the maximal PLF achieved in 2007-08 and 2008-09.

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

69.9

72.2

72.7

74.8

73.6

76.8

78.6

77.19

Undertaking Description

The undertaking can be described with the aid of the triangular diagram shown below. The chief object ( represented by the cardinal trigon ) is to calculate the steam coal demand in India.

MMTC being the largest importer of steam coal, for several coal powered power workss in different provinces in India, funny to cognize who the power works capacity edifice is traveling on through the state.

Other of import aims of the undertaking is to understand the pricing fluctuation of steam coal throughout the universe and analyze its consequence on the steam coal demand.

Undertaking Plan

The undertaking program includes the stairss that I need to take to carry through the declared aim the summer internship undertaking. First I will roll up the power coevals capacity of the provinces in India. And so analyze the approaching power workss. Using which I will cipher the entire steam coal demand in India ( by these power workss ) .

Second, I will transport out a survey to understand the pricing mechanism and the planetary steam coal monetary value fluctuations and its impact on the steam coal demand. And eventually will make SWOT and Five force analysis of MMTC via-vie its competition.

Benefits of undertaking

The biggest clients of MMTC are province electricity boards. And the companies running the power workss on those provinces. Hence the demand of coal is really fluctuating, depending upon the fundss available with the provinces.

Forecasting

For puting reorder point ( for A & A ; B category of points ) or make up one’s minding measure required for fixed period ( as in instance of C category points ) correct anticipation about demand is required. Harmonizing to Chambers, Mullick, & A ; Smith there are three sort of calculating methods. They are:

Qualitative technique: When there is no old informations or they are really hard and expensive to acquire these techniques are used. One of the best illustrations for such state of affairs is merchandise launch. In instance of merchandise launch there is no old informations available. So merely possible option is qualitative technique. The chief aim in this instance is to convey together all the information in a logical, indifferent and systematic manner. Some of the methods under this technique are a ) Delphi method, B ) Market Research, degree Celsius ) Panel Consensus, vitamin D ) Visionary Forecast, vitamin E ) Historical Analogy etc ( Chambers, Mullick & A ; Smith, 1971 ) .

Time series technique: In this instance future anticipation is done based on past information. This technique is used in the instances where cause and consequence relationship is hard to set up. This analysis looks at the past form in the variable to be forecast and attempts to project those forms into the hereafter ( Menizer, 1988 ) . Time series analysis assumes that past information is made of four constituents ( Ramasubramanian ) . They are:

Horizontal: When informations value fluctuates around a changeless value

Tendency: When there is a long term addition or lessening in informations

Seasonal: When a series is influenced by seasonal factor

Cyclic: When information shows a cyclical rise or autumn

To cover with each sort of constituent or a combination of them, different clip series calculating method is available. Some of the often used methods are

a ) Average Method: In this instance simple norm of informations from a peculiar clip period is the anticipation for following clip period. So here clip period is non fixed. At each consecutive clip period new informations is added without taking any past information. This method is non popular for prediction.

B ) Traveling Average: In this method anticipation for any clip period is mean of information of last N clip periods. So here clip period for which information is considered is fixed. At each consecutive clip period most recent information is added and furthest information is removed from consideration. No of informations point to see is cardinal factor for truth of this method. We will be utilizing this method for our survey.

degree Celsius ) Exponential Smoothing: In this method alternatively of giving same weightage to each past information, recent information is given more importance. Here calculating for t+1 period ( F t+1 ) is calculated as

F t+1 = F T + I± ( Y t – F T ) , where Y T and F T are respectively ingestion and anticipation for clip period T and I± is smoothing changeless which lies between 0.1 and 0.9. By and large first month ‘s ingestion is taken as first month ‘s anticipation.

Value of smoothing changeless determines how much weightage is give to which informations. Higher the value of alpha means higher the weightage for recent informations. A big value of alpha gives really small smoothing, whereas smaller value of alpha gives more smoothing. This method is capable of extinguishing the consequence of spikes in past informations. Accuracy of this method is really much dependant on the choice of alpha.

Causal theoretical accounts: In this instance cause and consequence relationship is established. One of the cardinal undertaking here is to place the factors which can take to out put. Popularly used methods under this technique are a ) Arrested development, B ) Econometric, degree Celsius ) Leading index etc ( Chambers, Mullick & A ; Smith, 1971 ) .

Data Collection Method

Data aggregation was the most of import measure during the summer internship. I could non utilize the MMTC ‘s informations beginning for the usage of the undertaking. I had to see NTPC and Coal India ‘s offices for that for several times.

I besides collected informations from the single web sites of different electricity boards in the state and several other informations rich web sites ( listed in the mention subdivision ) .

Datas Analysis

Data analysis of the coking and non-coking coal based on the appendix-D is shown below:

Consequences and Discussion

The concluding consequence of the analysis says that the demand of steam coal ( non-coking coal ) should be around 47.6 million dozenss for imported steam coal. We took the electricity coevals and burden factors as the independent factors to cipher the future demand of imported steam coal.

Restrictions

Restriction of this analysis lies on the fact of the variableness of the utilizing factor ( see appendix-B ) and State wise power state of affairs ( appendix-A ) . If the variableness remains high so the consequences could change by immense sum. As we have already taken those fluctuations into consideration in our prediction, we are less likely to see this sort of problem until some major blow to the thermic power coevals sector happens in the close hereafter.