Variability of Market Conditions as a Source of Risk in The Planning of Mining Production and its Economic Results

Abstract

In present market conditions planning of mining production and its economic result is a difficult task which requires analysis and forecasting many internal and external conditions. Additionally, it is complicated by time-consuming, cost-absorption and unpredictability of mining conditions. According to above circumstances, the main aim of this article is to assess variability of market conditions in the context of mining production and its economic results. To realize above aim, in the first part of the article the assessment of variability of coal prices, coal production level and coal consumption in Poland in 2011–2016 is presented. Then the aspects of coal production, consumption and prices are considered on an ex post basis, in parallel with taking the attempt to verify the accuracy of previous established forecasts. In the conclusions the key risk sources in coal mining production planning and its results are indicated and advices on improvement these processes are formulated. In the risk assessment of mining production the fundamental variability measures are used such as a standard deviation and a variability coefficient calculated for coal production in Poland in 2011–2016. In the case of risk connected with economic results of mining production mentioned above measures are calculated for unit prices (for the key Polish price indices: PSCMI 1 and PSCMI 2). In the analysis of accuracy of forecasts of coal production the following forecast are used: (1) elaborated by Central Coal Mining Institute with Agency of Energy Development, (2) elaborated by Institute of Mineral Resources and Energy Management of the Polish Academy of Sciences together with the AGH University of Science and Technology in Cracow and (3) elaborated by Faculty of Organization and Management of Silesian University of Technology. In the verification process the relative and absolute forecast errors are used. The results of analyses let the author to state that the most important risk source for mining production in Poland is the variability of coal prices which directly influences at the economic production results and additionally in the conditions of high unit production costs causes the decrease of price competitiveness of Polish coal and decreases demand for Polish coal. Furthermore, high variability of market conditions results in the increase of risk which hinders effective forecasting of production parameters in macroscale (for coal mining industry) and in microscale (for the mining enterprises).