Conceptualization and parameterization of the market price mechanism in the WORLD6 model for metals, materials, and fossil fuels

Harald Ulrik Sverdrup*, Anna Hulda Olafsdottir

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

3 Citations (Scopus)

Abstract

A model for market price modeling in an integrated global model for resource supply has been developed and successfully applied in the WORLD6 model. A dynamic market and price model has been developed, based on immediately tradable amounts, affected by supply and demand. Real-world drivers and a systems approach with feedbacks in the price setting and market mechanisms were used in this study, without the model becoming too complex. Observed cause and effects and feedbacks were included, in order to have explanatory power or be truer to economic reality in terms of both structure and parameter settings. The model is adaptive from a fully free dynamic market to a biased or oligarchic market, depending on the condition. The market price model was parameterized for copper, zinc, lead, nickel, iron, aluminum, wolfram, niobium, molybdenum, lithium, vanadium, gold, silver, platinum, palladium, and tin, and for fossil fuels like oil and hard coal. The equation has the shape: price = k × market amount n, where market amount is the instantly tradable amount of metal in the market arena, k is a metal-specific coefficient, and n is an exponent. The derived equations were applied in the WORLD6 model, making simulations of market price set every day endogenously in the model possible. The price mechanism proposed here perform well in tests against observed data when included in the WORLD6 model. The obtained results were compared to a price curve for coffee and a similar pattern was found.

Original languageEnglish
Pages (from-to)285-310
Number of pages26
JournalMineral Economics
Volume33
Issue number3
DOIs
Publication statusPublished - 1 Oct 2020

Bibliographical note

Funding Information:
The price model was first developed 2010?2012 in cooperation with K. A. Rasmussen as, Hamar, Norway, for use with gold, silver, and platinum market dynamics modeling. The concept was first employed on a broader basis in the WORLD5 model during the CONVERGE project, funded by the EU FP7. This study contributed to the SimRess project (models, potential, and long-term scenarios for resource efficiency), funded by the German Federal Ministry for Environment and the German Environmental Protection Agency (FKZ 3712 93 102), which resulted in the WORLD6 model. Dr. Ullrich Lorenz is project officer at the German Environmental Protection Agency (UBA).

Publisher Copyright:
© 2019, Springer-Verlag GmbH Germany, part of Springer Nature.

Other keywords

  • Dynamic modeling
  • Metal price
  • Mining
  • Recycling
  • System dynamics
  • WORLD6

Fingerprint

Dive into the research topics of 'Conceptualization and parameterization of the market price mechanism in the WORLD6 model for metals, materials, and fossil fuels'. Together they form a unique fingerprint.

Cite this