Asian Journal of Control, Vol. 10, No. 6, pp.

632 637, November 2008

Published online in Wiley InterScience (www.interscience.wiley.com) DOI: 10.1002/asjc.064

USING NON-LINEAR GARCH MODEL TO PREDICT SILICON

CONTENT IN BLAST FURNACE HOT METAL
Jiu-sun Zeng, Chuan-hou Gao, Xiang-guan Liu, Ke-ping Yang, and Shi-hua Luo

ABSTRACT

Forecasting of silicon content in blast furnace (BF) hot metal has always
been an important tool in the control of iron-making process. To get an accurate
prediction of silicon content is an urgent task for BF operators. The approach
based on generalized autoregressive conditional heteroskedastic (GARCH)
has been introduced to predict step-ahead silicon content in BF hot metal.
The algorithm has been explained in detail and simulation results have been
analyzed from different criteria. It is shown that the algorithm gives good
results and is helpful for practical production.

Key Words: Blast Furnace, silicon content, ARMA, generalized autoregres-

sive conditional heteroskedastic (GARCH).

I. INTRODUCTION has been applied to the same problem. Most of these

Forecasting of silicon content in Blast Furnace
(BF) hot metal has always been an important tool in
control of iron-making process. It is a key index to eval-
uating the status of BF and the quality of iron. To in-
crease the output of iron and save energy, BF operators
make extensive use of silicon content prediction in their
decision-making. So it is of great importance to make
precise predictions of silicon content.
In recent years, several methods have been applied
to predict silicon content in hot metal. For example,
fuzzy controller [1] and artificial neural networks [2]
have been tested. In addition, the chaotic method [3]
Manuscript received April 18, 2006; accepted October 29,
2007.
Jiu-sun Zeng, Chuan-hou Gao, Xiang-guan Liu, and Ke-
ping Yang are with the Department of Mathematics, Zhejiang
University, Hangzhou 310027, China. Chuan-hou Gao is the
corresponding author (e-mail: gaochou@zju.edu.cn).
Shi-hua Luo is with the School of Information Management,
Jiangxi University of Finance and Economics, Nanchang
331305, China.
models can give good results when the volatility of sili-
con content is low, but in real applications, silicon con-
tent changes very fast and it is found that time series
methods are among the most effective.
An advanced time series method, the generalized
autoregressive conditional heteroskedastic (GARCH)
model [4] proposed by Bollerslev in 1986, has become
popular in recent years. It considers the moments of a
time series as variant (i.e., the error term: real value
minus forecasted value does not have zero mean and
constant variance as with an ARMA process). The er-
ror term is assumed to be serially correlated that can be
modeled by an ARMA process. Thus, a GARCH pro-
cess measuring the conditional mean and conditional
variance can be used to do forecasts.
In this paper we focus our attention on one-step-
ahead forecast of silicon content. To illustrate our
model, data of silicon content from Handan Steel are
presented for analysis. The forecasts of the GARCH
model are evaluated from different criteria.
The outline of our paper is as follows. In Section
II, the general GARCH method is discussed. Section III
describes the predictive algorithm in detail. Section IV
is our numerical results and analysis and Section V
states our conclusion.

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 J.-s. Zeng et al.: Using Non-linear GARCH Model to Predict Silicon Content in Blast Furnace Hot Metal 633

II. GARCH METHOD where 2 = 1 and t is basically a white noise process.

2.1 The GARCH (p, q) process p  0, q>0

A primary feature of the autoregressive condi- 0 > 0, i 0, i = 1, . . . , q
tional heteroskedasticity (ARCH) model, as developed
by Engle [5], is that the conditional variances change i  0, i = 1, . . . , p.
over time. Following the similar idea, numerous mod-
els incorporating this feature have been proposed. To perform predictions, this model is extended to
Among these models, Bollerslev’s generalized ARCH ARMA models with GARCH ( p, q) errors. We define
(GARCH) model is certainly the most popular and the ARMA-GARCH model as:
successful because it is easy to estimate and interpret
by analogy with the autoregressive moving average 
r 
s
yt = i yt−i + i t−1 + t
(ARMA) time series model. Using the ARCH and i=1 i=1
GARCH models to do empirical research has become 
t =  t h t (2)
popular in recent years. For example, Franses and
Ghijsels [6] applied the GARCH model to analyzing 
q 
p
h t = 0 + i 2t−i + i h t−i
daily returns in Europe’s main stock markets. Brooks i=1 i=1
[7] used the GARCH model to analyze the French
Franc and Deutsch Mark exchange rates but, to our where yt is an ARMA process and i , i are unknown
knowledge, predictions from a general ARMA model parameters, r is the order of autoregressive part and s the
with GARCH errors hasn’t received as much attention. order of moving average part. It is important to note that
Among the research were Garcia and Contreras [8] who in the presence of GARCH effects the optimal predictor
used GARCH model to predict day-ahead electricity for the dependent variable is a function of past values
prices in several European markets. not only of the observations and the errors (yt−i , t−i )
The information recovery process in time-series but of the conditional variances and the squared errors
analysis uses historical observations to derive estimates (h t−i , 2t−i ) as well.
of current and future values of the dependent variable.
Among the most popular estimation techniques are the
maximum-likelihood (ML) approach, which requires 2.2 GARCH (1, 1)
the availability of information on the entire probability
The simplest, but often very useful, GARCH pro-
distribution, generalized methods of moments (GMM),
cess is, of course, the GARCH (1, 1) process, which is
which reduces the informational requirements to spe-
also the model we use here. It follows as:
cific moments of the data, and nonparametric proce-
dures [9]. Given the Gaussian distribution for the time t |t−1 ∼ N (0, h t )
series is satisfied, we adhere to the Box-Jenkins mod- 
eling approach of parsimony, i.e. using the fewest t = t h t
model parameters as supported by the data, to estimate (3)
h t = 0 + 1 2t−1 + 1 h t−1
an ARMA process with conditional-heteroskedastic
(GARCH) error components. 0 >0, 1 0, >0
Let t denote a real-valued discrete-time stochas-
tic process, and t the information set (-field) of all For GARCH (1, 1) model, it is required that 1 +
information through time t. The GARCH ( p, q) pro- 1 <1, the closer 1 + 1 is to 1, the effect on volatility
cess is then given by is longer.
Considering the fact that the silicon content se-
ries is significantly auto correlated only for 2 lags, the
t |t−1 ∼ N (0, h t )
ARMA process we use here is ARMA (2, 0). Thus the

t =  t h t model becomes:


q 
p (1) yt = ayt−1 + byt−2 + t
h t = 0 + i 2t−i + i h t−i 
i=1 i=1 t =  t h t (4)
= 0 + A(L)2t + B(L)h t h t = 0 + 1 2t−1 + 1 h t−1

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634 Asian Journal of Control, Vol. 10, No. 6, pp. 632 637, November 2008
A GARCH model is used to fit data with heteroskedas-
ticity, and another important feature is that it can be fit-
ted to data with excess kurtosis; in successive analysis
we will find that the data of silicon content has both of
these features.
III. GARCH FORECASTING METHOD
Most silicon content series are characteristic of
high frequency, non-constant mean and variance and
high volatility, among others. These factors are the main
reasons to apply the GARCH method. Due to the high
volatility of silicon content, a difference logarithmic
transformation,
dsi(n) = log(si(n)) − log(si(n − 1)), (5)
is applied to smooth the volatility effect.
Before using GARCH to perform forecasts, rig-
orous statistical hypothesis testing should be applied
to validate the model assumptions of the GARCH
specification. The diagnosis checks verify the statisti-
cal significance and assumptions of the parameters in
the GARCH model and its residuals (actual values of
silicon content minus mean value).
Statistical tests on the residuals include the Ljung-
Box statistic, and plots, such as the autocorrelation and
partial correlation of the residuals (see [6, 7, 10]). The
computed statistical values for the Ljung-Box statistic
together with corresponding p-values are presented (see
Table I). The null hypothesis is that no serial correlation
exists and the hypothesis is accepted when the p-values
are high. In this case we reject the hypothesis.
Another essential test is that of the ARCH ef-
fect (i.e., heteroskedasticity). Engle’s ARCH statistic
has been used. This test supports that there exists het-
eroskedasticity. P-values are close to zero for all of the
three lags. The result is presented in Table II. With these
P-values we also reject the hypothesis that no ARCH-
effects exist.
After these statistical hypotheses testing applied it
is time to estimate the unobservable parameters through
Maximum Likelihood (ML) estimation. ML estimates
Table I. Result of Ljung-Box-Pierce Q-test.
Lag P-Value Statistics
10 0 206.86
15 0 217.15
20 0 220.49
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Table II. Result of Engle’s ARCH-test.
Lag P-Value Statistics
10 2.00e − 07 50.68
15 1.30e − 06 55.81
20 6.20e − 06 60.38
are known to be asymptotically unbiased and efficient.
The parameter estimation is based on maximizing a like-
lihood function for the available data.
It should be noted that during the parameter es-
timation procedure, it is possible that additive outliers
appear. But since we cannot predict when the BF oper-
ators exert a strong control measure we have decided to
neglect it and use the real data without any adjustment.
In this step, another testing has been applied to the
fitted residuals (actual values of silicon content minus
fitted values) of the estimated models. The Lagrange
Multiplier (LM) test is used to test whether there is
additional GARCH effect in the fitted residuals. If the
hypothesis testing is not significant, it shows that the
fitted residuals have no additional GARCH effect and
also the parameter estimation is valid.
With all the statistical significance and hypothe-
ses tests on parameters and residuals are validated, the
model can be used to forecast silicon content. Our pre-
dictive procedure is as follows. We estimate the param-
eters in the GARCH (1, 1) model (from (3) to (4)) and
the ARMA (2, 0) process for samples and generate a
one-step ahead forecast for t . With the forecasted t ,
we get the corresponding forecast for yt . Next, the first
data point is deleted from the sample and a new one is
added at the end of sample, then we estimate the pa-
rameters and generate a one-step ahead forecast again.
The GARCH (1, 1) is applied time and time again and
the forecasts are generated.
IV. SIMULATION OF PREDICTIVE
ALGORITHM
In our empirical analysis, we use data collected
from the Intelligent Control System on 2000 m3 BF,
Handan Iron & Steel Co., China, as sample data to
implement the algorithm. The data set contains 1001
data points. After difference logarithmic transform (5)
it turns into a sample with 1000 data points. Fig. 1 gives
the original data series of silicon content.
We divide the 1000 data points into two groups;
the first group consists of data points from 1 to 500, the
second from 501 to 1000. The two groups are then used
to test the new algorithm. For each group, the first 450
 J.-s. Zeng et al.: Using Non-linear GARCH Model to Predict Silicon Content in Blast Furnace Hot Metal 635

Fig. 1. Time series graph for original data of silicon content.

Fig. 2. The predictive result of the first group.

Fig. 3. The predictive results of second group.

data points are used as training data, and the final 50
data points are used as testing data. After the necessary
estimation and diagnostic test, the estimated parameters
are applied to predict. The predictive results are got
through the inverse transform of (5):
ˆ = exp(dsi(n))
si(n) ˆ ∗ si(n − 1)
Figs 2 and 3 show the result of the predictive algo-
rithm: From Figs 2 and 3 we can see that most predicted
values of both groups follow the change of silicon con-
tent and give good forecasts.
To further evaluate our predictive model, several
important criteria are considered. The first criterion is
(6) model’s relative error, which we are trying to minimize.

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636 Asian Journal of Control, Vol. 10, No. 6, pp. 632 637, November 2008
Table III. Results of prediction.
Group No Number for Training
1 450
2 450
It is denoted to be Perr and computed as follows:
 N
N 
Perr = ˆ
(si(k) − si(k)) 2
si(k)2 (7)
k=1 k=1
ˆ is the predicted value, si(k) the observed
where si(k)
value and N the total predicted numbers.
The second criterion is the relation between orig-
inal values and predicted values. It is denoted to be H
and computed as follows:
 N 
1 
H= Sk × 100% (8)
N k=1
where
 under Grant No. Y107110, Research Fund for the Doctoral
1 ˆ − si(k)))<0.1
((si(k)
Sk =
0 else.
Generally, if Sk equals to one, namely, ((si(k)ˆ −
si(k)))<0.1, we say that the prediction hits the tar-
get. And H is the percentage of prediction that hits the
target.
Table III gives some statistical features of sample
data and the results of prediction.
It is seen from the data in Table III that, for both
groups of data, the GARCH model gives more than 84%
hit rate at the range of [si] ± 0.1, and the accuracy of
prediction is below 0.04. The result is helpful for BF
operators to judge the situation of the BF and make cor-
responding control measures. What should be noted is
that the second data group has a kurtosis of 3.86 and un-
der the condition of excess kurtosis, the GARCH model
is also able to achieve a good result. Comparing to other
methods [11], the GARCH model works better under
situations with higher standard deviation and kurtosis.
V. CONCLUSION
Since its introduction by Bollerslev in 1986, the
GARCH models have been widely used in forecast-
ing financial time series and have fully shown its use-
fulness. This paper applies the GARCH (1, 1) model
to predict silicon content in hot metal to control the
BF iron-making and good result is achieved, taking ac-
countof the complex nature of silicon content series and
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Standard Deviation Kurtosis Perr H
0.060 2.63 0.032 86%
0.075 3.86 0.034 84%
the results previously reported in technical literature.
But there are still short-comings. The GARCH model
is only part of a solution since BF operators’ decision-
making is not solely based on expected forecasts of
silicon content. Improvements to the models like the in-
clusion of other dependent variables should be consid-
ered in future research.
ACKNOWLEDGEMENTS
The authors thank the Handan Steel Corporation in China
for providing field data and expert knowledge. The second
author would like to thank sponsorship and financial support
from Zhejiang Provincial Natural Science Foundation of China
Program of Higher Education of China (for new teachers) under
(9) Grant No. 20070335161. The fourth author would like to thank
sponsor and financial support from the Office of Education,
Jiangxi Province under Grant No. GJJ08358.
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Jiu-sun Zeng was born in Jiangxi,
China, in 1982. He received the
B.S. degree in Mathematics from
Zhejiang University, China, in
2004, and is currently a Ph.D. can-
didate of Zhejiang University, ma-
joring in Operational Research and
Control Theory. He is expected to
graduate in 2009.
His research interests are in the areas of system
identification and control theory, with application to
complex industrial system, specifically on metallurgical
process. He is currently working on subspace identifi-
cation methods and model predictive controller design
for blast furnace ironmaking process, other interests in-
clude application of statistical method to control.
Chuan-hou Gao was born in An-
hui, China, in 1975. He received
the B.S. degree in Chemical En-
gineering from Zhejiang Univer-
sity of Technology, China, in 1998,
and the Ph.D. degree in Opera-
tional Research and Cybernetics
from Zhejiang University, China,
in 2004. From June 2004 until May
2006, he was a Postdoctor in the
Department of Control Science and Engineering at Zhe-
jiang University. Since June 2006, he has joined the De-
partment of Mathematics at Zhejiang University, where
he is currently an Associate Professor.
His research interests are in the areas of optimiza-
tion and control for complex industrial process, in par-
ticular in chaos and model predictive control techniques
q 2008 John Wiley and Sons Asia Pte Ltd and Chinese Automatic Control Society
637
applied to these areas, and prediction and modeling of
noise from industrial process.
Xiang-guan Liu was born in Fu-
jian, China, in 1943. He received
the B.S. degree in Mathemat-
ics from University of Science
and Technology of China (USTC)
in 1966. After graduation from
USTC, he worked in Pangang Iron
and Steel Corporation of China and
won the First Level Award for
Progress on Science and Technol-
ogy of China and became a faculty of the Department of
Mathematics at Zhejiang University since 1995, where
he is currently a Professor.
His research interests are in the modeling and con-
trol of metallurgical process, in particular in the devel-
opment of expert system and optimization theory. The
expert system he developed was successfully applied to
several blast furnaces in China.
Ke-ping Yang was born in
Zhejiang, China, in 1982. She
received the B.S. degree in In-
formation and Computer Science
from Ningbo University, China,
in 2004, and the M.S. degree in
Operational Research and Control
Theory from Zhejiang University,
China, in 2006. She is currently
a statistician in Annpro Analytic
of Hangzhou, China. Her research interests are in the
field of statistical algorithms and application to indus-
trial systems and clinical study. She is an expert on
statistical theory and algorithms.
Shi-hua Luo was born in Jiangxi,
China, in 1975. He received the
B.S. degree and M.S. degree in
Mathematics from Jiangxi Normal
University, China, in 1998 and
2001, and the Ph.D. degree in
Operational Research and Control
Theory from Zhejiang University,
China, in 2007. He is currently an
associate professor of Jiangxi Uni-
versity of Finance and Economics. His research inter-
ests are in the field of modelling and optimization of
complex systems, especially on the extraction of non-
linear characteristics of chemical process and financial
process.