For most North American conveyor belt makers, the primary mining segments served are coal, copper and iron ore, according to Jim Hill, general manager for industrial products in North America at Fairlawn, Ohio-based Veyance Technologies Inc., a large producer of belting for the North American market. “All three have been impacted in a variety of ways.
“Coal production has been slowed over the past couple years due to milder winters, greater availability of natural gas and environmental regulation. The severity of this past winter helped reduce utility stockpiles, but we have not seen a rebound in mining demand for our products like we had seen in 2011.”
Competitive dynamics in the marketplace have allowed Veyance to maintain steady production levels at its plants, he said, but overall demand for belts used in coal mining is lower today than it has been for the last two years.
Mining and agriculture tire maker Titan International Inc. saw its earnings drop 6.8 percent in the first quarter and cited a “nonexistent” market for mining tires as one of the prime reasons. The outlook for mining continues to be negative, CEO and Chairman Maurice Taylor Jr. said. Because of that, “the price of tires continues to drop and will in the foreseeable future.”
In the final quarter of 2013, AirBoss of America Corp. blamed weakness in the coal mining market as the primary reason its rubber compounding division sales were off by $6.4 million, although its overall revenues—boosted by the purchase of Flexible Products Co.—rose 29 percent to $70.3 million. It mixes large amounts of compound for belt manufacturers.
“Right now it's tough sledding for coal,” AirBoss President Timothy Toppen said. “But mining is a big part of our business and will continue to be a b+ig part.” However, the company has been diversifying during the last year and because of that, the impact of the poor mining industry may not be as big in the future as it would have been in the past.
Fenner warned that its conveyor belt business is expecting weaker results than previously forecast because of a decline of confidence in the U.S. coal industry and an unsuccessful bid to snare a contract for supply of conveyor belts to an iron ore mining firm in western Australia.
Fenner said the company's profit before taxes could be reduced by 10-15 percent from earlier estimates of about $105 million because of the poor mining situation.
Cassandra Pan, president of Fenner Dunlop Americas, said when coal demand slowed, major coal producers became cautious in their spending because they “have been challenged by low profitability and liquidity constraints.”
Mining firms are maintaining supply discipline, she said, suggesting that their coal is worth more in the ground than the value currently placed on it in the market.
Underground coal production in Appalachia, where aging mines result in higher production costs, has decreased, Pan said, while above-ground operators in the Power River Basin in Illinois—with lower costs and highly productive operations—are gaining ground.
Fenner has a large base in the global belt market, which has helped offset some of the downturn in the U.S. “Our Australian business has performed well and is seeing improving demand for its products, assisted by continued high levels of iron ore and coal extraction, which is being reflected in higher order books,” Pan said.
She said the coal industries in India and China are going through structural changes. Coal mining is growing in India, although at a slower clip than previously projected, she said, while excess supply and falling coal prices have characterized China's coal market, leading to many mine closures.
“We experienced lower volumes in the western and southern European markets, caused by the continuing decline of coal mining in these regions and generally unfavorable conditions in the construction industry,” she said. “These were offset by progress in the export markets, particularly in Africa and the Middle East.”
Fenner Dunlop's business in Chile, where the focus is on copper, performed well and has continued to develop. “We see considerable potential for the region in the future, Pan said.