Parts of mining, oil and gas industries stymie belt makers

INDIANAPOLIS—Challenged. Extremely difficult. Suffering. The new normal.

Those are some of the short descriptions belt manufacturers, fabricators, distributors and suppliers used when discussing the current state of segments of the mining and oil and gas industries.

Sectors that have contributed the most to the loss of business in the mining market have been principally coal, iron ore and copper.

“Mines are postponing new projects, trying to save money,” said Boris Illetschko, who heads Semperet A.G.'s Sempertrans business. “They are trying to repair rather than replace belts. Nearly all commodity prices are down in coal, copper and ore.”

He said a mining boom in the short term was highly unlikely, “and the same holds true for crude oil. We need more balance in supply and demand.”

Jim Hill, CEO of ContiTech A.G.'s NAFTA business, has experienced virtually everything in the heavyweight belt market during his 28 years in the industry. So he maintains a calm demeanor.

“There's no doubt that this is a challenge for all of us—both in NAFTA and worldwide,” he said. Like Illetschko, he cited coal, copper and ore as the three biggest areas of concern in the mining sector.

Demand in down cycle

“After a series of acquisitions over the past years, the conveyor belt industry has become highly concentrated and quiet, and some customers are actively seeking to broaden their supplier base again,” Illetschko said at the NIBA—the Belting Association conference, held Sept. 14-17 in Indianapolis.

A key factor influencing the belt business is that demand is down because “falling prices for commodities such as copper ore, iron ore and coal result in cautious decisions about new mining installations and mine extensions,” he said. “Also, required conveyor belt replacements are considered very thoroughly due to cost pressures of our customers.”

Illetschko said a sluggish economy across the globe, and especially in China, not only does not support new demand but is also the underlying factor for low prices for mining commodities. All the factors combined lead to less demand for new and replacement conveyor belts, he said.

In addition, he noted, regional overcapacities and underutilized conveyor belt plants have forced belt manufacturers to close at least temporarily some of their factories.

On the plus side, Hill said aggregate, sand and gravel, and even construction have been showing improvement. And some mines are ordering new conveyor belts to replace old, worn-out ones. But, he admitted the market is nowhere near as good as it was just a few years ago and certainly not enough to get any belting company operating at full speed.

ContiTech has been able to weather the storm more easily than some other belt manufacturers because of its diverse operation. For instance, he said, its hose business is doing well as is its rubber track and automotive operations.

Semperit is in a similar situation because of its versatility.

Some heavyweight belting makers are providing more services, including belt installation, to offset losses in production. However, Illetschko said, “this move can create conflict with independent service and distribution partners.”

He said challenging commodity deposits require more advance technological solutions for conveyor systems and belts, “which only the most advanced companies can provide.”

Looking for bounce back

A major uptick in the belting market would be a big boost for any of the heavyweight belting firms, some officials said at the NIBA conference.

But that's unlikely.

Scott Phillips, operations manager of wholesaler and importer Global Belting Technologies in Stone Mountain, Ga., said what is occurring now is probably the new norm in the coal industry.

However, other segments that are showing some positive results, such as sand and gravel and rock quarries, should continue to improve, he indicated. Phillips also said the infrastructure market may slowly begin to improve. If it does, “that certainly will affect us,” he said.

Several others at the conference agreed with his take on the coal sector.

Overall, mining eventually will bounce back, especially in ore and copper, “but the question is when,” according to Tom Richardson, president of Burr Ridge, Ill.-based Conveyor Accessories Inc., a producer of belt fasteners, Staplegrip and Steelgrip tools, belt clamps, installation tools and other products used extensively by belting companies.

It has been difficult for mining companies as well as belt producers and distributors, the longtime industry veteran said. “A lot of people are not doing well.”

Conveyor Accessories has not fared too badly, though, because mines are hanging onto belts longer and need the equipment Richardson's company produces to keep them operating.

But he doesn't necessarily believe that's the reason his company has been successful during the last few years. “We're a gazelle; others are elephants,” he said. “We move fast, we interact quickly with people ... we know them ... we talk to them. We're a very efficient company.”

While his firm relies on electronics just as most do, he said, “we use it, it doesn't use us.”

Richardson anticipates that more consolidation is coming within the industry, primarily on the distribution front.

Tom Pientok, president and CEO of Cedar Rapids, Iowa-headquartered Apache Inc., doesn't see it bouncing back soon. But he does think it has stabilized to where it's going to be for awhile. “I don't see it getting any worse.

“What we're seeing is maybe a leveling off. We (Apache) have to be relentless in our pursuit of productivity and speed. We've make great strides in both, but not as much as in the future.”

With a weak global economy and no growth from China on the horizon, Illetschko said, “We assume the supply and demand of raw materials will remain unbalanced for awhile.” Nevertheless, he added, in the medium to long term, it's likely the megatrend of growing raw material demand will continue but, “we do not expect a "mining super cycle' in the near future.”