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Conveyor belt industry: sharp decline in costs, steady growth in demand

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[Abstract]:
Thedownstreamdemandoftheconveyorbeltindustryisstable,theindustrialconcentrationisincreased,andindustryleaderswithbrandandtechnologyadvantageshavebenefited;atthesametime,naturalrubberandsyntheticrubber
The downstream demand of the conveyor belt industry is stable, the industrial concentration is increased, and industry leaders with brand and technology advantages have benefited; at the same time, natural rubber and synthetic rubber have fallen sharply in the middle of the year, and the surplus of rubber supply and insufficient demand will be maintained for a long time, significantly improving Conveyor belt business profitability. On the whole, the conveyor belt industry has a low valuation and good defensibility. Under the assumption of a more cautious market trend in 2013, it has a good absolute and relative return, so it is given a “recommended” rating.
Conveyor belts are consumables and demand is stable
Wide range of downstream applications for consumables
Conveyor belts, also known as conveyor belts, are widely used in industrial and mining enterprises and in the transportation industry for conveying various blocky, powdery solids or articles. The conveyor belt can realize the automation of the transportation process, safe operation, continuous, high-efficiency, and large-angle transportation. It is easy to use, easy to maintain, and low freight. Typical experiments show that the use of belt conveyor belts can reduce labor intensity by 60%, reduce manual labor by 40%, and provide work efficiency by 3.5 times. If combined with palletizing machines and other machinery, labor intensity can be reduced by 75% and manual labor can be reduced. 40%, providing 8 times the work efficiency. In addition, the transport volume of the conveyor belt is smooth and continuous, and the transport volume can be flexibly adjusted, and the terrain restriction can be overcome to some extent. The work efficiency is superior to the screw transport, vibration transport, and pressurized pipe transport. There are currently two listed companies producing conveyor belts, Baotong Belts and Double Arrow.
The main application areas of conveyor belts are coal, steel, cement, and port industries, and these areas are places where the working environment is harsh and the workload is heavy. Large-scale assembly line customers generally replace the conveyor belts regularly. The high-temperature belt replacement cycle is 1 to 3 months, and the high-strength conveyor belt replacement cycle is 6 to 12 months. It is a consumable product.
In order to maintain the stability of the production line, the customer generally avoids arbitrarily changing the supplier, but follows the previous supplier. Due to the relatively small proportion of conveyor belts in production costs, consumables, downstream customers have stable demand and prices are not sensitive.
The production capacity will maintain a certain degree of redundancy and demand is the key issue
The production capacity of the conveyor belt company will maintain a certain degree of redundancy. There are three main reasons. The first is flexible production, and the production process is discrete production, which is different from continuous production of chemical companies. In discrete production, there is a large floating space for production capacity. By accelerating the production rate, the production capacity can be increased.
Second, there are many specifications for conveyor belts. The main specifications are skeleton, function, rubber formula, additives, thickness, width and so on. According to customer order requirements, the production of different specifications of the conveyor belt needs to adjust the production line, so that there is a lot of redundancy in production capacity. There is also a lot of conversion problems for product statistics of various specifications.
Third, the proportion of depreciation of production is very low, generally accounting for less than 3% of the production cost, so increasing production cannot significantly apportion the fixed costs. Because the investment in production lines is not large, enterprises generally maintain a certain amount of surplus production capacity.
Capacity capacity and scale will not be the key competitive advantage. The company's operating performance depends mainly on the demand climate. Due to the characteristics of the industry's production capacity, companies are all set to produce by sales. Investors need to avoid two misunderstandings. First, because the industry expands production, it is easy to judge whether the overcapacity is serious and the industry will be in a sluggish state. Second, simply compare the growth of production capacity with the increase in output, and it is easy to overestimate the growth rate of the company. On the contrary, more attention should be paid to customer needs and orders. Only the demand of the economy can release production capacity.
The output of downstream customers is still growing, and the demand for conveyor belts is stable
Although the steel, cement, and coal in the downstream industries of the conveyor belt are currently sluggish, the demand for conveyor belts is still growing. There are three main reasons.
First, although industries such as steel and cement are currently sluggish, output is still growing. Conveyor belts are consumables. As long as the customer's output is maintained at a certain level, demand will not be reduced.
According to the National Bureau of Statistics, from January to June 2013, China's total cement output was 1.096 billion tons, a year-on-year growth of 9.7%; during the first half of January-May, the country produced 389 million tons of steel, an increase of 7.4% year-on-year;
Second, the leading customers of the leading companies in the conveyor belt industry are large-scale enterprises. Under the sluggish industry, the operating rate of large-scale enterprises can still be maintained. For example, although the country's cumulative coal production from January to June totaled 1.79 billion tons, a year-on-year decrease of 68 million tons, a decrease of 3.7%, the industry's sluggishness mainly affected small coal mines, and the main customers of high-end conveyor belts were large coal mines. The output of these customers has continued to grow. Statistics from the National Bureau of Statistics show that the output of state-owned key coal mining enterprises increased by 1.9% from the same period of last year.
Third, China is still in an industrialized country that is developing. The mechanization and streamlining of production will also increase the demand for conveyor belts. With the development of production methods, the scope of application of conveyor belts has become more and more extensive, which has also led to an increase in demand.
According to statistics from the Rubber Industry Association, from January to June 2013, the national conveyor belt output increased by 5