I'm imagining a discrete system here, like a tile-based map. I haven't actually played Factorio, so I'm just assuming that's how it works (seems like it from the link a sibling post gave). As such, I'm not sure physics engine share much in common here.

It's not as simple as a tile-based map. Structures are built on a square tile grid, but objects on belts move at a much finer resolution, and have a bunch of specific behaviors (moving in two lanes, being picked up or dropped onto belts by inserters, belts merging into other belts, etc).

Older versions of the game actually used an even more flexible physics engine for objects on belt (not restricted to two lanes), but that was deemed unnecessarily complex -- and the current model is much more performant.