Date: June 1, 2009
Source: News Room
New Report Details US Waste Industry and Reveals First Volume Decline in Over 20 Years
New report documents the magnitude of industry changes and identifies economic, regulatory and technological drivers affecting the business.
A new study by Waste Business Journal details the first decline in residential waste generation in more than twenty years. The study also details an even more significant decline in commercial and industrial waste generation, particularly the 20% decline in construction and demolition wastes (C&D) that are closely tied to the economy. In the report called Waste Market Overview & Outlook 2009, WBJ estimates that 505 million tons of municipal wastes (MSW) were generated last year in the US. This was down slightly from 510 million tons in 2007. Collecting, processing and disposing of these wastes generated $55.7 billion in industry revenue during 2008.
Despite the decline in volumes, waste firms managed to hold the line on pricing and actually win 4-6% increases that have helped them maintain positive revenue and earnings growth more than offsetting the loss of business. Municipalities have had to follow suit by raising prices as well, especially to cover revenue shortfalls elsewhere in their budgets.
These and other vital industry statistics and analysis are part of the Waste Market Overview & Outlook 2009, which offers a thorough examination of the various segments of the business, the major players, and the evolving nature of the industry, and changing role of the private sector. It includes detailed statistics of waste generation, recovery and disposal volume, pricing and capacity by state and region that include historical statistics back to 1991, and include our projections through 2013.
The recent merger between Allied Waste and Republic Services (number two and three respectively) and Waste Connections' bold purchases of assets promises a reshaped industry much further along its path of privatization. The companies understand that one way to deal with turbulent economic times amidst rising fuel, labor and equipment costs is to streamline operations and vertically integrate their markets. Rising costs have focused company managers on disciplined price increases especially now that the industry is more consolidated, more attentive to return on invested capital, more rational about valuing existing landfill capacity and mindful of lessons in the past when pricing was sacrificed.
The more recent decline in fuel costs will benefit company operating margins, however the volatility of those costs implies that surcharges and hedging programs are likely to remain in place. Expect to see continued focus on controlling vehicle maintenance and insurance costs while investing in fleet upgrades and worker safety programs. Additional cash from operations will likely go towards "tuck-in" acquisitions, asset swaps and other vertical integration measures for which companies can reap immediate cost savings.
2008 was a revealing year for the recycling business. Sky high commodity pricing earlier in the year built great confidence in the long term viability of the industry when all at once falling prices were a stunning reminder of its vulnerability. Community recycling programs across the US took a big hit as the global economic downturn eroded demand and drove down prices paid for recycled materials. Some communities are likely to give up recycling programs altogether especially since once profitable programs now represent a significant expense. The collapse in the recycling market, where prices were off by as much as 75% to 100%, is a direct by-product of the financial crisis and our increasing reliance on markets in China and India, as demand has slumped for material to be converted into everything from boxes, to car parts and construction materials.
Communities may begin to employ flow controls, recently granted them by the Supreme Court, to assure the viability of their recycling programs during these dire times, but are unlikely to get back into the landfill business. The high capital costs and huge economies-of-scale that attend landfills lends advantage to the private sector, especially large publicly traded companies with greater financial wherewithal and the ability to control wastes across an entire region, needed to feed larger landfills economically. As new landfills become harder to permit, more waste is moving interstate. New York City now boasts that a third of its waste moves by rail to landfills as far away as South Carolina. Now that state's legislature and that of its northern neighbor have deployed moratoriums on new landfills. Those firms with landfills can expect to wield more pricing power, likely to justify further industry consolidation.
To learn more about the Waste Market Overview & Outlook 2009 which costs $595 US, Visit: www.wasteinfo.com/overview.htm. Or, call (619) 793-5190.
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