State of the Industry -- Future Stakes

How was 2003 for C&D recyclers, and what will 2004 bring? We talked with dozens of recyclers across the U.S. to try to get a reading on how the industry did this year and what will happen in the market next year. Overall, most people reported a flat (at best) market, with a modicum of optimism for 2004.

For the concrete and asphalt recycling sector, a critical factor is pointed to by Valentin Tepordei, an analyst for the U.S. Geological Service, Reston, Va., who has tracked natural aggregate production in the U.S. for many years.

He says 2002 production was less than 2001, and 2003 will be less than 2002. "State spending on highways is down, and they can’t provide the matching funds needed to do highway work." The private sector, especially renovation, is doing better, he says, but that is not enough to make up for the shortfall in highways.

Tepordei tracks recycled concrete production by natural aggregate companies, admittedly a small part of the entire market. But he says that while 2003 tonnage will be down from 2002, he has noticed aggregate producers increasing the number of distribution centers handling recycled concrete.

Many governmental agencies are now looking toward mixed C&D materials to improve their recycling rates, according to Will Flower of Republic Services Inc., Fort Lauderdale, Fla. "Most have been doing consumer recyclables such as cans and bottles," he says. "C&D is an untapped market. A well-thought-out C&D recycling system can reduce waste going to a landfill and make money. However, it remains very market driven; no markets for the finished products, no money."

Flower thinks a slowing economy and reduced housing starts are the reason the number of C&D roll-offs coming in were down in 2003 compared to 2002. "We’re not expecting an uptick in 2004," he adds. "There just were fewer projects. We hope 2004 will be better, but the waste industry is a lagging indicator of the economy."

Following are regional snapshots of the construction and demolition recycling markets.

NORTHEAST

Tadj Ondrick of Ted Ondrick Construction Co., Chicoppee, Mass., says the recycled concrete and asphalt market in New England is just where he predicted it would be. The bad news is that his prediction wasn't favorable, and the market is down 35 percent from last year. "Government is into funding a war, not highways," says the 35-year veteran of the crushing industry. "Highway work is way off in Massachusetts because there is no funding. Same in Maine." He adds that Connecticut also is not doing well, Vermont asphalt recycling is down, but Rhode Island is not as bad, and New Hampshire is still booming.

Ondrick says he knows of at least a dozen piles of concrete or asphalt that need to be crushed at regular customers’ sites, but they are putting it off until they need it for a specific order. "The economy is scaring people," he says. "Even Mrs. Housewife looking to do an overlay on her driveway is holding off because she is afraid her husband may get laid off."

Greg Wirsen of Green Seal Environmental, Sandwich, Mass., agrees that highway work took a real hit in 2003, but says it was a good year for mixed C&D plant operators because there was a lot of development. Indeed, southeastern Massachusetts is one of the fastest growing areas in the country.

"We had a slow spring because of the weather, there was a lot of rain, but it really took off from May on," he says. 2004 may not be as good, only because such a high plateau has been reached.

In Maine Eric Higgins of L.R. Higgins, Inc., Scarborough, Maine, says material intake and tipping fees were basically flat in 2003. Wood markets fluctuated all year, but are going well lately. For 2004 he says he tries never to get too optimistic, but expects it to go well because construction and demolition activity in south Maine remains strong.

Down in New York City, Ray Kvedaras, Cooper Tank Transfer, says both the amount of material and tipping fees went up nominally in 2003, with 2004 looking about the same. The prices are tied into what the big waste companies do, he says.

MID-ATLANTIC

Skip Gardner, Patuxent Materials, Crofton, Md., reports that funding has dried up for roadwork in his area, leaving 2003 flat compared to 2002 for concrete recycling. "Maryland is in a budget crunch, and won’t be out of it for a while," he says.

For that reason he sees 2004 staying the same. Getting material into the yards is no problem in the metro areas, but outlying areas have seen a slowdown in incoming concrete to be processed.

Concrete and asphalt recycling is going very well on the very east side of Virginia, says Jimmy Sisson, Waterway Materials. "We can’t fill the demand," he says. "We allow tipping for free and still can’t get the material in to recycle." He estimates that demand is 150 percent of supply.

The reason for the infeed shortfall may be that on-site recycling is taking some of it and that the word isn’t completely out on the streets about the free tipping, Sisson says.

Prices have remained firm for the final product, and the natural aggregate industry is trying to get a price hike going, which will only help recycled aggregates, says Sisson. For 2004, he expects the continued strong construction market will keep things looking rosy. "Municipal budgets are growing for infrastructure upgrades and maintenance because so much of our infrastructure here is old," he says.

Recovermat Mid-Atlantic, Halethorpe, Md., is having no trouble getting mixed C&D in, says Dennis Blanchard. "Sometimes we have to close at noon and all day Friday because our permit quotas have been met," he says. Hence, tipping fees were up in 2003, the best since 1998. Also helping are higher scrap steel prices. Markets for alternative daily cover and other products exist, but they aren’t as strong, he says.

He is not overly optimistic that 2004 will be better, although he notes that nobody is backing off their construction plans for next year.

SOUTHEAST

Things are about the same in Georgia when comparing 2003 to 2002, says Ken Patterson of Patterson Services, Mableton, Ga. "The difficulty here is getting people to accept the products. Most materials, except recycled asphalt, are not easily accepted," he says.

2004 and the years after should be better because "a lot of work has been done to educate buyers on the advantages and characteristics" of recycled C&D products, Patterson says. He adds that tipping fees remain around $18 a ton, making recycling even less desireable from an economic feasiblity standpoint.

In North Carolina end markets were about the same in 2003 as compared to 2002, Chris Roof, Material Reclamation, Raleigh, N.C., says. "We did see an upswing in markets for a few commodities, notably ferrous metals, that started in 2002 and came up more in 2003," says Roof. "Everything else was consistent."

Recycled aggregate "remains a late bloomer," he adds. "In North Carolina, we can’t seem to make a product that people will accept, except for the coastal regions, where there is no natural aggregate."

Derwin Charles of International Aggregates, Timberlake, N.C., agrees with the difficulty of marketing recycled aggregate, but that wasn’t why 2003 was a difficult year for his crushing operations—It was the weather. "We had a terrible winter, and then a lot of rain for six months. By July we had our total average amount for the whole year."

Roadwork in North Carolina has been steady, he says, and prices for recycled concrete did not drop in 2003, but asphalt did. That is because of increased competition. "We have seen a lot of crushers come in from out of state because there is no work from where they are from."

He hopes 2004 will be better because it appears a lot of work will be contracted. And by 2005 Virginia is supposed to have a lot of projects going on.

Florida is at the end of a 6- to 8-year, up-to-down cycle that it is hoped will start rising again, Tom Roberts, J.R. Capital, Deerfield Beach, Fla., says. 2003 markets are flat compared to 2002, which were "bad," he says. The reasons are a slow economy and not enough end markets for the products. More are especially sought for wood, aggregate and plastic.

For 2004 Roberts expects end markets to be up 6 percent to 12 percent, with tipping fees up 10 percent to12 percent. However serious issues still face C&D recyclers: The state has no incentives for recycling over disposal and lacks enough end markets, while environmental authorities over-regulate disposal of contaminated products, such as CCA wood and lead-based paint debris. (Roberts is also president of the Construction Materials Recycling Association.)

MIDWEST

The concrete recycling market in this area was largely flat when comparing 2003 to 2002. In the Chicago area, state work is still going on, or recyclers would be hurting. Still more crushers enter the business every year, so it gets more competitive.

In the Des Moines, Iowa, area, markets were again flat this year compared to last year, but 2002 was a boom year, reports William Lawrie, Corell Recycling, West Des Moines. "We are fortunate to have a lot of highway jobs going on in our area," he says, as well as a big new event center and mall going in. He can see a slowdown coming in the future, but it will not be immediate. In the meantime, prices for finished product rose slightly, while statewide they stayed flat.

MOUNTAIN REGION

"2003 was down in our area about 15 percent, which tracked the local construction market," says Mark Wachal, Recycled Materials Co., Arvada, Colo. "Those only in heavy highway are down even more. State spending is down, plus the five-year, multi-billion dollar reconstruction of I-25 is sucking a lot of money away from other projects."

There still is a glut of office space on the market in the Denver area, he adds, which slows that sector, although residential work is starting to pick up. Material is still coming in, creating an overabundance of asphalt, with some stockpiles getting pretty big.

Wachal says those piles might diminish in 2004, "based on the inquiries we have received so far, it should start turning around. Some projects that have only been on drawing boards look like they could move ahead. Also, borrowing remains cheap and that helped get some projects going. We certainly have the capacity here to handle the upswing."

In Salt Lake City, Utah, Boe Bland of Bland Recycling says 2003 recycled concrete production ranged from flat to up 10 percent compared to 2002, with the same range for end product prices. However, to keep material coming in, some operators have had to reduce tipping fees.

2004 should be better, Bland says, as more highway work is going to be contracted along with some commercial jobs. "But we still have the same problems getting the material accepted," he says.

In Las Vegas, Nev., Rob Dorinson, Evergreen Recycling, says that C&D generation rates remained consistent in 2003 compared to 2002, although tipping fees went up 25 percent to 30 percent at the landfills. That generation rate "is at a very high level, because housing remains booming in the area," Dorinson says, which is keeping his roll-off fleet very busy. Wood end markets are up and down, the same for carpet. OCC and metals remain solid markets, and concrete can still be tipped at a recycler at a reduced rate.

PACIFIC NORTHWEST

Dave Whitley of Nuprecon, Redmond, Wash., remains an astute observer of the industry and he provided the following report:

"The recycling markets for our area in 2003 were spotty. We ran into a problem with biofuel markets due to the stockpiles accrued at energy plants because we had a mild winter and warm summer. This is a local problem, but more work needs to be done on finding more viable markets for C&D processing output by the processing facilities.

"The 2004 trend should be about the same.

"In 2003 the amount of feedstock provided to local processing facilities was up substantially due to our ReNu Division collecting and hauling more and more CDL debris and diverting business from solid waste haulers who may have otherwise buried the materials. We currently serve over 220 commercial construction sites in the region. This activity was achieved at a price disadvantage, as the response from the solid waste haulers was to aggressively slash pricing from their usual rates. There seemed to be no bottom to what some of the oligopoly members will do when their market is threatened, and we can't go down the rabbit hole on pricing like they can!

"This clearly shows that the marketplace (the generators) want recycling!

"Regional material generation levels are trending down slightly due to the impact on the general contracting market base as fallout from the local economy’s malaise drifts downwind. However, looking at the regional development backlog, this will trend upwards again in 2004.

"Tip fees, per se, have not gone down. That is landfill tipping fees, which remain at $82.50 to $89 per ton. CDL fees have gone down superficially due to the predatory price practices that some solid waste players have been practicing. This reduction is not sustainable, as they are often hauling the material to landfills, and tipping fee reductions are not supported by greater value of the material output.

"The issues affecting the C&D recycling industry here are the same as most places:

• Regulation and regulatory interference, including municipal ‘flow control;’

• Lack of understanding of the C&D recycling arena and possibilities for diversion;

• Entrenched incumbent solid waste haulers protecting their primary business model;

• Difficulty in permitting of facilities and the "NIMBY" attitude local civic leaders have that belies their desire to be ‘green;’ and

• Infancy of end user markets for materials."

CALIFORNIA

This state remains a highly interesting case study in C&D recycling and a study in extremes. Where else can one concrete recycler proclaim the markets did well while another calls it "awful?"

California is a big state, and location did seem to matter. Most areas did poorly. For example, Dan Copp of Dan Copp Crushing, a large concrete/asphalt recycler in Southern California, sums up the market by saying: "2003 was awful and 2004 will be worse.

"California is in a state of chaos," he says. "Projects have been downsized or put off." There is some private work—big-box retailers and housing tracts—but not much roadwork. Prices for crushing are down a third from a year ago, and the situation will only get worse when the huge El Toro military base in Orange County is dismantled and the material from that site is dumped on the market. "That will leave a huge glut of concrete on the market, making next year even more difficult," Copp says.

Bill Emery of Emery Materials, Parris, Calif., is one recycler involved in those Southern California tract housing markets, and he says the market has been good. However, there are a lot of competitors around, and the natural aggregate companies still sell material very cheaply, he adds.

Jay Ware, Madison Materials, Santa Ana, Calif., is expecting mixed C&D recycling to become more intense in Orange County, although it may be difficult to meet demand. That is because legislation puts the onus on cities to meet the state’s famous AB939 recycling requirements, whereby municipalities must recycle as much as 75 percent of their C&D. "Many cities in southern Orange County are not meeting that requirement," Ware says, "and they will face hefty fines if they don’t pick up the pace." He expects to see a flurry of recycling activity down there, but perhaps no new recycling plants because land is very expensive and the NIMBY problem very acute.

In 2003 he says the markets were stable and the state has outlets for many of materials, including fines. "Carpet remains a challenge, as well as asphalt shingles," he says. "Drywall is starting to come around. Wood, concrete and OCC are no problem. Even plastics are being recycled by being sent overseas," Ware says.

He is upbeat about 2004 because construction activity remains steady and C&D material volumes are maintained. As for the state’s famous new governor, Ware says, "Arnold will have to be an environmentalist, but he won’t be at the expense of industry. He has to lure businesses back to the state."

In the state’s center, 2003 was a good year, Jeff Kroeker, Kroeker Demolition & Recycling, Fresno, Calif., says. "We were able to move all our base rock, wood and gypsum," he says. Boiler fuel remains a low-priced commodity, and, even though his customer plants are local, he feels pressure from competitors as far away as Los Angeles. "The United States, and especially California, needs to focus on the development of waste-to-energy plants," he says.

2004 should be a good year. Kroeker has four jobs lined up for his crushing spread. Getting raw product into his concrete recycling yard can be a challenge, he says, and he has dropped his tipping fee to zero, while a competitor is paying for waste concrete now. "Natural aggregate is getting more rare around us, and it is very difficult to get permits for new mining sites," he says.

Further north in the Bay Area, 2003 was a very slow year for concrete and asphalt recyclers, says John Armando, Raisch Products, San Jose, Calif. There isn’t a lot of construction and demolition activity going on, either.

For those reasons, his company expects no change in that market scenario for at least another year or two. He agrees the state is in chaos, and says "government at all levels is broke.

Reportedly a bill was introduced in the state legislature that would have earmarked funds for improving infrastructure, but it didn’t pass because it was feared that after the money was raised for the projects, it would be used for something else by whoever was governor."

In the Sacramento area, Anne Channell of California Concrete Crushing says the markets did well in 2003, but only because the company did not sell into government highway projects. "We can’t keep the material on the ground," she says, adding that the outlook for 2004 appears to be good. C&DR

The author is associate publisher of Construction & Demolition Recycling and executive director of the Construction Materials Recycling Association. He can be contacted via e-mail at turley@cdrecycling.org.