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After facing difficult times, demolition contractors are starting to see signs of improvement.

Kristin Smith April 11, 2012

Demolition contractors haven’t had it easy during the past few years. But if the sentiment of the more than 800 attendees at the 39th Annual National Demolition Association (NDA) Convention in San Antonio in March is any indication, then the worst appears to be over.

As peak demolition season approaches, it appears there will be plenty of projects to bid on, though they may not be in the traditional commercial sector.

“We are not out of the woods yet,” observes Rick Givan, special projects director for LVI Environmental Services Inc., headquartered in New York City. “It’s not time to pop the champagne cork, but as for the really hard years—we are distancing ourselves from that and there is a little uptick in the market.” Givan observes that attendees at the NDA Convention from all over the country were being upbeat.


Power Surge
Commercial projects, such as shopping centers, warehouses and sports arenas, are not as prevalent in the Western United States as they once were, according to Givan. “We are not seeing a lot of new life in the commercial demolition market. The commercial market has not really come around that well,” he says.

But Givan, who is based in Denver, isn’t discouraged because he says there is plenty of activity in other areas.

Being Constructive

Paying attention to construction figures can help gauge how much demolition work may surface as a result of construction activity. The Construction Backlog Indicator (CBI), released quarterly by the Associated Building Contractors (ABC), Washington, D.C., is a forward-looking national economic indicator that reflects the amount of work that will be performed by commercial and industrial contractors in the months ahead.

The fourth quarter 2011 CBI, published Feb. 15, 2012, shows a 3.2 percent decline in backlog from the previous quarter, to 7.8 months’ worth of work, but was still up 10.9 percent compared to the fourth quarter of 2010.

“Overall, the latest CBI numbers indicate a degree of stalling in the recovery of the nation’s nonresidential construction industry, likely due to a combination of the soft patch that developed in the broader economy early last year, a number of seasonal factors and the winding down of federal stimulus projects,” says ABC Chief Economist Anirban Basu. “But the good news is that given the recent acceleration in economic and employment growth, CBI is positioned to rebound more forcefully during the quarters ahead.

“In addition, the most recent data reflect the ongoing expansion in privately funded construction activity as opposed to the contraction of publicly funded construction,” Basu says. “The nation’s smaller construction firms are gaining an advantage from this shift, in contrast to the decreased construction activity among the larger firms that had benefitted from earlier federal stimulus projects and military base realignment-related construction.”

“We are seeing a big surge in the energy sector,” Givan says. Several power plants throughout the country are converting from coal-fired technology to gas-fired technology, which involves the demolition of turbines, scrubbers, stacks and boilers, for example.

“They are large demolition jobs, and we are seeing more of those than we have in a long time because of the switchover in energy,” Givan says. “That has been a strong market and continues to be.”

Another facet of the energy sector creating work for demolition contractors is oil and gas drilling. “There is an absolute boom going on for oil and gas drilling,” Givan says, “so there is a need for demolition to remove old structure and remediate fields.”

The U.S. government also seems to have money for specialty projects, Givan says. By specialty, he means projects that are more specialized than general military bases, involving chemical arsenals, munitions and hazardous remediation.

“The government seems to have money for those [projects] and they seem to be contracting those [projects] on a fairly active basis,” Given says. He adds that the U.S. Environmental Protection Agency (EPA) is continuing its effort to clean up mine sites throughout the Western U.S.

Givan also has noticed a resurgence in health care demolition projects because of the consolidation of hospitals and medical clinics. “In Denver alone two major hospitals are set for demolition in the coming year,” he says. LVI is working on the proposals to complete those hospital demolitions. Many of LVI’s jobs consist of remediation and abatement jobs that also include some demolition.

“Peripheral to the demolition, there is still a fair amount of remediation going on,” Givan says. At a rail yard or a water treatment plant, Givan says LVI might spend 30 percent of its efforts on demolition and 70 percent on-site cleanup.

Rich Lorenz, owner of Central Environmental Services (CES), Orlando, Fla., says market conditions in Florida are improving and so is business for CES. The company just bought a new 13.5-acre facility and, according to Lorenz, “is moving rapidly forward.”

“Our sales have increased by about 20 percent for the past two years after a disastrous year in 2009,” Lorenz says. “2010 and 2011 have been extremely profitable years, and we are right on track here in 2012 for another major increase for gross sales and profit.”

However, Lorenz says, many demolition contractors did not survive the recent economic crisis. He estimates the number of companies performing demolition and cleanup work in his region has dropped from an estimated 30 companies to about eight still in business. CES has been in business since 1964.

“When you are around as long as us, it is our reputation that is getting us hired,” Lorenz says. And there are plenty of companies hiring CES, including Disney World, NASA and the U.S. Air Force. CES also recently landed a large hospital project in Ormond Beach, Fla.
 

Material Matters
Scrap metal prices continue to be strong, according to Givan, though he notes events in Europe or a drop in the stock market can derail prices overnight.

Allied Alloys, a scrap metal recycler based in Houston, has seen an increase in the metal it is receiving from demolition jobs in the last year. Nidhi Turakhia, who handles marketing, sales and procurement for the company, says, “As we specialize in stainless steel and high nickel alloys, that is predominantly what we are seeing and asking for. In addition to that, I have also been coming across a lot of lead from demo projects.”

Oil and natural gas activity as well as a number of plants that are being decommissioned have boosted demolition activity, Turakhia says. The majority of material Allied Alloys receives, however, continues to come from commercial demolition projects.

In addition to metals, the reuse market for items such as generators, turbines and motors is also a well developed secondary market, according to Givan.

Materials such as wood, concrete and carpet fiber, on the other hand, are weak in Givan’s experience. These materials are all tied to the housing market. With a decline in new housing, less mulch or stone products made from recycled building materials are being used. To combat the lack of a market for concrete, much of it is now being reused on job sites rather than paying to have it hauled away.

Mixed C&D recycling facilities such as Long Island, N.Y.-based Liotta Bros. Recycling (LBR) have tried to combat the decrease in incoming materials by slowing down their sorting processes and separating material streams further. This allows them to earn more of a premium for their end products and reduce even further the amount of material that is being discarded at the end of the process. In the November-December 2011 cover story of Construction & Demolition Recycling, a sister publication of Recycling Today, Vic Liotta Jr., co-owner of LBR says, “If we can’t get [sufficient revenue] coming in per ton, we have to get it by being that much better at pulling it out and selling it rather than not pulling it out and dumping it. If we can continue to bring our recyclable percentage up by finding new ways to separate it and new customers to buy it, then that [amount] coming in really shouldn’t be that critical.”

The continued and growing emphasis by general contractors and regulatory agencies to increase diversion rates from construction and demolition sites is helping with material generation.

The U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) certification program gives points to companies toward certification for having a diversion rate of 50 percent or more of C&D materials. This is resulting in a bigger commitment from demolition companies like LVI and CES to continue to strive for higher landfill diversion rates and ultimately for more secondary materials to enter the market.

 

The author is associate editor of Recycling Today and can be reached at ksmith@gie.net.


A Forward Look
For a primer on forecasting with the Construction Backlog Indicator, see “Being Constructive” sidebar above.

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