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Awaiting Breakout

Features - Commodity Focus

Recycled aggregates producers see potential but are still waiting for business to pick up.

Curt Harler August 5, 2013

There is good news and some bad news in the C&D aggregates market. The good news is the economy is loosening a touch and transportation engineers want to build projects in the most cost-effective ways possible. The downside is that highway funds are tight and some engineers have not yet caught up with the idea that reusing C&D material from highway and other projects is a cost-effective way to spend taxpayer money.

Jim Dykes, president and owner of Dykes Paving, Norcross, Ga., says the market for recycled C&D aggregates is off 50 percent from its highs back in 2006 or 2007. He says he figures the Georgia market will remain about the same in 2013.

“I can’t see anything changing as far as quantity,” he says. “There are not enough new projects being started and not enough old structures being torn down.”

That puts Dykes and other C&D contractors in the squeeze between a lack of demand and a lack of product. Dykes says it also puts him on the hunt for high-profit projects.

John Kent, president of Oxford Recycling, Englewood, Colo., says he would like to see some public money spent in key infrastructure areas. He scoffs at the federal stimulus program, noting that about 60 percent in his state went to government and not to private projects. “We have terrible infrastructure problems in terms of bridges, highways and moving truck traffic,” he says. “We have sewer and water systems built in the 1950s to handle a lot less volume than they do today.”

With the hint of economic recovery, some states are at least looking at road projects. Recycling recovered aggregates is getting more attention as state highway engineers, under orders to squeeze every dollar, realize the value of recycled aggregates in their projects. On top of that, they can save project dollars by reducing their off-site shipment costs and the amount of money spent landfilling usable, recovered materials.

Of course, road contractors know that too. That could be one reason why Hanson Aggregates, Long Beach, Calif., has closed its portable crushing division. “We crushed for our own sites and freeway contractors,” says Michael Rogers, operations manager for Hanson.

Today, the large amount of portable equipment available for purchase—coupled with the number of used systems on the market—has lowered the cost of entry for contractors. Many do their own work, cutting traditional C&D operations out of the loop, according to Rogers.

While some stimulus money is being spent in California, Rogers says overall demand has diminished in light of the economy.

“You do see producers reusing the millings off their grinding projects,” Rogers says. “I don’t see any real increase in it. In Southern California it has gone on for years and ebbed and flowed.”

Kent questions where the money is allocated—why dollars go to projects at small, regional airports rather than at big airports such as the Denver International Airport or the like.

Dykes knows some states are getting a little more money than others. “There still are not enough funds from the federal level to the community level,” he says, adding that highway projects in Georgia are lagging behind any national recovery because the roads were overbuilt to begin with. Still, Dykes and other C&D operators say they see glimmers of hope.

“I see some slight improvement,” Oxford Recycling’s Kent says, “but we’re not setting the world on fire.”

But even with some sunshine, he says the markets are very fragile. “We could go backwards very easily,” Kent warns.

Part of his optimism is based on the number of housing starts he says he sees in his area. However, the big projects are not out there yet, Kent adds.

“On the aggregate side we have six stationary locations and two portable teams. The demand we anticipate from stationary and portable for 2013 is consistent with 2012 (2 million tons),” says Leonard Cherry, president of the family-owned Cherry Cos., Houston. His company recycles concrete, asphalt, steel, tires and shingles as well as provides demolition and stabilizing services. “Each is a different market, although all are related,” he says.

Cherry Cos.’ revenue last year was roughly $84 million. “We anticipate a modest increase in 2013,” Cherry says.


Asphalt Woes
Not every market is hot. Historically, most metropolitan areas have a glut of recycled asphalt. Little has changed.

“You grind 2 inches off the Interstate. They let you recycle 25 percent of it. What do you do with the other 75 percent?” Dykes asks.

Observers like Rogers are concerned about the stockpiles of asphalt that will be a drag on the market no matter what happens in the near future. “Stockpiles are awfully large,” he says. “The abundance of material means a real imbalance of supply and demand.”

If stockpiles are a problem in California, where a typical site might run three acres and a really big one covers five acres, in other areas of the country the abundance of material is a real drag on the economy.

Oxford Recycling is taking in less asphalt than it normally does. “But it is moving,” Kent says.

His concern is crushed concrete. “Demand for crushed concrete is way down,” Kent says. “We are taking in more than we are shipping out. We have huge stockpiles of product. We were giving it away at cost.”

In the meantime, tipping fees are doing nothing but going up. “There is not as much utilization of finished product,” Rogers says. “If you can’t get it out the gate, why bring it in the first place?”

Storage of a depressingly low-value item is expensive. That said, it is certainly not all gloom and doom in the C&D aggregate business.

“The use of portable crushers on demo jobs appears to be on the rise,” Cherry says. He also says he sees modest improvement in the utilization of asphalt in nonhot-mix applications.

“Expansion of new end markets is always near the top of our goal list, but as long as we continue to build on past successes, the market continues to expand, which is what we are currently seeing,” Cherry says.
 

Bright Spots on the Road
In some areas, highway specifications for crushed concrete have been relaxed significantly. This trend is helping the markets in several states.

Being more lenient has allowed for greater use of recycled materials in main-line route construction. In most cases, the regulations allowing use of recycled concrete aggregate have been in place since the early or mid-1990s. The challenge C&D operators have is getting recycled material written into defunded jobs.

Dykes Paving recently completed a 250,000-ton job on Interstate 75. “They allowed every bit of it to be used on the main line … not just shoulders and ramps,” Dykes says happily.

That is a sea change from the norm, where this recycled material has been used on a limited basis. On highway jobs, it goes beyond road materials.

“Seasonal adjustments are always a factor, but demolition, aggregate stabilized and steel are currently the strongest markets we serve,” Cherry says.

Kent did take advantage of the tax incentives offering 50 percent depreciation to purchase a new loader. “It’s not in production yet,” he says. However, he figures if and when things get busier, he will need the machine.

Cherry has a similar outlook with regard to the economy going forward. “We have a substantial capital expenditure budget for 2013 in anticipation of returning markets,” he says. “Specifically, we plan to be adding across the board.”

That means Cherry Cos. will add crushers, pugmills, screens, loaders and excavators. This, Cherry says, is to allow the company to be positioned for growth in 2014.


Up on the Roof
The asphalt roofing shingle market is another area where some C&D recyclers say they expect to turn a profit.

“We have seen a pickup in demand for asphalt shingles,” Dykes says. He says his operation is one of the few in the state still handling the material. “Everyone in Georgia has given up on shingles but us,” he says.

In urban centers, he sees jobs with 50 percent buildup of asphalt roofing, making it worthwhile to handle a project.

Still, there is interest. Recovery Technology Solutions (RTS) is building a $22 million asphalt recycling facility between Macon and Atlanta.

The goal of the plant is to recycle asphalt-based material, distilling it down to asphalt for construction.

RTS uses what might be considered an expensive and technical process to recycle asphalt shingles and extract and recover asphalt cement, fiberglass/felt, mineral aggregates and mineral fillers.

The idea is to keep the material out of landfills and to allow the resultant liquid asphalt to be reused for shingle manufacturing or highway asphalt. RTS takes the processed recycled asphalt and adds material to bring it back to the required viscosity to meet specifications.

Alabama just relaxed its specifications on recycled asphalt roofing, allowing 5 percent recycled material, up from 3 percent, in highway uses.

“We’re already seeing the Alabama market taking shingles from Georgia,” Dykes says.

He continues, “You are starting to see a lot more people getting into C&D. They want to keep it out of the landfills and make money out of it.”

In his area, Kent says he would question this business plan. “The private sector is sucking air,” he says, adding it will take another presidential election—whether a Democrat or Republican is elected—to get things on an even keel.

“I do not see things making huge headway. I don’t know that some companies can wait that long … they are hanging on by a string,” says Kent.


The author is a freelance writer living in the Cleveland area. He can be contacted at curt@curtharler.com. This feature originally ran in the May/June issue of Construction & Demolition Recycling, a sister publication of Recycling Today.

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