From disruptions brought about by COVID-19 to new leadership in Washington, the U.S. economy has seen significant changes over the last year and a half. While many industries have learned to adjust to what has been coined the “new normal,” challenges such as supply chain disruptions and inflation have created unprecedented setbacks for day-to-day operations.

At Waste Today’s Corporate Growth Conference, which was Nov. 4 in Chicago, industry analyst Michael E. Hoffman provided a view of how these macroeconomic factors have translated into specific impacts on the waste and environmental services sectors.

Economic forecast

U.S. inflation rates recently hit a three-decade high, with the consumer price index (CPI) increasing 6.2 percent in October from a year ago. While these pricing spikes are expected to continue alongside rising demand for core goods, Hoffman expressed a positive outlook on the solid waste industry’s ability to overcome cost increases.

“So, the state of garbage is [actually] really good right now. Is there inflation in the marketplace? Absolutely. Can the industry price through inflation? Absolutely,” Hoffman said. “I think garbage can price through inflation. It’s about conviction as an operator, not [whether] you can do it or not. In fact, [we’ve] seen through the third-quarter earnings season that was happening, mostly. And even where it doesn’t look like it was happening as effectively, it was clearly happening. [Companies] just needed to pick up the pace.”

Given the solid waste industry’s affinity for inflation, which Hoffman said supports better core and reported price, fiscal year 2022 (FY22) sales are expected to benefit more from inflation than costs increases. In addition, consensus headline CPI is now anticipated to average 4.4 percent growth in FY21 versus an original expectation of 2 percent.

Volume trends

In terms of volumes, Hoffman said the industry has consistently reported better numbers than expected throughout the third quarter.

The original FY21 guidance forecast has volume in a range of 0.5 percent to 2.5 percent. However, it was reported that in the first half of 2021 (1H21), volumes trended 135 basis points (bp) better than the February fiscal year outlook average volume growth of 1.4 percent.

While the 2H21 pace is expected to ease, Hoffman believes it will still run at above a long-term industry growth rate of 1 percent.

“Doing year-over-year comparisons is a little bit meaningless because of the weirdness of last year, but you see the patterns,” he said. “Negative in Q1, really high in Q2, and then everyone was thinking we were going to settle into some normalcy somewhere between [Q1] and [Q2], and we ended up better than that. Why? Because all of us have found opportunities to get in the car, get out and go somewhere, and pretty much every time we do that, we create a trash event.”

These volume trends have been supported by new business formation and an above-average merger and acquisition (M&A) cycle, Hoffman noted.

“There’s clear evidence of new business formation, and with that new business formation there’s also existing commercial business that’s starting to see positive service intervals. So, the two of those are measured as volume when you look at it from the reporting standpoint,” Hoffman said.

As for M&A, Hoffman said this cycle is the strongest he’s seen. “If everyone gets everything closed they think they can, I think we’ll spend $3 billion [by the] public companies this year. The high of 2019 was $2.7 billion. So, we could see a 10 percent increase in that and that was on the peak of four years in a row of above-average trends following the 2017 tax change that helped accelerate.”

Weakened link

A major talking point of Hoffman’s Economic Update session was how supply chain disruptions have taken a toll on solid waste operations.

When addressing the current shortage of microcontrollers, Hoffman said capacity to meet demand requirements is not projected to catch up until 2H22, and it will not be until 2H23 before backlog of demand is worked back to “normal.”

He said, “How did we get here? Two things happened. We all went to work from home, so there was this massive buying of computers as a sort of incremental volume pressure on the need for chips. And then two, events happened. As the economy started to recover and auto production started to come back, and there’s still this demand and this new source of demand at a higher level, that put pressure on the microcontroller.

“[We also] had a fire in Japan that took out 5 percent of the world’s capacity in making these and then in February you had the Texas storms that disrupted the chipmaking in that marketplace for about three weeks," he added.

Given the circumstances, Hoffman encouraged those on the equipment side of waste hauling operations to be cognizant of current wait times.

“Next year is sold out—a year ... to get a truck. You should be thinking about your ordering for 2023 now or you’re not going to get trucks or whatever else you’re ordering that has microcontrollers,” he said.

RWS Facility Services , a Chadds Ford, Pennsylvania-based provider of facilities management services, has announced that it has appointed Karen Carus to the role of business development manager for the company’s Facility Managed Services business unit. In her new role, Carus will work to increase the company’s national footprint of facility services clients, providing support services to manufacturing, distribution, pharmaceutical and commercial office partners, as well as expanding services to the existing RWS client base.

Carus brings more than 15 years of experience in national account development within the manufacturing, distribution and retail verticals to RWS. Prior to joining RWS, she held the position of business development manager for the technology and manufacturing division of ABM Industries, a New York City-based provider of facility services for commercial properties across the U.S.

“Karen's vast experience in successfully growing the sales and service operations of multiple service companies makes her an optimal fit for RWS as we continue to expand our full-service platform,” Tom LaMartina, vice president of RWS Facility Managed Services, says. “We are excited to have someone with such proven expertise join our Facility Managed Services team."

Georgia Gov. Brian P. Kemp has announced that Celadon Development Corp. plans to invest more than $155 million to open its North American headquarters and a state-of-the-art recycling and advanced manufacturing facility in Savannah, Georgia. The facility will produce recycled fiber pulp. Celadon is a joint venture partnership of Kamine Development Corp. and Nicollet Industries. The company was formed to deploy large-scale recycled brown pulp infrastructure across North America.

According to a news release from Gov. Kemp’s website, this investment represents the first phase of Celadon’s investment in the state. In addition to establishing a North American headquarters and a recycled brown pulp manufacturing facility, Celadon will open a second production line of its recycling and manufacturing operations during the second phase of its expansion in Georgia.

Celadon Development Corp.’s Savannah plant will produce 450,000 tons per year of recycled fiber pulp during phase one, and it will produce 900,000 tons per year of recycled fiber pulp after phase two is completed. Upon completion of the second phase, the company expects to export about 87,000 20-foot equivalent units of finished product through the Port of Savannah annually.

This month, the company already has opened a 65,000-square-foot dry processing plant for clean old corrugated containers and plans to establish a logistics operation in Savannah to facilitate its logistics needs, the news release from the governor’s office states.

“The state of Georgia, the Georgia Ports Authority and the Savannah Economic Development Authority have made our project possible,” says Tim Zosel, CEO of Celadon Development Corp. “The teams are incredibly proactive, and we could not have developed this project without their support.”

Celadon also made news earlier in 2021 when the Port Tampa Bay Board of Commissioners in Florida announced Celadon’s plans to lease 37 acres of land from in Tampa, Florida, to construct a paper and cardboard recycling plant.

Kamine Development Corp. did not provide Recycling Today with details on the timeline for the Port of Savannah project.

The Ray Lovato Recycling Center, a nonprofit environmental organization in Rock Springs, Wyoming, has received a $29,000 grant from the Foodservice Packaging Institute’s Foam Recycling Coalition (FRC) to add a foam densifier to its current recycling center that recovers recyclable materials from residents and businesses within the area.

The center is located within the economic center of southwest Wyoming and serves about 13,000 households and diverted nearly 1.72 million pounds of materials from the landfill in 2020. Its goal is not only to maximize diversion of materials from its local landfill through unique recycling programs, but it also has made a mission to provide second-chance employment to community individuals with developmental disabilities, drug and alcohol addiction and veterans with PTSD.

At its facility of over 6,000 square feet, materials accepted include corrugated cardboard, office paper, paperboard, newspaper, magazines, books, aluminum, tin and plastics.

The FRC funding will allow the center to purchase and install a foam densifier unit to begin processing polystyrene (PS) products that will be collected at its drop-off center from local businesses and residents. The densifier will allow the organization to collect many types of PS products, including foam foodservice packaging and protective packaging.

“Our area is home to immense mineral resources employing a large portion of our private workforce,” says Devon Brubaker, board president of the Ray Lovato Recycling Center. Brubaker adds with few large retailers in the area, the center has seen a significant amount of e-commerce packaging. The packaging, along with food-grade foam products, will provide the center a large diversion opportunity with the help of this new densifier.

The grant is made possible through contributions to FRC, which focuses exclusively on increased recycling of postconsumer PS. The FRC’s members include America Styrenics, Cascades Canada ULC, CKF Inc., Chick-fil-A, Dart Container Corp., Pactive Foodservice/Food Packaging, Republic Plastics and TOTAL Petrochemicals & Refining USA.

The Ray Lovato Recycling Center is the 21^st grant recipient to receive FRC funding since 2015. More than 4 million additional residents in the United States and Canada can recycle PS as a result of FRC grants.

“The Ray Lovato Recycling Center is providing the necessary services to recycle clean and empty foam packaging that is generated by local businesses and residents,” says Natha Dempsey, president of the Foodservice Packaging Institute, which oversees FRC. “The center demonstrates how an organization can set an example with its own mission and continue to expand its operations after having success and seeing an opportunity to increase diversion from the landfill.”