Construction spending buoys C&D recyclers
In March 2006, U.S. spending on construction peaked at an annual rate of $1.2 trillion dollars. By February 2011, as the global financial crisis worked its way through the economy, that figure had slumped to barely $750 billion. Construction and demolition recycling generally tracks spending on construction, so for C&D recyclers that five-year period was largely one of unrelieved cutbacks.
Since then, however, the news from construction has been mostly good. And last November, seasonally adjusted construction spending hit $934 billion. That was up nearly six percent from a year earlier, and total construction spending appeared likely to top the trillion-dollar mark again early this year for the first time since the downturn.
For C&D recyclers, that means the sources and markets for recyclable and recycled construction and demolition materials have come a long way up from a long way down. “It definitely is back,” said Patti Hamilton, vice president at Sun Recycling in Davie, Florida. “2013 was a phenomenal year for us.”
While construction has rebounded nicely in some regions, however, nationally it has a long way to go before it starts charting new highs. In fact, November’s recent annual spending rate is only slightly more than the industry was posting 10 years ago, in November 2003. Still, that’s much better than the lows of 2011, 19 percent below where it is now.
Despite the national picture, recyclers in other regions are also having banner years. For instance, 2013 was a record year for Zanker Road Resource Management in San Jose, California, according to Michael Gross, director of sustainability. One reason is that San Jose’s building market didn’t collapse during the 2008-2009 recession as many other regional building markets did. “We saw a downturn in the economy but not like anybody else,” he added. “We’ve been swamped for several years and last year was our best year ever.”
Another factor in Zanker’s strong year is the tech-fueled construction boom in Silicon Valley. Locally based Apple and Google both have billion-dollar building projects going on in the Valley, and they’re not the only ones. “Within a mile radius of our area, we have more than six large construction projects going on,” Gross said.
Nationally, this construction bounce-back is showing a divergence between public and private sector spending. Although overall construction spending was up, public outlays for building projects actually fell during the 12 months ending in November, according to the latest figures. But the government pullback was more than made up for by the private sector, which was led by a blistering 36 percent year-over-year increase in spending for multifamily residential projects.
Construction and demolition recyclers as a group aren’t particular about what gets built or who’s paying for it, so except for regional variations, differences in public versus private or multifamily versus single family aren’t major concerns. However, another issue is that this return to an improved construction industry is different from past rebounds.
One change is that recycling is much more popular and accepted than it has ever been before, said Hamilton. For instance, in Florida, during the years since the last peak in construction spending, the state has legislated a goal of recycling 75 percent of the total waste stream by 2020. That has a major effect on C&D recycling in the state because C&D material represents a large percentage of Florida’s total waste stream. Normally it is 24 percent to 30 percent, Hamilton said, and during hurricane season it can be as much as 45 percent. So C&D recycling is central to reaching that 75 percent goal.
The legislation has encouraged members of the community to appreciate the importance of the role C&D plays in achieving recycling objectives, Hamilton said. “People are more focused on how they can recycle C&D material,” she said. “It’s been a huge help and a big plus to the C&D recycling industry.”
The growing acceptance of recycling is in some ways a mixed blessing. Today, more construction projects are recycling materials – especially concrete – on-site when existing structures are demolished to make way for new buildings. That’s helped to limit supplies of concrete, Gross said.
“Sales of base rock from our concrete recycling operation has been flat, because more of the projects that are going on now are tearing down existing buildings before putting up new structures,” he explained. “When that happens, we lose the concrete coming into our site and the sales of products out from our site.”
Markets for other recycled C&D materials, including mulch, biomass and sheetrock, have also been relatively flat compared to the growth in construction, the recyclers said. “We’re moving everything but we’re not making a ton of money on stuff,” Gross said.
Recyclers who rely on construction to provide them with materials and markets are well aware that it’s cyclical and affected by many factors, including weather. For example, after construction sector employment in November hit the highest level since August 2009, and the industry unemployment rate fell to 8.6 percent, freezing weather in December resulted in a loss of jobs and the industry unemployment rate ballooned back up to 11.4 percent.
The temperamental nature of construction is one reason C&D recyclers are viewing the recent rebound with some caution. Rather than attempting to expand C&D recycling capacity, Zanker has focused on improving efficiency and acquiring certification from the Recycling Certification Institute in anticipation of new rules from the US Green Building Council. “That’s going to have a dramatic effect on us because we’re the only ones certified around here,” Gross said.
In the Florida market, where building has been climbing up more strongly from a deeper trough, Sun Recycling has responded to the improvement by cautiously increasing its C&D recycling capabilities. “We’ve definitely expanded,” said Hamilton. “We’ve added equipment, we’ve added people. But it’s a very strategic and planned expansion.”