Construction and demolition debris recycling
A slowdown in construction spending nationally – mostly
residential, but increasingly commercial – is hitting construction
and demolition (C&D) recyclers. C&D volumes are expected to drop
this year and next, says Michael Taylor, executive director of the National
Demolition Association in Doylestown, Pennsylvania.
“There has been a slight drop in volumes as demolition
activity has slowed,” Taylor says. While demolition is only half
of the C&D acronym, demolition alone generates approximately 115
million tons of debris annually in North America.
Close to 70 percent of demolition debris is recycled,
Some of the biggest declines to hit C&D recycling
in the United States are from construction. The U.S. Commerce Department
reports that total construction spending slipped 0.4 percent in April
from March to an annual rate of $1.12 trillion.
Spending in the private sector for factories and offices
rose 1.6 percent, offsetting residential construction, which fell 2.3
percent for the 26th consecutive monthly decrease.
Construction spending has not increased month-over-month
since September. Total spending in April was down 3.9 percent compared
to April of last year.
The construction slowdown is not decreasing the number of C&D companies,
Taylor says, noting that he is not seeing a decrease in member companies
within the demolition industry. The association has more than 1,100 members
in North America.
C&D recyclers are also represented by the Construction Materials
Recycling Association (CMRA) in Eola, Illinois. William Turley, executive
director, says he is also seeing new C&D recyclers enter the market
despite the downturn in construction spending.
“We are seeing new companies bring mixed C&D operations online all
the time, and that will continue into the foreseeable future” he says,
adding that many of the manufacturers of equipment for sorting C&D
report having a six-month backlog.
“We expect recycling to remain strong no matter what,” Turley says. Some
areas of strength for C&D recyclers include infrastructure work and
green building projects, which requires the material generated during
construction projects to be recycled.
“We expect our industry, to some degree, to reflect what is happening
in the construction industry,” Turley says. But he says it is hard to
know C&D volumes for this year compared to last year because the
numbers are not tracked on a regular basis.
Looking at C&D volumes in the solid waste industry provide somewhat
of a proxy. Republic Services, Inc. in Fort Lauderdale, Florida, reports
that C&D volumes relative to residential construction dropped 15
percent over the last 12 months.
“In most markets, the home construction business started getting soft
in 2007,” says Will Flower, vice president of communications at Republic
Services. He says that C&D volumes are now mostly flat, although
there are some market variations.
“Despite the decrease, we have seen pricing remain stable,” Flower says.
Brian Butler, an analyst who covers the solid waste industry for Friedman
Billings Ramsey & Co., Inc. in Arlington, Virginia, says that many
investors quickly jumped to the conclusion that as national construction
numbers declined, C&D rates would follow.
“However, in practice it appears the waste haulers, both public and private,
have shown excellent discipline on C&D pricing,” he says. “While
C&D rates are not moving up in most markets, there has not been a
significant decline as many expected.”
Many of the public companies have parked or removed containers out of
markets with significantly reduced C&D demand, Butler says. He says
disposal rates along with fuel costs have remained high, limiting the
ability of private haulers to cut prices.
“Residential construction volumes are down 15 percent, but non-residential
volumes have held up better,” he says. “Only recently are companies beginning
to talk about weakness in the non-residential construction market.”
Butler says monthly construction spending from the U.S. Census Bureau
provides a good barometer of what is happening with C&D volumes.
In the first quarter of this year, 12-month residential construction
spending was down 17 percent, while non-residential construction was
up 15 percent. The net impact was a 2.2 percent decline.
Butler expects residential construction volumes to remain weak. But he
says the rate of decline will slow in the second half of this year and
be flat to positive next year. He also expects growth to slow this year
in non-residential construction volumes.
Stewart Scharf, an analyst with Standard & Poor’s Corp. in New York,
expects the downturn in C&D volumes at solid waste companies to continue
through at least 2008 and probably into 2009, when volumes may stabilize
and start to pick up somewhat.
“Although C&D volumes account for a relatively small percentage of
total waste collection volumes, the downturn in the residential housing
market continues to negatively impact C&D volumes,” he says. “Combined
with soft economic conditions, organic volumes have been flat to down
in single digits over the last few quarters.”
Scharf says the recovery in C&D volumes depend on the recovery in
the housing market and the economy. S&P is forecasting a 34 percent
drop in housing starts for 2008, versus a 26 percent decline in 2007.
S&P predicts a 10.7 percent rebound in 2009.
While overall construction spending is probably the biggest impact on
C&D debris volumes, government regulations play a significant role
in the market.
“Some municipalities have begun restricting the disposal of C&D waste
in landfills, requiring homebuilders to recycle a percentage of the debris,”
Do these types of regulations help C&D recyclers? Turley, with the
Construction Materials Recycling Association, says that while C&D
recyclers need further help developing new markets for C&D material,
some regulations hurt more than help.
“We are seeing state environmental agencies directing and even requiring
recycling of material, while a different department in the same agency
has made restrictions so tight it is nearly not economically feasible
to recycle,” he says.
A balance is needed between regulation and market development. The solution
is to write a small percentage of C&D material into specification
documents and promote the reuse of C&D debris, says Taylor, with
the National Demolition Association.
“Don’t set up administrative barriers or economic disincentives for companies,”
he says. “Push these materials to architects, engineers and purchasing