Climbing Fuel and Steel prices have required haulers, large and small, to adjust their operations. With no end in sight for the price hikes, waste industry officials say they are struggling to find ways to pass along rising costs to their customers while remaining competitive in their own rapidly changing markets.
“We're trying to deal with them,” says Mary O'Brien, chief marketing officer for Advanced Disposal Services, Jacksonville, Fla. Despite rising commodities costs, Advanced Disposal has continued to expand its operations with a number of acquisitions during the past year, the most recent being the acquisition of Appalachian Waste Services in April.
Advanced Disposal currently has more than 1,400 employees and operates a fleet of 550 trucks. O'Brien says the company has been aggressive to factor rising fuel and steel costs into the contracts that it negotiates with its customers.
Chaz Miller, state programs director for the National Solid Wastes Management Association (NSWMA), says many companies try to include contract provisions with their customers that use various indexes to account for commodity price increases.
Advanced Disposal commonly uses a fuel index when it negotiates both its multi-year contracts with municipalities and its year-to-year private contracts. Depending on the contract, a fuel index may account for fuel price fluxuations on either a monthly or quarterly basis. If the price of diesel were to decrease, the index used in such provisions would determine the savings owed to a customer, O'Brien says.
In late April, according to a report from the Washington-based Waste Equipment Technology Association (WASTEC), the average price of hot-rolled steel increased to nearly $1,100 per ton from $600 per ton in January. Additionally, the price of June crude oil rose to $118.75 per barrel on the New York Mercantile Exchange, more than 80 percent higher than in April 2007.
New York City haulers, such as Mr. T Carting Corp., Glendale, N.Y., try to maximize what they bill their customers, but face an additional obstacle. The city currently enforces a rate cap for commercial haulers of $12.20 per cubic yard, or $160 per ton, that determines how much haulers can charge for their services in the city. David Biderman, general counsel for NSWMA, is lobbying the city to increase or even eliminate the rate cap, which the city has held for nearly 50 years. “[The city's] concerned there isn't enough competition to warrant eliminating the rate cap,” he says.
There are more than 200 licensed carters in the city, Biderman adds. “It's cut-throat competition,” he says. The city is currently conducting studies to investigate what to do with the cap, and Biderman says he expects a decision in the coming weeks.
Tom Tuscano, chief financial officer for Mr. T Carting, which operates a fleet of 29 trucks, says the cap has limited the firm's ability to raise its prices — even to the maximum cap level — because of stiff competition in his market. While increasing rates is one way to make up for increased fuel and commodities prices, Tuscano says, he is constantly auditing his company's operations to ensure cost efficiency.
Regardless of the future of the city's rate cap, tightening the company's costs to a need-based efficiency is often the best way to deal with rising fuel and steel prices. “We haven't bought a new truck in five years,” he says.
This is nothing new to a number of haulers. “We operate on purely a need basis,” O'Brien says when asked how increased steel costs have affected equipment purchasing for Advanced Disposal. “If our business is growing, then we buy more trucks.”