Leone Young, Principal

September 22, 2020

8 Min Read
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WasteExpo Together Online 2020, the first virtual WasteExpo, was held last week from September 14-17, and over 3000 participants were in attendance. Although we certainly missed the live event, and look forward to seeing everyone in person again next year, the conference held four days of very informative keynotes and sessions. We were able to listen in on quite a number of them, and in this edition of Business Report, we pull together the themes we took out of the presentations.

Recycling: Some Positive Trends Emerging, Despite Municipal Budget Cuts

Although current and looming municipal budget cuts and heightened contamination issues in the wake of the pandemic were frequently noted as setbacks for recycling, a number of conference speakers noted several positive trends emerging. Recycling is increasingly being viewed as an essential service, with a vital role to play in the manufacturing supply chain, particularly with regard to fiber. And, although the need for strengthening end markets for recycled commodities and upgrading inadequate and outdated materials recovery facility (MRF) infrastructure were noted as critical to the future of recycling, improvements in these areas were also noted. In the session “The Ups and Downs of Recycling”, Waste Management’s Brent Bell noted an improvement and sees greater capacity coming online in domestic end markets, while Bill Moore of Moore and Associates backed that up in the session “Commodities Updates—Fiber, Plastic and COVID-19” with the stats on 13 domestic fiber projects expected to come on line between 2020 and 2023, which will utilize old corrugated cardboard (OCC) and some mixed paper as feedstock. Stephanie Baker of KW Plastics Recycling noted the capacity additions KW is bringing on, spurred by seemingly greater commitment to using recycled plastic content by the consumer brand companies. With regard to the future of MRF infrastructure, a number of presenters noted the growing use of optical sorters and robotics that not only help combat contamination but also can be programmed for intelligent sorting, or positive sort, making MRFs more responsive to the changing waste stream and commodity price fluctuations. In “The Ups and Downs of Recycling” session, Peter Wright of the Environmental Protection Agency (EPA) noted that while the recycling rate in the US had stalled in recent years, the EPA plans to come out with new national recycling goals in November of 2020, which he thought might help kickstart higher recovery. Bottom line, these emerging trends can be seen in the prices for various recycled commodities and their outlooks. Bill Moore highlighted significant new demand over the next five years for both OCC (though prices have come off Spring highs) and mixed paper. Stephanie Baker talked about the strength in the recycled HDPE and PP markets, despite low virgin oil prices. In a fun end to the end of the presentation “The New Modern MRF—Shaping Today’s MRFs in the Wake of COVID-19”, moderator Anne Germain of the National Waste & Recycling Association fired off several hard to recycle or controversial items, and asked panelists to give their opinion on whether they are now or ever going to be recyclable or not. Pizza boxes generally got the current thumbs up, flexible food packaging/pouches probably never, while Styrofoam was considered challenging and expensive.

PFAS—More Complexities on the Horizon but Further Evidence for Landfill Sequestration

In Business Report, we have done several pieces on per- and polyfluoroalkyl (PFAS) with regard to emerging regulation, the risks and opportunities, and cost, among other issues. In the session “Beyond the Basics of PFAS”, all the participants noted that in addition to growing, and varied, state regulation of PFAS in drinking water, several states (notably Florida and Michigan) were moving toward PFAS standards for surface water and potentially discharge permits, which could bring more focus to the nexus between wastewater treatment plants and landfills. It was also noted that the EPA had given North Carolina State University a grant to study potential PFAS in landfill gas emissions, which could bring more regulatory pressure to bear if PFAS are found in any great quantity, all of which could impact facilities and potentially raise costs. However, on a positive note, participants also addressed that there was indeed increasing evidence that landfills are able to successfully sequester PFAS—far more goes in than comes out in the leachate. This becomes increasingly important as the current technologies (commonly granular activated carbon, reverse osmosis and ion exchange) are in essence separation technologies, NOT destruction technologies, and the resulting residue must be handled, most likely landfilled, as PFAS incineration is increasingly controversial. Currently, it was noted that destruction technologies are only in the lab, or at best in the pilot stage, and are quite costly.  

M&A Speculation Out of Several Sessions

Merger and acquisition (M&A) speculation, a perennial industry favorite, ran through a number of the sessions we attended. In the opening keynote session, Ron Mittelstaedt, Chairman of Waste Connections, opined that the majors had probably done their last public deals, given heightened Department of Justice (DOJ) scrutiny, while noting his belief that if Trump is reelected the status quo of strong M&A activity will continue, but if Biden is elected, there could be a dramatic deceleration in M&A activity, at least over the short to intermediate term. In the M&A portion of the associated Business Leadership Forum, there were comments from a number of different industry voices, from the private company, due diligence and financing sides of the business. In contrast to Mittelstaedt’s comments, one speaker noted that he was surprised more independents HADN’T moved to sell, particularly in the wake of COVID-19, but believed that as a result of disciplined public company leadership on price and recycling, the independents have room to grow, are doing well, and can obtain relatively cheap financing. Another speaker noted that the pending Advanced Disposal and WCA acquisitions could also have held back the M&A market to some extent, such that as they close, more folks could come to market. Several conference participants noted that the pause in M&A due to COVID-19 appeared to be coming to an end, and the fourth quarter could be very active for deals, given that and the upcoming election. In the “Breaking Down Business Trends—COVID, Budgets and Beyond” session, Michael Hoffman of Stifel also spoke to the repercussions of a democratic win in November on M&A, noting that the anticipated increase in both the corporate tax rate (on the publicly-traded companies) and the capital gains tax rate (which would impact many private companies) may shut down or slow M&A for a while.

Technology Adoption in the Industry is Accelerating

In prior Business Reports and particularly after last year’s WasteExpo, we have discussed that technology is finally taking on a much greater role and importance within the solid waste industry. A lot of the initial focus was on safety and customer service—on-board cameras and routing software—and obviously that remains a focus, particularly among the independent haulers. However, at WasteExpo Together Online, there was greater focus on MRF technology, with several participants noting that many MRFs are likely to be moving toward 3-6 optical sorters/robotics per facility, in part to address labor shortage and safety concerns post COVID-19, but increasingly to optimize positive sort, which as previously noted, enables MRFs to better adapt to the evolving waste stream and maximize recycled commodity values. Additionally, in a lengthy and very informative session “Plugging into Opportunities in Refuse Fleet Electrification”, the pros and cons of electric vehicle (EV) conversion were discussed in detail. On the positive side, EV offers reduced emissions, is quieter (and thus more appealing to drivers usually), and generally requires less maintenance. Municipal garbage fleets are a logical target for the EV market, given their return to a central location, as well as the frequent braking and stopping that takes advantage of the regenerative braking system in EV. On the other hand, upfront cost per vehicle is significantly higher, and often an emission reduction, or carbon neutral, local mandate is what prompts the decision to go electric, though the session participants noted there is huge interest from all over. Also, on the negative side, battery life, weight and range are issues, while terrain is also a factor. As such, it was noted several times that EV makes no sense for a one truck operation in Alaska! Also, of key importance — particularly in dense municipalities with less space — the infrastructure/space needs for charging can be an obstacle, as well as utility and/or grid constraints. All that said, it was agreed that EV issues are generally surmountable, and EV is coming—the question is whether CNG-powered trucks remain a stepping stone or municipalities go straight to EV.

 There were various viewpoints throughout this year’s WasteExpo as to whether the increased focus and adoption of technology was going to put the smaller independent haulers at a material disadvantage and drive more consolidation in the industry, particularly among the more traditional owners. However, that notion was pushed back on during the session “Independent Haulers & the Role of Technology”. The smaller haulers who spoke admitted that the majors did have more resources to implement technology, but the independents could be nimbler about it!

 

 

About the Author(s)

Leone Young

Principal, LTY ERC, LLC

Leone Young is the Principal of LTY ERC, LLC, providing consulting and research services to, and conducting special projects for, the environmental services industry, primarily the solid waste sector. From 1990 through 2008, Young was with Citigroup in New York as Managing Director, Senior Environmental Services Analyst and was responsible for industry coverage and stock recommendations for companies in the environmental services sector for Citigroup's equity research department. She was ranked #1 in the Institutional Investor poll for eight consecutive years.

Young is noted for her historical perspective, depth of industry knowledge and collaborative approach with clients and companies.

Young has a BA in Economics and an MBA in Finance from Cornell University.

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