After enjoying increasing recycled commodity values for the first two quarters of 2022, the waste and recycling industry’s largest public companies struggled with major commodity price declines during the third quarter. Most executives are planning for flat or continued price declines in the fourth quarter and have made other business adjustments to offset further price volatility. Catch up on the latest recycling statistics and commentary from third quarter earnings reports.
|Q3 Revenue*||Year-over-Year Change|
|Casella Waste Systems||$80.22M||+26.7%|
*Each company may categorize its recycling revenue in slightly different ways, for example, by including organics recycling activity. GFL Environmental does not report specific recycling revenues.
- Despite declines in commodity values this quarter, WM says its recycling business is profitable and generates “solid returns in any economic environment” because it has shifted about 85% of its third-party volumes to a fee-for-service model, said John Morris, the company’s executive vice president and chief operating officer.
- The blended average commodity value for Q3 was about $94 per ton, and Morris estimates the rate could dip to $50 per ton in Q4. That’s compared to $132 per ton in Q4 of 2021.
- WM says it's also managing recycling business costs by continuing to invest in MRF automation projects, said CEO Jim Fish. Its five fully automated MRFs have about 30% lower labor costs and 13% lower total operating costs, he said, as well as having a 40% improvement in “key safety metrics.” WM plans to finish four automation projects and add one new MRF by the end of 2022.
- WM recently acquired a controlling interest in the U.S. business of Avangard Innovative, which Fish said would grow plastics recycling capabilities for film and clear plastic wrap, but investment returns on the acquisition are “on a more prolonged horizon, given that operations are in the early stages of scaling.” Fish plans to offer more details during the Q4 earnings call once the deal closes.
- The company's average recycled commodity price per ton sold during the third quarter was $162, down $56 per ton from Q2 and down $68 per ton compared with the prior year. It forecasts Q4 commodity prices to be about $90 per ton.
- CFO Brian DelGhiaccio said the company sees opportunities to work with BP to improve recycling at gas stations. Republic is also continuing work on its polymer center projects and has budgeted an additional $40 million this year to begin work on future sites.
- Recycled commodity values were down almost 35% year over year when excluding acquisitions, CEO Worthing Jackman said. The company expects another 60% drop in Q4, with the average price for OCC being particularly low at about $50 per ton.
- The company plans to process more of its recycled commodities internally instead of having to pay processing fees to third parties, said CFO Mary Ann Whitney, “which is where you can get hit incrementally in times like this, where when the values go down.”
- As the company builds new processing facilities, it will also update technology to improve recycling quality at existing facilities. Investment in such technology is another way to improve commodity prices through cleaner material and help “de-risk” periods of tumultuous recycling values, Whitney said.
- GFL anticipates that poor recycling prices will create a CAN $50 million headwind going into 2023. It plans to offset those conditions with price increases and its fuel surcharges program.
- CFO Luke Pelosi said the company is “actively engaged” in discussions to renegotiate and restructure contracts, with the goal of moving away from commodity price-driven returns and into fixed processing fee models. It’s a concept he said the company has been thinking about since before recent OCC price crashes.
- GFL sees opportunities in being located around Toronto, where “the whole dynamic on recycling is going to be changing,” Pelosi said. GFL will also assess its current footprint for opportunities to build recycling facilities in areas the company thinks could use more recycling capacity.
Casella Waste Systems
- Revenue from the company’s Resource Solutions division was $80.2 million, up notably year over year due to acquisitions. However, recycling commodity values were down 37% year over year.
- Casella projects another 20% decline in commodity values from September through December, resulting in about a $2 million headwind for Q4, said CFO Ned Coletta. The company could see another $60 to $70 a ton decrease in recycling commodity prices next year if price trends continue.
- CEO John Casella said the company has done “a fantastic job” offsetting the low commodity prices through its sustainability recycling adjustment fee, which shifts most of the price exposure to customers. He also highlighted recent tech upgrades at several recycling facilities, which he said will increase safety and operational efficiencies and help generate solid returns.