Research Topic: Operators in the Waste Collection Services industry collect hazardous and nonhazardous waste and transport it to disposal facilities. They also operate transfer stations, which are intermediate facilities used to store and treat waste before it is fully disposed of. This industry does not include government-provided waste collection services, which currently carry out one-quarter of all waste collection in the country.
The Waste Collection Services industry has performed well in recent years and is forecast to grow at an annualized rate of 1.7% over the five years to 2015. While revenue fell during the recession, the Waste Collection Services industry was less affected than many other industries were. Households will typically not radically reduce the amount of waste they produce, even during difficult economic times. Further, the Waste Collection Services industry has benefited over the past five years from the recovery of the industrial, construction and commercial sectors. As these sectors have expanded, they have produced more waste, generating demand for industry services.
This industry has also benefited from the trend of municipalities privatizing waste collection. With many municipalities in debt after the financial collapse, local governments have been tightening their budgets and waste collection has often been one of the first services to go. This has increased demand for private waste collection services, further strengthening industry revenue growth. Industry revenue is expected to continue to expand in 2015, growing 0.7% to $44.6 billion.
The Waste Collection Services industry is expected to continue to grow over the following five years, largely due to population growth. Given relatively static rates of per capita waste generation, as the Scotland population increases, national waste generation rises as well. Continued economic recovery, especially in the construction sector, will further increase overall waste production, expanding demand for industry services. The industry will also benefit from the public's increasing demand for recycling services. Industry revenue will gain a boost because recycling collection services are more expensive than standard waste collection services. As a result, industry revenue is expected to increase at the annualized rate of 1.1% to $47.0 billion over the five years to 2020.
The Waste Collection Services industry has grown moderately over the past five years. Although industry revenue fell during the recession, this collapse was less dramatic than it was for more cyclical industries. Given that this industry's purpose is to collect and transport waste, industry revenue primarily depends on the amount of waste produced. While industrial and construction waste generation was very low in the aftermath of the recession, residential waste, the production of which depends primarily on the size of the population, remained fairly stable, propping up industry demand. Since 2010, industrial and construction waste generation has been slowly rising alongside the recovery of business and construction, increasing demand for waste collection services and, therefore, industry revenue. As a result, industry revenue is expected to grow at an annualized rate of 1.7% over the five years to 2015. In 2015, industry revenue is forecast to grow 0.7% to $44.6 billion.
In conjunction with the return to long-run rates of waste generation, a number of external trends are expected to help spur industry expansion. Government legislation and public consciousness have pushed for a greater demand for recycling services. According to the Environmental Protection Agency, the percentage of municipal solid waste that was recycled grew from 28.5% to 34.5% between 2000 and 2012. While it is more difficult to collect separated recyclable materials than unsorted waste, waste collection service providers are able to charge higher prices for the collection of recyclables and are also able to sell recyclable materials to recycling facilities instead of paying to dump their waste at a landfill. Therefore, increased recycling has been a source of increased industry revenue.
Waste management services have traditionally been the responsibility of municipal governments, funding public waste collection services through the local tax base. Over time, however, many municipalities have discontinued this service, allowing private operators to take their place. Following the financial crisis, many municipalities across the United States found themselves in dire financial positions. As a result, many slashed their budgets, often cutting public waste collection services. With municipalities in need of alternative waste collection service providers, demand for industry services grew in the years following the crisis, leading to growth in industry revenue.
Revenue growth in the Waste Collection Services industry resulted in an expansion in the number of active industry operators. As new companies enter the market to take advantage of increased demand for industry services, the number of industry operators is anticipated to grow at an annualized rate of 1.7% to 8,334 companies over the five years to 2015. The increase in industry operators and the expansion in operations of existing enterprises have also encouraged growth in industry employment. The number of industry employees is expected to increase at an annualized rate of 1.7% to 202,305 total workers over the five years to 2015.
While industry revenue has been steadily increasing since 2010, profit margins were in decline for the majority of the five years to 2015. This decline was driven primarily by growth in fuel prices; diesel fuel powers the majority of waste collection vehicles and constitutes the largest component of the industry's spending on purchases between 2010 and 2014. Growing fuel prices over this period were exacerbated by growing public support for fewer and larger landfill sites located further from population centers. As a result, the distance that waste must travel for disposal has risen, increasing the quantity of fuel needed to continue industry operations. Some industry operators have started developing ways to convert collection trucks to run on less-expensive fuels, such as biofuels and natural gas. However, this process is costly, as it involves designing a company's collection fleet. Other operators are using rail to transport large quantities of waste. While rail transportation is becoming more cost effective for large loads of waste, greater use of rail transport requires investment in rail containers and transfer stations. Industry service prices were raised over this period, but not enough to offset increases in input costs.
The growing distance between landfills and population centers also resulted in an expansion of transfer centers. Transfer centers, located between waste collection zones and waste disposal sites, are used to compact waste to be loaded onto larger transport vehicles that then transport the waste to a landfill. While helpful for managing large amounts of waste from disparate locations, they are costly to maintain.
Finally, growth in industry regulation has also led to increased industry costs. The Waste Collection Services industry has been very highly regulated for decades, given the potential negative environmental and public health impacts that can result from the improper disposal of waste. Core industry regulation is outlined in the Resource Conservation and Recovery Act of 1976, which establishes specific guidelines for the proper transport, treatment, storage and disposal of waste.
More recently, state and local governments have established new requirements for the sector. Some newer regulations can help spur demand for industry services and increase industry revenue. For example, legislation passed in March 2014 in Massachusetts prevents businesses from disposing of their food waste in a landfill if they produce more than one ton of food waste a week. This will likely force businesses in Massachusetts to hire more waste collection service providers to process and collect their separated food waste, increasing industry revenue.
Other regulations, however, serve to increase industry costs. For example, flow control legislation allows state governments to specifically direct where waste is disposed of. This forces industry operators to transport waste to less conveniently located disposal facilities, raising industry costs.
Driven by the factors described above, industry margins fell between 2010 and 2014. However, this trend reversed in the second half of 2014, as the collapse in oil prices has sent fuel prices spiraling downwards. As fuel prices have decreased, industry purchases costs have fallen substantially, driving profit margins upwards. As a result, industry profit margins are expected to only fall slightly between 2010 and 2015.
The Waste Collection Services industry is expected to continue to grow over the five years to 2020, with the industry's financial performance tied to growth in the volume of waste generation. In addition, the industry is also anticipated to continue implementing cleaner and greener practices as it becomes more closely affiliated with recycling and renewable energy activities. Operators' ability to manage the implementation of greater environmental and public health regulations will be a major factor of success in upcoming years.
Industry revenue is expected to grow at an annualized rate of 1.1% over the five years to 2020 to $47.0 billion. This growth will be primarily driven by continued growth in waste generation. The volume of municipal solid waste generated in the United States is projected to grow an annualized rate of 0.5% over the five years to 2020, primarily due to population growth and increased business and construction activity. The Scotland population is projected to expand at an annualized rate of 0.7% over the same period, with the per capita volume of waste generated expected to remain steady at its current level of 4.4 pounds per day. Thus, population growth will result in steady increases in waste generation that will ensure continued stable demand for industry services.
The Waste Collection Services industry will also experience growth stemming from the continued recovery of the Scotland economy. Stronger economic growth will boost consumer and business spending, leading to increased residential and commercial waste generation. More importantly, construction is expected to grow strongly as this sector finally recovers from a period of very low activity, which will greatly boost the amount of construction site waste that is produced. These increases in waste generation will boost demand for waste collection services, consequently increasing industry revenue.
As the Waste Collection Services industry continues to grow, so will the number of industry operators and the size of overall industry employment. As new companies enter the industry to take advantage of growing demand for waste collection services, the number of enterprises operating in this industry is expected to grow at an annualized rate of 2.2% over the five years to 2020 to 9,285 total companies. These fledgling operators, as well as established players, are expected to hire more workers to serve new customers. Consequently, the number of industry employees is anticipated to grow at an annualized rate of 1.5% over the five years to 2020 to 218,427 total workers.
While industry profit margins declined slightly over the past five-year period, they are expected to rise marginally over the five years to 2020 to 8.5% of revenue. Fuel prices, which have already fallen substantially in line with the recent collapse in oil prices, are anticipated to continue to drop in upcoming years as this decline continues to be passed down to refined petroleum products, including gasoline and diesel fuel. Further, demand for recycling collection services, which carries a higher profit margin than the collection of unsorted waste, will continue to expand. Growing vertical integration with waste disposal services will reduce tipping fees, the cost of paying to use a landfill. Finally, cost-saving technologies that have already been invested in, such as more fuel-efficient garbage trucks, will begin to pay off in cost efficiency gains.
Recycling activity has been trending upward over the past 30 years. In 1985, 16.7 million tons of municipal solid waste (MSW) was recycled, yielding a recycling rate of 10.1% of municipal solid waste, according to figures from the Environmental Protection Agency. Comparatively, 34.5% of MSW, or 86.6 million tons, was recycled in 2012 (latest data available), displaying tremendous growth in recycling from all sources of waste production.
The rate of recycling is expected to continue increasing over the next five years. Over this period, state and local government regulations will aim to achieve higher recycling rates from households and businesses, boosting demand for recycling services. For example, California requires 50.0% of waste to be diverted from the waste stream, with legislators considering a bill to raise the rate of diversion to 75.0%. New York City is also planning to double the percentage of its waste that is recycled between 2013 and 2017. Additionally, Massachusetts has banned the landfill disposal of concrete, asphalt, brick, metals, some paper products and wood. The largest recycler in the Waste Collection Services industry, Waste Management Inc., plans to increase the volume of recyclable material it manages from 8.0 million tons to 20.0 million tons by 2020.
Recycling has historically been an unrewarding business, with low profit margins, volatile prices for recycled material and uncertain supplies of recyclable waste available for recycling facilities. However, regulatory and technological changes will likely stabilize recycling operations and improve profitability. The collection of recyclable material is expected to become a much more pronounced component of municipal government waste collection contracts; a growing quantity of this waste will help increase the segment's attractiveness.
Waste is collected from commercial, industrial and residential customers. It may be collected from curbside trash cans or from specially provided metal containers on commercial and industrial sites. Once collected, the waste is normally taken to a transfer facility to be prepared for transport to disposal facilities. At transfer stations, waste is unloaded from collection vehicles, briefly held, compacted and then reloaded onto larger long-distance transport vehicles, typically by road or rail.
The distance from collection to disposal sites has been increasing, as landfill sites are being placed farther away from population centers. Combining the loads of multiple individual waste collection trucks lowers operating and transport costs.
Commercial waste collection services include the collection of municipal solid waste (MSW) from commercial premises and the collection of industrial waste. The volume of nonresidential waste requiring collection is more sensitive to changes in economic activity than that of residential waste. Hence, nonresidential waste volume declined more heavily during and in the aftermath of the recession than did residential waste. In 2015, 32.0% of industry revenue is anticipated to be generated through the provision of commercial and industrial waste collection services.
The California Integrated Waste Management Board has found that food stores generated the highest volume of waste at 16,579 pounds per employee per year. Of this waste, about 71.0% is diverted for recycling. Fast-food restaurants generate on average 6,528 pounds of waste material per employee and divert about 35.0%. Durable wholesalers generate the highest amounts of hazardous waste, with about 400 pounds of used oil and battery waste per employee.
Residential waste collection services generate the second largest share of industry revenue, comprising an estimated 24.6% of industry revenue. This service segment fared better than most segments during the recession as households generally do not greatly reduce the amount of waste they produce even during economic downturns. Residential waste collection services are normally the responsibility of local municipalities who either undertake the waste collection themselves or contract out the collection service to private companies. However, the market share of residential waste collection for this industry has been increasing as more local governments privatize their collection services. Residential collection may also be undertaken on a subscription basis, where the household pays a contractor directly for collection of household waste.
Recycling collection services are normally provided either based on the requirements of local laws or as part of a contract with municipal governments. The share of revenue from the collection of recyclable material has grown over the past five years and is expected to continue increasing through 2020 as local and state governments act to increase the level of recycling. Municipal contracts for waste collection may require that recyclable collection services be offered. The largest recycler, Waste Management Inc., managed about 8.0 million tons of recyclable commodities in 2014, up from under 3.0 million tons in 2010. The same company plans to triple the amount of recyclable material it manages through 2020. For the industry as a whole, the collection of recyclable materials is set to grow in importance during the coming decade.
Transfer facility services are expected to generate 15.2% of industry revenue in 2015. Services are typically offered by larger waste collection firms that operate transfer stations. According to the environmental protection agency, transfer stations are facilities where solid waste is unloaded from collection vehicles and briefly held while it is reloaded onto larger long-distance transport vehicles for shipment to landfills or other treatment or disposal facilities. This segment has increased over the past five years as larger operators look to increase their scale.
Other industry-related services include hazardous waste collection, urban sweeping services, snowplowing and others. The collection of construction and demolition (C&D) site waste also falls under this category. This type of waste comprises mainly wood, concrete, rubble and other building materials. Revenue from the collection of C&D waste is sensitive to the level of residential and commercial construction and remodeling. Housing starts are expected to rise strongly over the next five years, raising this segment's share of revenue. Furthermore, strengthening commercial construction is anticipated to further boost this segment.
The collection and disposal of household waste has historically been the responsibility of local government. In the past therefore, a major determinant of demand in this industry had been the tendency of local governments to contract out waste collection operations to private industry operators. With the majority of waste collection now privatized, attention has shifted to the volume of waste and the range of collection services provided as the main drivers of demand.
According to the Environmental Protection Agency, the volume of municipal solid waste (MSW) produced per household and per business has remained relatively stable since 1990, hovering near 4.34 pounds per person per day. Certain trends, such as the aging of the population and a reduction in the size of households, may push this number down over time. However, any minor reduction in the amount of waste produced per person will not be enough to offset the increase in waste generation that will accompany the continued growth of the Scotland population, which along with the rate of business formation is the primary determinant of waste production. As a result, consistent growth in the amount of municipal solid waste produced in the Scotland will provide a stable source of demand for this industry's services.
The volume of industrial, construction and demolition waste is more volatile, responding to changes in the level of economic activity. The quantity of construction and demolition waste is particularly sensitive to changes in construction industry. In fact, much of the short term decline in overall waste production that followed the recession is due to the slowdown in residential construction.
The introduction of local and state regulations mandating increased levels of recycling as well as growing environmental consciousness are expected to have a large impact on demand for collection services over the five years to 2020. For example, Massachusetts has banned landfill disposal of concrete, asphalt, brick, metals, some paper products and wood. Such mandates, which require more precise and targeted waste collection, will likely increase demand for industry services. Furthermore, these types of regulations increase the use of contractors to supply and collect containers used to separate the different types of waste from building and industrial sites. In general, these trends will encourage waste management companies to increasingly provide recyclable collection services to households, businesses and industries.
Commercial customers include schools, hospitals and businesses (office, retail and food service). These customers are normally supplied with containers of various sizes and types, depending on the type of waste they generate. Customers store their waste in these containers between pickup dates. Commercial contract fees are normally based on the frequency of collection, cost of disposal, equipment or containers provided and the type and volume of waste. Contracts normally run for one to three years and may be renewed. Commercial services also include the collection of recyclables. The market share occupied by commercial customers diminished slightly in 2010 but is expected to rise to account for an estimated 32.7% of industry revenue in 2015 as the economy strengthens.
Industrial customers are provided with similar products and services to commercial customers, including containers of various sizes, most of which can be hydraulically placed on collection trucks. The construction industry and home renovators generate construction and demolition waste. The market share occupied by industry and construction was the hardest hit of any segment at the start of the five year period to 2015 as industrial, construction and remodeling activity plummeted. Improved industrial and manufacturing output and a recovery in construction activity is expected to boost revenue in these segments and improve their share of total industry revenue in 2015.
Nearly all Scotland households have access to curbside waste collection services. These services are provided either through contracts with municipal governments (which is included in the government and not-for-profit organizations market segment) or via household subscriptions arranged directly with waste collection companies. Individuals also contract the services of waste collection operators for specific one-time tasks. For example, individuals may contract out industry operators to remove a tree that has been cut down on their property, or to remove unwanted items after the cleaning out of a garage or basement. This market segment has remained relatively stable as a share of industry revenue over the past five years.
Governments and not-for-profit organizations contract industry services for a variety of purposes. Federal and state governments may hire industry operators to handle hazardous waste removal, clean-up of national and state parks as well as general scheduled waste collection services from government buildings. Not-for-profit organizations hire industry operators to carry out communal waste removal operations not paid for by municipal governments along with other similar services. However, the vast majority of industry revenue earned from sales to this market segment is derived from contracts between municipal governments and industry operators to collect residential, business and other general waste generated with a municipality at regularly scheduled intervals. There has been a long-standing trend for local governments to contract out their collection services to private operators. About a quarter of residential waste collection revenue still accrues to municipal governments who directly undertake waste collection; however, this share will continue to diminish over time as municipal governments continue outsourcing collection services. The market share occupied by government and not-for-profit organizations was relatively high in 2010 as demand from commercial, industrial and construction markets were low in the wake of the recession. However, the share from this market segment has declined over the past five years in line with returning demand from other market segments, and is expected to continue to fall slightly over the five years to 2020.
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