Riding the wave

Demolition contractors and construction and demolition (C&D) recyclers throughout the Midwest are riding a wave of strong business that shows no signs of slowing. This wave of positive momentum, which started to pick up steam in 2017, has manifested itself in opportunities just now coming to fruition. Four companies doing business in the region spoke of the growth taking place in the Midwest and other factors affecting the C&D recycling industry.

Understanding the Uptick

While the C&D market has been showing signs of growth for several years, business began to really pick up in 2017. Jobs that were on the backburner finally began to get approval to move forward in the early half of the year, which has resulted in a steady stream of work.

“It seems as though as soon as President Trump got into office, a lot of jobs were released and things got approval to move forward,” Brian Baumann, president of Cleveland-based B&B Wrecking & Excavating, says. “Some jobs that we had done budget for a year or two previously finally came into fruition in 2017.”

New opportunities in the demolition and C&D markets have been fanned by growth in the construction sector, which continues to be bullish and promote healthy volumes.

“There remains a strong business climate for commercial and residential construction in this market. The C&D activity over the past few years, and especially here in 2018, has exceeded our expectations, and volumes are higher than anticipated,” Jason Haus, CEO of Dem-Con Cos. in Shakopee, Minnesota, says.

Jason Salisbury, who serves as president of Landfill Reduction and Recycling Inc., Appleton, Wisconsin, says recent growth has translated into an abundance of opportunity that is keeping industry participants busy.

“It seems the Midwest had very strong volume growth from 2016 to 2018,” Salisbury says. “We have been very pleased with the amount of C&D work we have been able to capture, and it seems that a lot of contractors’ work backlog extends well into 2018.”

Looking at Commodity Pricing

An increase in jobs isn’t the only thing that has demo contractors and recyclers in the Midwest feeling positive. Strong commodity pricing has also helped businesses stay profitable.

“What we saw in 2017 was the price of steel and scrap metal steadily rose from March through the summer,” Baumann says. “It fell back a bit in September and October, but we had a strong finish and finished December at the highest price of the year for scrap metal sales, and most steel mills in the Ohio Valley area were buying every month, so you could get sales off. Steel and copper prices have steadily risen, along with brass, which have all been up 10 to 15 percent.”

According to Bart Carmichael, president of Cleveland-based WasteTran Recycling Services, the commodity markets last year were strong overall but did face some challenges that temporarily hurt pricing.

“The markets were definitely on the uptick midsummer last year, and then they did fall off,” he says. “China quit buying a lot of paper cardboard, and that affected that industry but also runs right down to us. Ferrous metals seemed to follow the same trend. It seemed like midsummer we were in a great position, and then as fall hit, China quit buying, and it went downhill a bit.”

Carmichael continues, “One other thing that affected the metal market was the hurricanes last fall. There was such an influx of metals that it drove the market down.”

While metal prices have been strong overall in the Midwest, wood markets haven’t been as robust, mirroring what is taking place around the country. This has forced some businesses to rethink how they handle these materials.

“On the back end, wood markets have been challenging. Much of our boiler fuel markets have gone away, similar to the rest of the country,” Salisbury says. “The shift in wood markets has pushed us into mulch, animal bedding and erosion control product. Our way to combat changes in end markets is quality. If you can produce a very high-quality product with very little contamination, you can sell it. Recyclers that haven’t been able to achieve high product quality (especially in wood products) will likely be forced to send theirs to a landfill.”

Hiring Challenges

The steady amount of employment opportunities throughout the Midwest has resulted in a worker shortage that is forcing businesses to rethink ways of attracting new talent.

“Labor continues to be a struggle for a lot of facilities across the country,” Haus says. “Unemployment in our market and our finite location is 2 percent, which makes it very challenging to find labor as well as retain labor.”

Haus says this shortage has resulted in an increase in wages across most positions, which has added an additional cost to recycling.

“It has been difficult finding the right people; we’ve just had to look to different avenues,” Carmichael says. “We’re now willing to pay a little bit more to find qualified people. I want to make sure the people we have on the ground sorting through items are doing what they’re supposed to be doing, and paying the bare-bones minimum isn’t conducive for that.”

Carmichael notes that his company has begun to use a temp service to do the groundwork in finding new employees. This allows his company to simply sift through potential candidates rather than do all the legwork, which has made the hiring process more efficient.

Salisbury acknowledges that while the Midwest is starting to see the results of low unemployment overall, the personnel shortage isn’t affecting all job functions in the region.

“We recently posted a position for a logistics manager and received over 200 applicants in only a few weeks,” he says. “And despite the well-known driver shortage, we have hired some really good drivers this year.”

Salisbury says he has had particular difficulty filling positions among his sorting staff. He attributes this to the negative stigma surrounding the job and the fact that workers have more attractive options. Salisbury says that while this shortage could be disruptive in the short term, it could help spur the further development of robotic sorting technologies over time.

Future Projections

While the current rush of activity won’t last forever, it appears that the demolition and C&D recycling industry will remain strong for the foreseeable future.

“All indicators point to a strong 2018 and, likely, the next 18 months,” Haus says. “I don’t think we have enough information to look much beyond that. We have carryover from the 2017 season related to the storm damage that will add to the 2018 season; but, beyond that, it looks like construction will remain strong in this market for the foreseeable future.”

Just how optimistic are recyclers and demo contractors about what’s taking place in the Midwest? A couple industry veterans say they are more enthusiastic now about the business than at any other time in their careers.

“I have never had more of a backlog of work than I do going into 2018,” Baumann says. “B&B Wrecking probably doesn’t need another job for five to six months based on what we have started or what we are about to start. We are expecting to grow our gross sales roughly 20 percent in 2018, and a lot of that has to do with the fact that we have a lot of contract work, but also that the price of scrap is trending upwards.”

Carmichael echoes Baumann, saying that attitudes among demolition contractors and C&D recyclers in the Midwest, and especially northeast Ohio, are positive for 2018.

“There are so many positive indicators in 2018,” Carmichael says. “With all the building and projects going on in northeast Ohio, it’s like I’ve never seen it before.”

The author is editor of Construction & Demolition Recycling and can be reached at aredling@gie.net.