Keeping the momentum

Features - Regional Spotlight // NORTHEAST

Demolition contractors and C&D recyclers in the Northeast are coasting off of record construction backlogs in the region.

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May 21, 2018
Adam Redling
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Anyone who has had to sit through a high school physics class will remember Newton’s first law of motion: Objects in motion tend to stay in motion, unless acted upon by an opposing force. For construction and demolition (C&D) recyclers and demolition contractors working in the Northeast, that’s good news, as the steady economy and booming construction sector have carried the industry’s positive momentum unimpeded into spring.

Setting the pace

The strength of the construction sector is a good barometer for gauging the direction of the demolition and C&D recycling industries. Despite the lack of a much-anticipated infrastructure stimulus package heading into the spring, construction professionals are still reporting strong growth and record backlogs that have carried over to the demo and recycling sectors.

“Construction in this region is booming,” Bernie Laber, executive project manager of Revolution Recovery, Philadelphia, says. “The front end of the business has been exceeding our expectations. We are meeting this demand and growing. We anticipate a continued upward trend in the construction and demolition activity in our market.”

Randy Wolf, director of Conshohocken, Pennsylvania-based L&S Demo Recycling, echoed Laber’s sentiments, stating that its recycling operations have been going strong and appear to be primed for more success in the year ahead.

“2017 continued the upward trend we’ve seen for the past five years,” Wolf says. “We operate a roll-off hauling business as well, and that business has mirrored the general growth [we’ve seen]. The first three months of 2018 seem to be in line with previous years, and we are expecting a solid 2018.”

Scott Knightly, president of Epping, New Hampshire-based EnviroVantage, says that not only has the volume of work been positive for his company, but also the types of projects the company is seeing have been a pleasant surprise.

“Business conditions in the Northeast remained strong through 2017 and continue to build in all sectors through the first quarter of 2018,” Knightly says. “The strongest sectors, for example healthcare, require higher levels of skill and expertise due to the complexity of the projects. For EnviroVantage, who operates throughout the entire Northeast, the volume as well as the quality of work has exceeded expectations.”

While the spring is usually the time of year when contractors’ and recyclers’ businesses start to ramp up in the Northeast, industry participants got a jumpstart on the action this year. The year started out strong and continued throughout winter, which has kept businesses busy.

Anthony Contento, executive vice president of Cortland, New York-based Contento Recycling LLC, says that although Contento is new to the C&D recycling world, its C&D hauling business and demolition division are enjoying unseasonably strong growth.

“Though much of our work is seasonal and takes places mostly in the spring and summer months, we have serviced quite a few long-lasting construction projects throughout the winter,” Contento says. “As the spring of 2018 progresses, Contento Recycling has already secured a full workload for the spring and summer. This leads us to believe that we will have a very active year with both demolition and new construction in our area of central New York.”

Mark Frederico, owner of Rochester, New York-based Frederico Demolition, acknowledges that while the company saw a couple months of slowed growth in late winter, business has been good for the company overall. Frederico attributes part of the company’s recent expansion to its emphasis on cultivating and maintaining relationships throughout the region.

“Business has been very good,” Frederico says. “I would say that 70 percent of that sentiment is due to us being a third-generation contractor and having some mature relationships that have helped us through what we’ve seen in the recent past, where there have been some challenges. As we’ve expanded our business, we’re on a controlled, slow-growth pattern. So, we’ve also managed to create new relationships with some out-of-city, out-of-state owners in some markets that’ve helped us when our local market in Rochester is slower. Overall, we’ve done very well.”

Understanding the challenges and opportunities

Knightly says that the relative stability of commodity markets has allowed businesses in the region to continue to thrive, but singles out China’s National Sword as problematic for those recyclers dependent on materials impacted by the import ban.

“Commodity pricing within the demolition industry has not been as volatile in the last year as other commodity markets,” Knightly says. “Both steel and copper are fairly stable and easy to project over a long-term or multiyear project. Those commodities dependent on foreign markets such as China are having extensive issues.”

Laber says that although business has been good, fluctuating commodity prices have offset some gains from the booming construction market, keeping margins tight. On a positive note, Laber says the company saw old corrugated cardboard (OCC) markets reach record highs, while metal markets have continued to rebound. Conversely, like most recyclers nationwide, Revolution Recovery has been faced with falling plastic prices and dwindling wood end markets.

“End markets for wood tightened in this region,” Laber says. “Newer sources of cheap natural gas helped finish off outlets for wood-based alternative fuel that had been hanging on through the glut. This happened at the same time as a low-demand season for mulch. While the timing is challenging, adjusting to changing markets is the nature of this business. The more flexible and diversified we are, the stronger we will be.”

Wolf says that L&S Demo Recycling is well-positioned to face some of the industry’s present obstacles, but that simple economics dictate much of its recycling initiatives.

“Our company also operates a scrap metal yard and a paper and plastic recycling company,” Wolf says. “Our ability to internalize many commodities and our ability to produce high-quality mulch insulates us from some of the vagaries of the market, but lower prices still effect the bottom line. Traditionally, we do not believe in recycling for recycling’s sake. We must make an appropriate margin to continue recycling a particular commodity.”

Similarly, Contento says that while fluctuating commodity prices are always something the company keeps an eye on, the nature of Contento’s business has allowed it to remain protected even in the face of changing global trade dynamics.

“The shifting commodity prices have had some effect on the profitability of our scrap metal recycling operation, but other than that, we have remained relatively unaffected,” Contento says. “Being that we do not deal with too much cardboard, paper or plastic, the Chinese National Sword policy has not had a large effect on our business.”

The economics of the region, where a higher density of large landfills makes the need to recycle less critical when values dissipate, has helped Frederico Demolition deal with some subdued prices for recyclables.

“Shifting commodity prices haven’t been that big of a deal for us. Our givebacks on jobs that have larger volumes of ferrous and nonferrous metals allow us to be more aggressive, but when the volumes aren’t there, it doesn’t affect us that much,” Frederico says. “You just have to estimate the job based on what the commodity value is at the time, and that’s all you can do. Our region is filled with landfills in the Northeast, so C&D disposal is easy. There’s no question that we’re recycling, but we don’t function like other areas [because of the economics]. I’m not saying that’s the way it should be, it’s just the way that it is.”

Environmentally conscious building

Green building is an idea that has been slow to catch on in some regions of the country outside of healthcare and education projects. Contractors and recyclers working in the Northeast, by contrast, have seen an uptick in more environmentally conscious building and demolition practices.

“LEED building is very popular in our area,” Contento says. “We operate about 30 miles south of Syracuse where there is a U.S. Green Building Council (USGBC) office. Syracuse also has one of the largest LEED-certified buildings in New York state, Destiny USA, a massive shopping center located in the middle of the greater Syracuse area. I think that massive projects like Destiny USA are proving to other developers, both large and small, that building a LEED-certified building is very achievable and is an accomplishment worth striving for.”

LEED stands for Leadership in Energy and Environmental Design and is a third-party certification system from USGBC.

Knightly says that with the number of readapted and repositioned mills and industrial buildings in the Northeast, EnviroVantage’s focus is on recycling and reusing 90 to 95 percent of existing materials or structures on its projects. However, he points out there are some challenges with meeting these recycling goals on some projects because of recent environmental concerns with paint.

“In order to be competitive, demolition contractors must recycle the majority of each project for repurpose or reuse. But due to environmental concerns, the challenge to repurpose or recycle painted concrete and painted wood came to the forefront, narrowing recycling options and forcing innovative solutions,” Knightly says.

While green initiatives have increased in popularity in the Northeast in recent years, more work needs to be done to assure companies are following through on these standards, according to Laber.

“Revolution Recovery’s growth came at the same time that LEED became more widely accepted in our region,” Laber says. “At this point, the ability to offer services that meet LEED requirements is less of a competitive edge because both companies that legitimately meet the standard and those that do not have entered the game. While acceptance of green building standards has grown, the need for the public to stay engaged and ensure the intent of the standard is met remains as important as ever.”

Naomi Cooper, vice president of Cooper Tank Recycling in Brooklyn, New York, seconds the idea that more work needs to be done to verify that what is being touted as LEED or green building recycling meets the recycling criteria.

“In the New York City market, there is definitely an increased focus on LEED, and green building has become a higher priority for many developers and architects,” Cooper says. “However, LEED v4 requires source separation of five material streams, and in New York City, that is nearly impossible to achieve due to space constraints at construction sites.”

Cooper says save for a few materials, such as gypsum wallboard, ceiling tiles and carpet, source separation is a “fruitless exercise” if the end goal is recycling or reusing the material.

“[Our company] accepts mixed materials and has sophisticated equipment to sort it out, but even a source separated load is likely to get dumped on a mixed pile at a transfer station, re-comingled and processed with everything else,” Cooper says.

Cooper says LEED should be used to verify that material being reported as recycled is recycled.

Continued movement

The Associated Builders and Contractors (ABC), Washington, recently reported its Construction Backlog Indicator (CBI), an index used to determine the pipeline of construction work throughout the country, indicated contractors in the Northeast were enjoying the most substantial work backlog ever recorded. This steady stream of work promises to keep recyclers and demolition contractors busy for the rest of the year.

“2018 looks like it will be a year full of demolition and redevelopment in central New York,” Contento says. “Our partner company, Contento, has a full schedule of demolition and there is a lot of money funneling into central New York to fix up rundown buildings and neighborhoods. There is a particularly large amount of development in the housing sector in our region. This will likely provide Contento Recycling with a lot of C&D material to process.”

Knightly says he thinks the coming year will bring ample opportunities for longer-term, large-scale projects and subsequent small- to medium-sized projects, but that both offer pros and cons.

“There are challenges with both the large and the small to medium projects,” Knightly says. “Large projects equal large risk and a longer schedule, whereas small- to medium-sized projects have large numbers of bidders creating a more difficult environment to win work.”

Although the strong economy and steady stream of work have operators in the Northeast optimistic about the year to come, there are forward indicators that could dampen the industry tailwinds for some materials.

“Sales are shaping out to be strong in 2018,” Laber says. “Rising oil prices in 2017 have been more volatile in the first quarter of the new year but remain an exciting indicator for the recycling markets. However, a flux of cheap natural gas in this region threatens that. Outlets for wood-based alternative fuel are closing down, unable to compete with the Marcellus Shale prices. Finding and creating new outlets for this material will be a main challenge as well as opportunity for 2018. Overall, landfill prices are still too low to foster more robust recycling markets and have given no indication of changing soon.”

Variables like a new infrastructure bill could further accelerate industry growth, while the fallout from China’s National Sword imports ban and the proposed tariffs on steel and aluminum could lead to unexpected hardships. However, for the time being, stakeholders in the Northeast are setting their sights on riding out the positive momentum.

“I think we’re in the same boat as everybody. The future is looking good, but that’s from a distance,” Frederico says. “Only time will tell how well we do, we just have to stay consistent and do our part looking for work. It doesn’t always just come right to you. However, we have seen some good things in the marketplace and in the economy that has us optimistic.”

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