Recovered fiber prices have steadily increased throughout 2023, but for North America’s top five haulers, the recycling business still isn’t what it used to be.
Waste Management (WM), Republic Services, Casella Waste Systems, GFL Environmental and Waste Connections all reported their third-quarter recycling revenues were down on a year-over-year basis. The trend was a continuation of what they reported in the second quarter of this year.
Throughout 2023, average prices for OCC and mixed paper have been rebounding from their fall 2022 collapse. According to RecyclingMarkets.net, the North American average for OCC is now $77 per ton, up from $30 a year ago. Meanwhile, mixed paper is $33 a ton, up from negative $1.50 a year prior.
But the largest companies say pricing in the third quarter of 2023 still hasn’t fully recovered.
The following are more details on recycling-related financial results for the top five publicly traded garbage and recycling companies in the third quarter of 2023:
WM’s recycling business tallied revenues of $366 million during the third quarter, down 13% year over year.
According to a quarterly report, the downturn in recyclables prices that started in the second half of 2022 has persisted into 2023. For the first nine months of the year, for example, the average single-stream committees price was down over 50% from the same period in 2022.
During the third quarter, the average commodity price was $58 per ton, which was down 38% year over year.
“The decrease is due to the slowdown in the global economy, which reduced retail demand and the corresponding need for cardboard packaging to ship retail goods,” the quarterly report stated.
In addition to revenue decreases, profitability fell in WM’s recycling business. According to a press release, the third-quarter operating earnings before interest, taxes, depreciation and amortization (EBITDA) declined by $10 million compared with the third quarter of 2022.
WM is continuing to spend heavily to boost its recycling business. During the third quarter, WM completed technology upgrades at two MRFs, with another two automation upgrades and a new facility, in Nashville, Tenn., expected to come on-line before the end of this year, the release notes.
“WM’s automated facilities continue to see strong improvements in product quality, throughput, and labor costs, which is mitigating the commodity price pressure on earnings,” the release states.
WM is projecting that its recycling investments, which will total over $1 billion, will yield an additional $240 million in operating EBITDA beginning in 2026. That’s assuming an average commodity value of $125 a ton.
In the short run, however, taking the MRFs offline for upgrades has slightly reduced the company’s total weight of recyclables sorted and sent to market.
Recycling makes up 7% of WM’s total revenue. Overall, WM pulled in $5.2 billion in revenue during the quarter, up 2% from the year-prior period.
By the numbers
The following is a look at key third-quarter 2023 recycling numbers from the five largest publicly traded haulers in North America:
- Q3 recycling revenue: $366 million
- Q3 revenue change YoY: Down 13%
- Average Q3 commodity price: $58 per ton
- Commodity price change YoY: Down 38%
- Q3 recycling EBITDA YoY: Down by $10 million
- Q3 recycling revenue: $76 million
- Q3 revenue change YoY: Down 12%
- Average Q3 commodity price (excluding glass and organics): $112 per ton
- Commodity price YoY: Down 31%
Casella Waste Systems
- Q3 Resource Solutions (which includes recycling) revenue: $76 million
- Q3 revenue change YoY: Down 6%
- Q3 Resource Solutions income: $4.1 million
- EBITDA YoY: Down 9%
- Commodity price change YoY: Down 28%
GFL Environmental (converted to U.S. from Canadian dollars on Nov. 13, 2023)
- Q3 recycling revenue: $55.4 million
- Q3 revenue change YoY: Down 10%
- Q3 recycling revenue: $36 million
- Q3 revenue change YoY: Down 25%
- Average Q3 OCC price: $88 per ton
The company’s recycling business brought in $76.3 million in revenue during the third quarter, down 12% year over year, according to a quarterly report.
The company’s average commodity price (excluding glass and organics) was $112 per ton during the third quarter, down 31% from the year-prior period.
During an Oct. 26 conference call with investors, Brian DelGhiaccio, Republic’s chief financial officer, said the company is seeing continued improvement in recyclables prices, however.
“We continue to see a steady recovery in fiber markets and plastics pricing has improved from recent lows,” he said. “Our current average commodity price is approximately $120 per ton.”
During the quarter, Republic also announced the location for its second Polymer Center: Indianapolis. The company will also co-locate a Blue Polymers plastics processing facility on site. The company has now broken ground on the project.
Recycling makes up about 2% of Republic’s total revenue. Overall, the company pulled in $3.83
billion in revenue during the third quarter, up 6% year over year.
Casella Waste Systems
Casella’s Resource Solutions segment, which includes recycling and other businesses, tallied revenues of $75.5 million during the third quarter, down 6% year over year, according to a quarterly report.
The Resource Solutions segment includes the company’s recycling business, its organics processing and disposal business, and services for large industrial, institutional or multi-site retail customers.
The quarterly report provides an explanation of why total revenues dropped by $4.8 million year over year in the Resource Solutions business.
The report notes that lower commodity prices, partially offset by higher tipping fees, reduced revenues by $6.3 million year over year. A slowdown in National Accounts sales also reduced revenue by $400,000.
Partially mitigating those declines were the impacts of simply sorting and marketing a greater weight of recyclables. Specifically, the higher processing volumes during the third quarter increased revenue by $800,000 year over year. Additionally, acquisitions over the past year increased revenue in the Resource Solutions business by about $1.1 million.
In addition to revenues declines, the Resource Solutions business also experienced a drop in operating income during the quarter. The operating income was $4.1 million, down 9% year over year.
During a Nov. 2 conference call with investors, Ned Coletta, the company’s chief financial officer, noted that average commodity prices in the third quarter were down 28% year over year, driven by lower pricing for just about everything: OCC and mixed paper, metals and plastics.
“This decline in commodity prices was partially offset by a 10.9% growth in processing fees,” he said.
He noted that Casella completed upgrades at its Boston MRF in late June. As a result, that facility was more profitable throughout the third quarter, with an adjusted EBITDA increase of $1.3 million year over year.
Casella tallied total revenues of $352.7 million during the third quarter, up 19.5% year over year. Much of that increase resulted from acquisitions.
The Canada-based company’s recycling business reported revenues of $55.4 million U.S. (all Canadian dollars converted to U.S. on Nov. 13, 2023) during the third quarter. That was down 10% year over year, according to a quarterly report.
In a Nov. 2 conference call with investors, Luke Pelosi, GFL’s chief financial officer, noted that “Commodities continue to be a year-over-year headwind.”
“While October has seen an uptick in fiber pricing, we expect this to reverse by the year-end and to be back to Q3 OCC pricing levels, as we exit the year, all of which is baked into our guidance,” he said.
Recycling now makes up 4% of the company’s total revenue. Overall, GFL’s revenue was $1.37 billion during the third quarter, up 3% year over year.
The company’s recycling business brought in $36.1 million during the third quarter, down 25% year over year, according to a quarterly report
Like the other haulers, Waste Connections noted that pricing in the third quarter hadn’t yet recovered from the nose-dive it took in fall 2022.
“The decreases are primarily attributable to lower commodity pricing for old corrugated cardboard, aluminum, plastics and other paper products as compared to the prior period,” the report states.
Recycling makes up less than 2% of Waste Connections’ total revenue, which was $2.06 billion during the third quarter. That was up 10% from the prior-year period.