The garbage industry has outperformed the market since 2015. Here’s why

Published

3 years ago

July 26, 2021

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In this article

A rising industry

America has long remained one of the most wasteful countries in the world, generating 239 million metric tons of garbage every year, about 1,600 to 1,700 pounds per person. While some view it as a threat to our environment and society, the solid waste management industry sees an opportunity.

“It’s a profitable industry,” according to Debra Reinhart, a member of the Board of Scientific Counselors for the EPA. “It’s a difficult industry but it is profitable if it’s done right.”

Two private companies, Waste Management and Republic Services, lead the solid waste management sector. Together they own about 480 landfills out of the 2,627 landfills across the United States. The two companies have seen staggering performance in the market, with the stock prices of both doubling in the past five years. Both Waste Management and Republic Services declined CNBC’s request for an interview.

“They’ve learned how to be best-in-class businesses,” said Michael E. Hoffman, a managing director at Stifel Financial. “Their publicly traded stocks outperformed the market handily between 2015 and 2019 and underpinning it is a meaningful improvement in their free cash flow conversion.” The stocks have continued to outperform.

Tipping fees

Since its inception, landfills have made a majority of their revenue via tipping fees. These fees are charged to trucks that are dropping off their garbage based on their weight per ton.

In 2020, municipal solid waste landfills had an average tipping fee of $53.72 per ton. That translates to roughly $1.4 million a year in approximate average gross revenue for small landfills and $43.5 million a year for large landfills just from gate fees.

Tipping fees have seen steady growth over the past four decades. In 1982, the national average tipping fee sat at $8.07 per ton or about $23.00 when adjusted for inflation. That’s nearly a 133% increase in 35 years.

While tipping fees make landfills sound like a risk-free business, they are still quite an expensive investment. It can cost about $1.1 million to $1.7 million just to construct, operate and close a landfill. For this reason, private companies have replaced municipal governments to own and operate the majority of the landfills across the U.S.

“I think it’s because the trend has been to go larger and larger so the small neighborhood dump can’t exist because of the regulations and the sophistication of the design,” Reinhart said. “So we are tending to see large landfills, which do require a lot of investment upfront.”

Privatization of landfills

Private companies have also played an important role in discovering new ways beyond tipping fees to turn a profit out of garbage. Landfill mining and reclamation, a process of extracting and reprocessing materials from older landfills, is one of them.

In 2011, a private scrap metal company contracted with a nonprofit landfill in southern Maine to mine precious metals. In four years, they recovered more than 37,000 tons of metal worth $7.42 million.

But it isn’t always a success story. In 2017, the city of Denton, Texas, ended its landfill mining program before it could even start after realizing that the benefits weren’t worth its $4.56 million price tag. According to experts, economics is usually the biggest challenge to make landfill mining work.

“There’s virtually no way I can see how that makes money,” said Hoffman. “The commodity values would have to be at such higher levels than they are today for whatever it is you’re trying to get your hands on.”

Meanwhile, some experts argue that landfill mining can be profitable if done correctly by recovering more space for tipping fees.

“Many people are mining but they’re not reusing the space,” according to Sahadat Hossain, professor of civil engineering at the University of Texas at Arlington. “If you do the operation right, you’re never going to be involved and it will always make you money.”

Landfill gas to energy

Modern chemistry has also allowed landfills to be mined for energy, using methane gas that is produced from decaying trash. According to the U.S. Energy Information Administration, landfill gas generates about 10.5 billion kilowatt-hours of electricity every year. That’s enough to power roughly 810,000 homes and heat nearly 547,000 homes each year.

“The landfill gas operations that are known as low or medium DTU which are the predominant form of capturing the gas and turning it into electricity or steam and then selling it? Those are very good returns on capital projects,” Hoffman said.

While revenue from generating energy and fuel isn’t quite impressive, landfills that participate do benefit greatly from generous subsidies. The tipping fee, combined with various mining techniques and government subsidies have altogether transformed the landfill industry into a booming business.

The solid waste management industry will only continue to expand as long as there are those who view garbage as a resource rather than waste. Because when it comes to landfills, one man’s trash is quite literally another man’s treasure.

“Waste is not a waste, but it’s a resource,” emphasized Hossain. “World has limited resources. If we don’t reuse and recycle these, we cannot talk about a circular economy. That will always be a talk in the tabletop discussion.”

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Everrati rebrands B2B EV conversion arm to ‘Powered by Everrati’ amid clientele increase

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1 hour ago

April 25, 2024

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Everrati rebrands B2B EV conversion arm to 'Powered by Everrati' amid clientele increase

EV conversion specialist Everrati announced reshuffling its business-to-business (B2B) strategy, rebranding the division as “Powered by Everrati.” The branding partially results from increased customers to the B2B division, which is reporting encouraging year-over-year growth.

Everrati Automotive Ltd. is a UK-based restoration company that has expanded its business to the US. It specializes in EV conversions of timeless classics like Porsche 911s and Land Rovers. Most of our previous coverage of Everrati has focused on said conversions, including an all-electric Mercedes SL “Pagoda” and a Land Rover Defender designed to be stored on a yacht.

However, in addition to its own EV revamps, Everrati shares its proprietary technology to help other businesses go all-electric. In July 2022, we reported that the company had established a new B2B division called Everrati Advanced Technologies (EAT). The goal at the time was to provide high-tech consultancy services to clients, from initial concept and feasibility studies, through scalable low-volume production of EV conversions.

Everrati said EAT would initially focus on low-volume luxury vehicle conversions, aiding in every step of the process from design, development, engineering, and production consulting to help its customers create any bespoke powertrain design they want.

Nearly two years later, Everrati is reporting increased interest in its B2B EV conversions and is now pivoting that division to support said growth.

Businesses can utilize “Powered by Everrati” conversions

Similar to its predecessor, the newly branded “Powered by Everrati” division utilizes the conversion specialist’s electric powertrain and software technology to offer clients a turnkey solution that comes with support throughout the entire process.

At this point, in its development of EV conversion technology, Everrati is confident that its powertrains will reduce development and launch timelines, risks, and overall costs. The company explained that clients also gain access to Everrati’s in-house-developed Vehicle Control Unit (VCU) architecture, which can reduce the cost of new electric vehicle programs by up to 70%.

Such technology and savings have piqued the interest of new clients all around the globe, as Everrati states its contract signings have increased 200% year-over-year. Everrati founder and CEO Justin Lunny spoke to the expanded EV conversion division and what it means for the company’s overall strategy in the future:

I’m proud to announce the new name for our B2B division: Powered by Everrati. Our pipeline is brimming with opportunities as specialist and luxury brands, Low Volume Manufacturers, and OEM ‘classic divisions’ wishing to bring their heritage into the future, seek to swiftly create new, or electrify existing vehicles. With 70% of all new cars in Europe expected to be pure electric by 2030, momentum is really accelerating. Our ability to deliver bespoke EV projects efficiently positions us as the go-to partner for businesses aiming to transition to zero-emission solutions. Everrati continues to grow from solid foundations, driven by our commitment to providing customers with complete, turnkey cutting-edge EV solutions.

Our unique business proposition empowers clients to swiftly embrace zero-emission technology, while our B2C business flourishes globally in response to increasing demand. Indeed, with so many redefined customer commissions from our Porsche, Land Rover and Mercedes-Benz based product portfolio having been delivered worldwide, these completed OEM-grade vehicles visibly demonstrate to our B2B clients the boundaries we are pushing and the unparalleled results that can be achieved.

Everrati is not sharing specifically who any of its B2B clients are at this time.

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Hyundai to add hybrids at EV-only plant as rising demand throws a curveball

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2 hours ago

April 25, 2024

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Hyundai to add hybrids at EV-only plant as rising demand throws a curveball

Following similar announcements from rivals, Hyundai is adding more hybrids to its lineup as a bridge to its next-gen EVs. Hyundai will add hybrid production lines at its dedicated EV plant in Georgia as demand rises.

Hyundai adds hybrids at its new dedicated EV plant

Hyundai is shaking things up after initially announcing plans to build a $5.5B EV assembly and battery plant in Bryan County, GA.

After hybrids accounted for a larger share of sales in the first quarter, Hyundai plans to add hybrid production at the facility. “It is because we need to cope with sharply rising hybrid demand,” A Hyundai executive said on the company’s Q1 earnings call (via Nikkei Asia).

Hyundai’s EV sales share fell in all major markets in the first three months of 2024 compared to last year, including Korea (4.4% vs. 9%), the US (5.5% vs. 6.6%), and Europe (10.7% vs. 15.9%).

Meanwhile, hybrids accounted for a larger portion of sales in Korea (21% vs. 14.7%), the US (10.9% vs. 10.4%), and Europe (15.7% vs. 15.2%).

Overall, EVs accounted for 4.5% (vs 6.5% in Q1 2023) of the brand’s sales, while hybrids held 9.7% of the share (vs 8.2%). Hyundai’s total auto sales fell 1.5% to 1 million in Q1.

Hyundai is expected to begin production at its GA plant in Q4. The automaker believes electric models, like the IONIQ 5 and IONIQ 6, will qualify for the federal EV tax credit, which should help boost demand.

Once up and running, Hyundai’s Metaplant will be able to build 300,000 EVs annually, which can be expanded to 500,000 if needed.

Hyundai’s first three-row electric SUV, the IONIQ 9, will debut soon. It’s expected to be introduced later this year as Hyundai looks to boost sales in key segments.

Electrek’s Take

The news comes as several automakers, like Ford, GM, and even sister company Kia, announced similar plans to introduce more hybrids to their lineups.

Despite this, Hyundai’s EV sales are still climbing in key markets. Hyundai’s EV sales doubled in March in the US, its most important market, with Q1 sales up 62%, also a record.

Hyundai Motor America CEO Randy Parker assured, “Demand for our vehicles, especially EVs, remains high.” The Korean automaker looks to satisfy the growing demand for hybrids with added production in GA.

Hyundai already has some of the cheapest EVs in the US, with the Hyundai Kona Electric (starting under $33,00), the IONIQ 6 (starting at $37,500), and IONIQ 5 (starting at $41,800).

To sweeten the deal, Hyundai is offering a massive $7,500 cash offer that can bring prices down to nearly nothing. If you’re in the market for a new EV, now may be the best time to get started. You can use our links below to find deals on Hyundai EVs at a dealer near you.

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Middle East escalation could trigger oil price shock that fuels inflation, World Bank warns

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3 hours ago

April 25, 2024

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Middle East escalation could trigger oil price shock that fuels inflation, World Bank warns

A general view of Isfahan Refinery, one of the largest refineries in Iran and is considered as the first refinery in the country in terms of diversity of petroleum products in Isfahan, Iran on November 08, 2023.

Fatemeh Bahrami | Anadolu | Getty Images

The outbreak of a major conflict in the Middle East could trigger an energy shock that pushes oil prices above $100 a barrel, fuels inflation and results in higher interest rates for longer, the World Bank warned Thursday.

Tensions in the Middle East reached a boiling point earlier this month as Israel and OPEC member Iran appeared on the brink of war, raising fears that crude oil supplies could be disrupted as a consequence.

The governments in Jerusalem and Tehran appear to have decided against escalation after exchanging direct strikes on each other’s territory for the first time. Oil prices have pulled back nearly 4% from recent highs as investors have discounted the probability of a wider war in the region.

The World Bank, however, cautioned that the situation remains uncertain.

“The world is at a vulnerable moment: A major energy shock could undermine much of the progress in reducing inflation over the past two years,” said World Bank Chief Economist Indermit Gill.

Oil Prices, Energy News and Analysis

Oil prices could average $102 per barrel if a conflict involving one or more oil producers in the Middle East results in a supply disruption of 3 million barrels per day, according to the World Bank’s latest commodity markets outlook report. An price shock of this magnitude could stall the fight against inflation almost entirely, according to the report.

Global inflation cooled by 2% between 2022 and 2023 largely due to commodity prices plunging nearly 40%, according to the World Bank. Commodity prices are now plateauing with the global financial institution forecasting modest declines of 3% this year and 4% in 2025.

“Global inflation remains undefeated,” Gill said. “A key force for disinflation — falling commodity prices — has essentially hit a wall. That means interest rates could remain higher than currently expected this year and next.”

While the conflict in the Middle East presents upside pricing risks, the world could see relief if OPEC+ decides to start unwinding its production cuts this year. Oil prices would fall to an average $81 a barrel if the cartel brings 1 million barrels per day back onto the market in the second half of the year, according to the World Bank.