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Article19 Jan 2023

Landfills and Recycling: Inside US Waste Management

A new report from Citi Research’s Bryan Burgmeier includes detailed analysis of the US waste management business, from collection and transfer to recycling and the alternative energy opportunity presented by landfills.

US municipal solid waste services is estimated to be an approximately $80 billion industry that has grown at a +2.8% CAGR over the last 20+ years (it was a $43 billion industry in 1999).

 

US Waste Industry by Activity

Figure 14. Candidate Landfills for Future LFG Projects (470 candidates) Source: Citi Research, EPA If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-800-5008 (TTY: 711), from outside the US +1-210-677-3788.

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, Waste Business Journal

 

Waste service revenue is generated from three categories: collection, processing, and disposal.

  1. Collection is 63% of industry revenue and encompasses picking up and transporting waste from where it was generated to a transfer station, material recovery facility, or disposal site.
  2. Processing (12% of revenue) comprises recycling, the act of taking used material, separating into it different streams based on the underlying material and selling that material back to producers for a fee, and transfer stations which are drop-off points for waste where it can be consolidated, compressed and moved to its final location.
  3. Disposal is 25% of the waste industry and is largely comprised of landfills, a plot of land designated to the systematic burial of waste; disposal also includes waste-to-energy conversion which uses combustion of non-recyclable materials to generate heat, electricity or fuel. Publicly traded waste servicers have a large relative market share advantage vs. private and municipal competitors in the disposal market.

US waste collection involves picking up and transporting waste and recyclable materials from where it was generated to a transfer station, material recovery facility, or disposal site. It comprises 63% of the $80B US waste industry with public companies comprising 34%, private companies at 16%, and municipalities at 12%.

 

MSW Management (1960-2018)

Figure 38. MSW Generation

Figure 37. MSW Management (1960-2018) Source: Citi Research, EPA If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-800-5008 (TTY: 711), from outside the US +1-210-677-3788.

Figure 38. MSW Generation Source: Citi Research, EPA If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-800-5008 (TTY: 711), from outside the US +1-210-677-3788.

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, EPA

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, EPA

 

Focus on Recycling and Landfills

Recycling is an increasingly important part of society with consumer pressure pushing recycling, reusable or compostable products and a circular economy for the entire value chain. The US recycling rate rose from 7.3% in 1975 to 31.4% in 2005 as consumer participation increased significantly due to consumer trends favouring recyclable products, consumer education by governments and companies, and an industry shift toward single-stream recycling that doesn’t ask citizens to separate recyclable materials (paper, plastic, metal, etc.) into different bins before placing them curb-side.

Recycling rates have largely plateaued since increasing only +70bps from 2005-2018 to 32.1% and down from the 2017 peak of 35.0% as easy-to-recycle products such as newspapers have seen sharp declines in production and hard-to-recycle products such as plastics have risen in popularity. Paper & paperboard comprised 36% of MSW.

 

How Does a Materials Recovery Facility (MRF) Work?

Figure 42. How Does an MRF Work? Source: Citi Research If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-800-5008 (TTY: 711), from outside the US +1-210-677-3788.

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research

 

Landfills are increasingly scarce resources for waste disposal due to negative consumer perception, limited land availability in certain parts of the country, and government regulation. Accordingly, landfill use as a percentage of total MSW disposal has been declining consistently since 1960 when it comprised 94% of disposal vs. only 50% in 2018. Per Standard & Poor’s Capital IQ, there were ~8,000 landfills in 1988 compared to ~1,500 in 2014 and the size of the average US landfill has nearly tripled in that time.

While it is easier to expand upon an existing landfill than it is to open a new one, technology has also allowed for greater air space at landfills with new processes for breaking down organic waste and compactors to consolidate the trash in the occupied space.

Landfills have become a privately owned business with private players operating almost 90% of the remaining permitted capacity, per Waste360, well above 17% in 1984 and 36% in 1998, per Solid Waste Association of North America (SWANA). Landfills are expensive to own and operate so they are better suited for those with greater access to capital; companies with greater scale are also better able to achieve economies of scale with better fixed cost absorption through collection volumes. Some municipalities will lease the landfill to a private player and strike a deal to keep collection costs at a reasonable level.

 

Landfill Use by Year

Figure 52. Landfill Use by Year Source: Citi Research, EPA If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-800-5008 (TTY: 711), from outside the US +1-210-677-3788.

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research, EPA

 

Landfills make money by charging fees, known as tipping fees, to waste operators using the disposal site.

 

Renewable Natural Gas

Beyond traditional collection & disposal operations, well-capitalized companies are working to extract further value from their landfills through the creation of renewable natural gas. When organic material decomposes in an anaerobic environment such as a landfill, it produces gases such as methane (~50%), carbon dioxide (~50%), and other non-methane organic compounds (<1%). These gases are captured through collection and control systems and converted into energy. Renewable natural gas (RNG) is the considered to be “pipeline quality” and can be transported through existing infrastructure providing a significant whitespace growth opportunity for waste companies.

 

Creating Renewable Natural Gas from a Landfill

Figure 65. Creating Renewable Natural Gas from a Landfill Source: Citi Research If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-800-5008 (TTY: 711), from outside the US +1-210-677-3788.

© 2022 Citigroup Inc. No redistribution without Citigroup’s written permission.

Source: Citi Research

 

Before the RNG opportunity, some landfills would produce landfill gas (LFG) in an effort to recycle waste gases back to electrical energy through gas turbines or most commonly internal combustion engines. 68% of LFG energy operations are for electricity and 17% are for another form of fuel (nat gas, coal, fuel oil). Using LFG to create RNG is a form of upcycling a previously existing operation. The EPA estimates that MSW landfills were responsible for 15% of the US methane emissions in 2020.

The full report goes into more detail on all commercial aspects of the waste disposal cycle including collection- residential and commercial and transfer. See the full note here. And for related reading, please see page 35 of Citi’s Disruptive Innovations VIII GPS report on chemical recycling.

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

 

 

 

 

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