10 Takeaways from the Industry's Heavy Hitters

The four companies on the stage accounted for about $30 billion in revenues in 2014, have invested about $40  billion in capital, operate approximately 500 landfills and dispose of 200 million tons of waste annually.

The CEOs agreed that with Hoffman’s summation that “garbage is good,” with many seeing the conditions the best they’ve been in some time. “For first time since the downturn, I can see the light at the end of the tunnel,” Steiner said. “We're one of few industries where total volumes haven't reached previous levels. … But if we can keep a pace of 1 million to 1.3 million housing starts, now is the time for our industry.”

Burke amplified the point and explained why housing construction is such a boon for the waste industry saying it has “four pops.” The first “pop” is special waste, then the waste generated in the construction process, new goods purchased and old ones phased out by homebuyers and then volumes generated by the new businesses that open to serve up-and-coming communities.

All four CEOs talked about roll-off pulls being particularly strong in the current environment.

Steiner added that the uptick in construction extends to the commercial real estate side of things as well. However, “you see it more regionally than with housing,” he said.

Burke said one reason that volumes have yet to return to pre-recession levels is due to a secular shift in consumer behavior. “The recession made us all better consumers,” he said. “I’m not sure people are spending the same way they did in the past. … Consumers are not taking the same debt.” With less consumption and less eating out at restaurants, commercial waste volumes are constrained.

Steiner explained that Waste Management’s path to growth is “2+2,” that is, 2 percent volume growth and 2 percent pricing growth.

When asked how the industry ended up with the current troubled state for recycling, Steiner said, “We got here because times were good, cardboard prices were high and nobody thought they’d go low. … In the past it’s also been V-shaped recoveries.” This time, it’s played out much differently.

The CEOs also agreed that a fundamental issue is that recycling plants are really manufacturing plants. And if you’re selling your output for more than the costs of your inputs, it’s impossible to make profits. To sustain recycling going forward, returns can’t be based on selling the end commodity, but by collecting fees for conducting the collections and processing of materials.

“If you go back on how you bid these contracts, you bid a collection fee and assumed commodity prices would take care of processing costs,” Quarin explained. “We have to step in and say, if we are collecting, charge for collection and if we are processing, charge for processing.” How you split the revenues or costs of the end products should be a separate discussion.