Landfill Industry Statistics and the Structure and Behaviour of the Landfill Industry

IntroductionLandfill industry statistics have been remarkably few and inaccurate until recently, and the change toward the collection and use of data, providing waste types and quantities as landfill statistical data, is only now becoming important. This is due to the fact that governments and industry are starting to see waste as a resource and a commodity worthy of investment, and need good waste flow data on which to base their investments.The landfilling of waste probably ranks amongst one of the longest established industries. As soon as people started to congregate in communities, there must have been people digging what were known as “middens” to take human solid waste, and charging for the service.But, while nobody did anything much other than throw it into a hole by the truckload very few cared, what or how much, was being thrown. So, even the quantity discarded was poorly recorded. Landfill industry statistics were thought of as being of little interest or value, and very little was done, let alone the recording of tonnages against a nationally or internationally recognized register to classify in a consistent manner all of the vast number of waste material types.So, the result has been that in many nations, government statistics are only available historically for total tonnages of waste sent to landfill, and in many countries the make-up of that waste was only very scantily recorded at a national level, if at all.This was the case in the UK until the early 2000’s, but has been improving since.The Main Influences on Landfill Industry StatisticsThe emergence of the EU Waste Register has altered all that, and it now makes financial sense to collect this data, for the purpose of understanding the individual waste flows for the implementation of re-use, and recycling.So, that covers the development of landfill industry data collection, and is important to the waste re-use and recycling community, however, very many investors would like to understand landfill industry statistics, in order to assess the potential profitability of landfills for investment purposes.With that in mind let us consider the way in which landfill industry statistics could assist such decisions in the assessment of landfills as a profitable business, but in general don’t help that much.With only modest changes in technology over the last 10 to 20 years and little opportunity for differentiation, landfilling is accurately described as a mature industry. There are minimal barriers to entry once the operator has complied with the requirement to show that a landfill operator is a “fit and proper person” by taking a course and obtaining a Certificate of Technical Competence (CoTC) in landfilling. This means that new landfill companies are constantly being created, bringing new pricing dynamics in the area they originate.The industry also conforms to the concept of a competitive model when viewed for the nation as a whole. Under these conditions, operators see obtaining market share achieved by price competition, to be the dominant objective of most landfill operators and rightly so, too.As a result, landfill market prices are, in general, dictated by the lowest price in each catchment area. Catchment areas are defined by the high cost of transport of waste, and to a lesser extent by the philosophy of local authority waste management practice which is to tend to wish to dispose of waste in the locality of its generation to avoid hostility from the voting public toward transhipment of waste between regions, and urban areas.As with the majority of mature industries, the landfill business has also undergone substantial consolidation in recent years as operators attempt to increase market share and achieve economies of scale. In fact there is hardly any big waste disposal industry player not to have made acquisitions in the last decade. The effect of this upon landfill industry statistics has been to make disposal costs and quantities disposed sub-regionally even harder to establish as mergers result in large changes in shipping routes and landfill destinations after each merger. Such changes happen inter-company and are rarely transparent within the data.Despite the many mergers, the fact that the industry is now more concentrated in fewer companies than before, by other industry standards it is still fragmented and again this impairs the usefulness of landfill industry statistics, with widely varying profitability levels co-existing regionally.ConclusionIn practice when interpreting landfill industry statistics and how charges for landfilling, and hence landfill profitability varies, it is most important to remember that because transport costs, represent a very significant proportion of total waste management costs, landfill markets operate very much on a regional basis.This means that a degree of local monopoly power can exist in areas where most of the landfills are operated by the same company. In such areas, general landfill industry statistics may not reflect actual profitability levels.This happens when landfill companies find that they are able to control a significant proportion of the landfill capacity, and manipulate landfill gate fees upward. In the UK this has happened in areas like Bedfordshire, where one company has a substantial presence. In such situations, prices can be raised to levels above competitive market rates and operators may, in the short term, earn abnormally high profits.Ultimately, the landfill investor should in general not rely on landfill industry statistics when considering the likely return on landfill operating company investment, and there is no substitute for detailed and specific market research on local gate fees and landfill development costs as apply to specific sites.