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Six lockdown learnings from the waste management sector

During the coronavirus lockdown, the country’s lifestyle changed – and so did the nature of the waste generated. Waste management firms had to adapt rapidly to an environment that created both challenges and opportunities. We explore the trends across our portfolio of companies in the waste sector during lockdown and beyond.

More people at home means more household waste

During lockdown, most of the population spent more time at home than usual and that led to a rise in household waste – both general waste and recycling. The composition of waste also changed to include, among other things, more aluminium cans – a likely consequence of increased consumption of drinks previously bought in pubs and restaurants. Metal prices can have a big impact on some waste firms’ profitability, and demand for recycled metals during lockdown has fluctuated. By July, however, the aluminium price had returned to its pre-lockdown level, helping to support profits at waste firms that extract and sell metals from household waste1.

The amount of commercial and industrial waste fell sharply

In lockdown, factories and the hospitality sector closed, transport terminals were empty, and offices were locked shut. No surprise, then, that while household waste went up, the volume of commercial and industrial waste fell by half, according to data reported by major waste companies. Many recycling centres were closed too, meaning the volumes usually provided by these channels fell almost to nothing – though households continued to dispose of recycling in their municipal household waste. The fall in commercial and industrial waste was a big challenge for firms that process this material and outweighed the benefit of the rise in household waste. In general, efficiency has been affected by the change in waste composition, varying prices for recycled product, and fluctuating demand as different industries have come back online at different rates; however, the best operators have used this demand profile to their advantage in opening new disposal channels, and used the quieter period to focus on process improvements.

Construction firms stopped operating

During the coronavirus crisis, the construction industry almost completely closed down for a period, although it has since returned to close to pre-Covid output levels. The closure presented a problem for waste management firms that supply construction companies with materials such as aggregates, which can be made with ash from waste incinerators or by recycling existing aggregate. Lockdown created a logistical challenge: how to store all that aggregate until the construction industry was ready to begin buying it again?

However, it is expected there will be demand for aggregates

It’s not all bad news. The government has proposed to invest £5 billion in infrastructure as part of a plan that prime minister Boris Johnson has likened to Roosevelt’s New Deal. These road repairs, hospital maintenance and school rebuilding, not to mention the high-speed rail line HS2, will require large quantities of building materials.

Remote working has helped some firms realise efficiencies

As in the rest of the economy, the lockdown required workers in the waste sector to work from home where possible. That has forced companies to adopt new ways of working, in some cases becoming more efficient in the process. These benefits could be a positive legacy of the lockdown.

Market disruption has created an opportunity for acquisitions

Disruption in the sector will create winners and losers, in turn creating the potential for mergers and acquisitions in a market that was still largely fragmented but suited to operations of scale. Some firms are recapitalising and/or looking at alternatives to bank funding to give them the capital needed to acquire strategically relevant businesses if the conditions are right, or to move on organic opportunities. In general, there is still a strong appetite for consolidation in the waste sector, as shown by the recent £4.2 billion acquisition of recycling and waste firm Viridor.

Do you work in waste management? Have you observed examples of good practice you’d like to share? As our economy recovers from the coronavirus, we think it’s essential to bring together skills, expertise and learnings. Please share your thoughts with us on social media or by email.

  1. London Metal Exchange aluminium price
BGF Insights 08.21.2020

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