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HomeMy WebLinkAboutHandouts_Regular_7/14/2022 Major Impacts 2022July to the Industry Inflation Impacts to Our Industry INFLATION INDICATORS 202020152010200520009.0%8.0%7.0%6.0%5.0%4.0%3.0%2.0%1.0%0.0%Year High-Inflation at a 40Year High-Inflation at a 40 3 EnvironmentSafetyCustomersDiversity&EquityInclusion,nation al average of $6.20 per gallon in August 2022.gallon, and JPMorgan analysts are even forecasting a Gasoline experts see prices rising to $5 or more per •consumers. price increases as businesses pass on cost increases to Shipping capacity constraints also find their way into •likely behind the steady increase in frontline labor costs. Rising wages for workers amid a labor shortage are •needed semiconductors. continued their upward march because of a shortage of Prices of new cars, trucks, appliances and computers •likely to stay elevated.chain disruptions are some of the reasons inflation is A hot housing market, component shortages and supply •nearly all categories of consumer goods.Widespread shortages early in the pandemic affected •well as in many other countries.then rebounded and rose quickly in the United States as Inflation fell slightly in the beginning of the pandemic but • Category 86%2.702.402.101.801.501.200.900.600.300.00 Crude Oil (WTI) Futures 230%Natural Gas Futures 1.000.900.800.700.600.500.400.300.200.100.00$ / gallon$ / DGE 4 EnvironmentSafetyCustomersDiver sity&Equity FUEL –KEY INDUSTRY INFLATION IMPACTS impacting costsPort congestion, spot market rates, and equipment shortages also •guidelines indicate fuel makes up 5% of hauler costIncrease in fuel costs drive transportation rates. Industry general •driving increase in ratesand National driver shortage continues to put pressure on labor•CPI / FuelLogisticsbeing converted to Renewable Dieselpacity aSome cdecreased demand for oil during the pandemic. OPEC is gradually increasing oil production after limiting it due to a •adversely affecting supplyexacerbated by falling refinery capacity and geopolitical events Demand is up, supply is flat, and inventories are down. This is •OilDiesel FuelRussia/Ukraine war pressuring the supply marketNatural gas is expected to keep rising with events such as the •supply concerns and rising demandNatural gas prices have been racing higher on a combination of •2) higher demand outside the power sectorinfrastructure at maxwith US export Inflation drivers include: 1) increase in LNG exports•Natural GasCNG Market Influencers and ImpactoditymmCoMain 5 industry-collection-waste-impacts-uniquely-decade-a--drivers-truck--shortage-highest-report-archive/article/2020/02/10/new-news-swanaswana.org/news/EnvironmentSafetyCustomersDiversity&EquityIncl usion,LABOR KEY INDUSTRY INFLATION IMPACTS of collection costs.35%makes up CDL federal drug database removed over 40,000 drivers from US roadways In general, labor Front line labor costs have almost doubled since 2020 and continue to increase Labor shortages and turnover driving increase in wagesWagesLaborCDL Drivers / Market Influencers and ImpactoditymmCoMainCategory Category 31%66%Group II and II+ Base Oil $14$12$10$8$6$4$2$0 Natural Rubber $50$0 6 EnvironmentSafetyCustomersDiversity&Equity MAINTENANCE –KEY INDUSTRY INFLATION IMPACTS Transportation costs continue to rise affecting landed cost•Prices for several base oil grades touch record highs•to 2020have increased 60% in 2022 compared ubricants Base oils for l•Oils, AdditivesGroup 2 & 2+ BaseLubricantsCarbon black up as it is a derivative of crude oil.•in rubber producing nations.Natural rubber up year to date due to bad weather conditions •2020 costsover increase % peaked at a 44Natural rubber •BlackRubber, Carbon Natural / Synthetic RetreadNew & –Tires compactors, container maintenance parts, collection vehiclesparts, labor, tires, lubricants, carts, containers and collection -Maintenance costs have increased approx. 29% •commoditiesMixed basket of Maintenance Market Influencers and ImpactoditymmCoMain Category 146%120100806040200 Rolled Coil Steel -Hot 109%Resin/HDPE* 1.201.000.800.600.400.200.00 7 MAINTENANCE –KEY INDUSTRY INFLATION IMPACTS EnvironmentSafetyCustomersDiversity&Equity Transportation costs continue to rise affecting landed cost•Labor and raw material shortages continue to strain industry•PlasticSteel, PartsCollection impacting all vehicle productionOn top of steel prices and shutdowns, global semiconductor shortage •and reduced built slotsLabor shortages shut down major supplier leading to low inventories •breaking highs -supply and higher prices causing recorddemand has rebounded faster than mill output. This has led to tight related shutdowns last year, steel -19 pandemic-Following Covid•SteelHot RolledVehiclesCollection Existing container maintenance costs are increasing with steel prices•suppliers seeing labor shortagesSteel manufacturers continue to throttle production while container •Steel import tariffs still in place•time highs-reaching historic allHot rolled steel/coil prices peaked at an increase of over 200% •Hot Rolled SteelCompactors&Containersproliferating oil prices and supply pressure due to foreign warsAfter dipping, resin prices are quickly climbing again due to •Shortage of resin due to natural disasters•Cart unit costs have increased over 40% compared to 2020•HDPECarts Market Influencers and ImpactoditymmCoMain CDL AVAILABILITY 8 EnvironmentSafetyCustomersDiversity&EquityInclusion,DRUG SCREENUNEMPLOYMENTDEMANDCDL SCHOOLS/ SUPPLY internal and external talent.training opportunities for creating Employers apprentice programs are CDLs. commercial learners permits and 40,000) leaves many future drivers (up to closure of these agencies and Association (CVTA) shares the The Commercial Vehicle Training distancing.fewer students due to social , while those open graduate closed20% of truck schools are still closures.in CDL training40% drop The industry has seen a shortage in the labor market. given the support Driver roles recruiting agencies will not Many a CDL, are not.as workers who would typically get , CDL applications in every Statereducing the number of This is a CDL. not require do UPS, local or last mile delivery Drivers for Amazon, FedEx, and shopping. such as increases in online economy caused by the pandemic due to drastic changes in the Demand for Drivers has tripled Statistics).the road. (Bureau of Labor staying home rather than being on discovered they could earn more by has “couched” many drivers who which unemployment benefits stimulus increased Federal Drivers’ pay exceeds unemployment insurance (up to $400/wk) added to State Federal unemployment subsidies we enter 2021. (U.S. Xpress)as nearly 200,000 fewer driversClearinghouse have resulted in and the Drug & Alcohol and licensing due to the pandemic Reduced commercial driver training US and Canada.in the 14 States and 4 territoriesMarijuana is legal in Recreational from marijuana use., most of which were test resultsfailed drug September 2020 due to –of driving force) from January 40,000 drivers were removed (~1% 80,000 fewer Drivers than a year ago –Over 70,000 more job openings than CDL Drivers in the U.S. EXTERNAL CONTRIBUTING FACTORS– Truck driver shortages: 9 EnvironmentSafetyCustomersDiversity&EquityInclusion,WM’s LABOR SHORTAGE MITIGATION EFFORTS drivers to increase retention rateIncrease connection and retention of new –Improve On the Job Training-with the proper safety protocols Train new drivers in person -Centersopen the Arizona and FL Training-Re-protocolsperson hiring events with proper safety -targeted campaigns; hosted inLeverage a centralized advertising strategy; build -Source candidates faster-Hiring Teams; provide candidates immediate feedbackIdentify dedicated interviewers and Area –Streamline area hiring processes-education for all employeesemployee referral bonuses and referral retention bonuses. Introduced free on and retention bonuses; -Increase pay; offer sign-Improve Compensation-Waste Management focused on five main levers: SOLUTIONS extreme competition in industry.the driver workforce is aging, attracting fewer younger drivers. There is Driver requirements have become more stringent, and 10 increase since 1994 (cnbc.com)0.75 percentage point, the biggest Fed hikes its benchmark interest rate by 2022 CPI-U2021 CPI-U2020 CPI-U2022 G&T2021 G&T2020 G&T2022 WST2021 WST2020 WST Month Rolling Average (US CPIs)-12 DecNovOctSepAugJulJunMayAprMarFebJan7.5%6.5%5.5%4.5%3.5%2.5%1.5%0.5%Month Rolling Average (US CPIs)-12Month Rolling Average (US CPIs)-12 the halfway mark in 2022.been experiencing throughout 2021 and at impacts that we are experiencing and have annually do not reflect the significant cost The lagging indices used to adjust rates March estimate.revision of 1.5 percentage points from the rate will end the year at 3.4%, an upward Expectation includes the Fed’s benchmark point in its most aggressive hike since 1994.quarters of a percentage -interest rates threeThe Federal Reserve raised its benchmark 1990.This is the highest rate of inflation since month inflation rate is 8.6%. -The current 12 WASTE INDUSTRY INDICES EnvironmentSafetyCustomersDiversityEquityInclusion, INFLATION SUMMARY%8.3 290285280275270265260 Consumer Price Index (CPI)15.5%140135130125120115 Producer Price Index (PPI)unprecedented high level.General Freight Trucking index is at an of 2020. Along with both PPI and CPI, the % since January almost 29The index is up reflects the changes in WM’s industry. General Freight Trucking is an index that LocalTrucking,FreightGeneral:P PI the pandemic.amid tight global supply chains related to that high inflation could persist for a while and motor vehicle production, suggesting October, driven by surging costs for fuel U.S. producer prices increased solidly in IndexPriceProducer:PPI 28.5%195185175165155145135 PPI: General Freight Trucking, Local 11 EnvironmentSafetyCustomersDiversity&EquityInclusion,gain, namely fuel.with energy costs recording the biggest based, -1981. Upward pressure was broad% in April of 2022, the highest since 3to 8.The annual inflation rate in the US surged IndexPriceConsumer:C PI 12 Village of Tequesta Historical CPI TrendsVillage of Tequesta Historical CPI Trends 42.3% vs. 17.5% actual–Agreement Life of Index Change of 10.8% equates to 4.18% CPI42.3% vs. 17.5% actual–Agreement Life of Index Change of 10.8% equates to 4.18% CPI Village of Tequesta 2022 CPI CalculationVillage of Tequesta 2022 CPI Calculation cost impacts.accurately reflect actual (8.46% avg) annual 2022 was 3.50% (capped) which doesn’t in our contract from 2017 to WSTAverage to Village of Tequesta at 3.5%.WST annual maximizeurrent contract sets the Our cchanges in the cost of providing service. 3.5% cap, does not best reflect the actual consumers, not seasonally adjusted with a all urban ,Services in US City AverageWater and Sewer and Trash Collection -The Village’s use of the CPI Series, Title: WST Village of Tequesta Index EnvironmentSafetyCustomersDiversityEquityInclusion, CONFIDENTIAL AND PROPRIETARY unusual market conditions together. for these unforeseen costs, we look forward to addressing these or implementing contract specific adjustments to account a capWST with or without Whether it’s adjusting the difference between outstanding service over the length of an extended partnership. best environmental services at the best price and preserve that communities we call home. WM shares in the desire to secure the best service to our customers and the -ever to providing industryWith new challenges facing us every day, WM is as committed as ADDRESSING INFLATION 13INFORMATION OF WM 14 MACRO LABOR TRENDS MismatchCostDemandSupplyTraining drivers leave the workforce.turnover as more experienced retain, to increased cost of bonus), to increased wages to (higher wages, signing from increased cost to hire from the Driver shortage: the board increases on cost The industry has seen across ►year.-over-yearhourly earnings rose 3.6% In June, national average ►CDL).mile delivery do not require a FedEx, UPS, etc., local or last online shopping (Amazon, pandemic such as increases in economy caused by the due to changes in the Demand for drivers has tripled ►annually).over the next decade (110K hire roughly 1.1M new Drivers trucking industry will need to ATA has reported that the ►Training more desirable.Remote work is becoming aligned to job openings. The location of talent is not Many moved during COVID. Where they are: seeking.that types of jobs workers are services, etc.) do not match restaurant, hospitality, available (transportation, The types of job that are What they are: available does not match:The number of jobs 2021. (U.S. Xpress).fewer drivers as we enter resulted in nearly 200,000 Alcohol Clearinghouse have the pandemic and the Drug & training and licensing due to Reduced commercial Driver ►marijuana use.most of which were from due to failed drug test results, September 2020 –January (~1% of driving force) from 40,000 Drivers were removed ►distancing.social students due toopen graduate fewer still closed, while those 20% of truck schools are ►due to CDL school closures.40% drop in CDL training The industry has seen a ► CONFIDENTIAL AND PROPRIETARY APPENDIX 15INFORMATION OF WM CONFIDENTIAL AND PROPRIETARY 16INFORMATION OF WM CONFIDENTIAL AND PROPRIETARY 17INFORMATION OF WM