While general construction remains challenged, isolated opportunities still exist. Take the biomass energy market, for example. Plants that consume wood products to produce energy are increasing in number due to concerns over foreign oil dependence and the resulting government subsidies.
Riverdale Environmental Services, Granite Falls, MN, recognized the potential in this market several years ago. The company started as a land clearing business. However, its primary focus evolved into management of biomass materials as it searched for better utilization of the material it was generating.
"There was increased pressure - especially from the governmental work we were doing - to better utilize the material," says Joshua Streblow, Riverdale Environmental Services. The firm's involvement in biomass started with a regional plant that was coming on line. "We researched that sector, saw where it was headed and made the jump."
Land clearing is now a small segment of the company's business. "We keep it going to generate a portion of our feedstocks, but we are focusing more upon management" says Streblow. "There are real opportunities out there, but it is still a very young industry."
Riverdale Environmental expects to process 100,000 to 120,000 tons next year with its Vermeer tub and horizontal grinders. "The plants have a desire to work with companies who can give them a complete package so they can focus on what they do," Streblow notes.
However, he emphasizes that the biomass market is not one to go into if you're looking to get rich quick. "It is very consuming," he points out. "To do it just on the value of the biomass based on your own activity is pretty tough.
More demand to come
Dozer Enterprises, Bear Lake, MI, started out as an excavation business that performed land clearing. Then it, too, changed its business model to pursue the biomass energy market.
"We were burying a lot of trees and burning them," says Joe Miller, president. "Then we got into the chipping. That took off and about three years ago we switched everything over from excavating to chipping. We have 15 full-time and two part-time employees."
Before the economic downturn, the company was providing 3,000 tons of biomass wood chips to two plants every week using its Morbark Model 40/36. "Right now, we're down to 1,000 tons a week just because they aren't using the power at the plants," says Miller. "The plant is only running at about 40% capacity, where normally it runs about 80%."
Even so, Jerry Morey, Bandit Industries, sees the decline in demand in some regions as the exception. Most areas have actually witnessed robust growth. "As the years pass, the bio-energy market is going to be called on more and more to meet the demand," he predicts. "More biomass plants are going into operation."
Ed Dodak, assistant regional manager, Midwest sales, Morbark, sees big potential for other land clearing contractors if they are already set up with the right equipment, such as a cutter, a skidder, trucks and trailers. "We expect biomass to grow more in the next five years. There are more requirements for plants to go green and start burning wood again," he states. "Biomass has really taken off. We have sold 13 or 14 new machines here in Michigan last year. They are all feeding power plants."
Proximity to plants drives all
"One of the key factors in providing biomass chips and making it economical is the distance from the source to the plant that is using it," says Mark Ferguson, Fecon.
The whole profitability model centers around transportation costs. "Transportation can be a significant portion of your overall cost structure," says Streblow. "With your cost structure, 75 or 100 miles is really going to be your target on the outside. The closer you bring it in, your profitability really skyrockets."
The size of the job also impacts the allowable distance from the plant. "If it is a big job, we will go 60 miles," says Miller. "If you go much more than that, with the cost of fuel, you are basically losing money."