On the downside.

Recyclers will be anxious to find out whether significantly lower mill prices paid in August mark the start of a long-term trend or the first step in another quick up-and-down cycle.

Mill buyers seemed to have the upper hand in August as they paid from $40- to $70-per-ton less for ferrous scrap grades tracked by the Raw Material Data Aggregation Service (RMDAS) of Management Science Associates Inc. (MSA), Pittsburgh.

The biggest drop in pricing took place in the highest-price grade tracked by RMDAS: The Prompt Industrial Composite grade of new production busheling and bundles. That grade dropped by an average of $69 per ton nationally and by $71 in the North Central/East region.

Other grades followed in the decline, with No. 2 Shredded Scrap being purchased for an average of $42 per ton less and No. 1 HMS being sold for $40 less per ton.

The average price paid per ton of the Prompt Industrial Composite grade was $274 in the firsts three weeks of August. The grade continues to trade at a higher price per ton than shredded scrap, which averaged $231 per ton in August, or No. 1 HMS, which averaged $204 per ton in August.

The drop in August pricing marks the biggest swing recorded since MSA began publishing its RMDAS index for ferrous scrap. The previous biggest swings for the No. 2 Shredded grade were a $26 rise in November of 2005, a $23-per-ton gain this February and a $13-per-ton drop in December of 2005.

Regionally, mills in the Southern United States continue to pay less on average for all grades of scrap, though the differences have narrowed relative to the previous few months.

For the Prompt Industrial Composite grade, Southern mills are paying $8-per-ton less than mills in the other two regions. Southern mills are paying either the same or just $3-per-ton less than buyers in other regions for the No. 2 Shredded Scrap grade, but from $5- to $8-per-ton less for No. 1 HMS.

A scrap recycler in Ohio comments that the price declines are having some degree of impact on supply, with perhaps a 20-percent drop-off in shredder feedstock such as auto bodies becoming apparent since scrap buying prices declined to match mill prices.

Additionally, demolition work scheduled primarily to take advantage of high scrap prices may fall off if that aspect of the demolition estimate changes dramatically.

"But prompt industrial scrap keeps flowing, since those generators don't hold on and let their scrap pile up," the Ohio recycler says.

The differences in flow may account for a further narrowing of spreads between grades, as supply of the obsolete scrap that comprises shredded and heavy melt grades becomes a little more restricted.

The September buying numbers will be watched closely by all involved, as speculation centers on whether some shippers held on to inventory rather than sell at the lower August prices. And if so, whether their patience will pay off or whether they'll be sorry they didn't sell for more than $200 per ton when they had the chance.

(Additional News about ferrous scrap, including breaking news and consuming industry reports, is available online at www.RecyclingToday.com.)