During the Chinese New Year, the scrap steel market faced severe supply and demand imbalances, triggering significant price fluctuations. With the scrap market closed and electric arc furnace (EAF) steel mills nearly shutting down, only 2 to 3 remained operational, and supply stagnated. Blast furnace mills also operated below capacity, further weakening demand and causing a sharp drop in scrap consumption.

As of February 6, scrap inventories across China's 211 steel mills fell to 4 million tons, down by about 563,000 tons from pre-holiday levels and nearly 890,000 tons year on year. EAF mills saw smaller inventory reductions due to prior production cuts, while blast furnace mills experienced nearly a 30% drop as some maintained production during the holiday.

In the context of the continued shortage of market supply, some steel mills began to raise scrap steel purchase prices after the holiday, and market sentiment gradually improved. However, supply recovery is expected to lag due to slow restarts at scrap processing facilities. In the short term, market resources will remain in short supply, further pushing up scrap steel prices.

In terms of outlook, scrap steel prices are likely to keep climbing, driven by steel mills' restocking needs and anticipated favorable macroeconomic policies. However, as supply steadily improves and demand recovery falls short, prices may face a potential adjustment by mid to late months.