Chinese coil prices have proved more resilient than was expected two months ago. MBR anticipated that flat product prices would remain in the doldrums throughout August; it was believed that mills' earliest opportunity to raise prices would occur in September. The progressive strengthening of domestic and export prices over the last month, although relatively modest for some products, has therefore been something of a surprise. HR coil prices have been particularly buoyant - confounding beliefs that fast rising production levels would saturate the domestic market in China, undermining prices in the process. Export levels have dropped from the record-breaking highs reached earlier this year around the time when changes were made to China's VAT rebate system; but there has been no large-scale reduction in flat product exports. On the contrary, flat product exports tended to be higher in May and June than they were during the first quarter of 2007, despite the fact that Chinese mills should have lost some of their competitive advantage following reduction or cancellation of the export rebates available on flat products (see chart).
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