Last month we looked at the impact of international markets on EU domestic prices, or, at least, the changes in relationships between domestic and overseas prices. In the case of Japan we have argued that due to the sustained, if modest, recovery in the domestic economy, the steel market is now less influenced by overseas markets. Domestic demand showed a very powerful influence in the recent past, driving up prices when the international market was at a particularly low ebb. Looking at the two charts on Japan's HDG and rebar prices, the period when export markets were driving domestic prices can be seen drawing to an end in 2002 in both cases. From then on and until the end of 2004 the Japanese domestic HDG market clearly has a life of its own, much more attractive to steelmakers than export markets, it was all rather too good; there was a correction during 2005, and it could be argued that export markets set the pace again; certainly the minor rebound in export prices seems to have helped the domestic price revival. However, over the past year it is clearly domestic, and not overseas markets driving prices, as the export price has sunk under the impact of lower Chinese imports and higher Chinese exports.
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