Dragon Steel

The second book in Laurence Yep's Dragon Series, first published in 1985. It starts off right after the events of Dragon of the Lost Sea, and is followed by Dragon Cauldron and Dragon War.

After defeating Civet, Thorn and Shimmer transfer her unconscious body to the undersea kingdom of Shimmer's uncle, High King of the Dragons, Sambar XII. In addition to Civet and the mist stone, King Sambar also wishes to take Shimmer's dream pearl. Shimmer creates an illusion to fool him, but Thorn, not knowing this, ends up landing them both in the dungeons, stripped of all their magics. While in the dungeons, they discover that Monkey had met up with a similar fate. Together with the help of Shimmer's former clan, the servant girl, Indigo, and a powerful being known as the Lord of the Flowers, all four escape from Sambar's palace, with Civet in tow.

Tropes used in Dragon Steel include:

Absurdly Sharp Blade: Anything made out of dragon steel. The dragons make claw tips out of the stuff.
Adipose Rex: King Sambar XII
Atlantis Is Boring: Averted. The undersea dragon kingdom is teeming with all sorts of wildlife and interesting architecture.
Battle Cry: The dragons of the Inland Sea shout "The Sea! The Sea!" before a fight.
Blue and Orange Morality: The Lord of the Flowers, who only cares about flowers and the hunt and can be described as whimsical at best, and dangerous at worst.
Convection, Schmonvection: Dragons work near active volcanoes to make dragon steel, which somehow doesn't boil them alive. Possibly justified in that dragons are almost supernaturally durable, and can survive temperatures far above boiling.
Deadpan Snarker: Monkey.
Defeat Means Friendship: Civet has lost the taste for vengeance she had in the previous book, and at the end of the book, agrees to help in exchange for a home in the Green Darkness.
Foreign Queasine: Sambar considers himself a gourmet, and will have live sea critters on the menu during banquets.
Forging Scene: Shimmer's tribe has been relegated to the most unpleasant job under the sea: the forging of dragon steel (hence the title). It takes place near undersea volcanoes and even young children have to work to earn their keep in Sambar's kingdom. Most of them are covered in burn scars.
Great Escape: Much of the book is about escaping prison, or breaking others out of prison.
Jerk with a Heart of Gold: Indigo, who puts on a facade of only being concerned for herself, while it's pretty darn obvious that she cares deeply for the whole gang.
Kraken and Leviathan: Shimmer gets into a fight with a bunch of krakens and is badly outnumbered until members of her former clan come to help.
The Ladette: Indigo, who is pretty tomboyish.
The Last Of Its Kind: The flower known as Ebony's tears once bloomed all along the shores of the Inland Sea before it was destroyed by Civet. The dragons of the Inland Sea have preserved one last flower in the hopes of being able to replant them if the sea is ever restored.
Memento MacGuffin: Ebony's tears, the last remaining flower of its kind from the destroyed Inland Sea, that holds great sentimental value to the dragons of the Inland Sea. Shimmer needs a flower to summon the Lord of Flowers and free Monkey, but since most of the novel takes place under the ocean, it's the only flower available for thousands of miles.
Power Nullifier: Prisoners in Sambar's dungeon are given needles that disrupt the flow of chi around them, which disables all magical abilities.
The Professor: Shimmer's mentor, an elderly female historian, makes an appearance in this book and gives Shimmer the last Ebony's (a flower) tears in existence to rescue Monkey.
Silly Rabbit, Idealism Is for Kids: Indigo, who was not treated very well in the dragon palace, has a very cynical outlook on life. Or at least she seems this way at first.
Super Not-Drowning Skills: Shimmer, being a dragon, can breathe and move underwater as easily as she can in air or on land. Humans visiting the dragon kingdom, however, need an enchanted pearl to allow them to breathe and talk while under the sea. It also keeps them warm and prevents the crushing pressure at the bottom of the ocean from killing them.
Unobtanium: Dragon steel, a metal that never rusts or breaks and can only be forged in undersea volcanoes by dragons.