Chinese housing prices weigh on iron ore market

The price of iron ore slipped as the recent rally in Chinese housing prices showed signs of easing.

The iron ore price has continued its downward slide after fresh data showed the Chinese housing market was losing momentum.

Iron ore dropped 2.8 per cent to $US56.20 overnight, according to The Steel Index, from $US57.80 during the previous session.

The fall comes ahead of sales updates from Australia’s major miners, with Rio Tinto scheduled to report second-quarter figures this morning and BHP Billiton set to publish fourth-quarter sales tomorrow.

Average home prices in China increased at a slower pace in June than in May and April, figures from China’s National Bureau of Statistics showed.

The more subdued growth follows moves by some cities to clamp down on possible signs of froth in the property market.

The spectre of a slowing housing market could make traders concerned about falling demand for steel from apartment developers, which would be a negative for iron ore.

Upwardly revised expectations of Chinese growth from ratings agency Standard & Poor’s were not enough to buoy trade in the commodity.

Meanwhile, one analyst has offered a slightly more upbeat view of the beleaguered commodity, which has been holding at surprisingly elevated levels for some months due to Chinese steel mill restocking and hopes of a boost in demand from China’s stimulus spending plans.

Clarksons Platou analyst Jeremy Sussman is now “less bearish” on iron ore and sees better demand for the commodity, Bloomberg reported.

But he still thinks there is a “real downside” for iron ore, given the market’s structural oversupply.

In London trade, BHP Billiton lost 2 per cent, while Rio Tinto fell 0.3 per cent.