Iron ore keeps falling despite China rate cut Iron ore fell to a new five-year low on Tuesday, putting increasing pressure on the world's largest miners of the steelmaking commodity. Benchmark Australian ore for delivery into China fell 2 per cent to $68.60 a tonne, the lowest level since 2009, according to data from the Steel Index. Futures for May delivery of the steelmaking raw material were down 2.5 per cent on China's Dalian Commodity Exchange. The iron ore price rallied briefly after China's first interest rate cut since 2012 on Friday, on the hope that looser credit could encourage steel mills to restock inventory. Yet it failed to stem the rout as demand from construction and retail sectors remains uncertain. The commodity is now down almost 50 per cent since the start of the year. "I don't think anybody expects to hit an iron ore price bottom any time soon," said Jessica Fung, an analyst at BMO Capital Markets. The interest rate cut "might decrease the interest expense but it doesn't mean there will be more loans made that will drive metals consumption," she said. China is the world's largest iron ore consumer and relies on imports for 75 per cent of its consumption. Yet its steel industry has been hit by a slowing real estate market. At the same time, top iron ore miners have continued to ramp up production in an effort to gain market share, confident their cost of production will remain below the market price. For example, iron ore output for BHP Billiton, a leading producer, rose 17 per cent in the quarter ending September. Still, the continued plunge in the price has unnerved investors. Shares in BHP were down 1.7 per cent in London on Tuesday after rising 5 per cent on Friday following the news of the Chinese rate cut. Year-to-date they have dropped 14.7 per cent. Andrew Mackenzie, BHP's chief executive, said at an investor meeting in Adelaide last week that the company's iron ore operations were still profitable. According to UBS analysts, iron ore production costs at BHP and fellow miner Rio Tinto are $49 and $45 a tonne, respectively. Chinese iron ore miners, on the other hand, are suffering. WoodMackenzie, the consultancy, estimates that between 50m to 60m tonnes of iron ore capacity in China has closed. "Demand doesn't seem to be there at the minute; there seems to be more and more negative signs coming out from the property market and supply growth is still arriving from the majors," said Gavin Montgomery, a steel and iron ore analyst at WoodMackenzie. Additional reporting by James Wilson