The party is over for iron ore.

That's the word-for-word headline on an ANZ Bank briefing note after some of its analysts returned from a trip to China.

It says the vital steel making ingredient will never go above $US100 a tonne again.

Today it's sitting under $76, that's 40 per cent lower than at the start of the year.

Senior commodities analyst with ANZ, Mark Pervan, has returned from a recent trip to China with other analysts and says they were surprised with what they saw, that the challenges ahead were more challenging than they thought they would be.

"There has been some key changes in the dynamics of the iron ore market, including the more depressed state of the Chinese real estate sector and the supply of local iron ore.

"It's fallen quicker than was expected and I think most people [in the iron ore mining industry] have been surprised by the speed of the falls.

"It is really the lack of rebound that we're not seeing in the market which is the reason we have had to become a lot more bearish on the outlook."

The dramatic slump in price has his the newer entrants to the market hardest.

Established iron ore miners like Rio Tinto and BHP Billiton, which are shipping out record tonnes, are still making healthy profits an estimated $20-$30 a tonne.

The number three producer, Fortescue Metals Group, is believed to be making a cash margin of $10 a tonne.

But Atlas Iron is possibly breaking even and Mt Gibson are running at a loss.

Mr Pervan doesn't believe this will lead to merger and acquisition activity, but more likely infrastructure sharing and other strategies amongst the smaller players.

The low iron ore price is being felt across the Australian, punching a hole in the Western Australian Budget with much lower royalties than anticipated.

It's also hurting the Federal Budget, which won't benefit from the expected higher company taxes from miners and service industries, and a lower balance of trade.

Plunges today in iron ore stocks on the Australian share market were indicative of the gloom over the sector.