The price of iron ore has sunk below $US70 a tonne for the first time since the middle of 2009 as investors continue to fret about the imbalance of supply and demand.

At the end of the offshore session on Friday, benchmark iron ore for immediate delivery to the port of Tianjin in China was trading at $US69.80 a tonne, down 0.3 per cent from its previous close of $US70 a tonne.

The latest dip rounded off a fortnight of heavy falls, which dragged the commodity down about 10 per cent. It is now trading at levels almost 50 per cent below the $US135 mark seen at the start of the year.

Despite all the negativity swirling around iron ore, there is a strong prospect for a recovery early this week after the People’s Bank of China surprisingly cut rates for the first time in two years late on Friday, after iron ore markets had closed. The shock move caused markets to jump in Europe and the US, with other commodity prices a key beneficiary.

Highlighting the renewed optimism was a sharp lift in the UK-listed stock of iron ore heavyweights Rio Tinto and BHP Billiton, with the former jumping 6 per cent and the latter adding 5 per cent.

Recent pain in the iron ore market has led many forecasters to lower their expectations for the commodity’s price in coming years, with the Bureau of Resources and Energy Economics seen likely to follow suit next month.

The Australian Financial Review reports the official government forecaster will next month reduce its forecast for the average price of iron ore over the next five years,which is currently a range of between $US90 to $US105 a tonne.

“BREE, as well as many other analysts, didn’t see, I guess, the length of the fall or how low the spot price would go in this particular period,” the government agency’s boss, Wayne Calder, told the paper. “And it’s really still driven in terms of a lot of things that are happening in the Chinese economy, in housing and accumulation of steel stock.”